HSBC 2001 Annual Report Download - page 144

HSBC HOLDINGS PLC
Report of the Directors (continued)
142
Remuneration
Policy
In common with most businesses, HSBCs
performance depends on the quality and commitment
of its people. Accordingly, the Boards stated
strategy is to attract, retain and motivate the very
best people.
In a business that is based on trust and
relationships, HSBCs broad policy is to look for
people who want to make a long-term career with the
organisation because trust and relationships are built
over time.
Remuneration is an important component in
peoples decisions on which company to join, but it
is not the only one; it is HSBCs experience that
people are attracted to an organisation with good
values, fairness, the potential for success and the
scope to develop a broad, interesting career.
Within the authority delegated by the Board of
Directors, the Remuneration Committee is
responsible for determining the remuneration policy
of HSBC including the terms of bonus plans, share
option plans and other long-term incentive plans, and
for agreeing the individual remuneration packages of
executive Directors and other senior Group
employees. No Directors are involved in deciding
their own remuneration.
The Remuneration Committee applies the
following key principles:
• to pay against a market of comparative
organisations
• to offer fair and realistic salaries with an
important element of variable pay based on
relative performance
• to have as many top-performers as possible at
all levels within HSBC participating in some
form of long-term share plan
• for new employees only, since 1996, to follow a
policy of moving progressively from defined
benefit to defined contribution Group pension
schemes.
Basic salary and benefits
Salaries are reviewed annually in the context of
individual and business performance, market
practice, internal relativities and competitive market
pressures. Allowances and benefits are largely
determined by local market practice.
Annual performance-related payments
The level of performance-related variable pay
depends upon the performance of HSBC Holdings,
constituent businesses and the individual concerned.
Key measures of success include achievement of
financial goals, concerning both revenue generation
and expense control; customer relationships; full
utilisation of professional skills; and adherence to
HSBCs ethical standards. HSBC has a long history
of paying close attention to its customers in order to
provide value for shareholders. This has been
achieved by ensuring that the interests of HSBC and
its staff are aligned with those of its shareholders and
that HSBCs approach to risk management serves the
interests of all. Closer alignment with the interests of
shareholders is being achieved by extending
employee participation in the existing share plans.
Bonus ranges are reviewed in the context of
prevailing market practice and overall remuneration.
Long-term share plans
In order to align the interests of staff with those of
shareholders, share options are awarded to
employees under the HSBC Holdings Group Share
Option Plan and the HSBC Holdings savings-related
share option plans. When share options are granted,
which are to be satisfied by the issue of new shares,
the impact on existing equity is shown in diluted
earnings per share on the face of the consolidated
profit and loss account, with further details being
disclosed in Note 11 of the Notes on the Financial
Statements. The dilutive effect of exercising all
outstanding share options would be only 0.5 per cent
of basic earnings per share.
For the majority of employees, the vesting of
share awards under the HSBC Holdings Group Share
Option Plan is subject to the attainment of total
shareholder return (TSR) targets. Separate
arrangements are currently in place for employees of
CCF. The Remuneration Committee seeks to respond
to the variety of environments and circumstances
which are faced by different businesses in different
markets at different times.
The HSBC Holdings Restricted Share Plan 2000
is intended to align the interests of executives with
those of shareholders by linking executive awards to
the creation of superior shareholder value. This is