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‘The Turning Point for Marks & Spencer’s Investor Relations Following the Shareholder Rebellion of 2008’

CCA502 - Corporate Communications AE2 Individual Assignment Charlotte Heeney


Marks & Spencer PLC: An introduction According to the Investor Relations Society (2013), the process of a company communicating its key information and business achievements to its shareholders “enables a full appreciation of the company’s activities, strategy and prospects”. This then results in the desired audiences and markets being able to decide the degree to which the company’s ownership and value can be justified. Another interpretation of how investor relations can be defined states that it is “responsible for managing and communicating information to the public pertaining to the company’s operations, managerial organization and financial standing”, suggesting that it applies to all stakeholders as opposed to purely shareholders. While these definitions differ in their perception of which audiences are most important, they are both relevant to the issues raised in this essay and the way in which they can be related to Marks & Spencer’s communication of its investor information.

This report will conduct a critical analysis of the corporate communication between Marks & Spencer PLC and its stakeholders, predominantly its investor relations with the company’s shareholders, through research into a variety of sources including media coverage and brand-owned content provided by Marks & Spencer itself. It will discuss the positive ways in which the company communicates key information that is of interest to shareholders, including financial performance, remuneration and whether the company is succeeding in its business objectives. Another key component of this report will be the discussion and analysis of how information which is considered to be important to investors is also communicated to other stakeholders, and this will determine the overall success of Marks & Spencer’s corporate communication behaviour to all that are implicated by the company.

Any large organisation will have several shareholders taking varied interests in its activities, and according to research the interests of shareholders can be broken down into two types. Firstly, investors that are more financially-centred will prioritize figures provided by the company showing high return on their investments. On the other hand, shareholders who are considered to be ‘ethical investors’ will take interest in the CSR policies and values of the company, along with its reputation (Boddy, 2011). Therefore; it is important to take into account both types of investor interests in order to fully analyse the extent to which Marks & Spencer have met these needs through their corporate communication readily accessible to its shareholders.


Before a critical analysis can take place, Marks & Spencer has several positive and negative qualities which need to be discussed: firstly, the company can be complimented on its growing international presence, strong UK base and significant rise in multi-channel revenue, all factors that shareholders would appreciate. However, past media coverage about the company concerning profit loss and shareholder rebellion will have a negative impact on potential shareholders choosing to invest. Another way in which Marks & Spencer are currently threatened is by analysts scrutinizing its financial performance and the share allowances granted to senior members of staff within the company, a particular analyst stating “it’s make or break time at M&S”, which is unfortunately supported by previous media coverage of the fall in profit (The Guardian, 2013). On the other hand, these negative factors can be turned into opportunities for the company to improve its corporate communication through internal behaviour: for example, analyst and investor opinion could be changed through a rise in profit, increased information made accessible to shareholders and a more appropriate assessment of the allowances made available to directors and executives within Marks & Spencer PLC.

There are several variables which are affecting the company externally which also need to be taken into account: when it comes to political factors, Marks and Spencer is currently in a relatively positive business position in terms of political support, and the company has taken the ever-changing technological factors on board successfully by having a growing multi-channel presence which allows the company to access new markets through the appropriate technology. However, its position in terms of social and economic factors is at risk due to negative attitudes still in place about the company’s financial performance combined with the economic climate at present. Therefore; these are the most dominant issues that Marks & Spencer needs to take into account when trying to improve its investor relations and communication to other involved stakeholders.


To what extent can Marks & Spencer’s communication with its shareholders be considered successful? As a well-established and highly recognised retail company, Marks & Spencer PLC has maintained a successful business for many years across the UK and internationally. However, a key issue affecting the company and its investor interests is the question of whether shareholders have faith in the company’s senior directors and financial decisions. In previous years, there has been huge criticism of Marks & Spencer concerning the amount of shares awarded to its executives and senior directors in correlation to the company profit. According to recent sources, the company’s senior directors were granted awards more than double the basic pay of employees, which was “a level the governance group considers excessive” (The Guardian 20132). The fact that Marks & Spencer frequently changed its senior members of staff, especially the individuals taking on the role of Chairman, has also resulted in numerous negative publications about these individuals, which is a significant threat to the company’s investor relations. Facing one of the biggest shareholder rebellions in history in July 2008, where 22% of investors demonstrated their lack of faith in Sir Stuart Rose either through voting against or abstaining from the vote, Marks & Spencer faced a severe issue concerning its shareholders and their perception of the company (Reuters 2009). This type of negative feedback, despite being through the media, can have a serious effect on a company’s future success and maintenance of its shareholders. However, the reliability of these sources can questioned due to being taken from news publications which may not be fully objective. According to Sen et al (2001), “by not meeting the needs of other stakeholders, companies can destroy shareholder value because of consumer boycotts” which explains the importance of satisfying all stakeholders in order to maintain a strong relationship with shareholders, an issue which, based on the evidence above, Marks & Spencer clearly needed to address. This source has a higher reliability as it is an impartial view which is separate to Marks & Spencer; therefore it is a valid point which is useful to this particular issue surrounding the company.

