HSBC 2006 Annual Report Download - page 260

HSBC HOLDINGS PLC
Report of the Directors: Governance (continued)
Board of Directors > Corporate governance codes / Board committees
258
must disclose any significant ways in which its
corporate governance practices differ from those
followed by US companies subject to NYSE listing
standards. HSBC Holdings believes the following to
be the significant differences between its corporate
governance practices and NYSE corporate
governance rules applicable to US companies.
US companies listed on the NYSE are required
to adopt and disclose corporate governance
guidelines. The Listing Rules of the UK Financial
Services Authority require each listed company
incorporated in the UK to include in its Annual
Report and Accounts a narrative statement of how it
has applied the principles of the Combined Code and
a statement as to whether or not it has complied with
the code provisions of the Combined Code
throughout the accounting period covered by the
Annual Report and Accounts. A company that has
not complied with the Code provisions, or complied
with only some of the Code provisions or (in the
case of provisions whose requirements are of a
continuing nature) complied for only part of an
accounting period covered by the report, must
specify the Code provisions with which it has not
complied, and (where relevant) for what part of the
reporting period such non-compliance continued,
and give reasons for any non-compliance. As stated
above, HSBC Holdings complied throughout 2006
with the applicable code provisions of the Combined
Code, save with respect to the appointment of the
current Group Chairman, as referred to above. The
Combined Code does not require HSBC Holdings to
disclose the full range of corporate governance
guidelines with which it complies.
Under NYSE standards, companies are required
to have a nominating/corporate governance
committee, composed entirely of independent
directors. In addition to identifying individuals
qualified to become board members, this committee
must develop and recommend to the board a set of
corporate governance principles. HSBC’s
Nomination Committee, which follows the
requirements of the Combined Code, includes a
majority of members who are independent. All
members of the Committee are non-executive
Directors and three of the four members, including
the Committee chairman, are independent non-
executive Directors. The Committee’s terms of
reference do not require the Committee to develop
and recommend corporate governance principles for
HSBC Holdings. As stated above, HSBC Holdings is
subject to the corporate governance principles of the
Combined Code.
Pursuant to NYSE listing standards, non-
management directors must meet on a regular basis
without management present and independent
directors must meet separately at least once per year.
During 2006, HSBC Holdings’ non-executive
Directors met twice as a group with the Group
Chairman, but without the Group Chief Executive or
Group Finance Director present, and met twice as a
group without the Group Chairman, Group Chief
Executive or Group Finance Director present. HSBC
Holdings’ practice, in this regard, complies with the
Combined Code.
In accordance with the requirements of the
Combined Code, HSBC Holdings discloses in its
annual report how the Board, its committees and the
Directors are evaluated and the results of the
evaluation (on page 256) and it provides extensive
information regarding Directors’ compensation in
the Directors’ Remuneration Report (on pages 280 to
289). The terms of reference of HSBC Holdings’
Audit, Nomination and Remuneration Committees
are available at www.hsbc.com/boardcommittees.
NYSE listing standards require US companies
to adopt a code of business conduct and ethics for
directors, officers and employees, and promptly
disclose any waivers of the code for directors or
executive officers. In addition to the Group Business
Principles and Values, which apply to the employees
of all HSBC companies, pursuant to the
requirements of the Sarbanes-Oxley Act the Board of
HSBC Holdings has adopted a Code of Ethics
applicable to the Group Chairman and the Group
Chief Executive, as the principal executive officers,
and to the Group Finance Director and Group Chief
Accounting Officer. HSBC Holdings’ Code of Ethics
is available on www.hsbc.com/codeofethics or from
the Group Company Secretary at 8 Canada Square,
London E14 5HQ. If the Board amends or waives
the provisions of the Code of Ethics, details of the
amendment or waiver will appear at the same
website address. During 2006 HSBC Holdings made
no amendments to its Code of Ethics and granted no
waivers from its provisions. The Group Business
Principles and Values are available on
www.hsbc.com/businessprinciplesandvalues.
Under NYSE listing rules applicable to US
companies, independent directors must comprise a
majority of the board of directors. Currently, over
half of HSBC Holdings’ Directors are independent.
Under the Combined Code the HSBC Holdings
Board determines whether a director is independent
in character and judgement and whether there are
relationships or circumstances which are likely to
affect, or could appear to affect, the director’s
judgement. Under the NYSE rules a director cannot
qualify as independent unless the board affirmatively