HSBC 2012 Annual Report Download - page 349

HSBC HOLDINGS PLC
Directors’ Remuneration Report (continued)
Summary letter from the Group Remuneration Committee Chairman
347
Overview Operating & Financial Review Corporate Governance Financial Statements Shareholder Information
Report of the Group
Remuneration Committee
Page
App1
Summary letter from the Group
Remuneration Committee Chairman ... 347
Summary of remuneration policy ............. 351
Summary of 2012 remuneration outcomes 354
Additional disclosures ................................ 361
Emoluments table ......................................... 361
Non-executive Directors’ fees ...................... 362
Other directorships ....................................... 363
Share plans .................................................... 363
Pensions ........................................................ 365
Employee compensation and benefits .......... 366
1 Appendix to Directors’ Remuneration Report
Summary letter from the Group
Remuneration Committee Chairman
Dear Shareholder
This report covers the reporting period from
1 January 2012 to 31 December 2012 and provides
details of the Group Remuneration Committee
(‘the Committee’) and remuneration policy of the
Company.
This report has been prepared by the Committee
with reference to the draft regulations put forward
by the UK Government Department of Business,
Innovation and Skills regarding the requirements
for the content of a Directors’ Remuneration Report.
The regulations will apply to all UK companies
listed on a major stock exchange with financial years
ending on or after October 2013, and this report is
therefore prepared using the new standards on a
voluntary basis, to meet best practice in reporting.
In line with this draft legislation, the report
is provided in three sections: the summary of the
report, a section outlining HSBC’s forward-looking
remuneration policy and a section setting out
remuneration outcomes for 2012. Additional
disclosures as required under Schedule 8 of the
Large and Medium-sized Companies and Groups
(Accounts and Reports) Regulations 2008 and other
disclosure requirements are provided at the end of
the report in the appendix.
Remuneration strategy
The quality and commitment of our human capital
is fundamental to our success and accordingly the
Board aims to attract, retain and motivate the very
best people. As trust and relationships are vital in
our business, our goal is to recruit those who are
committed to maintaining a long-term career with
the organisation.
HSBC’s reward strategy supports this objective
through balancing both short-term and sustainable
performance. Our reward strategy aims to reward
success, not failure, and be properly aligned with
our risk framework and risk outcomes.
In order to ensure alignment between
remuneration and our business strategy, individual
remuneration is determined through assessment
of performance delivered against both annual and
long-term objectives summarised in performance
scorecards as well as adherence to the HSBC Values
of being ‘open, connected and dependable’ and
acting with ‘courageous integrity’. Altogether,
performance is judged, not only on what is achieved
over the short and long term, but also on how it is
achieved, as the latter contributes to the
sustainability of the organisation.
The financial and non-financial measures
incorporated in the annual and long-term scorecards
are carefully considered to ensure alignment with the
long-term strategy of the Group.
Structure of remuneration
In order to simplify remuneration, elements are
limited to the following:
• fixed pay;
• benefits;
• annual incentive; and
• the Group Performance Share Plan.
The Group Performance Share Plan (‘GPSP’)
was developed to incentivise senior executives to
deliver sustainable long-term business performance.
A key feature of the GPSP is that participants are
required to hold the awards, once they have vested,
until retirement, thereby enhancing the alignment of
interest between the senior executives of the Group
and shareholders. Further details are given on
page 351.
Executive Directors, Group Managing Directors
and Group General Managers participate in both
performance-related plans, namely the annual
incentive and the GPSP. Other employees across the
Group are eligible to participate in annual incentive
arrangements. Both the annual incentive and long-
term incentive awards are funded from a single
annual variable pay pool from which individual
awards are considered. Funding of the Group’s
annual variable pay pool is determined in the
context of Group profitability, capital strength,
and shareholder returns. This approach ensures