Non-executive directors of Marks & Spencer (M&S) are expected to veto any pay rise for Sir Stuart Rose as a result of his controversial elevation to the post of executive chairman.

The move comes amid growing criticism from leading institutional shareholders of the retailer’s actions in making Sir Stuart both chairman and chief executive, in defiance of corporate governance best practice.

Legal & General (L&G) and Schroders have condemned the proposal over the past week and it is understood that several other leading investors, including Fidelity, privately are supportive of their stance.

M&S, which has held meetings with a number of disgruntled investors in recent days, will seek this week to defuse further opposition by writing to all shareholders with a detailed explanation of its actions.

The company will reiterate its belief that retaining the skills of Sir Stuart is critical, particularly given the present difficult trading environment. The former Arcadia boss has made a commitment to stay with the company until July 2011.

Although M&S’s remuneration committee has yet to meet, it is understood that the outcry from investors effectively has ruled out any chance that the promotion will be accompanied by a pay rise.

Some investors have suggested that, as a concession, Sir Stuart should submit his name for reelection at the next annual meeting, to allow shareholders to put their views. However, the M&S board is understood to have rejected the idea.

M&S’s actions have provoked an unusually strong response from institutions. Peter Chambers, chief executive of L&G Investment Management, which holds 4.3 per cent, said last week: “We believe we have a moral responsibility to uphold corporate ethics in the UK and believe bellwether companies share this responsibility. We don’t believe M&S should be explaining why they are not complying. They should be complying.”

Richard Buxton, the head of UK equities at Schroders, which owns 2 per cent of the shares, went further, accusing M&S of setting an “appalling example” and casting doubt on its claims that it had widespread investor support for the boardroom shake-up.

Some shareholders have been critical of the role of Sir David Michels, the senior nonexecutive director and head of the nominations committee. The former Hilton Group chief executive is to become deputy chairman as part of the shake-up and has been cited as the leading candidate to succeed Sir Stuart as chairman when he eventually retires.

Some investors believe that Sir David is too close to Sir Stuart to be truly independent, although those who know the men insist that their links do not extend beyond a cordial working relationship. One source said: “David has a high regard for Stuart’s abilities but he is independent in the truest sense. He is the sort of bloke who will always tell it how it is.”

Analysts believe that the investor revolt has put paid to any hopes that the hotelier may have had of becoming chairman.

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