HSBC 2008 Annual Report Download - page 306

HSBC HOLDINGS PLC
Report of the Directors: Governance (continued)
Employees > Share plans
304
context of business performance, market
practice and internal relativities. Allowances and
benefits are largely determined by local market
practice;
• employees participate in various variable pay
arrangements. Discretionary variable pay is
dependent on the achievement of objectives
which derive from those determined at the
Group level. Since 2008, these objectives
typically cover four categories – Financial,
Customer, Process and People. Targets which
measure these objectives generally include
profitability, expense control, customer
recommendation, employee engagement,
adherence to HSBC’s ethical standards, lending
guidelines, internal controls and procedures,
with an emphasis on risk management to
maintain a strong and secure operating platform.
Actual levels of pay will depend on the
performance of the Group, that of constituent
businesses, and of the individual, taking into
account competitive market practice.
• to ensure that the interests of HSBC and its
employees are aligned with those of its
shareholders, and that HSBC’s approach to risk
management supports the interests of all
stakeholders, a proportion of variable pay
awards above certain thresholds is required to
be deferred into HSBC Restricted Shares. In
addition, employees are encouraged to
participate in HSBC Holdings savings-related
share option plans and local share ownership
arrangements.
Employee share plans
To help align the interests of employees with those
of shareholders, share options are granted under all-
employee share plans and discretionary awards of
Performance Shares and Restricted Shares are made
under the HSBC Share Plan. There have been no
awards of discretionary share options since
30 September 2005.
Set out on pages 304 to 311 are particulars of
outstanding employee share options, including those
held by employees working under employment
contracts that are regarded as ‘continuous contracts’
for the purposes of the Hong Kong Employment
Ordinance. The options were granted at nil
consideration. No options have been granted to
substantial shareholders, suppliers of goods or
services, or in excess of the individual limit for each
share plan. No options were cancelled by HSBC
during the year.
Employee share plans are subject to the
following limits on the number of HSBC Holdings
ordinary shares that may be subscribed for. In any
10-year period not more than 10 per cent of the
HSBC Holdings ordinary shares in issue from time
to time (approximately 1,214 million HSBC
Holdings ordinary shares at 2 March 2009) may in
aggregate become issuable pursuant to the grant of
options or be issued other than pursuant to options
under all-employee share plans. In any 10-year
period not more than 5 per cent of the HSBC
Holdings ordinary shares in issue from time to time
(approximately 607 million HSBC Holdings
ordinary shares on 2 March 2009) may in aggregate
be put under option under the HSBC Share Plan or
be issuable pursuant to the HSBC Holdings Group
Share Option Plan, the HSBC Executive Share
Option Scheme, the HSBC Holdings Restricted
Share Plan 2000 or the HSBC Share Plan. The
number of HSBC Holdings ordinary shares that may
be issued on exercise of all options granted on or
after 27 May 2005 under the HSBC Share Plan and
any other plans must not exceed 1,119,000,000
HSBC Holdings ordinary shares. Under the HSBC
Holdings savings-related share option plans, the
HSBC Share Plan, HSBC Holdings Group Share
Option Plan and the HSBC Holdings Executive
Share Option Scheme there were options outstanding
over 231,257,004 HSBC Holdings ordinary shares at
31 December 2008. Particulars of options over
HSBC Holdings shares held by Directors of HSBC
Holdings are set out on page 326 of the Directors’
Remuneration Report.
The effect on earnings per share of granting
share options and share awards is shown in diluted
earnings per share on the face of the consolidated
income statement, with further details disclosed in
the Earnings per share Note 13 on the Financial
Statements. The effect on basic earnings per share of
dilutive share options and share awards would be to
dilute it by 1.2 per cent.
All-employee share option plans
The HSBC Holdings Savings-Related Share Option
Plan and the HSBC Holdings Savings-Related Share
Option Plan: International are all-employee share
plans under which eligible HSBC employees (those
employed within the Group on the first working day
of the year of grant) may be granted options to
acquire HSBC Holdings ordinary shares. Employees
may make contributions of up to £250 (or
equivalent) each month over a period of one, three or
five years which may be used on the first, third or
fifth anniversary of the commencement of the
relevant savings contract, at the employee’s election,
to exercise the options. Alternatively, the employee