Rocky times for Sir Ken

Analysis By Will Smale BBC News business reporter

Sir Ken was knighted in 2000 for services to food retailing

Sir Ken Morrison has good reason to be a little miffed at present.

The 73-year-old chairman of supermarket group Morrisons, he has just survived a vote of confidence at its annual general meeting.

That 10.7% of investors voted against him continuing in the job must have been particularly galling for Sir Ken, since he has successfully led the company for 49 years, transforming it from a small Yorkshire business into the UK's fourth largest supermarket group.

Today it has more than 400 stores across the country, and until last year had never issued a profit warning.

Yet in business you are only ever as good as your most recent set of results, and since last year, Morrisons has issued no fewer than four profit warnings.

Sir Ken, who was knighted in 2000 for services to food retailing, might once have been seen as one of the stars of the supermarket sector, but not any more.

Difficult takeover

So why have things soured so much for Sir Ken and Morrisons?

MORRISONS FACTS Formed by William Morrison, Sir Ken's father in 1899 Established and still based in Bradford Sir Ken takes the helm in 1956 Goes public in 1967 Sir Ken relinquishes MD role in 1997 Joins FTSE 100 in 2001

In a word - Safeway - and Morrisons' �3bn takeover of its former rival back in spring 2004.

It looked like a great deal at the time and a real coup on the part of Sir Ken.

Not only was Morrisons taking over a bigger company, but it had successfully sneaked in ahead of the larger supermarket firms, Tesco, Asda, and Sainsbury's, who all seemed to have been caught unawares.

Analysts also applauded the takeover because it represented an almost perfect geographical fit.

While Morrisons was big across the north of England, Safeway had the majority of its stores in the south.

And as Morrisons had always been so well run, the coming together should have been pretty seamless.

However, the merger quickly started running into trouble.

Complicated by a different accounting system at Safeway, Morrisons discovered that merging the two businesses was a lot more difficult, expensive and time consuming that it first envisaged.

Some critics also said that former Safeway shoppers were not very impressed with their first experiences of Morrisons products, suggesting that customers in the south of England simply wanted different products than those in the north. Fewer pies, more sun-dried tomatoes was the argument in its simplest form.

Personal criticism

But why has Sir Ken been singled out for criticism rather than the whole Morrison's board?

Morrisons is now the UK's fourth largest supermarket group

Simply because although Sir Ken and his family only own 18% of the firm's shares, he has always had his hands firmly on the helm.

Critics said that while Sir Ken had always been a little gruff and autocratic, investors were prepared to ignore this during the good times, Now things are more tricky, his leadership style is under more scrutiny.

They also complained that Sir Ken did not have enough independent directors on the board.

It now appears that Sir Ken's retirement could be just a year away.

Before Thursday's annual general meeting it was announced that Sir Ken is to step back from day-to-day decision making at the firm.

And in answer to the criticism of his apparently autocratic style, Morrisons is continuing to search for four new independent directors to join the board.

Whatever the extent of the current difficulties at the supermarket, Sir Ken's legacy and achievement in turning Morrisons into a national chain and household name can never be taken away from him.

And when he does eventually stand down from the company, he can look forward to a retirement with an estimated personal fortune of �1.1bn.

E-mail this to a friend

Printable version