In terms of evidence from brand-owned content surrounding this issue, a particular press release from 2008 following the shareholder rebellion in July raises an interesting point: referring to the amount of shares granted to senior directors, the press release notes that “Sir Stuart Rose and Ian Dyson surrendered their entitlement” of these options despite the shares being authorised by Marks and Spencer’s 2005 Sharesave scheme (Marks &


Spencer PLC 2013). This is evidently in response to the shareholders’ negative feedback of Sir Stuart Rose earlier in July and is an indication of the company’s attempts to repair its investor relations by demonstrating a seemingly selfless choice to decline shares in the company. Unfortunately, this could be viewed as unreliable due to being written by the company itself and being in a non-objective position.

However, research shows this decision by Sir Stuart Rose was not appreciated to the extent that Marks & Spencer intended it to be, due to the event of his resignation in 2010: as a result of his “controversial two year reign”, Rose stepped down as Chairman to make way for Robert Swannell, currently still in this role, and sparked further media coverage about the unreliability of Marks & Spencer and the functionality of its business (The Guardian 20133). While this source could be viewed as subjective, media coverage of this scale is highly relevant to how communications with investors are mediated, due to the fact that analysts are frequently affected not only by statistics but by public opinion, consumer behaviour and competitor activity (US Bureau of Labor Statistics 2012). Therefore; in order to change shareholder perception of the company following Sire Stuart Rose’s failure, Marks & Spencer needed to convince all aspects of public of its reformation.

It can be argued that the turning point for Marks & Spencer’s investor relations can be taken from several elements of their behaviour following the shareholder rebellion, including an unusual aspect of the 2013 Remuneration Report: within the latest Annual Report, it is stated that “malus provisions” have been introduced, meaning that in the event of a dramatic drop in profits, the Remuneration Committee will be able to reduce the amount of shares granted to senior directors within the company (Marks & Spencer PLC 20132). Relating strongly to the issue of the 2008 shareholder rebellion, this is a clear demonstration of Marks & Spencer once again attempting to improve its shareholder relations by abiding by the wants of the publics in terms of reducing senior director benefits. However, on this occasion, the company is taking their commitment to their shareholders one step further by going against the norms of businesses and introducing such a rare policy. Further evidence from the Remuneration Report states that their attitude throughout the company concerning executive pay is sensitive to the current economic climate, and that they are striving become more transparent in their reporting in order to “provide shareholders with greater influence over future policy”. This is a strong example of good corporate communication as it demonstrates how the company is openly


allowing its investors to take control of elements within the organisation and make them feel valued through their investments.

In terms of influencing stakeholder opinion, the evidence taken from the Remuneration Report positively correlates with the view that “a strong reputation can lead to a superior corporate performance” (Roper and Fill 2012), a view that has been consistently integrated into the research conducted about Marks & Spencer PLC. In order to maintain good investor relations, a positive reputation provided by all stakeholders must be achieved, which raises the issue of how investor information is communicated to other audiences surrounding Marks & Spencer and how far these communications are successful.

It is important to consider how different stakeholders will access this information: individuals concerned with community issues, for example, would be most likely to gain insight from a company’s CSR report which, in the case of Marks & Spencer, is found in their ‘Plan A’ report. These details are also mentioned in the Annual Report’s Financial Review, stating that new methods “to address the eco and ethical challenges” are being introduced, which is an example of strong community relations involving investor-related content. Press and other media stakeholders have access to investor-related content through press releases and updates on the Marks and Spencer website, as well as through social media (Facebook 2013). However, examples of how the company provides information for their suppliers or stakeholders involved with public affairs are difficult to find; therefore it can be advised that Marks and Spencer devises ways to communicate investor information to these stakeholders, perhaps through news releases or specific newsletters, in order to ensure all involved parties are well-informed.

