HSBC 2012 Annual Report Download - page 358

HSBC HOLDINGS PLC
Directors’ Remuneration Report (continued)
2012 remuneration outcomes
356
Financial (60% weighting – achieved 32%)
The Committee continued to judge Capital Strength
(10%) and Dividend Payout (10%) as critically
important reflections of financial performance
as they encapsulate a number of key factors of
importance to shareholders. In essence these
elements demonstrate a combination of profit
generation, control of capital usage, cash availability
at the holding company and regulatory satisfaction
with the preceding factors sufficient to support
HSBC’s progressive dividend policy. In essence,
these elements are important indicators of the
sustainability of shareholder reward. Reflecting a
higher dividend in 2012 and a stronger core tier 1
capital ratio, the Committee awarded full weighting
of these elements of the scorecard.
An opportunity of 15% was available in respect
of delivering pre-tax profit improvement (on the
underlying basis described on page 348 used to
assess management performance) and this was
judged to have been substantially met with the
Committee awarding 80% of the available
opportunity (12% award). Driving this assessment
were the strong performances across the faster-
growing markets, particularly in Hong Kong, the
turnaround in GB&M’s performance in Europe, the
delivery of above-target sustainable cost savings and
lower loan impairment charges driven by marked
improvement in the US.
Return on Equity (15%) did not meet the
benchmark return. The Cost Efficiency Ratio (10%)
also fell outside the required measure, in large part
attributable to the significant regulatory and law
enforcement fines and penalties incurred in the US
and customer redress costs suffered in the UK.
Non-financial (40% weighting – achieved 20%)
25% of the available opportunity in this area related
to Strategy Execution and 80% was judged to
have been achieved (20% awarded). This strong
performance reflected a combination of growing
capital deployment into targeted areas of
opportunity, particularly into faster-growing
markets, strategic cost efficiency initiatives
successfully deployed, evidence of further benefits
from global business integration, progress on
building wealth management revenues and personal
commitment to developing client relationships.
The final opportunity under non-financial
measures (15%) related to Risk and Compliance and,
in light of the US regulatory and law enforcement
fines and penalties and further customer redress in
the UK, no award was made under this element.
The same deliberations and assessments with
regard to performance and adherence to HSBC
Values were undertaken by the Committee with
regard to the performance of I J Mackay. This is
summarised below.
I J Mackay
The performance scorecard for I J Mackay was
weighted 30% financial, 70% non-financial. In
aggregate, in assessing the quantum of the 2012
annual incentive against the theoretical maximum
opportunity of three times base salary, an overall
score of 64% of that maximum opportunity was
judged to have been achieved.
The Committee considered that performance
against the financial targets of Cost Disciplines and
Capital and Liquidity Management had been met
or were in progress.
The Committee considered that performance
against the non-financial targets including People,
Reporting and Planning, Maintaining a Strong
Control Environment and Regulatory Change had
been met or were in progress. With regard to
Compliance and Reputation, in light of the US
regulatory and law enforcement fines and penalties
and further customer redress in the UK, no award
was made under this element of the scorecard.
Awards under the GPSP
Awards to be granted in 2013 in respect of 2012
were assessed against the 2012 long-term scorecard
published in the Annual Report and Accounts 2011
and reproduced below.
The performance assessment under the 2012
long-term scorecard took into account achievements
under both financial and non-financial objectives,
both of which were set within the context of the risk
appetite and strategic direction agreed by the Board.
Notwithstanding the detail or extent of
performance delivery against the objectives, an
individual’s eligibility for a GPSP award requires
confirmation of adherence to HSBC Values which
acts in effect as a gating mechanism to GPSP
participation. Within the GPSP, the weighting
between financial and non-financial measures
in respect of 2012 was set at 60% and 40%,
respectively.
In aggregate in respect of the objectives set
for 2012, and in light of the significance of the legal
and regulatory fines and penalties incurred in 2012,
an overall performance outcome of 40% (2011:50%)
of the scorecard was judged to have been achieved;
this outcome applies to all eligible participants in the