Marks & Spencer sparked a furious reaction from big institutional investors yesterday after announcing that it was combining the roles of chairman and chief executive to keep Sir Stuart Rose at the business until 2011.

Sir Stuart will take on the new role of executive chairman on June 1, with Lord Burns stepping down as the nonexecutive head of the board.

Lord Burns insisted that the shake-up should be welcomed by shareholders because it allowed M&S to keep Sir Stuart while developing a “next generation” of leaders.

Sir Stuart, who had been widely expected to leave next spring, said that the move was the best for the business. He said: “If I was to go it would be hard to identify a successor early.”

However, leading institutions said that the move was a clear breach of corporate governance best practice. The Association of British Insurers (ABI) demanded an explanation and Legal & General, Marks & Spencer’s second-biggest shareholder, rounded on the board.

Mark Burgess, head of equities for Legal & General, said: “As set out in the Combined Code we believe strongly in the separation of the roles of chairman and chief executive, believing this allows a much needed balance in the boardroom and prevents the potentially damaging concentration of power. As such, we believe today’s announcement from M&S is unwelcome.”

Peter Montagnon, the head of investment affairs for the ABI, said: “The appointment raises some pretty fundamental concerns for our members. They have a lot of work to do to persuade people this is the right approach.”

The announcement comes as Sir Stuart endures his toughest spell in his four years in charge of M&S. He joined to fend off a potential takeover bid from Sir Philip Green and the success of his turnaround plan saw the share price hit a high of 749p last year.

The shares have since fallen nearly 50 per cent, with M&S one of the biggest losers on the high street over Christmas. M&S closed down 3p at 375p yesterday.

Under the management shake-up Sir David Michels will be promoted to deputy chairman and Ian Dyson will assume part of Sir Stuart’s responsibilities along with the title of group finance and operations director. Kate Bostock, the head of womenswear, will join the board as director of clothing along with Steven Esom, the former Waitrose managing director, who will be given the title of director of food. Steve Sharp continues as executive director of marketing. A number of senior managers are leaving, including Guy Farrant, director of retail.

Lord Burns said that four major shareholders backed the reshuffle plans. He added: “I’ve been talking to Stuart now for at least a year about the whole question of what was going to happen beyond 2009. This was the best way to take it forward.

“He was not attracted by the idea of just rolling things forward with nothing really changing.”

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