However, when it comes to other elements of brand-owned content, Marks & Spencer demonstrates a range of good and bad investor communication: the 2013 Financial Review provides a relatively in depth description of the most prominent financial occurrences of the previous year, with several positive statements for investors to analyse (Marks & Spencer PLC 20132). The fact that Group revenue saw an increase of 0.9% would be of significant interest to shareholders, as well as the dividend price remaining at 17.0p. The tone used throughout the Financial Review is encouraging and optimistic, promoting the view of “investing in our future” which shareholders would initially view as beneficial to their investment. However, it can be argued that the communication of this information is flawed due to evidence from the financial results: while there were some


positive outcomes, the majority of results saw a decline since the previous year. While Marks & Spencer have provided an honest overview of its results, it could be suggested that a more effective way of communicating these results to investors would be to provide information of why these losses have occurred and what will be done about them in the future. Although these were mentioned previously as a positive element of their communications, the fact that further evidence about their results is contradictory poses a serious threat to the success of their investor relations as it could result in shareholders losing confidence in the company once again. Another potentially negative issue that can be drawn from Marks & Spencer’s communication with its investors is the lack of information about its international activity: while the report shows a rise in international revenue, there is very little detail about where and how this activity taking place. While the positive figures would appeal to investors, they may choose to reinvest in other companies that provide more substantial information about their international markets.

On the other hand, it can be viewed that Marks & Spencer’s communication with its shareholders has been well-established due to the popularity of Robert Swannell: in terms of his relationship with investors, evidence shows that Swannell’s was viewed as a more appropriate figure for Marks & Spencer as opposed to Stuart Rose’s “strained relationship” with shareholders (BBC, 2010). This information is highly valid to the issue of Marks & Spencer’s response to the shareholder rebellion in 2008 as it demonstrates how a Chairman who shareholders would approve of and be willing to support was specifically recruited. It is also a supportive piece of evidence for how Marks & Spencer communicates with its stakeholders as it is a clear example of how the company took its stakeholder needs into account and ensured that these were met. Therefore; the appointment of Robert Swannell is a strong example of Marks & Spencer PLC succeeding in relating to its investors.


Conclusion It can be concluded that Marks & Spencer PLC’s investor relations has been improved significantly following the 2008 shareholder rebellion due to several reasons: firstly, the resignation of Sir Stuart Rose and introduction of Robert Swannell contributed greatly to shareholders’ faith in the company due to the popularity of Swannell as opposed to the controversial opinions of Rose as Chairman. Secondly, the introduction of malus provisions in 2013 has demonstrated the company’s desire to build a more “honest and transparent approach” with its shareholders concerning shares granted to senior directors (Marks & Spencer PLC 20132). Finally, the way in which Marks & Spencer communicates investor-related information through its media and community relations can be included due to inclusion of these details in a format, such as news releases and the ‘Plan A’ report, that is accessed by these stakeholders.

However, a recommendation for Marks & Spencer to consider when addressing investor communications in the future could be to provide a more substantial platform for all stakeholders to access, such as a dedicated corporate social media page, in order to ensure all stakeholders receive appropriate and up to date information concerning the company’s shareholder information. Based on the research conducted in this essay, the opinion of all stakeholders is very important to the maintenance of shareholder attitude and involvement; therefore Marks & Spencer PLC should ensure the public has a favourable opinion in order for the company convince shareholders that they are a good investment.


