The CEO cycle at banks and big companies works roughly like this – a CEO takes the institution through massive changes (M&A, restructuring, change of strategy) and the successor follows on by lowering the temperature, cementing the successes and sorting out the failures.
Given that former HSBC CEO Stuart Gulliver spent his seven years at the top giving the bank a complete overhaul so that it was fit for today’s leaner banking environment, John Flint – seen as a safe pair of hands by many observers – was surely the ideal successor?
Apparently not, as on Monday the HSBC board, led by chairman Mark Tucker, ousted him after only 18 months in post. Mr Tucker told an analysts’ call that “in the increasingly complex and challenging global environment in which the bank operates, the board believes that a change is needed to make the most of the significant opportunities ahead of us’’.
This suggests that further major changes for the bank are afoot, a prospect that will concern as many shareholders as it delights. Reuters reported that: “Three senior HSBC executives told [it] the decision had come as a surprise, but that Mr Flint was paying the price for an overly cautious approach that prioritised cost controls, and investment in China, over a more ambitious push into the US.’’
This is even more surprising given HSBC’s troubled times in the US after buying Household in 2003, and the generally poor record foreign banks have in the country.
With this in mind, if HSBC wants a more swashbuckling CEO then maybe it should consider hiring investment banker Andrea Orcel, who was set to take over the equivalent role at Santander until the Spanish bank suddenly withdrew its offer in January, stating that compensating him for his deferred remuneration at UBS was too costly. Mr Orcel, who has since launched a lawsuit against Santander for damages, had acted as adviser to the bank’s late chairman, Emilio Botín, during two decades of frenetic and successful dealmaking so maybe now was the time to pick someone a bit less flamboyant – John Flint perhaps?
The serious point is that regardless of these two cases, banks need to be fully honest with themselves as to the type of CEO they want at the outset – dealmaker or steady manager – as one person is unlikely to be both. Getting it wrong can prove costly in terms of both lost opportunities and the negative waves it creates in the marketplace when a decision is suddenly reversed.
Brian Caplen is the editor of The Banker. Follow him on Twitter @BrianCaplen
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