As a long-time student of China, John Bond knows his Chinese proverbs. They give him perspective on his life and career, which was dominated by his 45 years at Hongkong and Shanghai Banking Corporation, better known as HSBC, at times the world’s largest bank. “Today, you’re a rooster. Tomorrow, a feather duster” is one of them.
Last year, when he resigned as the chairman of mining giant Xstrata in the face of an investor rebellion that gave him a walk-in role in Britain’s “shareholder spring,” the wizened old rooster came close to feather duster status. It was a rather unpleasant way to wind down an illustrious career that had made him one of the best-known executives in Britain and one of the few Westerners on a first-name basis with many of the premiers, finance ministers and banking regulators in Asia and dozens of other countries in HSBC’s global empire.
“Unquestionably, it was a mistake to put in the retention bonuses without performance conditions,” he says, referring to the infamous attempted vote that linked shareholders’ approval for Xstrata’s merger with Glencore to the lavish payouts to Xstrata’s executive team.
Sir John Reginald Hartnell Bond – he was knighted for services to banking in 1999 – and I are plunked in the living room of his surprisingly modest house in South Kensington, London. Checking the address before I arrive, and knowing that Mr. Bond had been the chairman or CEO of three of the biggest companies on the London stock market – HSBC, Vodafone, Xstrata –and a director of other biggies, including Ford, I had expected a great pile of a mansion. Instead, I found myself in a rather pokey garden flat that had begun life a few decades earlier as a car garage. “I spend relatively little time in this country,” he says by way of explanation for the small digs. Indeed, he is in town for a mere 48 hours before starting an Austrian ski holiday and heading back to Vero Beach, Fla., where he and his wife Elizabeth (Liz) spend several months a year. Hong Kong, the home of their three children and the city that defined his career, occupies the rest of his calendar.
It is 10 in the morning. Mr. Bond and I face one another on comfy white sofas. Coffee is made and, incredibly generous with his time, he explains that our chat will continue over lunch at Blakes Hotel around the corner. The coffee table is decorated with a pot of charlatan red roses and stacks of hardbacks, among them a picture book of Arabian horses and Canadian author Wade Davis’s Into The Silence, the award-winning account of George Mallory’s doomed attempts to scale Everest. The room is decorated with family photos, including more than a few of daughter Annabelle, the glamorous socialite and adventurer who was careful not to forget her lipstick when she reached the top of Everest in 2004.
Mr. Bond is 72, compact and seems in robust good health. He wears jeans, a black sweater and bright red socks that keep diverting my attention from his eyes. He surprises me again with his self-deprecating humour. “I haven’t been imbued with copious self-confidence and haven’t in any point in my life,” he says. “I look back and think I was just an ordinary bloke who got lucky.”
Born in 1941 in Oxford, he is the son of a merchant marine sailor and the nephew of four Second World War bomber airmen (all of whom survived). He failed his University of Oxford entrance exams but, at age 18, won a scholarship for a year of schooling in California. “I got on the plane, the first plane ride of my life. The stewardess went by and I said ‘ma’am, can you tell me where my parachute is,’ and she said, ‘honey, there aren’t any,’” he says, laughing.
The small-town rube would have no idea what adventures, riches and power were in store for him. After his California stint ended, he found a job cleaning decks on a ship going across the Pacific and was discharged in Hong Kong. “I fell in love with Asia and I came back to this country to look for a job that would take me back to Asia. Everything led to this tiny bank with a market cap of $50-million (U.S.),” he says.
That tiny bank was HSBC. When he left the bank in 2006 as chairman and former CEO, its market value was about $200-billion. Along the way he turned HSBC Canada into a banking force and filled the gaping holes in its American portfolio. But it wasn’t bubbly and beer all along the way. Household Finance Corp., the subprime lender and credit carder issuer bought by HSBC for $15-billion in 2003, played a bit role in the U.S. financial services meltdown and almost wrecked the mighty British bank’s American ambitions.
While Mr. Bond had retired from the bank two years before the 2008 credit crunch, the Household acquisition, along with the Xstrata debacle, have marred an otherwise stellar career. Mr. Bond knows that Household and Xstrata will be forever linked with his name even though they were relatively minor incidents in nearly five decades of business life in six countries. He notes that $4-billion of investments made while he was HSBC chairman were valued at $20-billion by the time he left the bank. “You don’t read about that in the press,” he says.
HSBC was founded in 1865 by a Scotsman, Thomas Sunderland, who worked for the Peninsular and Oriental Steam Navigation Company (P&O). He realized Hong Kong and the Chinese coast needed banking services and set up offices in Hong Kong and Shanghai. The new bank’s first fortunes were made in the maritime and opium trade.
