Today's climbdown by Marks & Spencer, courtesy of the decision of Steve Sharp and Stuart Rose to waive part of their Performance Share Plan awards, represents a victory for shareholders. However, the root cause of the problem - an over-generous Remuneration Committee - remains unresolved.

Manifest highlighted in the Meeting Business Report prepared ahead of the AGM, that the 2008 awards to three of the executive directors under the Performance Share Plan were in excess of the 200% of salary normal limit (to 'ensure their retention'). We noted that the 2008 awards represented the third successive year where ‘exceptional’ awards have been made. Further, on 11 June 2009, the Company announced the 2009 awards under the plan. The awards to both Stuart Rose and Steve Sharp were set at 300% of salary - thus being a fourth successive year where the Remuneration Committee had authorised 'exceptional' awards under the plan.

Such a consistent use of exceptional awards runs contrary to the expectations of shareholders who originally approved the plan in 2005. While an exceptional award once (or maybe twice) during the ten-year life of the plan would not be unreasonable, four consecutive 'exceptional' awards represented a flagrant abuse of the discretion assigned to the Remuneration Committee to make such awards.

Today's climb down will prove embarrassing for M&S, but questions will surely be raised as to the robustness of the Remuneration Committee in their willingness to make four consecutive 'exceptional' awards. When considered alongside the botched succession planning by the Nomination Committee, the best outcome for shareholders must now surely be a wholesale clear-out of the ineffective non-executive directors. Replacements should be fresh faces who are truly willing to challenge the dominance of Stuart Rose (a particularly key governance factor where there is a combination of the roles of chairman and chief executive roles).

Links: RIS Announcement