Household HSBC Watch

Commonly accepted principles of corporate governance include disclosure and transparency–whereby organizations clarify management’s roles and responsibilities to provide shareholders with a level of accountability, and the rights of, and equitable treatment of, the shareholders in question.

British banking behemoth HSBC (nyse: HBC - news - people ) may have gone against the U.K. Financial Service Authority’s Combined Code on Corporate Governance by appointing current Chief Executive Stephen Green to succeed Chairman Sir John Bond–who will retire after the group’s annual shareholder meeting on May 26 next year–yet it’s not as grave as it sounds.

Section A, 2.2 of the aforementioned code states: “A chief executive should not go on to be chairman of the same company. If exceptionally a board decides that a chief executive should become chairman, the board should consult major shareholders in advance and should set out its reasons to shareholders at the time of the appointment and in the next annual report.”

Chris Hodge from the Financial Reporting Council, the U.K.’s independent regulator for corporate reporting and governance, confirmed to Forbes that HSBC wouldn’t be penalized for breaking the code, as long as it comes up with a written explanation to shareholders in its annual report. “The code works upon the rules of ‘comply or explain’”, he added.

See the full report by Chris Noon, 11.28.05, 7:28 AM ET