BREAKINGVIEWS-HSBC chair pick dances on megabank’s fault lines

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

By Liam Proud

LONDON, Dec 3 (Reuters Breakingviews) - After the appointment of Brendan Nelson as HSBC's HSBA.L, 0005.HK permanent chair on Wednesday, investors will be wrestling with two key questions. Why does the leader of the board of an Asia-focused bank have no obvious expertise in the region? And why did it take so long to get to this underwhelming endpoint? The answers reveal deep fissures in the $250 billion lender.

The best argument for Nelson, who has served as interim chair since October after Mark Tucker's departure, is that he is more knowledgeable about banking and UK directorships than the other two final candidates, George Osborne and Kevin Sneader. Neither the former British finance minister nor the Goldman Sachs GS.N Asia boss has much experience of a balance-sheet behemoth like HSBC. Nelson at least sat on UK lender NatWest's NWG.L board and chaired KPMG's global banking practice.

That's where the good news ends. His experience is UK-heavy, which is problematic since Hong Kong is HSBC's most important market, and navigating East-West tensions is a core task for the job. The issue is compounded by the fact that newish CEO Georges Elhedery had never worked in Hong Kong for HSBC before taking the top C-suite role. So the two key people at the bank arguably share a blind spot in the most important market.

Then there's Nelson's age. At 76, he'll turn 77 in July, which may explain why Elhedery felt confident saying on Tuesday that Nelson wouldn't want to do the chair role for a typical term of six to nine years. The CEO simply wasn't aware that his interim boss had thrown his hat in the ring on a permanent basis, according to a person familiar with the matter. Add it all together and it's a borderline farcical end to a slow-moving process. Picking Tucker's successor should have been top of the board's agenda at least as far back as July 2024, when it chose Elhedery as CEO.

One possibility is that Nelson is still an interim in all but name. In that case, the board could simply restart the search in a year or so, in the hope that someone more qualified is available. Investors would be right to challenge the board on whether senior independent director Ann Godbehere is the right person to lead that future search, given she lacks Asia expertise herself and has hardly delivered the goods first time around. Another question is whether Tucker did enough during his eight-year tenure to ensure a smooth succession at the top of the board.

Still, the bank's unwieldy structure deserves the bulk of the blame. Leading HSBC competently requires in-depth knowledge of everything from Chinese politics to UK mortgage hedges and Mexican trade finance. That's a tricky skill set to develop from the outside, and governance best practice frowns on choosing insiders. In other words, HSBC was lucky in 2017 to find Tucker, who was an available, external Brit with strong knowledge of Asian finance and Western banking. Unfortunately for the group's shareholders, lightning might not strike twice.

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CONTEXT NEWS

HSBC said on December 3 that it had appointed Brendan Nelson as chair. He has served as interim chair since October 1.

On December 2, CEO Georges Elhedery said that Nelson had expressed a desire not to do the chairman's job for six to nine years at the current stage of his career.

(Editing by Aimee Donnellan; Production by Streisand Neto)

((For previous columns by the author, Reuters customers can click on PROUD/liam.proud@thomsonreuters.com))