HSBC Considers Payouts, New Roles for Execs Who Missed CEO Job: Sources

HSBC is reportedly considering financial payouts and new roles for executives who were contenders for the CEO position but were not selected. This move aims to retain top talent and restructure the leadership team. Sources indicate that the banking giant is focused on maintaining stability and rewarding key executives to ensure their continued contribution to the company's success.

Boston Brand Media brings you the latest news - As HSBC (HSBA.L) prepares to appoint its third CEO in nine years, the bank is considering financial incentives and reallocating key projects to retain those who miss out on the top job, according to two sources familiar with the discussions.

Europe's largest bank may reassign its technology transformation and innovation strategy, currently overseen by CEO Noel Quinn, to someone other than his successor, said the sources, who requested anonymity.

HSBC is expected to choose its new CEO from internal candidates, with an announcement possibly coming this month, according to two other sources.

The bank aims to retain top talent amid internal changes and challenges, such as tensions between Britain and China, its key markets, and a sluggish share price performance.

Three shareholders, including two of HSBC's 20 largest, expressed concerns to Reuters that the CEO appointment might lead to further management upheaval.

For example, if Chief Financial Officer Georges Elhedery is chosen as CEO, the CFO role would see its third occupant in less than three years.

"Promotions can create gaps elsewhere, and this can be problematic if not managed well," said one investor.

Reassigned projects might come with significant pay incentives, as they are a major part of Quinn's key performance indicators. Quinn's total pay package doubled in 2023 to 10 million pounds ($12.8 million).

"HSBC is conducting a robust process to find its next Group Chief Executive, considering both internal and external candidates. We will update the market as appropriate," said a spokesperson.

The nominations committee is likely to choose from executives including CFO Elhedery, wealth business head Nuno Matos, Europe boss Colin Bell, and investment bank chief Greg Guyett, according to media reports.

Chairman Mark Tucker is also set to step down by 2026. "It is unusual for a large bank like HSBC to undergo three major changes so rapidly," said Octavio Marenzi, CEO of consulting firm Opimas.

These changes follow Quinn's restructuring of the bank, which involved dropping underperforming businesses in markets like the United States, Canada, and France, and reducing upper management ranks.

A key task for Quinn's successor will be to revive the bank's share price. Since Quinn took over in August 2019, HSBC stock has gained only 4%, compared to a 54% rise in the European banking sector index and an almost 14% increase in the UK sector index.

RIGOROUS SELECTION

HSBC reported a record annual profit of $30 billion in 2023, but challenges persist. The bank faces increasing geopolitical tensions between Britain and China, which together contribute to more than half its profit, as well as a projected decline in global central bank interest rates, which had previously boosted revenues as they rose.

"There are few candidates capable of managing both the political and human aspects of the role," said a second investor, who wished to remain anonymous in accordance with the policy on commenting on CEO selection processes.

Those who were passed over for the CEO role in the past have sometimes left the bank. For instance, former wealth business head Charlie Nunn, who was considered for the CEO position before Quinn, left in November 2020 to become CEO at Lloyds, according to a former senior executive. A spokesperson for Nunn declined to comment.

The selection process not only highlights HSBC's top talent but also makes those not chosen potential targets for headhunters, the former executive noted.

Reuters was unable to determine the size of the financial incentives being discussed. "Increased pay for better retention below the C-suite level would be beneficial," a third HSBC shareholder commented. "Ensuring stability and continuity for the bank during the CEO transition is crucial."

Ping An Asset Management, HSBC's largest investor, declined to comment.

Kyle Samuels, CEO of Creative Talent Endeavors, which advises banks and venture capital firms on staff retention, said internal promotions can be complex. "The Chairman needs to communicate decisions transparently and offer significant new roles or projects to those not selected. Immediate recognition and rewards can also help," said Samuels, who is not currently advising HSBC on its process.

However, some analysts believe that appointing an insider could help the bank maintain its course. "While it is uncommon for a bank to change its Chairman, CEO, and CFO in quick succession, appointing the current CFO as CEO could provide some degree of continuity," said Benjamin Toms of RBC Capital Markets.

For questions or comments write to writers@bostonbrandmedia.com

Source: Reuters‍