HSBC 2003 Annual Report Download - page 222

HSBC HOLDINGS PLC
Directors’ Remuneration Report (continued)
220
Service contracts and terms of
appointment
HSBC’ s policy is to employ executive Directors on
one-year rolling contracts although, on recruitment,
longer initial terms may be approved by the
Remuneration Committee. The Remuneration
Committee will, consistent with the best interests
of the Group, seek to minimise termination
payments.
No executive Director has a service contract
with HSBC Holdings or any of its subsidiaries with
a notice period in excess of one year or with
provisions for predetermined compensation on
termination which exceeds one year’s salary and
benefits in kind, save as referred to below. There
are no provisions for compensation upon early
termination of executive Directors’ service
contracts save for W F Aldinger and C F W de
Croisset, details of which are set out below.
Mr Aldinger entered into a new employment
agreement with Household on 14 November 2002
for a term of three years, such term to commence
on the effective date of the acquisition of
Household by HSBC. Full details of the agreement
were set out in the Discloseable Transaction
Circular relating to the acquisition of Household
sent to shareholders on 26 February 2003 in
advance of the Extraordinary General Meeting to
approve the acquisition. The terms of the
employment agreement, which were an integral
part of the Household acquisition that shareholders
approved at the Extraordinary General Meeting,
are unchanged. The effective date of acquisition,
and commencement date of the contract, was
28 March 2003.
During the term of the agreement Mr Aldinger
will be paid an annual base salary equal to his
annual base salary as at the date of the merger
agreement between Household and HSBC
(US$1 million) and an annual bonus in an amount
at least equal to the annual average of
Mr Aldinger’s bonuses earned with respect to the
three-year period ended 2001 (pro rated for any
partial year) (US$4 million). Within 30 days of the
effective date, Mr Aldinger received a one-time
special retention grant of HSBC Holdings ordinary
shares under the HSBC Holdings Restricted Share
Plan 2000 with a value equal to US$10 million.
These Restricted Shares will vest in three equal
instalments on each of the first three anniversaries
of the effective date, as set out on page 228. After
each of the second and third anniversaries of the
effective date, subject to the approval of the
Trustee of the HSBC Holdings Restricted Share
Plan 2000, Mr Aldinger will receive an additional
grant of HSBC Holdings ordinary shares with a
value equal to at least US$5.5 million. The purpose
of these arrangements is to retain the services of
Mr Aldinger through the initial integration of
Household. HSBC considers it is essential that the
experience, knowledge and skills of Mr Aldinger
be retained for the benefit of HSBC shareholders.
If Mr Aldinger’s employment is terminated by
him during its term for ‘good reason’ , or by
Household for reasons other than ‘cause’ or
disability, he will be entitled to: a pro rata target
annual bonus for the financial year of the date of
termination; a payment equal to his annual base
salary, plus the average of his annual bonuses with
respect to the three-year period ended 2001, times
the number of full and partial months from the date
of termination until the third anniversary of the
effective date, divided by twelve; the immediate
vesting and exercisability of each stock option,
restricted stock award and other equity-based
award or performance award (or cash equivalent)
that is outstanding as at the date of termination and
treatment as retirement eligible for purposes of
exercising any such award; for the remainder of his
life and that of his current spouse, continued
medical and dental benefits at Household’s cost;
and his retirement benefits (as set out on page 224)
in a lump sum.
Sir John Bond is employed on a rolling
contract dated 1 January 1993 which requires 12
months’ notice to be given by either party.
C F W de Croisset has a contract of
employment dated 7 January 1980 that was in
force before he joined the Board of CCF. The
contract has no set term but provides for three
months’ notice to be given by either party. Under
the terms of the contract Mr de Croisset would be
entitled to receive one month's salary for each year
of service with CCF on termination of his
employment with CCF. In accordance with French
legal requirements and practice, this contract was
suspended while he served as an executive Director
of CCF. On 29 February 2004, Mr de Croisset took
early retirement from the Group, relinquishing his
role as Chairman and CEO of CCF. In light of
French legal requirements a review of market