HSBC and another chaotic chair search

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In September 2010, while working as banking editor at the Financial Times, I wrote a story with the headline: HSBC chief Geoghegan threatens to resign. Michael Geoghegan was demanding promotion to president. A boardroom dispute and days of unseemly competition for the top two jobs ensued. There has been real damage to HSBC’s reputation for professionalism.

The fact that one of the world’s largest banks (and one of Britain’s most valuable listed companies) finds itself in a similar chaotic situation now, for the second time in fifteen years, is beyond belief.

Mark Tucker officially left his role as head of HSBC in September, after taking a new job as head of Asian insurer AIA months earlier. The board of directors has since been witnessing disagreements over who should replace him. This week he is due to hear presentations from two candidates – former Chancellor of the Exchequer George Osborne and Goldman Sachs Asia head Kevin Sneader, a former chancellor. A third candidate, veteran banker Najeeb Kharraj, recently withdrew.

How could it come to this? Tucker had been president for eight years, so he was close to the nine-year maximum under corporate governance standards. A responsible board was supposed to plan his succession to ensure a smooth handover without an oversight gap.

On one level, this reflects a worrying aerobic exercise and a shortage of strong chairs in British boardrooms. Within the banking sector this was clear. At Barclays, two successive chairmen backed former CEO Jes Staley even after evidence emerged about his historical ties to Jeffrey Epstein, convicted of child trafficking. At NatWest, former boss Howard Davies U-turned within hours, first backing and then sacrificing former chief executive Alison Rose, after a client confidentiality row involving Nigel Farage.

A more recent example, away from banking, is the governance fiasco at the BBC, where an editorial error in a TV documentary led to the resignation of the de facto chief executive, director general Tim Davie, after a weak, low-profile chairman failed to control a divided board.

Tucker, who started as HSBC boss in 2017, has certainly not been a weakling. Generally admired for his no-nonsense work ethic, he nonetheless left a mixed record. The stock price rose during his tenure — by about 40 percent — but it underperformed its peers, and Tucker never seemed happy with his CEO picks. (He made three of them.) He must also bear the blame, at least in part, for the current chaos in the caliphate.

When it comes to appointing a chairman, British rule dictates that it is the second person on the board, the “senior independent director,” who should run the process. But a good boss will have paved the way by appointing one or two credible candidates as non-executives in previous years.

Back in 2010, HSBC’s John Thornton, a former Goldman Sachs partner, was appointed to the board as a potential successor to outgoing chairman Stephen Green. But his aloof style displeased other directors, making what should have been his natural rise impossible. Meanwhile, as CEO, Geoghegan was not liked enough by the board to be appointed chairman. Hence the cake battle.

In the latest reinstatement, Tucker has added two senior figures to the HSBC board in 2023 – Anne Godber, a veteran finance director and non-executive, as senior independent director and acting chairman Brendan Nelson, an accountant.

But neither was seen as a long-term option for the top job. According to people close to the board, there was hope that Tucker would remain in his position longer, perhaps beyond the nine-year “comply or explain” limit on board membership, by explaining to regulators why this had to happen, rather than complying with the standard. These efforts failed, and Tucker and organizers may have been equally opposed to the idea. Either way, its rapid exploration of other options, and AIA’s surprise offer, left HSBC in the lurch.

At the same time, Godbeer also failed to understand the challenge of finding a credible third party from within or outside the bank. Even if Tucker ended up leaving a year earlier than originally intended, a succession plan should have been put in place.

After a late struggle to find a replacement chair, Osborne now appears to be the favorite for the role. He brings with him an impressive communications record from his six years as chancellor, and enjoys strong connections, particularly in Washington and Beijing, where he sought a close trade alliance between the UK and China while in office. But his knowledge of banking is weak – so weak that regulators would certainly think twice about approving him, whether he is a former adviser or not.

Even if CEO George Al-Hadiri is well-respected, the slow and desperate appointment of a non-banker as head of Europe’s largest bank is not a recipe for success or good governance.

patrick.jenkins@ft.com