HSBC 2009 Annual Report Download - page 321

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dependent on the achievement of objectives
which derive from those determined at Group
level. Since 2008, these objectives have
typically been categorised in four segments –
financial, customer, process and people.
Financial and non-financial metrics are used to
measure performance against the objectives,
which include profitability, expense control,
customer recommendation, employee
engagement, adherence to HSBC’s ethical
standards, lending guidelines and internal
controls and procedures. Effective risk
management is emphasised to maintain a strong
and secure operating platform, and that
influences employee remuneration. Actual levels
of variable pay depend on the performance of
the Group, its constituent businesses and the
individual, taking into account competitive
market practice and relevant regulator
requirements;
• to ensure that the interests of HSBC and its
employees are aligned with those of its
shareholders, that HSBC’s approach to risk
management supports the interests of all
stakeholders and that remuneration is consistent
with effective risk management, the Group
requires a proportion of variable pay awards
above certain thresholds to be deferred into
awards of Restricted Shares. In addition,
employees are encouraged to participate in
HSBC Holdings savings-related share option
plans and local share ownership arrangements.
Employee share plans
To help align the interests of employees with those
of shareholders, share options are granted under all-
employee share plans and discretionary awards of
Performance Shares and Restricted Shares are made
under the HSBC Share Plan. There have been no
awards of discretionary share options since
30 September 2005.
Set out on pages 320 to 326 are particulars of
outstanding employee share options, including those
held by employees working under employment
contracts that are regarded as ‘continuous contracts’
for the purposes of the Hong Kong Employment
Ordinance. The options were granted at nil
consideration. No options have been granted to
substantial shareholders, suppliers of goods or
services, or in excess of the individual limit for each
share plan. No options were cancelled by HSBC
during the year.
The Remuneration Committee agreed to make
adjustments to all unexercised share options and
share awards under HSBC’s various share plans and
share schemes as a consequence of the 2009 rights
issue. The adjustments were based on the theoretical
ex-rights price, which was considered to be the most
appropriate methodology to reflect the rights issue.
The adjustments under certain share plans and share
schemes were approved by the relevant tax
authorities, where necessary. In the case of the
HSBC France and HSBC Private Bank France share
plans, similar adjustments were made by these
subsidiaries as a consequence of the rights issue.
The adjustments were to the ratios at which the
subsidiary company shares are exchangeable for
HSBC Holdings ordinary shares of US$0.50
following the exercise of options.
Employee share plans are subject to the
following limits on the number of HSBC Holdings
ordinary shares that may be subscribed for. In any
10-year period not more than 10 per cent of the
HSBC Holdings ordinary shares in issue from time
to time (approximately 1,742 million HSBC
Holdings ordinary shares at 1 March 2010) may in
aggregate become issuable pursuant to the grant of
options or be issued other than pursuant to options
under all-employee share plans. In any 10-year
period not more than 5 per cent of the HSBC
Holdings ordinary shares in issue from time to time
(approximately 871 million HSBC Holdings
ordinary shares on 1 March 2010) may in aggregate
be put under option under the HSBC Share Plan or
be issuable pursuant to the HSBC Holdings Group
Share Option Plan, the HSBC Executive Share
Option Scheme, the HSBC Holdings Restricted
Share Plan 2000 or the HSBC Share Plan. The
number of HSBC Holdings ordinary shares that may
be issued on exercise of all options granted on or
after 27 May 2005 under the HSBC Share Plan and
any other plans must not exceed 1,585,250,000
(1,119,000,000 prior to adjustment for the rights
issue) HSBC Holdings ordinary shares. Under the
HSBC Holdings savings-related share option plans,
the HSBC Share Plan, HSBC Holdings Group Share
Option Plan and the HSBC Holdings Executive
Share Option Scheme there were options outstanding
over 337,038,157 HSBC Holdings ordinary shares at
31 December 2009 (1.9 per cent of the issued
ordinary shares). Particulars of options over HSBC
Holdings shares held by Directors of HSBC
Holdings are set out on page 347 of the Directors’
Remuneration Report.
The effect on earnings per share of granting
share options and share awards is shown in diluted
earnings per share on the face of the consolidated
income statement, with further details disclosed in