The Week in Breakingviews

The first HSBC chairman I interviewed was John Bond. Back in 2004, there was no question who was running?the institution that called itself “the world’s local bank”. The chairman’s word was final. Indeed, HSBC did not have a chief executive for the first 128 years of its existence. It only created the position in 1993, after moving its head office from Hong Kong to London.?

At the time, HSBC was known for smooth management succession. Bond had replaced William Purvis as chairman in 1998. When Bond stepped down in 2006, he handed the reins to Stephen Green, then the bank’s CEO. British institutional investors reluctantly put up with the transition, but let it be known that HSBC’s next chairman should be an outsider. Subsequent heavy losses on U.S. subprime mortgages reinforced their case.?

Not everyone got the message. When Green resigned in 2010 to become a UK trade minister, his successor as CEO, Michael Geoghegan, campaigned to become chairman. A vicious boardroom scrap ensued. Geoghegan departed, but the top jobs still went to HSBC insiders. Douglas Flint, previously the bank’s finance director, became chairman, while Stuart Gulliver took over as CEO. It was not until Flint stepped down in 2017 that HSBC appointed its first external chairman: Mark Tucker, the former boss of Asian insurance giant AIA.?

HSBC’s recent governance has been less stable. John Flint (no relation) lasted just 18 months as CEO before Tucker and the board pushed him out. Noel Quinn became interim boss before being given the job permanently in 2020. This week he announced his decision to retire, wanting to find a “better balance” between his personal and professional lives. Not everyone was convinced by this explanation: it was met with an outbreak of spontaneous laughter at Breakingviews’ morning meeting in London. But whatever the reason, Europe’s largest bank is very publicly searching for its next CEO. As my colleague Liam Proud observed, there’s a real risk of strategic drift.?

What’s the better model? On the one hand, most large companies probably benefit from?periodic injections of external management. On the other, big banks value continuity. I can’t think of many large financial institutions that have recruited a leader from outside their ranks when things are going well. On Wall Street, which has largely resisted pressure to separate the roles of chairman and CEO, firms mostly promote from within. The recent transition from James Gorman to Ted Pick at the helm of Morgan Stanley is an example of a handover so smooth it was almost boring.?

HSBC also has reason to favour an insider. One adviser calls?it “the most complicated bank on the planet”. It’s hard to imagine someone without deep experience of the lender quickly getting to grips with its $3 trillion balance sheet and 220,000 employees. Then again, if a bank is so elaborate that only a handful of people have the skills to run it, perhaps some radical simplification is overdue.?

Some things I learned from Breakingviews this week:?

Hong Kong’s stock market is up 20% from its January low.?

Annual home insurance premiums in Florida are now three times the U.S. average.?

Tuition fees accounted for just a quarter of Harvard University’s revenue last year.?

Vernon Hill, the former chairman of failed Republic First, sued the bank for using his dog Sir Duffield’s image in marketing materials.?

Chinese carmaker Xpeng’s new sub-brand, Mona, is short for Made of New AI.?