HSBC 2011 Annual Report Download - page 262

HSBC HOLDINGS PLC
Directors’ Remuneration Report (continued)
Executive Directors’ remuneration > Fixed pay / Annual bonus / GPSP
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Citigroup, Deutsche Bank, JPMorgan Chase & Co,
Standard Chartered and UBS. These companies were
selected on the basis of their broadly similar business
coverage, size and international scope, and are
subject to annual review for continuing relevance.
Fixed pay
No fixed pay increases are proposed for executive
Directors in 2012.
Annual bonus
Determining executive Directors’
performance
S T Gulliver
The annual bonus award made to S T Gulliver in
respect of 2011 was based upon the Committee’s
assessment of the achievement of personal and
corporate objectives as laid out in his performance
scorecard agreed by the Board at the beginning
of the year. This approach took into account
performance against both financial and non-financial
objectives and was set within the context of the risk
appetite and strategic priorities agreed by the Board
as appropriate for 2011.
In order for any award of annual bonus to be
made under the above performance scorecard
approach the Committee had to firstly satisfy itself
that S T Gulliver had demonstrated personal
adherence to and leadership in promoting HSBC
Values. This over-riding test assesses behaviour
around the HSBC Values principles of being
‘open, connected and dependable’ and acting with
‘courageous integrity’. The Committee determined
that S T Gulliver had exhibited strong leadership
and behaviour in this area and so met the required
standard.
Equal weighting was given within the
performance scorecard agreed for S T Gulliver for
2011 between financial and non-financial measures.
In aggregate, in assessing the quantum of the 2011
annual bonus against the theoretical maximum
opportunity of three times base salary, an overall
score of 57.5% of that maximum opportunity was
judged to have been achieved. The achievement of
the financial measures was scored more highly than
the non-financial measures. A summary of the
assessment and rationale for the conclusions is set
out below.
Financial (50% weighting – achieved 30%)
The Committee considered that in the key areas of
Capital Strength (10%) and Dividend Progression
(10%) HSBC had fully met the objectives agreed and
so this element of financial performance had been
achieved. In assessing the extent to which Profit
(10%) and Cost Performance improvement (10%)
had been delivered, these were judged to have been
met to the extent of 50%. The Committee assessed
positively the profit performance across CMB
globally, in RBWM outside the US and in GB&M
outside Europe and the US. The unexpected increase
in loan impairment charges in the third quarter in the
consumer finance business in the US and the impact
of the eurozone crisis on GB&M performance in
Europe were the key drivers of underperformance.
In terms of cost performance, this was assessed
positively and broadly in line with the profit
performance. With regard to Return on Equity (5%)
and Return on Risk-Weighted Assets (5%), largely
driven by the underperforming areas noted above,
performance was below the targets set and thus those
elements of the scorecard attracted no award.
Non-financial (50% weighting – achieved 27.5%)
Half the opportunity in this area related to Strategy
Execution and out of a maximum possible 25%
opportunity, 80% was judged to have been achieved.
This strong performance reflected execution of
planned divestments of underperforming and sub-
scale businesses and, importantly, the sale of the
upstate New York branches of the US commercial
bank and the US credit and storecard businesses.
The Committee noted that the portion of the annual
bonus attributable to these latter two divestments
would be clawed back in the event the agreed sales
do not complete. Elsewhere in relation to Strategy
Execution, the Committee noted good progress
regarding organic expansion in mainland China,
early stage development of the Wealth Management
strategy and strong personal commitment to and
success in supporting key client relationships.
The remainder of the opportunity within the
non-financial portion of the performance scorecard
related to People and Values (10%) and Compliance
and Reputation (15%). The Committee awarded 75%
of the available opportunity in respect of People and
Values noting the strong cohesion of the new senior
management leadership team which was updated
during 2011. With regard to Compliance and
Reputation, in spite of the considerable progress
made under S T Gulliver’s leadership in rolling out
HSBC Values awareness Group-wide to avoid
repetition of legacy compliance failings, the
incidence of the PPI redress settlement, the mis-
selling instances uncovered at NHFA Limited and
continuing legacy legal and compliance issues in the
US, the Committee determined that there could be
no award under this element of the scorecard.