HSBC Chief Geoghegan Should Spurn Any Offer of Chairmanship, Analysts Say
Chairman Stephen Green’s decision this week to join the British government without a successor being named, prompted speculation among investors about a replacement. Geoghegan or former Goldman Sachs Group Inc. partner John Thornton, head of HSBC’s North American unit, may take the role, says Colin Mclean, who manages 650 million pounds ($999 million) including HSBC shares at SVM Asset Management in Edinburgh.
“Thornton would be the best choice as chairman, leaving Geoghegan focused on changing the emphasis back to emerging markets,” said Christopher Wheeler, a London-based analyst at Mediobanca SpA. “Thornton’s appointment, presumably as non- executive chairman, would be universally accepted as positive.”
Geoghegan, a 37-year HSBC veteran, has worked all over the world for the London-based bank. After stints in Asia and the Middle East, he ran the South American unit from 1997 to 2003. Geoghegan increased his executive powers in February when he took control of strategy as part of a move to Hong Kong to sharpen the bank’s focus on Asia.
It would be better for HSBC if Geoghegan stayed where he was “and a non-executive took up the role of chairman,” said Mike Trippitt, an analyst at Oriel Securities Ltd. in London who has an “add” rating on the stock. “You would get continuity in the business.”
Geoghegan, 56, may not want the job anyway, Trippitt said. “It is a more ambassadorial role,” while “Geoghegan’s strengths are in rolling up his sleeves and getting on with the business.”
In a statement issued after Green’s announcement on Sept. 7, Geoghegan said, “I continue to run the company.” He did not say whether he would apply for the chairman’s job. New York- based Thornton didn’t respond to a request for comment.
Thornton, 56, has been chairman of HSBC’s North American unit since 2008 and also has experience of working in Asia. During his 23-year career at Goldman, he did stints as chairman of its Asian unit from 1996 to 1998 and was a non-executive director of Industrial and Commercial Bank of China from 2005 to 2008.
Geoghegan is favorite to succeed Green as chairman, according to spread-betting firm Cantor Index, which is offering odds of 4-6 on his appointment, with Thornton as second favorite at 2-1. The chairman of HSBC’s Chinese business, Vincent Cheng has odds of 6-1, Cantor Index said. Cheng joined the bank in 1978, and was made executive director in 2008.
Green’s replacement as chairman will be announced by the end of the year, HSBC said in a statement on Sept. 7. A spokesman for the London-based lender declined to offer further details when contacted by Bloomberg News.
The bank’s nomination committee, which will propose a successor to the board, includes non-executive directors Simon Robertson, 69, and Rona Fairhead, 48, both of whom were named this week as potential candidates by the Wall Street Journal. MWM Consulting has been hired by HSBC to advise on Green’s replacement, according to a spokeswoman at the recruitment company.
Mervyn Davies, the former chairman of Standard Chartered Plc and former trade minister, is a potential candidate for chairman, the Financial Times said this week. Investment banking head Stuart Gulliver, Sandy Flockhart, the head of retail and corporate banking, and Finance Director Douglas Flint were named by the newspaper as potential replacements for CEO Geoghegan, were he to become chairman.
HSBC spokesman Adrian Russell declined to comment on potential personnel moves affecting individual employees before any formal announcement. Davies was not immediately available to comment, a spokesman said.
Promoting CEOs to the chairman’s post was discouraged in a British government-commissioned review of corporate governance in 2003. Two years later, HSBC promoted Green to chairman from CEO, explaining the move was necessary “because the company is so large,” a spokesman said at the time.
“We are not supportive of chief executives going to become chairs of the same company,” Pensions Investments Research Ltd., which advises investors on corporate governance, said yesterday.
It pointed to “potential difficulties arising from a former CEO not having sufficient detachment to objectively assess executive management and strategy, or obstructing the ability of the new chief executive” to develop different policies.