Michael Geoghegan, the outgoing chief executive of HSBC, was told over dinner in London's Goring Hotel 10 days ago that he was not to be the new chairman.
But, contrary to damaging press reports Mr Geoghegan neither threatened to resign unless he got the promotion nor did he "throw his toys out of the pram".
HSBC sources repeated yesterday that its top management had behaved "impeccably" but added: "Someone has behaved badly in leaking false and diabolical reports to the press that Mike Geoghegan had tried to blackmail the board." One senior source said: "Our selection process has been going on since March and we have considered external and internal candidates but unanimously decided a few weeks ago that Douglas Flint, the finance director, should be the new chairman, and that with Stuart Gulliver, the new chief executive, they would be the dream team to lead the bank. Once that was decided, Mike was told and he reacted with the dignity you would expect.
"But, clearly, someone wanted to hurt Mike by leaking the news. We are deeply sorry about these damaging reports as he is a great guy, and has done a great job during a difficult time. Mike understood totally that being chief executive no longer means automatically becoming chairman."
Reports that shareholders are angry about the new appointments were not true, the source said, although they had every reason to be angry about the way the news emerged.
During a conference call with the press on Friday night, Mr Geoghegan appeared to support the board's stand, saying: "You have to be asked to be chairman and the reality is that I was not asked and it was quite obvious that Douglas Flint is the best person. After Stephen Green's decision to step down [as chairman], I came to a quick solution about 10 to 12 days ago that it was time to hand over to the next generation."
He added: "I have always maintained in-house to my colleagues that five to six years should be the period of time a chief executive should be in that position. The flaw in the whole [media] reporting process was that it was assumed that the chief executive would become chairman but it is a much broader process."
After 37 years with the bank, Mr Geoghegan will receive a £1.42m golden goodbye package when he steps down in December but he will continue in an advisory capacity until 31 March next year for a fee of £200,000 which he will donate to charity.
Mr Green, who is leaving to become the new Trade Minister, said the appointments of Mr Flint and Mr Gulliver, who are taking pay cuts (because they will be on different incentive plans) and will be paid £1.5m and £1.25m respectively, had unanimous backing and will create an "awesome team" to drive HSBC's position as a world-leading bank. The moves will be confirmed by the board in Shanghai this week and have already been approved by the Financial Services Authority and Hong Kong authorities.
Mr Green added that the appointments follow changes to the bank's corporate governance over the past five years. "There was a strong executive chairman role and we have clearly changed that. It is the chief executive who drives the business and strategy and the chairman runs the board and its governance."
The new deputy chairman, Sir Simon Robertson, who as the senior non-executive director headed the succession planning and delivered the news to Mr Geoghegan, said at Friday's press call that it had been an orderly, consensual process and had in no way been "rushed" despite appearances. He said it was "diabolical that these leaks have undermined what we are trying to do and undermined certain individuals in an invidious way. We are extremely unhappy about it and it does not reflect well on us but it has not detracted from our determination to get the best for our company."
As part of the rejig, Sandy Flockhart, currently chairman of personal and commercial banking, based in Hong Kong, will become chairman of HSBC Bank UK and chairman of Europe, Middle East, Africa, Latin America and commercial banking. Iain Mackay will replace Mr Flint as group finance director, with a £700,000 package, relocating from chief financial officer Asia-Pacific.Reuse content