When Succession Fails: Lessons from HSBC’s Chaotic Search for a Chair

How weak planning and abrupt resignations exposed serious shortcomings in the bank’s governance framework

Executive Summary: HSBC’s board has again faced criticism for its poor succession planning following the abrupt resignation of chairman Mark Tucker. This article reviews the bank’s historical governance challenges, examines Tucker’s tenure and departure, and assesses the implications of Brendan Nelson’s appointment. The case highlights the ongoing importance of robust succession planning under modern governance codes.

Historical context: strategy shift and its consequences

Ten years ago, we wrote about the impact of a significant change in strategy at HSBC, following the retirement of hands-on Sir William Purves and the succession by growth-minded Sir John Bond. This led to a major expansion programme, with the ill-judged acquisition in the United States of consumer finance company, Household International, and the private banking business of Edmund Safra with its Swiss connections. Each of these transactions led to major problems, with the first exposing money laundering in the USA and the second linked to tax evasion in Switzerland.

The point we were making was that the succession approved by the board had not been accompanied by the necessary organisational planning for the different strategy envisaged by the new executive chair. The result was huge write-offs in relation to sub-prime lending, and widespread criticism of the bank for facilitating tax avoidance and tax evasion, followed by suggestions that the bank had become too big to be managed and should be broken up.

It took more than a decade before the fortunes of the bank were stabilised with the arrival of a hard-charging new chairman, Mark Tucker. But subsequently, after eight years, and a year before his planned retirement, he suddenly announced his resignation. The bank’s reputation was once again hit by the board’s lack of planning for such an important event.

Regulatory perspective on succession planning

The relevant sections of the UK Companies Act, 2006, don’t mention succession planning per se, but they do stress the directors’ responsibility for looking after the long-term future of the company, and the need to consider the suitability of the directors on the board. This clearly implies a requirement for proper succession planning.

The UK Corporate Governance Code 2024 refers to succession in Section 3, but essentially by addressing the length of time directors should remain on the board, and the process of recruiting new directors, mandating the establishment of a nomination committee to ensure that recruitment is carried out in a professional manner.

Mark Tucker’s tenure and governance gaps

HSBC had suffered over the ten years before Tucker’s arrival, firstly from the legal actions brought against them, and, following the crash of 2008, from very low interest rates squeezing margins, and regulators requiring extra capital reserves and the need for extra staff costs to handle new regulations. They also seemed to have rather lost their way strategically.

Mark Tucker had an impressive track record, building the insurance business in the Far East firstly of Prudential Insurance, then of AIA after it was spun out of US insurer AIG in 2010. He was regarded as hard-driving and focused on detail, and though his banking experience was limited, his Far East experience and successful reputation made him appealing to a bank which had never previously appointed a chairman from outside the bank.

Subsequently, his record as chairman of HSBC broadly won approval, particularly over his handling of the Covid pandemic, and seeing off the attempt by a Chinese shareholder to get the bank to hive off its Asia business. However, the share price barely moved until his final months in office. Moreover, his succession planning regarding chief executives laid him open to criticism. He got rid of his first CEO without having a replacement lined up. He promoted the next temporary CEO to chief executive, but was caught when that CEO resigned unexpectedly early, with no successor lined up. And a former senior HSBC executive was quoted in the Financial Times after this event as saying that Mark Tucker’s future reputation depended on choice of the next CEO, and being involved in the decision over the next chair.

A year later, Tucker announced his own early resignation, out of the blue, with four months’ notice, a year earlier than planned, and with no successor lined up.

The board’s response to Tucker’s resignation

What happened next didn’t show the board of HSBC or its chairman in a good light.

It appears to have been taken completely by surprise and entered into a hurried recruitment process, looking to pick someone with banking expertise, knowledge of, and experience in, the Far East and a track record of success in board and chair roles, coupled with skill in handling international diplomacy.

Three contenders emerged: George Osborne, former chancellor under the Conservative government, Kevin Sneader, former global managing partner of McKinsey, and Naguib Kheraj, ex-Standard Chartered deputy chairman. Each seems to have ticked some, but not all, of the boxes.

However, the directors ended up, instead, choosing a person who had been on the HSBC board for a couple of years, and had most recently served for a few months as interim chair after Tucker’s departure. Chartered accountant, Brendan Nelson, was confirmed as chairman, being deemed to have appropriate banking experience and good governance credentials.

Verdict on HSBC board’s succession planning

 How does the selection of Brendan Nelson as chairman in succession to Mark Tucker match up to HSBC’s requirements, and what does all this say about corporate governance by the HSBC board and its former chairman?

In a nutshell, this looks like a questionably satisfactory short-term solution. The new chairman has banking experience and is familiar with HSBC’s strategy and its board members and their various backgrounds and effectiveness in board meetings, but has little experience of Asia. Moreover, he is said to have declared that he doesn’t want the job for long. How effective a chairman he will be after that last admission remains to be seen, and his tenure is likely to be short in view of his age.

But the performance of Mark Tucker in walking away to a new opportunity at short notice without having taken any steps to find a suitable successor can only be condemned in the strongest terms. And what does it say about the rest of the board that there was no contingency planning, and they allowed Tucker to get away with this? Very poor corporate governance.