In the early 20th Century, it expanded into Bangkok and Manila and into China proper. After China’s Communist revolution and the rise of Mao Zedong, the bank refocused on Hong Kong and moved its headquarters to London just before the colony was handed over to the Chinese in 1997.
As HSBC expanded throughout Asia and into North America, Mr. Bond lived all over the map.
He had stints in Thailand, Singapore and Indonesia and later New York City, Buffalo, N.Y. (where HSBC’s Marine Midland Bank was based) and, finally, London, though he has always considered Hong Kong his home. Along the way, he emerged as HSBC’s roving troubleshooter, fixing the company’s disastrous Wardley investment banking arm, cleaning up a computer system that had gone bad and turning around Marine Midland in Buffalo, a city he and Liz did not expect to like but did. “After 18 months there, we made a profit and I told Liz about the good news,” he says. “She said, ‘You fool. We’re having a wonderful time living here. Why did you fix it so quickly?’”
In 1993, he was made HSBC’s CEO. In 1998, he was chairman. His signature American move came five years later with the Household acquisition. I ask Mr. Bond why Household went pear shaped, to use a popular British expression. He takes some of the blame, but not all.
Household, he explains, fit HSBC’s philosophy, and his own, of providing services to the unwealthy to help them move up the consumer ladder. Some 40 per cent of American households had trouble getting credit from commercial banks.
The unwealthy were Household’s market; it had 50 million customers. The default rate was high, at about 4 per cent, but the net interest margin of about 11 per cent ensured the profits kept rolling in. In fact, the core subprime lending business weathered the financial crisis fairly well. The losses came well after the acquisition, when Household, under American boss Bill Aldinger, loaded up on wholesale portfolios of subprime securities and also traded them. Their blowup cost HSBC about $10-billion of writedowns. HSBC’s controls on Household were clearly lacking. “If I knew how Household was going to unfold, I would have at least made certain I had a weekly report about post-acquisition activity,” Mr. Bond says.
The Xstrata episode was more damaging to Mr. Bond’s career. Xstrata came out of nowhere in the early part of the last decade to become one of the world’s biggest mining companies after its hostile takeover in 2006 of Canada’s Falconbridge. Somewhat reluctantly, Mr. Bond became Xstrata’s chairman in 2011, when it was an open secret that it was being lined up for a takeover offer from its 34-per-cent owner, Switzerland’s Glencore International, the world’s biggest commodities trader.
The merger proposal offer duly came and, in the spring of 2012, Xstrata CEO Mick Davis and his lieutenants were awarded the fat retention package, worth £150-million ($270-million). It came with no performance requirement; all the Xstrata boys had to do was show up for work after Glencore and Xstrata came together. The institutional investors cried foul because the merger vote and the vote to approve the retention package had been bundled into one.
Mr. Bond found himself fighting a losing war with investors. He announced in November, 2012, that he would not seek re-election as chairman but had to stay put for an agonizing six months while his replacement was found. He was formally voted off the board last May.
“I was far more concerned about the terms of the deal than I was about the retention side,” he says. “We’d look like awful chumps if Mick and the mining team that were responsible for 80 per cent of the merged companies’ assets decided to leave.”
After two hours of talking, we repair to an elegant and vaguely Oriental subterranean restaurant at Blakes Hotel. Mr. Bond orders cod and mashed spinach washed down with a Pilsner and I opt for mushroom soup, Scottish baked salmon and crunchy asparagus.
We talk about China and I realize I could listen to him speak for hours about the emerging superpower’s history, culture and economy. “You know in 1990, the Chinese and Indian economies were the same,” he says. “China is now four times bigger. I asked a senior Chinese official why this was and he said, slightly tongue in cheek, that it’s because we don’t have a god and we don’t have democracy. The god remark really gobsmacked me. India has Hindus, Muslims, Parsis, Catholics. He said it’s simpler in the world if you don’t have a god and that the Chinese see a lot of heat in religion.”
His insights on China are riveting. It’s a fairly quick lunch; Mr. Bond has to get back to pack for the family ski holiday and I wonder whether I should have spent the last three hours talking about China instead of Household Finance and Xstrata, two companies that are already fading from memory.
Favourite book: A Journey in Ladakh, by Andrew Harvey. “Fascinating story about an Oxford educated mine meeting an Eastern mind.”
Film: Some Like It Hot.
Outdoor activity: Hiking.
The music he would like played at his funeral: Wish me luck as you wave me goodbye. “It was played to the air force guys in the war before they took off.”
Children: Annabelle, Lucy and Jonathan, all in Hong Kong.
Board directorships include: Northern Trust Corp. in Chicago, Shui On Land Ltd., a property developer in China and Maersk, the world’s biggest shipping container company.
Quote: “China fascinates me.”