Corporate Governance of HSBC: Board Structure, Diversity, and Recommendations

Board Appraisal Report

Table of Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY..................................................................................................................................3
Corporate Governance – Theory and practice.............................................................................3
Board structure and committee analyses.....................................................................................4
Board diversity analyses..............................................................................................................5
Recommendations and Justifications...........................................................................................6
CONCLUSION................................................................................................................................7
REFERENCES................................................................................................................................1

INTRODUCTION
Board of directors (BOD) is that body of a corporation that governs it. It is elected by the
shareholders. HSBC Holdings PLC is a British origin multinational holding company that
operates in banking and insurance sector. National Australian Bank (NAB), one of the
competitors of HSBC is the fourth largest financial institution operating in Australia. The
current report will discuss the corporate governance of HSBC. The report will compare the board
structure and committees of both the organizations. Further the report will evaluate and compare
the board diversity of HSBC group with NAB. Lastly the report will recommend some
constructive suggestions for the improvement of the Board of HSBC Group.
MAIN BODY
Corporate Governance – Theory and practice
Corporate governance theory that the HSBC Group organization applies is the agency
theory. As per the agency theory the company acts as an agent of the shareholders of the
company. Shareholders are the ones who invest for getting the ownership of the company.
Shareholder of an organization entrust the management of the company, that comprise of its
directors and officers with their resources (Yermack, 2017). In large organizations like HSBC
there exist a usual deflection in the interest of shareholders and other stakeholders both in short
and long term. For instance, directors and officers of HSBC group demand profit in short term
whereas shareholders do not. This contradiction in the thoughts implies its effect over the
workings of directors and officers, having interest not matching to that of the shareholders.
HSBC corporate governance rules aim at establishment of framework on legal grounds
that is similar to the relationship that agency theory establishes. Rules set up aligns the interests
of officers and directors with the interests of shareholders. Agency theory rules, and norms
reduce the probability for the organization to experience adversities in the results.
Global businesses and their functions of the HSBC group follows the organization’s
framework for legal entity. In order to strengthen the accountability and how the information
flows the organization has deployed a seven principal subsidiaries framework that look after the
companies of the group (Jurakulovna and Bahodirovich, 2021). Each of the principal subsidiary
oversight the companies which operates in their region. These principal subsidiary are held
accountable to the board of directors of HSBC for the operations and performance of the
companies.