HSBC 2008 Annual Report Download - page 317

HSBC HOLDINGS PLC
Directors’ Remuneration Report
315
Page
Remuneration policy (unaudited)
Remuneration Committee ............................. 315
Overall principles .......................................... 315
Application to executive Directors ................ 316
HSBC performance and market context ........ 316
Executive Director remuneration .................. 317
Salary ......................................................... 317
Annual bonus ............................................. 317
Long-term incentive plan ........................... 318
Funding ...................................................... 321
Total shareholder return ............................ 322
Pensions ..................................................... 322
Share ownership guidelines ....................... 322
Service contracts ........................................ 322
Other directorships .................................... 323
Non-executive Directors ............................... 323
Fees ........................................................... 323
Remuneration review (audited)
Directors’ emoluments .................................. 324
Pensions ........................................................ 324
Share plans .................................................... 326
Remuneration Committee
The Remuneration Committee meets regularly to
consider human resource issues, particularly terms
and conditions of employment, remuneration and
retirement benefits. Within the authority delegated
by the Board, the Committee is responsible for
approving the remuneration policy of HSBC
including the terms of bonus plans, share plans and
other long-term incentive plans and for agreeing the
individual remuneration packages of executive
Directors and other senior Group employees taking
into account the pay and conditions across the
Group. No Directors are involved in deciding their
own remuneration.
Following each meeting the Committee reports
to the Board on its activities. The terms of reference
of the Committee are available at
www.hsbc.com/boardcommittees.
The members of the Remuneration Committee
throughout 2008 were Sir Mark Moody-Stuart
(Chairman), J D Coombe and G Morgan. At the
conclusion of the Annual General Meeting on
30 May 2008 W S H Laidlaw became a member of
the Committee.
There were seven meetings of the Remuneration
Committee during 2008. The table on page 291 gives
details of Directors’ attendance at these meetings.
The Committee appointed Deloitte LLP and
Mercer Limited to provide independent advice on
executive remuneration issues during the year.
Towers Perrin has been appointed by the Committee
to provide remuneration data. As global firms, these
firms also provided other consulting services to
various parts of HSBC. Other consultants are used
from time to time to advise on specific issues.
During the year the Group Chief Executive provided
regular briefings to the Committee. The Committee
received advice from the Group Managing Director,
Human Resources, A Almeida and the Head of
Group Performance and Reward, J Beadle.
Overall principles
A global reward strategy for the Group was approved
by the Remuneration Committee in 2007. This
strategy provided a framework for the Remuneration
Committee in carrying out its responsibilities during
the year and includes the following key elements:
• An assessment of reward with reference to clear
and relevant objectives set within a balanced
scorecard framework. This framework facilitates
a rounded approach to objective setting. Under
this framework, objectives are set under four
categories – Financial, Process (including risk
mitigation), Customer and People. Whilst the
achievement of financial objectives is very
important, the other objectives relating to
efficiency and risk mitigation, customer
development and the productivity of the Group’s
human capital are also key to financial
performance and the development and
sustainability of the Group over the short and
medium term;
• A focus on total compensation (salary, bonus
and the value of long term incentives) with
variable pay (namely bonus and the value of
long term incentives) differentiated by
performance;
• The use of considered discretion to assess the
extent to which performance has been achieved
rather than applying a formulaic approach
which, by its nature, may encourage
inappropriate risk taking and cannot cover all
scenarios;
• A significant proportion of variable pay being
deferred into HSBC Holdings Restricted Shares
to tie recipients to the future performance of the
Group and to retain key talent; and
• A total remuneration package (salary, bonus,
long-term incentive awards and other benefits)
which is competitive in relation to comparable
organisations in each of the markets in which
HSBC operates.