HSBC 2010 Annual Report Download - page 230

HSBC HOLDINGS PLC
Directors’ Remuneration Report (continued)
Executive Directors’ remuneration > Funding / TSR / Guidelines / Service contracts / Other directorships // Non-executive Directors
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conditions have been satisfied. Awards will normally
be forfeited if the participant is dismissed for cause
or resigns from HSBC. In all circumstances the
Committee retains discretion to ensure fair and
reasonable treatment.
Funding
The dilution limits set out in the HSBC share
plans comply with the Association of British
Insurers’ guidelines. To date, all vesting awards of
Performance Shares and Restricted Shares under the
HSBC Share Plan 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 and Performance
Shares that cannot be satisfied from shares already
held by employee benefit trusts commencing in
2011.
Total shareholder return
Pursuant to the Large and Medium-sized Companies
and Groups (Accounts and Reports) Regulations
2008, the graph below shows the TSR performance
against the FTSE 100 Index for the five-year period
ended 31 December 2010. The FTSE 100 Index has
been chosen as this is a recognised broad equity
market index of which HSBC Holdings is a member.
HSBC TSR and FTSE 100 Index
80%
90%
100%
110%
120%
130%
Dec 2005 Dec 2006 Dec 2007 Dec 2008 Dec 2009 Dec 2010
HSBC TSR FTSE 100
80%
90%
100%
110%
120%
130%
Dec 2005 Dec 2006 Dec 2007 Dec 2008 Dec 2009 Dec 2010
HSBC TSR FTSE 100
Source: International Data Corporation
Pensions
The normal retirement age for executive Directors
is 65, with the exception of V H C Cheng, for whom
no retirement age is specified in keeping with
local legislation. The pension entitlements of the
executive Directors for 2010 are set out on page 231.
Share ownership guidelines
To ensure appropriate alignment with our
shareholders, we operate a formal share ownership
policy, expressed as a number of shares, for
executive Directors and the Group Managing
Directors. The Committee considers that material
share ownership by executives creates a community
of interest between senior management and
shareholders.
Under the existing guidelines, the shareholding
is expected to be achieved within five years of the
executive’s appointment or three years from the date
of approval of amendments to the HSBC Share Plan
on 30 May 2008, whichever is the later. The
executive Directors and Group Managing Directors
are required to build and retain the following
shareholdings:
Number of shares1
to be held
held at 31
December
2010
V H C Cheng ................................. 200,000 1,383,564
D J Flint2 ........................................ 400,000 494,933
A A Flockhart ................................ 200,000 1,066,450
S T Gulliver3 .................................. 600,000 4,279,244
I J Mackay4 .................................... 200,000 287,719
Group Managing Directors ............ 125,000 –5
1 For the purposes of the guidelines, unvested awards of
Restricted Shares are included. Unvested Performance
Share awards are excluded.
2 Appointed Group Chairman on 3 December 2010.
3 Appointed Group Chief Executive on 1 January 2011.
4 Appointed Group Finance Director on 3 December 2010.
5 All of the Group Managing Directors exceed the expected
holdings.
The Committee monitors compliance with the
share ownership guidelines annually. The Committee
will have full discretion in determining any penalties
in cases of non-compliance, which could include a
reduction of future awards of long-term incentives
and/or an increase in the proportion of the annual
bonus that is deferred into shares.
Service contracts
Our policy is to employ executive Directors on one-
year rolling contracts although longer initial terms
may be approved by the Committee if considered
appropriate. The Committee will, consistent with
the best interests of the Group, seek to minimise
termination payments.