Morrisons Hires KPMG to Review Corporate Governance

(Bloomberg) -- Wm Morrison Supermarkets Plc has appointed KPMG to review its corporate governance following the resignation of two non-executive directors, according to people familiar with the matter.

Britain’s fourth-largest grocer wants KPMG to provide an independent assessment of the board’s processes and policies, according to the people, who asked not to be identified because the appointment hasn’t been made public.

Neil Davidson, previously the corporate compliance and responsibility committee chairman at Morrison, and Tony van Kralingen, the former remuneration committee chairman, resigned at the end of March. No specific reason was given by the grocer.

However, the Financial Times reported that the two non-executives had raised corporate governance complaints when they resigned. In particular, they had concerns about Chairman Andrew Higginson’s perceived closeness to David Potts and Trevor Strain, the chief executive and chief operating officers, respectively, the FT said. All three men previously worked together at Tesco Plc, Britain’s largest supermarket.

A new three-year remuneration policy was approved at the grocer’s annual meeting Thursday, though more than a third of shareholders voted against it, according to a company statement. Investors had previously raised concerns about executive pension contributions, which are currently set higher than those for Morrison’s wider workforce. In its latest annual report, Morrison said it was committed to reducing pension allowances for directors over the life of the new remuneration policy.

Neither Davidson nor Van Kralingen had made formal complaints about corporate governance at Morrison before submitting their resignation letters, one of the people said. Van Kralingen joined the Morrison board in 2017 after having held a senior supply chain position at SABMiller International. Davidson spent most of his career working for Arla Foods UK and joined the Morrison board in September 2015.

Corporate Governance

Davidson is also treasurer of the Independent Group for Change, a disbanded British political party, which was accused by auditors of the inappropriate destruction of financial documents in accounts filed at Companies House last month. A representative for Davidson said he disputes the auditor’s characterization of the political party’s record keeping, saying there was no impropriety. He declined to comment on Davidson’s resignation from Morrison or his views on its corporate governance.

Van Kralingen couldn’t be reached for comment. Morrison and KPMG declined to comment.

The March resignations came during a turbulent period for British grocers. The coronavirus led to a surge in stockpiling, which put immense pressure on supermarkets. Morrison had to hire an additional 25,000 workers to cope with demand and implement safety measures.

Potts and Strain have been credited with helping Morrison rebound from a low point in 2015, when the company was hemorrhaging sales to the German discounters Aldi and Lidl. Morrison’s sales growth had slowed before the pandemic-induced surge, indicating the turnaround may have been running out of steam.

Figures from Kantar Group Ltd., a grocery analyst, show that sales at Morrison jumped almost 10% in the 12 weeks ended May 27, fueled by the growth in demand during lockdown.

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