HSBC Chief leaves Lawmakers puzzled by ‘Quite Strange’ Pay Setup
Chief Executive Officer Stuart Gulliver opened his testimony on alleged tax dodging at HSBC Holdings Plc’s Swiss private-banking operations to the U.K. Parliament’s Treasury Committee in the traditional manner, with an apology.
“Just to be clear, what are you apologizing for?” Committee Chairman Andrew Tyrie asked. “Who is doing the apologizing here?”
Gulliver, clutching his hands together, replied: “I have a collective responsibility. I wasn’t running the private bank at that particular point, but I’ve spent 35 years with HSBC, so there’s a proximity issue.”
This set the tone for the rest of the hearing. Gulliver and HSBC Chairman Douglas Flint were sorry for the way that the bank had facilitated tax evasion and money laundering in the past, but they weren’t going to take the fall for it. It was a different era, Gulliver said.
The CEO was keen to emphasize that he wasn’t like other bankers the Treasury Committee has mauled in recent years. “I myself grew up in Plymouth,” a port city in southwest England, he said. “I went to a state school.”
That man-of-the-people image may have been somewhat dented when he said later in the hearing that the bank had cut his compensation by 1.75 million pounds ($2.7 million) one year following scandals including that over foreign-exchange manipulation. For context, it would take a member of Parliament 26 years to earn that amount.
‘Quite Strange’
The committee struggled to understand a number of things Gulliver suggested were routine, such as his compensation arrangements when he was working in Hong Kong, where he was paid through a company based in Panama. He had some sympathy with them. “Looking back 15 years later, clearly Panama looks quite strange.”
As the hearing wore on, Flint came to Gulliver’s rescue. When Tyrie listed the scandals and investigations currently surrounding the bank, the chairman described himself as “humbled.”
“It’s not a very happy list, is it?” asked Tyrie.
“It’s a terrible list,” Flint agreed. The thing about the bank’s corporate structure, he explained, was that “it worked very well until it clearly didn’t.”
Who was responsible for the structure? “It probably was set in 1865,” when the bank, then based in Hong Kong, opened.
This was Flint’s evidence in a sentence. The wrongdoing for which he and Gulliver were taking a degree of responsibility all happened some time ago, and some distance away.
Hold-Mail Accounts
The distance was important. The opposition Labour Party’s Teresa Pearce wanted to know about “hold-mail accounts,” where customers asked the Swiss branch of the bank not to communicate with them. “Do you not think that that’s suspicious?” she asked.
“In Switzerland, it would not have been seen as suspicious,” Gulliver explained. What about customers withdrawing suitcases full of cash, asked Pierce. “In Switzerland, it was common for people to carry cash,” explained Flint.
Switzerland, like the past, is another country. They did things differently there.
Source: Bloomberg
