HSBC 2004 Annual Report Download - page 218

HSBC HOLDINGS PLC
Directors’ Remuneration Report
216
Remuneration Committee
The Remuneration Committee meets regularly to
consider human resource issues, particularly terms
and conditions of employment, remuneration,
retirement benefits, development of high potential
employees and key succession planning. The
Remuneration Committee seeks to respond to the
variety of environments and circumstances which are
faced by different businesses in different markets at
different times and has in place appropriate policies
and procedures to monitor the size of the potential
remuneration awards. The members of the
Remuneration Committee throughout 2004 were Sir
Mark Moody-Stuart (Chairman), W K L Fung and
Sir John Kemp-Welch. S Hintze was appointed a
member of the Committee on 30 January 2004.
There were seven meetings of the Remuneration
Committee during 2004. Sir Mark Moody-Stuart and
Sir John Kemp-Welch attended all of these meetings,
W K L Fung attended five meetings and S Hintze
attended five of the six meetings following her
appointment. Following each meeting the Committee
reports back to the Board on its activities. The terms
of reference of the Committee are available on
www.hsbc.com by selecting ‘Investor Relations’ ,
then ‘Corporate Governance’ , then ‘Board
Committees’ .
Towers Perrin, a firm of specialist human
resources consultants, has been appointed by the
Committee to provide independent advice on
executive remuneration issues. As a global firm,
Towers Perrin also provides other remuneration,
actuarial and retirement consulting services to
various parts of HSBC. Other than the provision of
expert advice in these areas to the Remuneration
Committee and to HSBC, Towers Perrin have no
connection with HSBC. Other consultants are used
from time to time to validate their findings. The
Remuneration Committee also receives advice from
the Group General Manager, Human Resources,
J C S Rankin, and the Senior Executive, Group
Reward Management, P M Wood.
General Policy on Employees
As with most businesses, HSBC’ s performance
depends on the quality and commitment of its
people. Accordingly, the Board’ s stated strategy is to
attract, retain and motivate the very best people.
In a business that is based on trust and
relationships, HSBC’ s broad policy is to look for
people who want to make a long-term career with
the organisation since trust and relationships are
built over time.
Remuneration is an important component in
people’ s decisions on which company to join, but it
is not the only one; it is HSBC’s experience that
people are attracted to an organisation with good
values, fairness, the potential for success and the
scope to develop a broad, interesting career.
Within the authority delegated by the Board of
Directors, the Remuneration Committee is
responsible for determining the remuneration policy
of HSBC including the terms of bonus plans, share
plans and other long-term incentive plans, and for
agreeing the individual remuneration packages of
executive Directors and other senior Group
employees. No Directors are involved in deciding
their own remuneration.
The Remuneration Committee applies the
following key principles:
• to ensure that the total remuneration package
(salary, bonus, long-term incentive awards and
other benefits) is competitive in relation to
comparable organisations in each of the
countries or regions in which HSBC operates;
• to offer fair and realistic salaries with an
important element of variable pay, differentiated
by performance;
• through awards of shares (and in limited
circumstances, share options) to recognise high
performance and retain key talent; and
• since 1996, to follow a policy of moving
progressively from defined benefit to defined
contribution Group pension schemes for new
employees only.
In line with these principles:
• employees’ salaries are reviewed annually in the
context of individual and business performance,
market practice, internal relativities and
competitive market pressures. Allowances and
benefits are largely determined by local market
practice;
• employees participate in various bonus
arrangements. The level of performance-related
variable pay depends upon the performance of
constituent businesses and the individual
concerned. During 2004 variable bonus plans
were reviewed to give greater emphasis to
revenue growth whilst retaining a strong link to
expense control; other key measures taken into
account in determining individual bonus levels
include customer relationships; full utilisation of
professional skills; adherence to HSBC’s ethical
standards, internal controls and procedures.
Bonus ranges are reviewed in the context of