Sainsbury's appoints Sir Ian Prosser

J Sainsbury yesterday announced that Sir Ian Prosser will become its new non-executive chairman next year, a decision that angered some of the struggling supermarket group's largest institutional shareholders.

One major institution, which declined to be named, said: "We were surprised to hear of his appointment. We have a number of reservations and we have contacted the company with a view to discussing these reservations."

It is understood that some investors are unhappy about Sir Ian's track record when he was chairman of Six Continents, the leisure and hotels company formerly called Bass. They argue that, far from delivering shareholder value, he was very slow to act upon their demands to demerge the group.

Another noted: "He was always regarded as an autocrat and one of the last in the FTSE 100 to split his role as chairman and chief executive." Sainsbury shares yesterday fell 7.25 to 281.5p.

Two years ago, institutional shareholders also protested against his mooted appointment as chairman of Standard Chartered, the emerging markets bank. Sir Ian later withdrew his candidacy.

It is understood that Sir Ian's appointment was not discussed with the rival factions of the Sainsbury family, which speak for 38pc of the company's shares.

Sainsbury's, which last year was overtaken by Asda as the country's second largest supermarket group after Tesco, said that Sir Ian, 60, will become its non-executive deputy chairman from March 29.

As previously announced, chief executive Sir Peter Davis will become chairman, succeeding Sir George Bull, who is retiring from the board. Justin King, the former Marks & Spencer food director, takes over as chief executive on that date.

Sir Ian, who becomes senior non-executive director and chairman of the nominations committee, will succeed Sir Peter as Sainsbury's chairman at the company's annual meeting in July 2005.

Sir Ian, who amassed a £10m pension pot during his 34 years at Bass and Six Continents, paying him a pension of £600,000 a year, will be paid £150,000 a year as deputy chairman, rising to £350,000 a year when he becomes Sainsbury's chairman.

He is also non-executive deputy chairman at BP, where he chairs the audit committee, and is senior independent non-executive director of Glaxo Smithkline. Referring to those roles, he said: "I hope that having that background will be a great support. It's not a too heavy workload."

Sir Ian, who insisted that he delivered shareholder value during his 16-year reign as Bass and Six Continents chairman, added: "Sainsbury's has got a tremendous brand name and interfaces with the customers. That's what I find very exciting. Intellectually I liked the idea."

He described Mr King as a "tremendous enthusiast" and said he was looking forward to working with him. One analyst said: "Sir Ian's appointment seems to be greeted with disappointment from almost everyone."

He added: "The big fear is that once Justin gets his feet under the table, he'll conclude that Peter's strategy isn't working and it must change. That will lead to a clash between Justin and Peter, and Sir Ian will have to step in to mediate between the two. Is he strong enough to do that?"