HSBC 2009 Annual Report Download - page 324

HSBC HOLDINGS PLC
Report of the Directors: Governance (continued)
Employees > Share plans / Subsidiary company share plans
322
Discretionary Share Plans
Note 10 on the Financial Statements gives detail
on share-based payments, including awards of
Restricted Shares made in 2009.
The HSBC Share Plan was approved at the 2005
Annual General Meeting and amendments were
approved at the Annual General Meeting in 2008.
Awards of Performance Shares are made under this
Plan to executive Directors and other senior
executives. The performance conditions for these
awards are described under ‘Performance Shares’ on
page 339.
Awards of Performance Shares are directed to
those senior executives who can influence corporate
performance such as members of the Group
Management Board. Due to market context it was
decided that no awards of Performance Shares would
be made in 2009.
Awards of Restricted Shares may be made to
other senior executives. In addition, awards are
typically made to employees as part of the Group’s
bonus deferral policy. Awards of Restricted Shares
define the number of shares to which the employee
will become entitled, generally between one and
three years from the date of the award, and normally
subject to the individual remaining in employment.
To date, all vesting awards of Performance Shares
and Restricted Shares have been satisfied by the
transfer of existing shares. To create additional core
tier 1 capital and retain funds within HSBC, the
Board has agreed that new shares may be issued to
satisfy the vesting of awards of Restricted Shares
and Performance Shares that cannot be satisfied
from shares held by employee benefit trusts
commencing in 2011.
The maximum value of awards that may be
granted to an employee in any one year under
the HSBC Share Plan is 700 per cent of the
employee’s annual salary at the date of grant. For the
purpose of the limit, any Restricted Share awards
made on or shortly after the commencement of
employment or in substitution for all or any part of
any bonus to which the employee would otherwise
have been entitled, are excluded.
Since September 2005, no share options have
been granted under the HSBC Share Plan. There
may be particular circumstances in the future where
option grants could be appropriate.
Prior to 2005, discretionary awards of share
options, with vesting subject to the attainment of a
predetermined TSR performance condition, were
made to employees at all levels of HSBC.
The vesting of these options was subject to the
attainment of pre-determined relative TSR
performance criteria, except in HSBC France (which
was acquired in 2000) where performance criteria
were phased in. There are no outstanding
performance conditions that remain to be satisfied
for the exercise of discretionary share options. Under
the HSBC Holdings Group Share Option Plan, the
maximum grant of options which could be made to
an employee in any one year (together with the
Performance Share awards under the HSBC
Holdings Restricted Share Plan 2000) was 150 per
cent (or in exceptional circumstances 225 per cent)
of the employee’s annual salary at the date of grant
plus any bonus paid in the previous year.
Under the HSBC Holdings Executive Share
Option Scheme the maximum value of options
which could be granted to an employee in any one
year was four times the employee’s relevant
earnings.
The options are generally exercisable between
the third and the tenth anniversary of the date of
grant.
The exercise price of options granted under the
HSBC Share Plan, and previously under the HSBC
Holdings Group Share Option Plan, is the higher of
the average market value of the ordinary shares on
the five business days prior to the grant of the option
or the market value of the ordinary shares on the date
of grant of the option, or the nominal value of a
share. The exercise price of options granted under
the HSBC Holdings Executive Share Option Scheme
was the market value of the ordinary shares on the
business day prior to the grant of the option. The
HSBC Share Plan will terminate on 27 May 2015
unless the Directors resolve to terminate the Plan at
an earlier date.
The exercise period of the options awarded
under discretionary share incentive plans may be
advanced to an earlier date in certain circumstances,
for example on the sale of a business. In the case
of the HSBC Holdings Executive Share Option
Scheme, the exercise period of the options awarded
may be extended in certain circumstances, for
example, on the death of a participant the executors
may exercise the option beyond the normal exercise
period.