References 1) BBC (2013) ‘Marks and Spencer’s new chairman to rebuild bridges’ (online) (viewed 30th November 2013). Available from: http://www.bbc.co.uk/news/business-11060129

2) Boddy, D. (2011) ‘Management - An Introduction’ 5th ed. 2(5): 146-148. Harlow, England: Pearson Education Ltd

3) The Commune (2010) ‘Protest against Marks and Spencer over Indian sweatshop’ WordPress 2013 (online) (viewed 3rd December 2013). Available from: http://thecommune.co.uk/2010/08/29/protestagainst-marks-and-spencer-over-indian-sweatshop/

4) Facebook (2013) ‘Marks and Spencer’ (online) (viewed 3rd December 2013). Available from: https://en-gb.facebook.com/MarksandSpencer

5) Guardian News and Media Ltd (2013) ‘Marks & Spencer results: what the analysts say’ (online) (viewed 3rd December 2013). Available from: http://www.theguardian.com/business/2013/may/21/marks-and-spencer-analysts

6) Guardian News and Media Ltd (2013)2 ‘M&S investors urged to make pay protest’ (online) (viewed 24th November 2013). Available from: http://www.theguardian.com/business/2012/jun/26/marks-andspencer-investors-pay-protest

7) Guardian News and Media Ltd (2013)3 ‘Stuart Rose steps aside early as Swannell takes M&S helm’ (online) (viewed 29th November 2013). Available from: http://www.theguardian.com/business/2010/aug/23/marks-and-spencer-chairman-robert-swannell

8) The Investor Relations Society (2013) ‘Definition of Investor Relations’ (online) (viewed 3rd November 2013). Available from: http://www.irs.org.uk/about/definition-of-investor-relations

9) Marks and Spencer PLC (2013)1 ‘Notification of transcripts of directors/persons discharging managerial responsibility’ Press Releases (online) (viewed 29th November 2013). Available from: http://corporate.marksandspencer.com/investors/press_releases/pdmr_notification

10) Marks and Spencer PLC (2013)2 ‘Annual report and financial statements 2013’ (online) (viewed 3rd November 2013). Available from: http://corporate.marksandspencer.com/documents/publications/2013/annual_report_2013.pdf

11) Reuters (2009) ‘TIMELINE - Marks & Spencer’s profit decline’ (online) (viewed 24th November 2013). Available from: thttp://www.reuters.com/article/2009/05/19/ms-idUSLJ41511020090519

12) Roper, S. and Fill, C. (2012) ‘Corporate Reputation’ (online) Harlow, England: Pearson Education Ltd (viewed 30th November 2013). Available from: Dawsonera

13) Sen et al., (2001): Eccles, R.G., Ioannou, I. and Serafeim, G. 2013. ‘The Impact of Corporate Sustainability on Organizational Processes and Performance’ Harvard Business School (online) (viewed 3rd November 2013). Available from: http://www.hbs.edu/faculty/Publication%20Files/12035_a3c1f5d8-452d-4b48-9a49-812424424cc2.pdf

14) US Bureau of Labor Statistics (2012) ‘What Market Research Analysts Do’ (online) (viewed 29th November 2013). Available from: http://www.bls.gov/ooh/Business-and-Financial/Market-researchanalysts.htm#


Appendices Total word count = 2,550 1. Debate Questions “All Publicity is Good Publicity” Marks and Spencer PLC would be against this statement because it has had several incidents involving bad publicity which has resulted in senior members of staff, such as Sir Stuart Rose, resigning from their positions (The Guardian 20133). It also relates to the main issue within this essay that their shareholders lost confidence in the company due to bad public opinion of Stuart Rose, therefore damaging Marks and Spencer’s reputation.

“What the Public Thinks Doesn’t Always Matter” Marks and Spencer PLC would be against this statement because, similarly to the previous statement, maintaining a positive public opinion of the company is vital to maintaining company success. For example, following a sweatshop scandal which occurred in 2010, protests broke out against Marks & Spencer which negatively impacted the company’s reputation (The Commune 2010). It is important to remember that the public attitude towards a company will ultimately impact its sales, which will affects all other stakeholder groups including investors and result in a loss of confidence of that company.

“You Don’t Always Have to Tell the Truth to the Press” This statement raises an interesting point; however Marks and Spencer PLC would also be against this statement due to the fact that the company has worked extremely hard to promote honest, transparent communications to all its stakeholders throughout the years following the shareholder rebellion (Marks & Spencer PLC 20132). The company has demonstrated in their reports and publications as well as reactions to media that they believe honesty is the best policy and want to ensure all stakeholders fully understand the company and its values.

“Shareholders Are More Important Than Customers” While Marks and Spencer PLC strongly value the opinion of their shareholders, the company would be against this statement because, relating back to the previous statements, their success relies heavily on the perception that their customers have of the company. As customers are a dominant audience for voicing their opinions about brands and products, the company must maintain a good relationship with them in order to maintain positive feedback and avoid deterring shareholders from investing.

