HSBC 2003 Annual Report Download - page 217

215
The Nomination Committee met once during 2003. The terms
of reference of the Committee have been broadened
substantially and more meetings will be held in 2004 and
future years.
Chairman, Corporate Social
Responsibility Committee £20,000 p.a.
Member, Corporate Social
Responsibility Committee £15,000 p.a.
This Committee first met in February 2004 and will meet on
a quarterly basis.
Executive Directors are normally permitted to
retain only one Director’s fee from HSBC. For
example, executive Directors who are also
Directors of The Hongkong and Shanghai Banking
Corporation Limited may elect to receive a fee
from either HSBC Holdings or The Hongkong and
Shanghai Banking Corporation Limited.
Executive Directors
The executive Directors are experienced executives
with detailed knowledge of the financial services
business in various countries. In most cases there
has been a need to attract them from abroad to
work in the United Kingdom.
Having regard to the broad international nature
of the Group, the annual market survey of senior
executive remuneration takes into account not only
remuneration data in the UK but also in other
overseas markets.
Consistent with the principles applied by the
Committee to employees generally, there are four
key components to the executive Directors’
remuneration:
• salary;
• annual cash bonus;
• long-term incentives; and
• pension.
The Committee generally provides, on a
discretionary basis, long-term share incentives to
executive Directors and members of senior
management through conditional awards of
Performance Shares under the HSBC Holdings
Restricted Share Plan 2000 rather than through the
HSBC Holdings Group Share Option Plan, as
explained under ‘Long-term incentive plan’ below.
The level of awards available to the executive
Directors under the annual cash bonus scheme and
the HSBC Holdings Restricted Share Plan 2000 is
entirely dependent on performance. Remuneration
policy for executive Directors is intended to
provide competitive rates of base salary but with
the potential for the majority of the value of the
remuneration package to be delivered in the form
of both short and long-term incentives. This
typically results in base salary comprising around
40 per cent of total direct pay and the remaining 60
per cent split equally between annual bonus and the
expected value of Performance Share awards. The
remuneration package of W F Aldinger has a
smaller proportion of fixed salary and a higher
proportion of annual bonus and Restricted Share
awards. The awards are in accordance with the
minimum level of awards set out under his
employment agreement entered into at the time of
the acquisition of Household.
Each component of executive Directors’
remuneration is explained in detail below. The
current approach and structure of remuneration has
been in place since 2000 and the Committee
believes it has served HSBC well. The Committee
has, however, made the following modifications to
the performance condition for future awards of
Performance Shares under the HSBC Holdings
Restricted Share Plan 2000 in order to make the
condition more relevant and long-lasting:
• the elimination of any re-testing provision so
that awards lapse if the performance condition
is not satisfied after the initial three-year
performance period; and
• a change to the benchmark group (set out on
page 217) to make it more relevant as a
benchmark against which HSBC’s
performance is measured.
The use of Performance Shares and the HSBC
Holdings Restricted Share Plan 2000 will fall
within the Committee’s review of share-based
remuneration to be undertaken in 2004.
Salary
The
Committee reviews salary levels for executive
Directors each year in the same context as other
employees. With respect to market practice and
taking account of the international nature of the
Group, the Committee benchmarks the salary of
each Director and member of Senior Management
against those of comparable executives in large,
diverse companies.