HSBC faces inevitable succession row after Geoghegan quit rumours

CEO Michael Geoghegan has apparently threatened to quit if he isn't made chairman. Has HSBC made a rod for its own back?

by James Taylor
Last Updated: 19 Aug 2013

When HSBC chairman Stephen Green took a role in Government, the bank presumably hoped that appointing his replacement would be a quiet and painless process. So much for that: today's FT splashes the story that straight-talking CEO Michael Geoghegan has apparently threatened to quit if the bank doesn't make him chairman - something it seems they're reluctant to do. Losing both of its top two at once would obviously be a nightmare for HSBC, but perhaps they've only got themselves to blame. After years of promoting the CEO to executive chairman, contrary to all governance best practice guidelines, it's hardly surprising that a change of tack now will go down badly with the present incumbent...

The FT reports that Geoghegan reacted badly to being told that he was being passed over for the chairmanship - and suggested that he would be particularly miffed if the job went to John Thornton, the ex-Goldmanite who's the current favourite for the job. In the Evening Standard, MT contributing editor Chris Blackhurst has a slightly different take: his sources deny that Geoghegan threatened to throw his toys out of the pram and quit ('that's not his style', supposedly), but that he's 'waiting to see what decision the board makes'. Apparently he firmly believes the bank should continue to be run by an executive chairman; and if that happens, he'd be the obvious choice. You certainly can't imagine him hanging around to work under someone else.

The trouble is that the board - or maybe some of HSBC's big institutional shareholders - want the bank to belatedly embrace governance best practice and appoint a non-exec chairman. For the last 20 years, the chairman has effectively been the most powerful person in the business (hence appointing the ex-CEO made sense). So if HSBC decides now that it's time for the chairman to act more as an independent check on the day-to-day operations of the business, as led by the CEO - which is generally accepted to be the most reliable form of corporate governance - that's quite a change.

HSBC is refusing to comment on the rumours. But it's clearly now in a bit of a pickle. Geoghegan's been with HSBC for almost 40 years, and has worked for the bank all round the world; that kind of knowledge would be a big loss. Yet if it appoints an exec chairman over his head, we'd be very surprised if he stuck around. If it doesn't, and chooses a non-exec chairman instead, there's a risk he'll feel ignored (not to mention ruled out of a future elevation) and leave anyway. Yet if it does indulge him, it won't go down well with the governance lobby.

On the other hand, it's become increasingly clear that HSBC's horizons are shifting eastwards - as evidenced by Geoghegan's own recent relocation to Hong Kong. So perhaps it couldn't care less about UK best practice guidelines...

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