HSBC 2004 Annual Report Download - page 222

HSBC HOLDINGS PLC
Directors’ Remuneration Report (continued)
220
Holdings Restricted Share Plan 2000. It is proposed
that awards under The HSBC Share Plan will be up
to a maximum of seven times salary. Whilst having
flexibility to make awards at this level in certain
exceptional circumstances, the Remuneration
Committee does not intend seven times salary to be
the normal level of award. The average face value of
the awards proposed for executive Directors is just
over three times base salary; proposed individual
awards are set out in the table below. Awards
proposed for 2005 for Group Managing Directors
and Group General Managers will generally be
below two times salary.
Further details of the performance conditions
and vesting arrangements for The HSBC Share Plan
are set out below. A summary of the arrangements
relevant to previous awards of Performance Shares
under The HSBC Holdings Restricted Share Plan
2000 is also given. Subject to approval at the
forthcoming Annual General Meeting, all future
awards of Performance Shares, including the 2005
awards, will be made under The HSBC Share Plan.
2005 Awards
The Remuneration Committee is proposing that the
conditional awards shown in the table below should
be made to executive Directors in 2005. The table
shows the face value of the full conditional awards
and their approximate expected value.
Face
Value
Expected
Value
£000 £000
Sir John Bond .......................... 4,000 1,760
D J Flint ................................... 1,500 660
M F Geoghegan ....................... 2,000 880
S K Green ................................ 2,500 1,100
A W Jebson .............................. 1,415 622
Total ......................................... 11,415 5,022
As set out above, the higher face value of these
awards than in previous years is balanced by the
significantly more challenging vesting schedule of
The HSBC Share Plan where maximum value will
only be released to the individual if Group
performance is at a very high level.
The Trustee to the Plan will be provided with
funds to acquire HSBC Holdings ordinary shares at
an appropriate time after the announcement of the
annual results.
Under the terms of the 2002 employment
agreement entered into at the time of the acquisition
of HSBC Finance Corporation, W F Aldinger is
entitled to receive an award of US$5.5 million which
was to be used to purchase Restricted Shares in
HSBC Holdings. However, as referred to below, Mr
Aldinger is to retire on 29 April 2005 and it has been
agreed that this award will not be made.
C F W de Croisset and W R P Dalton, who
retired during 2004, did not receive a long-term
incentive award in 2004.
D G Eldon, who is to retire at the forthcoming
Annual General Meeting, will not receive a long-
term incentive award in 2005.
Performance conditions
Subject to approval of The HSBC Share Plan at the
forthcoming Annual General Meeting, awards of
Performance Shares, commencing in 2005, will be
divided into two equal parts to be subject to separate
performance conditions measured over a three-year
performance period:
• ‘The Total Shareholder Return (TSR) award’ :
one half of the award will be subject to a
relative TSR measure. TSR is defined as the
growth in share value and declared dividend
income, measured in sterling, during the
relevant period. In calculating TSR, dividend
income is assumed to be reinvested in the
underlying shares; and
• ‘The earnings per share (‘EPS’ ) award’ : the
other half of the award will be based upon the
absolute growth in EPS achieved by HSBC
Holdings over the three-year performance
period.
The TSR element of the award will be based on
HSBC’s ranking against a comparator group of 28
major banks. The comparator group will generally
comprise the largest banks in the world measured in
terms of market capitalisation, having regard to the
geographic spread and the nature of the activities of
each bank. The Remuneration Committee will use
this criteria in selecting any replacements to the
comparator group that may be necessary during the
performance period, for example because a bank
ceases to exist or to be quoted or if its relevance to
HSBC as a comparator significantly diminishes.
The comparator group at 28 February 2005
comprises ABN AMRO Holding N.V., Banco Bilbao
Vizcaya Argentaria S.A, Banco Santander Central
Hispano S.A., Bank of America Corporation, The
Bank of New York Company, Inc., Barclays PLC,
BNP PARIBAS S.A., Citigroup Inc., Credit Agricole
S.A., Credit Suisse Group, Deutsche Bank AG,
HBOS plc, JPMorgan Chase & Co., Lloyds TSB
Group plc, Mitsubishi Tokyo Financial Group, Inc.,
Mizuho Financial Group, Inc., Morgan Stanley,
National Australia Bank Limited, Royal Bank of