HSBC

Topics: Board of directors, Chairman, HSBC Pages: 9 (2708 words) Published: March 10, 2015
HSBC: Who’s the Boss?

HSBC: Who’s the Boss?
Case Overview
In September 2010, the business world was shocked by a public boardroom debacle at HSBC. Incumbent Chairman, Stephen Green, had announced his pre-mature departure from HSBC ahead of schedule, putting HSBC’s succession plan into the spotlight. An unforeseen and public power struggle ensued, with speculation as to whether incumbent CEO Michael Geoghegan or one of several other possible candidates would get the top job. The chaotic succession process undermined HSBC’s stellar reputation for smooth management succession, and damaged the credibility of the board. The objective of this case is to allow a discussion of issues such as the importance of board and senior management succession planning and what it entails, the difference between a Chairman’s and CEO’s roles, attributes of a good Chairman, and whether former senior executives should become board chairmen.

HSBC: A Model of Smooth Succession
HSBC has a long history of smooth board and senior management succession underpinned by clear succession plans. Regular review of these plans by independent non-executive directors also serves to strengthen its robustness.

This is the abridged version of a case prepared by Apple Goh, Chidambara Thanu, Mabel Koh, Lew Karxieu, Oh Kai Li and Song Huizhen under the supervision of Professor Mak Yuen Teen and Dr Vincent Chen YuShen. The case was developed from published sources solely for class discussion and is not intended to serve as illustrations of effective or ineffective management or management. The interpretations and perspectives in this case are not necessarily those of the organisations named in the case, or any of their directors or employees. This abridged version was edited by Rachel Goh Yi Ling under the supervision of Professor Mak Yuen Teen.

Copyright © 2013 Mak Yuen Teen and CPA Australia.

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The succession process for the Board Chairman position involves extensive benchmarking against external candidates to ensure its internal candidates are up to standard and not simply chosen by virtue of their insider status. This seeks to ensure that the best candidate is chosen - one who has the capacity for strategic thinking, authority to run the board, and personal standing to represent HSBC externally. Institutional shareholders are consulted with respect to the succession plan, in addition to an independent search process for potential candidates.

HSBC’s past successions for the Board Chairman position have been low key, without major disruptions to the business or public outcry. Successions have also been traditionally consensus-driven, with the succession receiving unanimous support from the board of directors.

Overhauling HSBC’s Model of Succession
In May 2006, Michael Geoghegan replaced Stephen Green as CEO of HSBC, while Green was promoted to Chairman. Despite executing another smooth CEO-to-Chairman hand-over1, HSBC was criticized for its tradition of promoting its CEO to Chairman, as this was perceived to impair the Chairman from independently and objectively monitoring the company. The handover was thrown into focus in part due to a climate of growing focus on corporate governance.

The roles at HSBC had traditionally been such that the Chairman functioned more as a CEO, while the CEO served as the deputy. Following the handover, Green concurred with governance critics that the operational management and oversight roles should be separate and distinct. He spent the next few years of his term as Chairman taking significant steps to re-define these two roles2, transferring the responsibility for strategy development from Chairman to CEO in 2009 and taking on more of a monitoring and ambassadorial role as Chairman. Besides paving the way to a more palatable corporate structure within the bank, these actions emphasised HSBC’s renewed commitment to corporate governance.

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HSBC: Who’s the Boss?

The End of an Era of Smooth...
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