HSBC has kicked off the search for its next-but-one chief executive by hiring a headhunter to assess the strength of its most promising managers and benchmark them against the best rivals externally.
Europe’s biggest bank by market capitalisation is determined to avoid the chaotic succession process that occurred in late 2010, when the bank — which had prided itself on discretion and smooth internal governance processes — saw boardroom squabbles spilled out into the media.
HSBC has mandated Russell Reynolds, a leading City of London recruitment firm, to look for gaps in its roster of up-and-coming executives and to search for candidates to fill them.
This comes amid mounting speculation about the likely replacements for HSBC’s current chairman Douglas Flint and chief executive Stuart Gulliver, who are expected to hand over the reins next year and in 2018, respectively.
The new process is not aimed at identifying successors for Mr Gulliver, but will look further ahead to ensure that there is a strong bench of promising managers ready to take over from whoever is the next CEO.
“It is way too soon to be involved in Stuart Gulliver’s succession, but we would expect to be involved when that does happen,” Dee Symons, a member of the financial services practice at Russell Reynolds, told the Financial Times.
John Flint, head of HSBC’s retail and wealth management division, is seen as the favourite to replace Mr Gulliver. But younger executives are jostling for position, including Antonio Simoes, head of HSBC’s main European operation, and Matthew Westerman, the former Goldman Sachs banker hired by HSBC this year to run part of its investment bank.
Earlier this year, HSBC lost one of its most promising executives when Simon Cooper quit as its head of commercial banking to join rival Standard Chartered.
“The financial services industry has not historically been seen as the gold standard in this area,” said Ms Symons. “But now regulators, as well as the banks themselves, are increasingly focused on succession planning.”
HSBC has pledged that its next chairman will be an outsider to the bank’s executive ranks, breaking with tradition, though the choice is likely to be made from among the board’s non-executives.
Henri de Castries, the former CEO of French insurer Axa, joined the HSBC board this year as a non-executive director and is the favourite to succeed Mr Flint next year. But that could hinge on the outcome of next year’s French presidential election, as Mr de Castries may be offered a senior post in the next government.
Mr Gulliver recently abandoned the 10 per cent return on equity target he set only last year as the bank grapples with a sector-wide squeeze on profits from record-low interest rates. However, shares in HSBC have rebounded since the Brexit vote in June, gaining more than 30 per cent in three months, helped by its high dividend yield.