HSBC 2011 Annual Report Download - page 261

259
Overview Operating & Financial Review Corporate Governance Financial Statements Shareholder Information
Clawback
In order to reward genuine performance and not
failure, individual awards are made on the basis
of a risk-adjusted view of both financial and non-
financial performance. However, if the assessment of
performance subsequently proves to be inaccurate or
incorrect, then previously unvested deferred awards
made since 2010 can be clawed back by the
Committee. Clawback has been exercised by the
Committee in 2012 in relation to the inappropriate
advice given by advisors of NHFA Limited and in
relation to the settlement of claims around the
possible mis-selling of Payment Protection Insurance
(‘PPI’) in the UK.
Management of risk
The integration of risk in our remuneration approach
is described in detail in the overview of
remuneration section on page 256.
Regulation
2011 has seen further significant change to the
regulatory environment as it relates to remuneration.
There is still a wide divergence in how regulations
operate globally and this presents significant
challenges to HSBC, which operates in 85 countries
and territories worldwide. In order to deliver long-
term sustainable performance, it is important we
have market-competitive remuneration in order to
attract, motivate and retain talented and committed
employees around the world.
We ensure our remuneration policies are aligned
with both new regulatory practices and the interests
of shareholders and confirm that HSBC is fully
compliant with the Financial Stability Board and the
FSA guidance and rules on remuneration.
Executive Directors’ remuneration
Composition of executive Directors’ reward
Executive Directors’ reward is delivered through
three main elements (excluding benefits):
Description Strategic purpose
Fixed pay • Takes account of experience and personal contribution to the individual’s role.
Annual bonus • Maximum bonus is three times fixed pay (a reduction from the previous maximum of four times).
• The award is non-pensionable.
• Drives and rewards performance against annual financial and non-financial measures and adherence to HSBC Values
which are consistent with the medium to long-term strategy.
• The 2011 bonus will be fully delivered in HSBC shares, 60% of the bonus is deferred over a period of three years, 33%
vests on the first and second anniversary of grant and 34% on the third anniversary of grant. During the vesting period
the Committee has the authority to claw back part of or all the award.
• 50% of the deferred and non-deferred awards are subject to a six-month retention period after vesting in line with FSA
regulations.
GPSP • Maximum award is six times fixed pay (a reduction from the maximum of seven times under the previous long-term
incentive plan).
• The award is non-pensionable.
• Incentivises sustainable long-term performance and alignment with shareholder interests.
• Award levels are determined by considering performance prior to the date of grant against enduring performance
measures set out in the long-term performance scorecard.
• The award is subject to a five-year vesting period during which the Committee has the authority to claw back part or
all of the award.
• On vesting the net of tax shares must be retained until the participant retires.
This approach applies to all executive Directors
with the exception of the Group Chairman, D J Flint,
who, from 2011, is not eligible for annual bonus and
is not expected to be granted awards under the GPSP
other than in exceptional circumstances.
Total remuneration benchmarking
methodology
When considering the competitiveness of executive
Directors’ remuneration packages the Committee
considers market data from a defined remuneration
comparator group. This group consists of nine global
financial services companies, namely Banco
Santander, Bank of America, Barclays, BNP Paribas,