HSBC 2011 Annual Report Download - page 264

HSBC HOLDINGS PLC
Directors’ Remuneration Report (continued)
Executive Directors’ remuneration > GPSP
262
line basis to 100% weighting at the maximum
performance target.
The only financial measure that exceeded the
range for 2010 was capital strength with a core tier 1
capital ratio of 10.5%. The dividend payout fell
within the range and the ranges for the Return on
Equity and Cost Efficiency Ratio financial measures
were not met. Within the non-financial measures the
Committee’s considered view was that Strategy,
Brand Equity and People had been partially met and
a partial weighting was applied. The target for the
Compliance and Reputation measure was not met for
2010.
Using this approach, the initial guideline for the
performance outcome for 2010 was calculated as
38.2% of the maximum face value of awards as
detailed below.
2010 long-term scorecard and initial performance outcome
Measure
Long-term
target range
(pre 2011)
Weighting
Actual 2010
Performance
Outcome
Return on equity .............................................................. 15% – 19% 15% 9.5%1 –
Cost efficiency ratio ....................................................... 48% – 52% 15% 55.2%1 –
Capital strength ............................................................... 7.5% – 10% 15% 10.5%1 15.0%
Dividends (payout ratio) ................................................. 40% – 70% 15% 46.6%1 9.2%
Strategy ........................................................................... Judgement 10% Judgement 4.0%
Brand equity ...................................................................
Top 3 rating and
improve US$bn value 10%
Top 3 rating but
drop in value2 5.0%
Compliance and reputation ............................................. Judgement 10% Not met –
People ............................................................................. Judgement 10% Judgement 5.0%
Mechanical performance outcome ................................. 100% 38.2%
Committee discretion ...................................................... 31.3%
1 As reported in Annual Report and Accounts 2010.
2 Based on results from The Brand Finance® Banking 500 2011 survey.
Notwithstanding this, during the shareholder
consultation process in respect of the GPSP, the
Committee had committed to shareholders that it
would be conservative when determining the first
awards to be made. Accordingly the Committee
determined that the initial performance outcome
should be reduced further to give a final performance
outcome for 2010 of 31.3%.
This performance outcome was then applied to
maximum face values (expressed as a percentage of
salary) for each participant. The awards made in
respect of 2010 are detailed below:
Maximum face
value of award
Performance
outcome
Awards
made
S T Gulliver ................................................................................................................ 600% 31.3% 187.8%
A A Flockhart ............................................................................................................. 350% 31.3% 109.6%
I J Mackay .................................................................................................................. 300% 31.3% 93.9%
2011 awards
Awards to be granted in 2012 in respect of 2011
were assessed against the 2011 long-term scorecard
detailed overleaf.
The performance outcome under the 2011
long-term scorecard was again based upon the
Committee’s assessment of the achievement of the
objectives as detailed below. This approach took into
account performance under both financial and non-
financial objectives and was set within the context of
the risk appetite and strategic direction agreed by the
Board.
Irrespective of the performance outcome,
eligibility for a GPSP award requires confirmation
of adherence to HSBC Values and all participants
passed that test in 2011.
The weighting between financial and non-
financial measures was set at 60% and 40%
respectively. In aggregate an overall performance
outcome of 50% of the scorecard was judged to have
been achieved. A summary of the assessment and
rationale for the conclusions is set out below.