November 7, 2016 / 3:28 PM / a year ago

HSBC investors fear timetable to find new bosses is slipping

* Some shareholders worried over chairman, CEO succession

* Current CEO Gulliver says to give update in early 2017

* Some investors doubt Henri de Castries wants chairman role

By Sinead Cruise and Simon Jessop

LONDON, Nov 7 (Reuters) - Some major shareholders in HSBC want the bank to give greater reassurance on succession-planning for its chairman and chief executive, concerned that a timetable for replacing veterans Douglas Flint and Stuart Gulliver may be slipping.

Three of four top-20 shareholders interviewed by Reuters said they were worried a revamp of the bank’s long-serving leadership had been knocked off course by several competing demands, denting hopes for a speedy refresh of HSBC’s culture and strategy.

Europe’s biggest bank said in March it had begun searching for a new chairman, and pledged to nominate a successor to 61-year old Douglas Flint “during 2017”. The new chairman would oversee the selection of a successor to 57-year old CEO Stuart Gulliver, who is expected to leave in 2018, it said.

But six months on, the investors said the lack of a progress update had started to cause concern, with some suggesting the board had been tied up with navigating the economic slowdown in Asia, investor consultations on its 2017 executive pay plans and the recent appointment of Clara Furse to chair its UK retail business.

They also said they felt it was looking less likely that former Axa boss Henri de Castries - who was widely regarded as the frontrunner for the chairman role when he joined HSBC’s board in March - would take the job.

They cited speculation among investors and market players that de Castries is keen to take up a role in French politics after the presidential election in the spring.

The fourth shareholder who spoke to Reuters said he was confident HSBC would fill both positions within its stated timetable.

All the shareholders declined to be named because their conversations with the company were ongoing. While it is unclear whether their views are fully representative of wider HSBC investor thinking, they suggest the bank’s challenging task of finding a chairman and CEO within two years has become a source of concern among big shareholders.

In an interview with Reuters on Monday, Gulliver said the bank remained on course to appoint a successor to Flint “at some point during 2017”. When asked about investor concerns about the succession process, he said he hoped to update shareholders early in the new year, without giving further details.

He was speaking after the bank reported a rise in profit but warned of a dim outlook for its British business next year due to slowing economic growth as a result of the vote to leave the European Union. It gave little detail on how its chairman search was progressing.

De Castries did not respond to requests for comment via his personal secretary.

LONG-SERVING

The replacement of Flint and Gulliver represents a big shift for the company, as they have more than 55 years of HSBC service between them and held several management roles before rising to their current positions about six years ago.

Roiled by swelling costs, spiralling pay packets and a number of regulatory and strategic missteps, investors have hoped for fresh blood for several years now, concerned that the two men were too entrenched to address some long-standing issues facing HSBC.

They include a long-awaited cultural revamp to move from the higher-risk banking seen before the financial crisis to more measured and sustainable lending, as well as the group’s high costs and uncertain position in the United States.

The three investors with concerns about the succession said that the planned process might deter chairman candidates as the new person would have to make the crucial decision of choosing a new CEO while learning the ropes themselves.

After a meeting with Sam Laidlaw, chairman of the HSBC’s Group Remuneration Committee and Nomination Committee, one shareholder said they felt the bank had not ruled out switching the order of the new appointments around. This would mean that Flint could lead the selection process for a new CEO.

While HSBC has pledged to break from tradition and appoint an external candidate as chairman, investors and sources within the bank broadly expect the new CEO will come from within its ranks.

With this in mind, appointing a new CEO might be an easier and faster process if led by someone more familiar with the skills and abilities of the top executives, the shareholder said.

However Gulliver told Reuters such a switch of appointment timing would be unlikely, because it could fan governance concerns.

“I think the view is that the investors wanted to see an outside chairman,” Gulliver told Reuters.

“I think if you did it the other way around you wouldn’t satisfy those governance concerns around the fact that we have always had an internal chairman, because the internal chairman would then be choosing the new group CEO,” he said. (Additional reporting by Lawrence White in London and Sumeet Chatterjee in Hong Kong; Editing by Pravin Char)

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