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| DATE | 2020-11-15 |
| FROM | Ruben Safir
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| SUBJECT | Subject: [Hangout - NYLXS] Doing business with trators and genocidal
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wsj.com
HSBC Has Big Ambitions in China. Westerners Still Dominate Its Board.
Simon Clark
8-10 minutes
Global banking giant HSBC HSBC 1.11% Holdings PLC has made clear that
its business destiny is in China. Its board, however, remains an
Anglo-American affair.
The London-based, Asia-focused bank appointed three board members along
with a chief legal officer and a chief operating officer in the past 12
months. All are American. Just two out of 14 board members are Chinese.
***HSBC exemplifies the difficulties multinational companies face
navigating tensions between the U.S. and China. The bank has received
competing demands for pledges of loyalty from Washington and Beijing
after China imposed a national-security law on Hong Kong. The U.S., the
U.K. and other Western governments opposed extending the law to Hong
Kong.****
The high-level appointments come even as the bank is scaling back its
already modest U.S. operations and shutting branches there.
“It doesn’t make good business sense,” said Gregg Li, a Hong Kong-based
investor who advises companies on governance, pointing out that
Shenzhen, China-based Ping An Insurance —HSBC’s largest investor—doesn’t
have a representative on the bank’s board. “Given where China is going I
would think you would start working much closer with the Chinese economy
and major players,” Mr. Li said. Ping An declined to comment.
HSBC earns more money in Asia than it does in therest of the world. The
bank’s British chief executive, Noel Quinn, is refocusing on the
lender’s lucrative network in China and Hong Kong while scaling back
operations in Europe and the U.S.
Mr. Quinn played down the importance of nationality in an interview.
“You’ve got to look at our experience, not just the nationality,” he said.
***In May, former Hong Kong Chief Executive Leung Chun-ying called on
HSBC to express support for the security law or risk losing business.***
HSBC wasn’t among the banks that arranged a Chinese government
dollar-bond sale in October, the first time in years that it wasn’t
involved in such a sale.
“I shall watch with interest now that the bank has a new board,” Mr.
Leung said in an email from Beijing. “Any business should have
sufficient collective expertise on the board level of its major markets.”
Mark Tucker, HSBC’s British chairman, led the appointment of former
Citigroup Inc. President Jamie Forese, former Bridgewater Associates LP
Co-CEO Eileen Murray and former Microsoft Corp. executive Steven
Guggenheimer to the board this year. Bob Hoyt was appointed chief legal
officer in October and John Hinshaw was appointed chief operating
officer in December.
Along with directors Jackson Tai and Heidi Miller, Americans represent
36% of the board, up from 25% in 2016, before Mr. Tucker became
chairman. There are more American directors than any other nationality.
There are four British citizens and three other Westerners: Henri de
Castries from France, Pauline van der Meer Mohr from the Netherlands and
José Antonio Meade Kuribreña from Mexico. Ewen Stevenson, the finance
director, holds British and New Zealand citizenship. The two Chinese
nationals on the board are Laura Cha and Irene Lee.
HSBC is starting a new digital wealth planning and insurance unit in
China called Pinnacle, which will hire between 2,000 and 3,000 employees
in the next four years. Pinnacle has obtained a fintech license in
China, a first for a foreign financial institution in the country,
according to the bank.
Bob Tricker, a former Hong Kong University professor of finance who
helped draft the Asian port city’s corporate-governance code in the
1980s, says the nationality question isn’t complicated.
“It’s intuitively obvious,” Mr. Tricker said. “If their strategy is to
see their future in China then they need to orientate their governance,
which is concerned with the way power is exercised over a company, in
China.”
The HSBC Building in Hong Kong. The London-based bank was founded by
British bankers in the Asian port city in 1865.
Photo: Bloomberg News
Mr. Quinn emphasized the Asian experience of board members including
himself, Mr. Tucker, Mr. Tai and Mr. Forese, who have all worked in the
region. Ms. Cha and Ms. Lee are “very strong,” he said.
“We have a very strong management team in Asia,” Mr. Quinn said. “Peter
Wong has grown up and lived in Asia all of his life apart from some time
in the U.S. when he was at university.”
Mr. Wong is chief executive of HSBC’s Hong Kong-based unit, whose local
board, one rung below the main board of directors, is chaired by Ms. Cha
and composed mainly of citizens of Asian nations. Earlier this year, an
HSBC Chinese social-media account posted a photo of Mr. Wong signing a
petition backing China’s security law.
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Opponents of the law criticized Mr. Wong, arguing it would undo Hong
Kong’s autonomy and threaten its Western-style pillars of free speech
and independent courts. Chinese politicians have said the law was
necessary after a year of protests. Beijing this month ousted four
pro-democracy Hong Kong lawmakers, prompting the rest of the opposition
bloc to resign.
Nationality has long been a strategic consideration at HSBC, which was
founded by British bankers in Hong Kong in 1865. Faced with the prospect
of HSBC becoming a Chinese bank when the U.K. ceded control of Hong
Kong, Michael Sandberg, the bank’s chairman until 1986, devised an
international strategy called the “three-legged stool” to build out
operations in Europe and the Americas to balance those in Asia.
Mr. Sandberg said in 1986 that if HSBC found itself confined to China
after the 1997 handover of Hong Kong “it must be absolutely as night
follows day that we would become a Chinese bank” and that in such
circumstances it would be “a complete anachronism to have all our senior
officers British.”
HSBC expanded to 88 territories in the 1990s and early 2000s, marketing
itself as the world’s local bank and moving its headquarters to London.
Following setbacks in Mexico and the U.S. it scaled back in the wake of
the global financial crisis of 2008. The bank has sold billions of
dollars of assets in the past decade and now operates in 64 territories.
Hong Kong and mainland China are by far its most profitable. HSBC
reported pretax profit of $2.41 billion in Hong Kong and mainland China
in the third quarter of this year, equivalent to 78% of its total pretax
profit in the period.
British nationals still have an outsize share of senior leadership
positions, and the need for more Asians in those roles is discussed by
employees, according to people familiar with the situation. British
nationals represented 16% of HSBC’s workforce but 36% of senior leaders
in 2019, while Chinese nationals made up 23% of employees and just 9% of
senior leaders, according to the bank. Indian nationals were 17% of the
workforce and 6% of senior leaders.
“That exactly reflects the colonial past of the bank,” Mr. Tricker said.
“They haven’t grown in China and with China in the way that they could
have done and should have done.”
“What we’re looking at is building a strong Asian leadership base,” Mr.
Quinn said. “We’re continuing to diversify the bank.”
—Frances Yoon and Julie Steinberg contributed to this article.
Write to Simon Clark at simon.clark-at-wsj.com
--
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