HSBC.

Mike Geoghagan – Outgoing CEO of HSBC at the RSA – A View of the Man, The Bank and his Story.

This man’s been in the news recently. Was he pushed or “ousted” (great word)? Was there a row? Has the HSBC Board lost it? After all two new chiefs come in as Mike, CEO, and Chairman Stephen Green both go to be replace by new Chairman, (who reported to Mike), CFO Doug Flint and new CEO, Head of Investment Banking at HSBC, Stephen Gulliver.

Meanwhile Mike Geoghagan walks away with a possible £23 million.

He’s been described as “hot headed”, has been 37 years with HSBC, only 6 of then in the UK and was CEO for 4 years.

At the RSA he looked like a man who didn’t have a lot of fun, he’s on “the road” 4 months a year, he’s very pale, a bit overweight (he looked unfit), not a very cheery soul with a level, slightly battle weary gaze but very confident and knowledgeable…well he wasn’t going to be turkey was he (some are though – how would he have managed Tony Hayward’s job at BP?)

And he seemed to have no soul…here’s what he said

“I went to a conference in May…took my wife who insisted I went sight seeing which I never do…I reflected that Venice, the financial centre of the world in the 16th century had become just a water attraction”.

  1. Life is about more than money…bankers are (or can be) boring and miss all sorts of points.Venicegives us a brilliant picture of how good the past can become. In Mike’s book I guess Singapore would be massively superior in every regard including architecturally.
  2. Experts he said are bad at predicting things – none of them had foreseen the speed of growth of the East and the South. Comment from me: experts are bad at understanding that people change things. Experts are bad period.
  3. His was a snappy, thumbnail overview of the coming nations and the future of finance:
    • China – “the home of tomorrow’s largest middle class”; 13% growth p.a. – not sustainable but wow! 717 cities of 500k plus people; more BMW’s sold than in theUK; incomprehensible rise in wealth and appetite. Shenzhen was a fishing village up to 30 years ago – today it’s one of the world’s 15 financial centres. Heading towards $5trillion GDP. China is growing back to where it was 150 or so years ago.
    • India – one of the biggest sources of “human capital” (my least favourite expression) – $1 trillion being invested in infrastructure (a very large number anyway) – 2 million graduates a year – domestic market the big, growing prize – people here working more strategically for career development.
    • Latin America – Now OK having been a hotbed of instability as recently as 1997 – “Brazil – from basket case to bread basket” – trade to China x3 since 1995 and China biggest investor in Brazil – pronounced bilateral transfer of talent – all South American counties show great potential for exciting growth.
    • Middle East – increasingly important role not talked about enough – growing, improving workforce – Emirates important but the key is Turkey – madness not to invite them into EU –it needs them.
    • Africa – “how did we all allow Africa to get so far behind?” – the least researched place in the world with the greatest opportunities – 10-20 years behind Asia – Egypt big  but sub-Sahara ablaze with growth opportunities – HSBC and Old Mutual tying up in South Africa and Walmart buying Massmart S.A. for $4 billion – it’s all happening or about to happen.Africa is key to the way the world’s youth thinks and feels.Africa will grow through investment not aid.
    • CIVETS – following BRIC the next big wave of opportunities – “go civet young man” –Chile, Indonesia, Vietnam, Egypt, Turkey, South Africa.
    • UK/West  – uncertainty – what price regulations? – City of London has a great role depending on the politicians – but we need to really understand what’s happening in the world – all that money in the East needs to flow West
  4. Lessons:
    • Competitiveness – low interest rates worldwide equates to the destruction of money…that sounds like bad news for banks but worse for us
    • Mindset – language learning is vital – assuming English is the lingua franca is lazy – “you cannot live in society with only one language” – merde! – you must learn how to service new trade flows – means culture – means structures – means harder work…
    • Mobility of money – capital will go where it can – politics can kill markets
    • Diversity and risk – Need to focus on spread and safety – HSBC do this and ensure no one business dominates – “and we only lend to a business with a future”.
    • Model Singapore –  to emulate – 18% growth – great mix of stability – tourism – entrepreneurialism – high quality politicians.
    • Cleaning it up – We are seeing blue skies again in Hong Kong – the control of pollution is key
    • More for less – Workers in the USA who used to get $40 per hour now command $9…it’s the way of the world.
  5. Not strikingly a “people-person” by reputation or charisma but he believes the keys are people and their education. As regards mind-set unless in the West we recognise the need to learn, change and meet the emerging economies we’ll lose – that simple. We need to put Bob Crow in the Foreign Office to see if he can get it at last. I wonder if in a funny way Mike is too global and somehow not rooted. Bet he hasn’t been on a bus since he was 9.

Stephen Green – Outgoing Chairman HSBC – Joining the Government as Trade Minister.

Extracts from an interview with Egon Zender. The pieces that overlap Mike’s global reflections are omitted. The values content is not. HSBC will miss this I’d imagine. This is very different to the technician Geoghagan. A warrior and a philosopher. Things v. Thoughts.

Green: There are various ways of describing and understanding the purpose of the business: you’re not a charity; you’re in business for profit in the shape of sustainable profitability, providing good and hopefully growing returns to your shareholders over the short, medium and longer term. So you need to focus on the long-term relationship with your customers. Secondly you have to invest in your people properly, and indeed invest in the business more generally, with a sufficiently long-term focus. Thirdly there are your responsibilities within the communities where you operate. Corporate social responsibility is essential to a genuine understanding of the real objectives of the business.

The Focus: So ultimately HSBC’s resilience is anchored in a culture that has evolved over the decades?

Green: One of the characteristics of this institution is an intense self-criticism, which you need, because you will not get it right all the time. What’s more, the landscape keeps changing and the environment keeps changing, so the moment you become complacent you’re doomed.

The Focus: How can one prevent a successful organisation and its people becoming complacent and make sure they are prepared to respond to the next crisis?

Green: It is part of the job of leadership to make sure nobody gets complacent. But you can’t prepare for crisis in the sense of ensuring that nobody ever takes any risks. You won’t make progress unless you take risks. If you take risks, then by definition some of the time things will go wrong, and you need to have enough buffers and enough strength to be resilient in the face of the unpredictable.

You need a strong culture that is constantly self-critical.

The Focus: It’s a well-known fact that for you personally, Christian values are very important and lasting values appear to be a major factor in your company’s resilience. Would you say that – not least in business – people need a strong orientation towards values, and how can this need be met?

Green: The values that are relevant to business life are surprisingly universal. People want a human relationship as part of doing business; people want trust as a basis for doing business; people know that you can’t fool all of the people all of the time – although that doesn’t stop some people trying. People understand what the values are that make for a trusting, successful, durable business relationship, whether it’s between a large bank and a large company, or between the individual banker in a branch and the individual customer they deal with. We know what the truth is, and it doesn’t matter where you live or what cultural, philosophical or religious background you have.

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