"Focus" HSBC is considering providing compensation and new job incentives for executives competing for the CEO position -- News

HSBC Chairman Mark Tucker seeks the third CEO in nine years

Sources say key projects are seen as incentive measures to retain candidates

London, Reuters, July 9 - Two sources told Reuters that HSBC (HSBA.L) is preparing to appoint its third CEO in nine years and is exploring financial incentive measures and reallocating key projects to retain those who have missed out on the top position.

The two anonymous sources said that Europe's largest bank may reallocate its technology transformation and innovation strategies. These businesses are currently overseen by CEO Noel Quinn.

Two other sources said that HSBC is expected to promote a new CEO from within, with an announcement possible as early as this month.

After a series of internal changes and facing tensions in its key markets of the UK and China, coupled with poor stock performance, HSBC is eager to retain top talent.

Three HSBC shareholders (two of whom are among the top 20 shareholders of HSBC) told Reuters that they are concerned that the appointment of a new CEO may lead to more management changes.

For example, if Chief Financial Officer Georges Elhedery is chosen as CEO, the CFO position will have to be filled by a third person in less than three years.

"Promotions will indeed leave vacancies elsewhere, and if not handled properly, this series of changes could lead to problems," one investor said.

HSBC's remuneration report shows that reallocated projects could bring significant compensation incentives, as they account for the majority of Noel Quinn's key performance indicators. Quinn's total remuneration in 2023 doubled from the previous year to £10 million (approximately $12.8 million).

"HSBC is undertaking a robust and rigorous process to find the next Group CEO. This process will consider internal and external candidates. We will announce the latest developments to the market in due course," a spokesperson said.

According to media reports, the nomination committee is expected to choose from a number of executives, including CFO Georges Elhedery, Wealth Management Head Nuno Matos, Europe Head Colin Bell, and Global Banking and Markets CEO Greg Guyett.

HSBC Holdings Chairman Mark Tucker is also set to step down in 2026.

"For a large bank like HSBC to undergo three major changes in such a short period of time is certainly unusual," said Octavio Marenzi, CEO of consulting firm Opimas.

Previously, Quinn reshaped HSBC by exiting underperforming businesses in markets such as the US, Canada, and France, and cutting senior management.

One of the immediate tasks for his successor will be to revive the bank's stock price. Since Quinn took office in August 2019, HSBC's stock price has only risen by 4%, far behind the 54% increase in the European banking sector index and nearly 14% increase in the UK banking sector index Image: Since Noel Quinn took office, HSBC's stock price increase has lagged far behind.

Strict Selection

HSBC's annual profit in 2023 reached a record $30 billion, but challenges still exist.

The bank faces increasingly intense geopolitical tensions between the UK and China (the profits of these two countries together account for more than half of HSBC's profits), as well as expectations of global central bank interest rate cuts (interest rate hikes have previously driven HSBC's revenue growth).

"Among the candidates who can lead the company, there are not many who possess both the necessary skills to deal with politics and personnel," said an investor who declined to be named.

People who have missed opportunities with the bank's CEO in the past have sometimes left.

A former senior executive said that Charlie Nunn, the former head of wealth management who was once considered a competitive candidate before Noel Quinn took over as CEO, left in November 2020 to become the CEO of Lloyds Banking Group (LLOY.L).

Nunn's spokesperson declined to comment on this.

The former senior executive mentioned above said that by highlighting the bank's top talent, the selection process also makes those who were not selected potential targets for headhunting companies.

Reuters was unable to verify the scale of the financial incentive measures being discussed.

"Increasing compensation to better retain the top management would be a good thing," said a third HSBC shareholder.

"Considering the CEO transition, ensuring the stability and continuity of the bank is indeed very important."

HSBC's largest investor, Ping An of China (601318.SS), declined to comment.

Kyle Samuels, CEO of Creative Talent Endeavors consulting firm, said that internal promotions can be complex. Creative provides advice to banks and venture capital firms on how to retain top talent.

"The chairman of the board needs to transparently communicate decisions and provide important new positions or projects to retain those who were not selected. Immediate recognition and rewards can also be helpful," Samuels said. He has not provided advice for HSBC's selection process at this time.

However, some analysts believe that appointing internal candidates may help the bank stay on track.

"Although it is relatively rare for a bank to have successive changes in the chairman of the board, CEO, and CFO in a short period of time, for HSBC, if the CFO really becomes the CEO, it will provide some degree of continuity," said Benjamin Toms of RBC Capital Markets