The Men Who Run HSBC

LONDON -- Management can make all the difference to a company's success and thus its share price.

To me at least, the best companies are those run by talented and experienced leaders with strong vested interests in the success of the business, held in check by a board with sound financial and business acumen. On the other hand, some of the worst investments to hold are those run by executives collecting fat rewards as the underlying business goes to pot.

In this series, I'm assessing the boardrooms of companies within the FTSE 100. I hope to separate the management teams that are worth following from those that are not. Today I am looking at HSBC (LSE: HSBA.L  ) , yet another FTSE 100 company mired in controversy.

Director

Position

Douglas Flint Chairman
Stuart Gulliver Chief Executive
Iain MacKay Finance Director

HSBC's board has three executive directors (including an executive chairman) and 14 non-execs.

A former accountant, Douglas Flint joined HSBC as finance director in 1995 and was elevated to Chairman in 2010 when Stephen Green stepped down to become Trade Minister in the coalition government. That was something of a deviation from HSBC's tradition of bumping its CEOs up to Chairman.

Guru
Flint was seen as a safer pair of hands than former CEO Mike Geoghegan. Made a CBE in 2006 for his services to the finance industry, he has served on several high-level reviews and is a guru on the subject of bank regulation. Previously a non-exec of BP for six years, he is tipped as an outside candidate to be the next Bank of England Governor.

Stuart Gulliver's appointment as CEO coincided with Douglas Flint's appointment. A career HSBC banker, he has worked mostly in investment banking, latterly head of that division. His success at building HSBC's Asian markets business, strong Asian connections, and deft avoidance of losses in the investment banking division in the 2008 financial crisis, are said to have been major factors in his appointment.

Replacing Douglas Flint as FD in 2010, Iain MacKay is a career accountant who joined HSBC in 2007.

The non-execs include Sandy Flockhart, a career HSBC banker who is retiring at the end of the month to fight cancer. The other non-execs are independent, and cover a broad spectrum of geographical and sectoral experience.

I analyze management teams from five different angles to produce an overall verdict. Here's my assessment: 

1. Reputation. Management CVs and track record: Prestigious chairman, experienced CEO. Score 4/5
2. Performance. Success at the company: Execs in top posts only since 2010. Score 3/5
3. Board Composition. Skills, experience, balance: Good skills, but insiders have the top jobs. Score 2/5
4. Remuneration. Fairness of pay, link to performance: 10% vote against remuneration report. Score 3/5
5. Directors' Holdings, compared to their pay: Gulliver has 26 million pounds of shares, other directors substantial. Score 4/5

Overall, HSBC gets 16 out of 25, a respectable score.

Flint and Gulliver have (so far) avoided calls for their resignations over the bank's U.S. money laundering offences. Arguably, the extent of the failures is a result of HSBC's strong managerial culture which favors recruitment from within. It builds a cadre of like-minded and loyal executives, but not one that is very open to external scrutiny.

However several of the U.K.'s struggling banks could envy HSBC's top team.

Buffett's favorite FTSE share
Let me finish by adding that legendary investor Warren Buffett has always looked for impressive management teams when pinpointing which shares to buy. So I think it's important to tell you that the billionaire stock picker has recently acquired a substantial stake in a prominent FTSE 100 company.

A special free report from The Motley Fool -- "The One UK Share Warren Buffett Loves" -- explains Buffett's purchase and investing logic in full.

And Buffett, don't forget, rarely invests outside his native United States, which to my mind makes this British blue chip -- and its management -- all the more attractive. So why not download the report today? It's totally free and comes with no further obligation.

Are you a sophisticated investor hoping to profit from this uncertain economy? We urge you to read "10 Steps To Making A Million In The Market" today -- your wealth could be transformed. Click here now to request your free, no-obligation copy. The Motley Fool is helping Britain invest. Better.

Further Motley Fool investment opportunities

Tony has shares in HSBC but no other company mentioned in this article. The Motley Fool has a disclosure policy.
We Fools may not all hold the same opinions, but we all believe that
considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.


Read/Post Comments (1) | Recommend This Article (0)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On July 26, 2012, at 7:18 PM, 1newdelhi wrote:

    My Shame of being a shareholder of HSBC Holdings Plc and the Board of Directors.

    By

    Michael Mason-Mahon

    Mr Flint (Chairman), Mr Gulliver (CEO), Lord Green (ex-Chairman), Michael Geoghegan (ex-CEO), Rona Fairhead Board Director (CEO FT Group) and Mr Sam Laidlaw Board Director (CEO Centirca) and the rest of the Board of Directors of HSBC Holdings Plc.

    The Penalty should be a $ 4 Billion Fine and Suspend their Banking Licence for 1 year.

    Should criminal action be taken against the above people? Has Mr Flint and Mr Gulliver brought their office into disrepute?

    As Mr Flint was the Finance Director at the time and now as Chairman, should Mr Flint be held responsible for this criminal behaviour?

    What are our Board of Directors doing besides staying silent, is this their Courageous Integrity or is it Faint heartedness (Cowardice)?

    Will Mr Flint do the right (as per HSBC Values see page 9 Annual Report) and resign?

    Will Mr Flint restore some of the reputation of HSBC (he talks about so much) and resign today?

    At the age of 55 these people have made me ashamed not only to be British, ashamed to be a human being, by their actions and inactions. Please go to youtube: stop cheating bankers

    Their treatment of people in India, I have found to be horrendous and disgraceful, it is my personal belief a criminal investigation should take place, concerning the behaviour of and Mr Flint (Lord Green ex-Chairman) also the Board of Directors of HSBC Holdings Plc and The Hongkong and Shanghai Banking Corporation Limited in India.

    In 2010 I sent a letter to the Board of Directors stating the very serious allegation being made by customers were true.

    When myself and others complained to the FSA about Mr Flint providing false information to shareholder, not telling the truth about complains in India (Does this make the Chairman a liar?)

    Richard Hennity General Counsel HSBC Holdings Plc, reply to questions by MP Teresa Pearce, this part of his reply in question four.

    (We are not aware of any complaints being made about HSBC India to the FSA except by a shareholder activist called Michael Mason-Mahon.)

    Why would HSBC Holdings Plc allow/accept an activist to represent their own customers?

    Their customers want my help because they cannot trust this Organisation.

    It is my personal belief that Mr Flint as Chairman has very serious problems with telling the truth, even when he is given the truth he will still not tell the truth.

    My question is simple should any decent society have to accept the following behaviour, money laundering, miss selling to the elderly, threatening to ruin people's lives if they do not pay, falsely registering people with CIBIL and taking money which they are not entitled to?

    Should any decent society have to accept the behaviour of HSBC Holdings Plc, Mr Flint (the Chairman) and the Board of Directors Lord Green (ex-Chairman), Michael Geoghegan (ex-CEO)?

    This is why I am ashamed to be a human being, because what right has anybody to act in this manner to a innocent human being?

    I am not saying it is only HSBC, you can read about other companies but I do have a lot of experience with HSBC Holdings Plc and it subsidiaries.

    Kind regards

    Michael Mason-Mahon

    Mobile: 0044 7834763544

    E-mail: ckmdm@aol.com

Add your comment.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 1959507, ~/Articles/ArticleHandler.aspx, 10/24/2014 9:57:45 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement