Marks & Spencer urged shareholders yesterday to back a controversial decision to elevate Sir Stuart Rose to the role of executive chairman as the retailer published a full explanation of the move and insisted that it had no alternative.

In a letter to investors, Lord Burns, the outgoing M&S chairman, argued that although some investors may be unhappy about the breach of usual corporate governance practice, the new boardroom structure was in the best interests of the business. He said: “The board has taken what it believes is the best decision for shareholders, cognizant of its prime objective to ensure the company’s ongoing success.”

A source close to M&S signalled that it believed that it had now drawn a line under the dispute, which has dominated the City for nearly four weeks. “This is our definitive position,” he said.

In addition to concessions revealed by Times Online on Wednesday, the letter to investors revealed that M&S is to recruit a second non-executive director to ensure a majority of independent directors on the board.

The retailer added that a £450,000 payout for Lord Burns would be made in 12 monthly instalments from June. They will stop if he finds a new role.

In the letter, Lord Burns detailed the concessions: .

— Sir Stuart will stand for re-election every year at the company's annual general meeting, starting this July

— His pay will remain £1.13million a year

— Two new non-executive directors will be appointed

— M&S will revert to having a separate chairman and chief executive once Sir Stuart's tenure as executive chairman ends in July 2011

— Sir David Michels will become deputy chairman and continue as a senior independent director.

Pirc, the corporate governance body, said that it still had serious concerns. Adam MacDougall, managing director, said: “We have a lot of clients champing at the bit on this, looking for remedies — and this letter doesn’t provide them. There is no significant justification for why he has to move up to executive chairman rather than just stay as chief executive.”

Peter Montagnon, the Association of British Insurers’ head of investment affairs, called for a period of reflection. He said: “It’s good that we have got an explanation to think about and discuss. Everybody is going to make up their own minds. The ABI is not in the business of making people’s minds up for them. This is a serious issue and we need to devote time to consider it.”

Legal & General, the second-biggest shareholder in M&S, declined to comment. The role of executive chairman flies in the face of corporate governance best practice, given concern about one person holding too much power in the boardroom.

Sir Stuart had been widely expected to step down as chief executive early next year, after five years with M&S. In the letter, Lord Burns said that it was clear that there were no internal candidates to replace him and that an external search would have been “an unwelcome distraction”, given the tough trading conditions.

Lord Burns said that the new role secured Sir Stuart’s services for an extra two years while allowing his executive team to take on more responsibility. He added: “The option to confirm that Stuart was leaving in 2009 and that we were starting the process of finding a new chief executive was not considered an attractive alternative.”

How they line up. . .

Rose-tinted

Paul Myners

A former M&S chairman. Known for influential reports on the effectiveness of institutional investors, the Guardian Media Group chairman finally broke cover this week to defend Sir Stuart Rose. He urged investors to remember that they were keeping his close friend for three more years. Mr Myners left M&S two years ago amid accusations that he was too close to Sir Stuart to be viewed as an independent non-executive director

Sir Richard Greenbury

Former M&S executive chairman.

The last person to lead M&S to annual profits of £1 billion, in 1997 and 1998, and the last to hold the dual role of chief executive and chairman for any notable period of time. His dominance of the boardroom was blamed for the retailer’s subsequent fall from grace, a point that infuriates him still. He keeps in contact with Sir Stuart Rose is a big supporter of the turnaround of M&S since Sir Stuart joined in 2004

Neil Woodford

Head of equities for Invesco Perpetual.

Became the first shareholder to state publicly his support for Sir Stuart Rose’s rise to executive chairman. Invesco’s statement fuelled rumours of a shift in sentiment in the investment community. Mr Woodford said that it was “entirely appropriate” for the M&S board to have taken the decision that it had about Sir Stuart

Thorn in the side?

Peter Montagnon

Head of investment affairs for the Association of British Insurers. One of the most influential figures in the City and outspoken on risks of poor corporate governance. He called yesterday for a “period of reflection”, but stopped short of accepting the explanation he had demanded from M&S this week. Was furious that M&S had not given any detail when it announced its plan to promote Sir Stuart. ABI members hold up to a sixth of shares traded on the stock market

Richard Buxton

Head of UK equities for Schroders. On holiday yesterday, but unlikely to be convinced by the answers given by Lord Burns, the M&S chairman. Mr Buxton turned the dispute over Sir Stuart’s future into crisis when he savaged M&S and its chief executive for setting an “appalling example” on corporate governance. He hinted that he would rather see Sir Stuart leave M&S than approve the reshuffle. The fund manager has 2 per cent of M&S

Peter Chambers

Chief executive of Legal & General Investment Management.

L&G refused to comment yesterday despite leading the opposition when M&S announced its plans three weeks ago. It was only given an hour’s notice of the reshuffle, despite being the retailer’s second-biggest shareholder. Mr Chambers stepped up the protest last week, saying that leading FTSE companies ought to adhere to the corporate governance guidelines

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