HSBC 2015 Annual Report Download - page 302

Directors’ Remuneration Report (continued)
Directors’ remuneration policy for all employees
HSBC HOLDINGS PLC
300
Remuneration policy for all
employees
The Committee oversees the Group’s remuneration policy
and its application to the wider employee population.
The Committee periodically reviews the adequacy and
effectiveness of the policy and ensures that it:
• meets the commercial requirement to remain
competitive;
• is affordable;
• allows flexibility in response to prevailing circumstances;
and
• is consistent with effective risk management.
The mix of fixed and variable pay granted to an employee
corresponds to the individual’s role, local market factors
and regulatory requirements. The variable pay for all
material risk takers (‘MRT’s) is restricted to a maximum
of 200% of their fixed pay.
The table provides an overview of the different remuneration
elements and how this is operated for our employees:
Component of remuneration Approach taken
Base salary Market competitive pay for the role, skills and experience required for the business. Used to attract and
retain employees.
Fixed pay allowances Given where a rebalancing of the fixed and variable pay components of remuneration is appropriate.
The criteria used for determining fixed pay allowances include: the role, skills, experience, technical
expertise, market compensation and other remuneration that the employee may receive in the year.
Allowances may be in cash and/or vested shares.
The shares (net of shares sold to cover any income tax and social security) would be subject to a retention
period.
Pension and benefits Provided in accordance with local market practice. This includes but is not limited to the provision of
pensions, medical coverage, life insurance, health assessment, tax return preparation, legal fees and
relocation allowances.
Annual incentives Awards to drive and reward performance based on annual financial and non-financial measures consistent
with the medium to long-term strategy, shareholder interests and adherence to HSBC Values.
For MRTs, awards are normally subject to a 40% or 60% deferral. Normally delivered in cash and/or
shares, subject to a minimum six-month retention period. The vesting schedule is normally over 3 years.
For 2016, it could be 3 years, 5 years or 3-7 years, depending on the regulatory status of the employee.
Deferred awards are subject to malus and all awards are subject to clawback.
MRTs who meet the de minimis requirements of the PRA are subject to the normal deferral rates
applicable to all other employees.
For all other employees, awards can be in the form of cash and/or shares. Awards above a specified
threshold are subject to deferral based on a deferral table. All deferred awards are subject to malus.
HSBC operates an anti-hedging policy for all employees. As part of this all employees are required to
certify each year that they have not entered into any personal hedging strategies in relation to their
unvested awards and holdings of HSBC shares subject to a retention period.
Long-term incentives Share awards made to incentivise sustainable long-term performance and align to shareholder interests.
Only Group Managing Directors are eligible to receive long-term incentives. All awards are subject to
malus and clawback.
Link between pay and performance
Under our remuneration framework, pay decisions are
made based on the following factors: business results,
performance against scorecard objectives, general
individual performance of the role, and adherence to
HSBC Values, business principles, risk-related policies,
procedures and Global Standards.
At the end of each performance year, performance against
scorecard objectives, including risk objectives, form the
basis of remuneration decisions. This ensures risk
management is embedded and forms an integral part of
all our activities. This is especially important for senior
executives and MRTs as risk and compliance measures in
their scorecards ensure that their individual remuneration
has been appropriately assessed with regard to risk.
The performance and remuneration of individuals in control
functions is assessed according to a balanced scorecard of
objectives specific to the functional role they undertake, to
ensure their remuneration is determined independent of the
performance of the business areas they control.
HSBC Values are key to the running of a sound, sustainable
bank. All employees have a separate behavioural rating,
which informs their eligibility for variable pay and
influences their variable pay determinations.
Regular reviews are undertaken to assess instances of non-
compliance with risk procedures and expected behaviours.
Instances of non-compliance are escalated for consideration
in variable pay decisions, using the adjustment, malus and
clawback policies described in the next section. For MRTs,
the Committee has oversight of such decisions.