HSBC late Friday announced a shakeup of its top leadership that was sparked by the nomination of chairman Stephen Green to a government post earlier this month. However, the reshuffle became a lot more dramatic than initially perceived when CEO Michael Geoghegan announced his resignation, leaving the board with not one, but two key positions to fill.
This opened up for a promotion of Asia veteran Stuart Gulliver to CEO, a position that he will take up on January 1. In a continuation of Geoghegan’s relocation to Hong Kong in February this year, Gulliver will return to this former stomping ground for his new job after six years in London. Subject to regulatory approvals, he will also be appointed chairman of The Hongkong and Shanghai Banking Corporation Limited, the Hong Kong-based arm of HSBC, which locally is still known at Hongkong Bank. Gulliver, who has spent 30 years with HSBC, is currently chairman for Europe, Middle East and global businesses and has been an executive director since 2008.
HSBC also named Douglas Flint, the bank’s chief financial officer since 1995, as its new chairman. He will succeed Green following the board meeting on December 3. As reported earlier, Green, who has been with HSBC for 28 years and took over as chairman in 2007, is stepping down following a call by UK prime minister David Cameron to become minister of state for trade and investment in January 2011.
Geoghegan has supposedly announced his resignation after being passed over for the chairman’s job. London-based media late last week described a behind-the-scenes wrangling for the position that involved primarily Geoghegan and John Thornton, a former Goldman Sachs banker who has been a non-executive member of HSBC's board since 2008. It has been a tradition for HSBC to groom its CEO to become the next chairman, making the decision to look beyond Geoghegan, who has spent the past 37 years with HSBC, an unusual one.
However, in its announcement of the leadership changes, HSBC denied any form of a power struggle and said it had been Geoghegan’s suggestion, upon Green’s decision to step down earlier than planned, to accelerate the management succession plan and appoint his successor now, so that a new leadership team would be in place in 2011.
“As the senior independent non-executive director who has led this process, I can confirm that [Geoghegan] has always wanted to do what is right for HSBC and supported putting the new top team in place at an early stage. He has behaved with great integrity throughout. Any suggestions to the contrary are unfounded,” said Simon Robertson, a senior independent non-executive director who as a member of the nomination committee was put in charge of the search for a new chairman.
HSBC also noted that the appointment of Flint, who has been leading the bank’s interactions with regulators at the board level, was a unanimous decision by the board and comes after discussions with a number of major institutional shareholders. It was made after taking into account a number of factors, including “the need to contribute to the unprecedented regulatory and public policy debate on the future shape of the banking industry, in particular, systemically important financial institutions operating globally with a universal banking model; the full-time demands of this engagement and the personal standing to represent HSBC at the highest levels; a deep understanding and experience of international financial services; and extensive experience of board governance and stakeholder engagement”.
The appointment of Flint also follows another long-standing HSBC principle, namely to elevate internal talent to the chairman's job, rather than to hire externally as is the practice at many other UK banks.
Flint will receive an annual salary of £1.5 million ($2.4 million) and an allowance equal to 50% of his salary to fund personal pension arrangements, but will not be entitled to receive any bonus or share incentive awards. Gulliver will be paid a basic annual salary of £1.25 million and the same allowance as Flint, as well as “the normal” housing and other benefits associated with expatriate living in Hong Kong, according to the HSBC announcement.
Geoghegan will step down as CEO on December 31 and will formally retire at the end of March, 2011. However, he will also have a three-month consultancy agreement with HSBC from April onwards.
Gulliver was one of the front-runners to succeed Geoghegan and, contrary to the current CEO who is believed to have relocated to Asia quite reluctantly, Gulliver told FinanceAsia earlier this year that he would welcome a return to Hong Kong, which he still regards as his home.
This is where his career began back in 1980 when he joined the bank's prestigious graduate programme of international managers, and it is where he cemented his role as a member of the bank’s leadership as head of treasury and capital markets from 1994 to 2002. In this role and against the backdrop of the Asian financial crisis, he led one of the swiftest and most sustained profit increases in HSBC's 145-year history. As a result his was called back to London to replicate his highly profitable Asian strategy across the rest of the bank's global corporate, investment banking and markets division. He was appointed to his current role as chairman of the bank’s overall businesses in Europe and the Middle East earlier this year.
According to the HSBC announcement, Gulliver has been responsible for managing complex risks for many years and shepherded and enhanced the group’s liquidity through the economic crisis.
Sandy Flockhart, currently chairman of personal and commercial banking, will replace Gulliver as chairman for Europe and Middle East and will also add Africa, Latin America and commercial banking to his remit.
Flint’s job will effectively be taken over by Iain Mackay who will be appointed group finance director. Mackay is currently CFO for Asia-Pacific. And in a further appointment, Simon Robertson will assume the role as deputy chairman, while retaining his role as a senior independent non-executive director to the board.