2. Stakeholder Map


3. Stakeholder Interests Concerning Investor Relations


Investors Key messages:

·

Marks & Spencer has a steady financial performance and the profit and losses can be justified by beneficial investments made to causes such as UNICEF (Marks & Spencer PLC, 2013)

·

The company is honest and transparent in its shareholder relations demonstrated through its Remuneration Committee policies and the management skills of its senior directors (Marks & Spencer PLC, 20132)

·

Marks & Spencer has made significant savings by implementing Plan A sustainability attitudes (Business Green, 2013)

Community Key messages:

·

Marks & Spencer strongly values sustainable sourcing, recycling, carbon neutrality and healthier food options which benefits all its stakeholders, both in the UK and internationally (Marks & Spencer PLC, 20133)

·

Marks & Spencer has made significant savings by implementing Plan A sustainability attitudes (Business Green, 2013)

·

The ‘Shwop’ scheme is highly beneficial to the environment and the economy (Daily Mail, 2013)

Public Affairs Key messages:

·

Marks and Spencer is developing new social and environmental standards to encourage further improvement and promote excellence (Marks & Spencer PLC, 20133)

·

Marks and Spencer is preserving the environment by having zero waste to landfill and zero net CO2e emissions from any store, warehouse, office or delivery fleet in the UK and Republic of Ireland (Marks & Spencer PLC, 20133)

Media


Key messages:

·

Marks & Spencer strongly values sustainable sourcing, recycling, carbon neutrality and healthier food options which benefits all its stakeholders, both in the UK and internationally (Marks & Spencer PLC, 20133)

·

Marks & Spencer has made significant savings by implementing Plan A sustainability attitudes (Business Green, 2013)

·

The ‘Shwop’ scheme is highly beneficial to the environment and the economy (Daily Mail, 2013)

·

Marks & Spencer has a steady financial performance and the profit and losses can be justified by beneficial investments made to causes such as UNICEF (Marks & Spencer PLC, 2013)

Suppliers Key messages:

·

Marks and Spencer is developing new social and environmental standards to encourage further improvement and promote excellence (Marks & Spencer PLC, 20133)

·

Marks and Spencer values its suppliers highly as the company strives to reach its vision of sustainability (The Guardian, 2013)

1. Associated Newspapers Ltd (2013) ‘Shwopping is the new shopping, darling: Joanna Lumley launches clothes recycling initiative for M&S’ (online) (viewed 5th December 2013). Available from: http://www.dailymail.co.uk/femail/article-2135431/Shwopping-Joanna-Lumley-launches-clothesrecycling-initiative-M-S.html

2. Guardian News and Media Ltd (2013) ‘M&S: doing the right thing leads to change – for the better’ (online) (viewed 5th December 2013). Available from: http://www.theguardian.com/sustainablebusiness/best-practice-exchange/marks-and-spencer-change-better

3. Incisive Media Investments Ltd (2013) ‘M&S Plan A sustainability savings reach £135m’ (online) (viewed 5th December 2013). Available from: http://www.businessgreen.com/bg/news/2273234/m-splan-a-sustainability-savings-reach-gbp135m

4. Marks & Spencer PLC (2013) ‘MARKS & SPENCER BECOMES THE FIRST MAJOR COMPANY TO SIGN UP TO UNICEF’S NEW CARBON OFFSET PROJECT’ (online) (viewed 5th December 2013). Available from: http://corporate.marksandspencer.com/investors/press_releases/marks-and-spencerbecomes-the-first-major-company-to-sign-up-to-unicef%E2%80%99s-new-carbon-offset-project

5. Marks & Spencer PLC (2013)2 ‘Annual report and financial statements 2013’ (online) (viewed 5th December 2013). Available from: http://corporate.marksandspencer.com/documents/publications/2013/annual_report_2013.pdf

6. Marks & Spencer PLC (2013)3 ‘Plan A Report 2013’ (online) (viewed 5th December 2013). Available from: http://corporate.marksandspencer.com/documents/publications/2013/plan_a_report_2013.pdf


Critical Analysis of M&S Investor Relations - Corporate Communications Essay