Green throws in the towel

SUDDENLY it is all over bar the shouting - but there will be plenty of that. Philip Green was an angry man as he dropped his bid for Marks & Spencer last night.

His fury is directed at the board and its advisers for refusing to come to the table in defiance of his claim to speak for up to 35% of the company.

The breaking point for Green appeared to be Marks' continued resolution not to open talks. But there will be scepticism about the suddenness of his withdrawal.

Marks will be vastly relieved, but its problems are not over. Green has retained the right to return to the fray within six months if anyone else comes in. Meanwhile, the board must answer to some big investors who will be very angry indeed.

Green cannot have been encouraged by the impressive display of loyalty earlier in the day by the 3,000 private investors who turned up at the M&S Annual General Meeting at the Royal Festival Hall.

You had the impression in Paul Myners and Stuart Rose of top executives in touch with their core constituency of customers, former employees and pensioners.

Winning the hearts and minds of the 333,000 private investors who have 20% of the votes was always going to be tough for Green.

But he appeared to be gaining momentum among the professional investment community, though it was difficult to judge just how much because of the huge turnover in shares in recent weeks. An assortment of primary brokers, hedge funds and arbitrageurs had bought a chunk of the emblematic retailer in the hope of collecting Green's 400p per share.

Green apparently spoke for 25% of the company's shares and he insisted that the new converts were 'traditional long-term investors'. In addition, he had 9% in the shape of contracts for differences - financial instruments which do not necessarily carry voting rights.

M&S, too, lobbied intensely for votes. Although by last night Rose had only publicly hooked Standard Life, he had hopes of bringing others including Investec and Legal & General to his side.

The board now has to justify to investors its stubborn reluctance to open the books to Green at £4 a share, which is likely to be far above where the shares end up today. One can understand the reluctance for commercial reasons (Green is a competitor through Bhs and Arcadia), but they have some persuading to do.

Marks has won the battle - and it was a memorable one - but it still has to win what may be a long war.

Audit gaps

NOT so long ago, in the wake of the Enron and WorldCom scandals, Britain's accounting bodies were insisting that such poor auditing practice could not happen here.

Our principle-based approach was supposedly far better able to distinguish unsound numbers than the rules-based approach in the United States. There was no need for a UK Sarbanes-Oxley to clear up matters.

The more we see of Mayflower and Jarvis - two companies where chasms have opened up in the balance sheet - the less valid the confidence of our accounting bodies looks.

At engineer Mayflower, where John Major once graced the board, the Accountancy Investigation and Discipline Board is going in to examine the work of PwC and Andersens, the former auditors.

The inquiry will be the first by the new independent regulator put in place to deal with allegations of misconduct by auditors.

It is looking increasingly likely that Jarvis could be next on the AIDB hit list.

Banks and investors are waiting for the release of a report by Deloittes, called in by the bankers to conduct a financial study of the business.

Among other things they can be expected to look at are how Jarvis's debts suddenly shot up to £230m and profits reports during the regime of Paris Moayedi, the former chief executive of the PFI contractor.

Ernst & Young have been auditors since 2000 when PwC resigned.

Deloittes were parachuted into the company in June by the banks in an effort to salvage the firm as the share price plummeted to new depths.

Unfortunately, the difficulties at Mayflower, Jarvis and before them MyTravel will do nothing to reassure investors in Britain's second rank of companies that audit and financial disclosure is as good as it has been cracked up to be.

The least we can expect from the new independent accounting inspectorate is a speedy conclusion to its deliberations - not the decade-long disciplinary procedures seen at Queens Moat and Polly Peck.