HSBC to stand by leadership despite shareholder complaints

HSBC is determined to shake off shareholder complaints and stand by its chairman and chief executive as it braces for aggressive complaints at its annual meeting on Friday.

Investors have been tested by faltering financial performance, compounded by a tax evasion scandal at its Swiss unit.

Shareholder adviser Pirc has recommended that investors vote against the re-election of Douglas Flint as chairman and Rona Fairhead as a non-executive director, as well as opposing the bank's remuneration report over the £7.6m pay package awarded to chief executive Stuart Gulliver.

Mr Flint and Mr Gulliver came under fire from UK parliamentary committees in February and March when they were quizzed on revelations that HSBC's Swiss private bank helped thousands of rich clients to dodge tax.

But the bank, Europe's biggest with a £120bn market capitalisation, is planning to dismiss calls for leadership change, and keep the two men in their roles for another two to three years.

"It is the desire of both men to see the bank through to the end of 2017, early 2018," said one person familiar with the situation.

That is a key timeframe for HSBC, which is operating under a US deferred prosecution agreement until December 2017. The DPA - stemming from another painful scandal, when it was fined $1.9bn by the US authorities over accusations it laundered money for Mexican drug barons - is an existential threat to HSBC. If the bank breaches the agreement, it could lose its vital dollar clearing licence.

Some investors are expected to press the bank on the costs of remaining in the UK, given rising regulatory costs and taxes. Mr Flint told Hong Kong shareholders on Monday that HSBC would soon look at "where the best place for HSBC is".

Interviews by the Financial Times with six of the top 20 shareholders at HSBC found that while there is widespread support for the top two executives, some feel the bank needs more radical action after a string of scandals and missed financial targets.

Ms Fairhead, the former chief executive of the Financial Times group, was pilloried by a parliamentary committee for failing to spot the Swiss tax-evasion as the former chairman of HSBC's audit committee.

Regulators have also raised questions over governance and have urged HSBC, like the UK's other big banks, to do more to bolster "the bandwidth" of the chief executive. Six months ago, HSBC appointed Andy McGuire as a chief operating officer. It is now considering creating an additional role - a "head of implementation", according to people briefed on the idea - to ensure a new strategic plan is properly enacted.

The FT revealed last week that the bank is planning to unveil its new plan - which involves a retreat from key emerging markets such as Brazil and Turkey to make the bank "simpler and smaller" - on June 9.

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