Reeling from press reports about his personal financial maneuvers, HSBC chief Stuart Gulliver offered a few plain words of explanation. He may have revealed more than he intended. His remarks show the bank is even more deeply flawed than the headlines suggest.
HSBC’s earnings announcement was certain to be a difficult event, with profits down and new embarrassments about its Swiss bankers helping clients avoid taxes. But when The Guardian revealed that CEO Stuart Gulliver had made some complex income-sheltering moves of his own, a tough day blossomed into a crisis.
The Guardian reported that Mr. Gulliver had sheltered millions of dollars in bonus payments in a Panamanian company though its Swiss private bank. To explain his arrangements, Mr. Gulliver offered this:
“Being in Switzerland protects me from the Hong Kong staff. Being in Panama protects me from the Swiss staff,” he said. “There is nothing more complicated than that.”
This is an amazing statement. Exactly why did Mr. Gulliver believe he needed “protection” from his own colleagues? Did he fear they’d revolt over his pay packet? Force him out of the private dining room? Slash the tires of his chauffeured car?
His comment reflects a belief that there are two classes at HSBC: the privileged, well paid few and the rest. His actions to shield his bonuses were done to preserve his privileges and avoid awkward questions about whether paying whopping bonuses were the best way to build a lasting business. (The latest results suggest they were not.) If there was even a hint of genuine teamwork and cultural cohesion at HSBC Mr. Gulliver would never have used such words. It’s hard to see how he can lead a major change in strategy at HSBC as long as this attitude persists.
But Mr. Gulliver wasn’t done yet. His comments about the unreasonably high standards to which chief executives are being held were just as silly. Here they are:
“It seems to me that we are holding large corporations to higher standards than the military, the church or civil service,” said Mr. Gulliver. “Can I know what every one of 257,000 people is doing? Clearly I can’t. If you want to ask the question could it ever happen again — that is not reasonable.”
Mr. Gulliver has an odd notion of management. It’s not the job of the CEO to have direct supervision of every employee. It’s his job to have a competent management team that does. And if they fail in that duty, the CEO bears ultimate responsibility.
Mr. Gulliver seems to accept misbehavior as inevitable in large organizations. That’s hardly a comforting message for investors (or regulators). And given HSBCs long list of indiscretions, Mr. Gulliver must have a high tolerance for misconduct.
HSBC appears to have been caught utterly unprepared to deal with this issue, but it looks like they’ll have another chance. Mr. Gulliver has been summoned to give testimony to a parliamentary committee.