HSBC’s top management are braced for a rowdy encounter with shareholders on Friday at which the Panama Papers, boardroom composition and executive pay are expected to be high on the agenda.
The bank and its its affiliates created more than 2,300 companies through Mossack Fonseca, the Panamanian law firm from which a leak of of 11.5m files prompted anger about the way wealthy individuals can hide their money offshore.
HSBC may face questions about the Panama Papers at the bank’s annual general meeting in London, where shareholders will vote on the election of directors to the board as well as on executive pay.
The chairman, Douglas Flint, has already told investors that a search for his successor is under way – signalling the fact that the new chair will then lead the search for a chief executive to replace Stuart Gulliver.
Gulliver’s pay was reduced to £7.3m in 2015, a year in which profits remained flat at £13.2bn ($18.8bn) and the bank conceded that an official monitor, who was installed at the bank after a money-laundering scandal four years ago, had raised “significant concerns” about the slow pace of change to its procedures to combat crime.
The monitor was imposed by the US regulators after the bank was fined £1.2bn in 2012 for failing to implement money-laundering controls, allowing Mexican drug traffickers to deposit hundreds of thousands of dollars each day in HSBC accounts.
When the Panama Papers were published earlier this month, HSBC said the documents pre-dated a thorough reform of its business model. “The allegations are historical, in some cases dating back 20 years, pre-dating our significant, well-publicised reforms implemented over the last few years,” the bank said.
At last year’s AGM nearly one in four shareholders voted against its pay deals, and the deputy chairman, Sir Simon Robertson, said that neither Flint nor Gulliver would be replaced. At the time, the bank was mired in revelations about the activities of its Swiss banking arm, from which leaked account details showed it had helped customers evade tax.
The AGM is taking place at a time of renewed shareholder activism. Two FTSE 100 companies, BP and Smith & Nephew, have already lost votes on pay reports, while more than 40% of shareholders at the mining company Anglo American voted against the pay of its chief executive.
HSBC investors will have two votes on pay. One is advisory and covers pay for last year, while the second is a binding vote on pay policy for the coming three years.
