HSBC tells it as it is

Kudos to HSBC Chairman Stephen Green for acknowledging a mistake in a direct manner:

“HSBC has a reputation for telling it as it is. With the benefit of hindsight, this is an acquisition we wish we had not undertaken.”

Green was letting investors know that the 2002 acquisition of Household Finance – a Chicago-based consumer finance business focused on subprime consumers with patchy credit records, now HSBC Finance Corporation – has destroyed around $10bn of shareholder value.

This direct approach, as I recently outlined in the first of 10 tips for giving speeches in tough economic times, is the best way to communicate bad news.

He communicated in a simple, direct and honest way about a mistake, even though it was one that had been made by his predecessor who placed too much faith in quantitative analysis of the risk the bank was taking with the Household acquisition:

Executives led by Sir John Bond, then the bank’s chairman, talked regularly about the bank’s team of more than 100 employees who had PhD degrees and were experts at predicting consumer behaviour. But they did not predict the collapse in the US mortgage market.

Hopefully the PhD’s are now being asked to measure it as it is.

HSBC tells it as it is

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