Saturday, 26 September 2009

Where should a CEO live ?

These days many companies are global. Does it matter where they are based ? Or where their top executives live ? I believe it does.

This post is prompted by the news that HSBC’s Chief Executive, Michael Geoghegan, will relocate from London to Hong Kong. This is a consequence of the fact that the future of the bank will more and more be in China.

In most companies, there is a corporate headquarters. Usually this is a historic accident – the headquarters are where the company originated from , even though its current business may be in completely different places. The CEO and most of the senior management reside in HQ. Sure they travel a lot. But they live in the base.

In the past, this made sense. The top team had to be physically together. Meet often. It doesn’t make sense today. It is much more practical to meet personally at regular intervals , but meet often virtually. That’s the way most companies are run anyway.

Its important for the top team to understand the countries which are most crucial for its operations. And real understanding does not come from travel alone. It often comes from living there. A CEO’s visit to any country is a carefully orchestrated event that gets him to places and see things that everybody wants him to see. There’s no way you can understand China, by alighting at Pudong airport, driving to the Shangri La, having a zillion presentations at the office, meeting two senior government officials, having dinner at the Yongfoo Elite and going back. However many times you do this, you won’t “understand” China.

For a truly global company, its top team must be spread over the major markets it operates in. The major geographies where its operations are. In the last team I was associated with, the top leaders were based in France, Germany, the UK, the US and China. It resulted in some arduous travel, but it achieved an important objective – it was a truly global team.

Its entirely appropriate that the CEO of HSBC resides in Hong Kong. After all its one of those rare “countries” where a commercial bank issues the local currency notes. HSBC issues most of the dollar notes in Hong Kong and one of its employees signs it. In the future the CEO might want to sign them himself. After all how many CEOs can have the satisfaction of taking his wallet out and seeing his signature every time he hands over a dollar bill. It must be the ultimate status symbol.


le embrouille blogueur said...

Great post Ramesh....I relate to the global team that you mentioned ... and yes ... that is a awesome high to see your own signature on a bill ....I didnot realize you were getting back into the gring till I saw the change in your profile ....good luck..for this long as you want to make it last.

Exkalibur666 said...

Great piece of information that HSBC issues the currency notes in HK.. which leads me to does performance of HSBC affect the value of the currency?..does HSBC discharge the duties of a central bank..if yes how does it balance earning profits for its shareholders with implementing monitary policy in HK..and such other questions..thanks for the great post...

Ramesh said...

@blogueur - Hey thanks very much. Yes, I had to return to the grind, albeit reluctantly. Don't want too long an innings though !!

Ramesh said...

@Exkalibur - Thanks. HSBC issuing notes is one of those funny relics of the British rule there. They (and Standard Chartered) only issue notes - they have no role as a central banker - that's the job of an independeant HK Monetary Authority. But somebody did an outsourcing of the job of issuing notes to HSBC long ago, and it continues.

Exkalibur666 said...

Thanks for the clarification..

Anonymous said...

The business blog is reopened, after a week-long vacation.:)

With an interesting topic! These virtual meetings are making the world smaller and smaller,isn't it?

A journey called Life said...

nice piece of info..

and its a different kick altogether signing a currency u said ultimate status symbol..

mahesh said...

I think it also makes a difference to the customers in Asia where business center has moved recently, that they are being given the attention from the head of their banking partners.

Also handing over your own signed dollar bill sounds very cool unless you are doing it on behalf of the central bank of Zim where the currency is not even worth the paper it is printed on.

Anonymous said...

Good point. In general, I think living abroad is a very valuable life experience - opens your mind in ways that you couldn't imagine. But how should companies choose between having the firang CEO live abroad (in a gated community with other expats, or otherwise) and having a local, say Chinese, CEO?

Anonymous said...

HSBC issues the currency bills for HK??? That was something I did not know at all!

And yes, markets should have the feel of the country they do business in - what works for one country can be totally disastrous in another!

You are getting back to the same old grind huh? Wishing you good luck and many more achievements! :-)

Ramesh said...

@athivas - Unintended vacation; consequence of suddenly getting back to the grind. Yes, the world's smaller and smaller indeed.

@AJCL - Central bankers are usually a dull and boring lot - presumably they don't feel the "kick".

@Mahesh - Thankfully the Zim$ is well and truly buried.

@DA - Oh yes; if the firang CEO hides in a gated community, then its a complete waste of time. Still, if he has to wrestle with the Net nanny in this country of mine, he'll at least understand the value of freedom of expression.

@thoughtful train - Oh thanks so much. I hope to get off this grind of a train and get on to the thoughtful variety as soon as I can !

Sandhya said...

I somehow feel that even if the CEO lives in China he is still going to be travelling most of the time and hence his exposure to china is going to be as fabricated as his team would want it to be.

the more important thing for the CEO is his ability to ensure that he places the right set of executives in the relevant markets and have an effective feedback mechanisms to take the right decisions

Ramesh said...

@Sandhya - Even if the top team travels a lot, by the every fact of living in a country, they would understand it better - much better than from reading reports. And I think its important that the top team is grounded in markets and in reality ; if they sit in the stratosphere as they often do, they cannot lead a company effectively.

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