HSBC 2008 Annual Report Download - page 309

307
Discretionary Share Plans
Note 10 on the Financial Statements gives detail on
share-based payments, including awards of
Performance Shares and Restricted Shares made in
2008.
The HSBC Share Plan was approved at the 2005
Annual General Meeting. Awards of Performance
Shares are made under this Plan to executive
Directors and other senior executives. The
performance conditions for awards of Performance
Shares are described under ‘Long-term incentive
plan’ on page 318.
Awards of Performance Shares are directed to
those senior executives who can influence corporate
performance such as members of the Group
Management Board.
Awards of Restricted Shares are typically made
to other employees based on individual performance,
business performance and competitive market
practice.
Restricted Share awards define the number of
shares to which the employee will become entitled,
generally between one and three years from the date
of the award, and normally subject to the individual
remaining in employment. To date, all awards of
Performance Shares and Restricted Shares have
been satisfied by the transfer of existing shares.
Since September 2005, no awards of share
options under the HSBC Share Plan have been
granted. There may be particular circumstances in
the future where option grants could be appropriate.
No options were awarded under the HSBC Share
Plan in 2008.
Prior to 2005, discretionary awards of share
options, with vesting subject to the attainment of a
predetermined TSR performance condition, were
made to employees at all levels of HSBC.
The vesting of these options was subject to the
attainment of pre-determined relative TSR
performance criteria, except in HSBC France (which
was acquired in 2000) where performance criteria
were phased in. Under the HSBC Holdings Group
Share Option Plan, the maximum grant of options
which could be granted to an employee in any one
year (together with the Performance Share awards
under the HSBC Holdings Restricted Share Plan
2000) was 150 per cent (or in exceptional
circumstances 225 per cent) of the employee’s
annual salary at the date of grant plus any bonus paid
in the previous year.
Under the HSBC Holdings Executive Share
Option Scheme the maximum value of options
which could be granted to an employee in any one
year was four times the employee’s relevant
earnings.
Subject to the attainment of the relative TSR
performance condition where applicable, options are
generally exercisable between the third and the tenth
anniversary of the date of grant. Employees of a
subsidiary that is sold or transferred out of HSBC
may exercise options awarded under the HSBC
Holdings Group Share Option Plan or the HSBC
Holdings Executive Share Option Scheme within six
or twelve months respectively of the sale or transfer,
regardless of whether the performance condition is
met.
The maximum value of options that may be
granted to an employee in any one year under
the HSBC Plan (when taken together with any
Performance Share award made under the HSBC
Share Plan) is 700 per cent of the employee’s annual
salary at the date of grant.
The exercise price of options granted under the
HSBC Share Plan, and previously under the HSBC
Holdings Group Share Option Plan, is the higher of
the average market value of the ordinary shares on
the five business days prior to the grant of the option
or the market value of the ordinary shares on the date
of grant of the option. The exercise price of options
granted under the HSBC Holdings Executive Share
Option Scheme was the market value of the ordinary
shares on the business day prior to the grant of the
option. The HSBC Share Plan will terminate on
27 May 2015 unless the Directors resolve to
terminate the Plan at an earlier date.
The exercise period of the options awarded
under discretionary share incentive plans may be
advanced to an earlier date in certain circumstances,
for example on the sale of a business, or may be
extended in certain circumstances, for example on
the death of a participant the executors may exercise
the option beyond the normal exercise period.