HSBC 2002 Annual Report Download - page 177

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Vesting schedule
Having regard to HSBC Holdings’ size and status
within the financial sector, a benchmark has been
established which takes account of:
1. a peer group of nine banks (ABN AMRO
Holding N.V., Citigroup Inc., Deutsche Bank
A.G., J. P. Morgan Chase & Co., Lloyds TSB
Group plc, Oversea-Chinese Banking
Corporation Limited, Mitsubishi Tokyo
Financial Group Inc., Standard Chartered PLC,
The Bank of East Asia, Limited) weighted by
market capitalisation;
2. the five largest banks from each of the United
States, the United Kingdom, continental Europe
and the Far East, other than any within 1 above,
weighted by market capitalisation; and
3. the banking sector of the Morgan Stanley
Capital International World Index, excluding
any within 1 and 2 above, weighted by market
capitalisation.
By combining the above three elements and
weighting the average so that 50 per cent is applied
to 1, 25 per cent is applied to 2 and 25 per cent is
applied to 3, an appropriate market comparator
benchmark is determined.
The extent to which awards will vest will be
determined by reference to HSBC Holdings’ TSR
measured against the benchmark TSR. The
calculation of the share price component within
HSBC Holdings’ TSR will be the average market
price over the 20 trading days commencing on the
day when the annual results are announced, which in
2003 is 3 March. The starting point will be,
therefore, the average over the period 3 to 28
March inclusive. TSR for the benchmark
constituents will be based on their published share
prices for 28 March 2003.
If HSBC Holdings’ TSR over the performance
period exceeds the mean of the benchmark TSR,
awards with a value, at the date of grant, of up to
100 per cent of earnings, will vest. For higher value
awards, the greater of 50 per cent of the award or the
number of shares, equating at the date of grant to
100 per cent of earnings, will vest at this level of
performance. If HSBC Holdings’ TSR over the
performance period places it within the upper
quartile in the ranked list against the benchmark,
these higher value awards will vest in full. For
performance between the median and the upper
quartile, vesting will be on a straight line basis.
The initial performance period will be three
years. If the upper quartile performance target is
achieved at the third anniversary of the date of grant,
but not if it is achieved later, an additional award
equal to 20 per cent of the initial performance share
award will be made and will vest at the same time as
the original award to which it relates. However,
regardless of whether the upper quartile target is
achieved on the third, fourth or fifth anniversary, full
vesting and transfer of the shares will not generally
occur until the fifth anniversary.
As a secondary condition, options and awards
will only vest if the Remuneration Committee is
satisfied that HSBC Holdings’ financial performance
has shown a sustained improvement in the period
since the date of grant.
Awards will vest immediately in cases of death.
The Remuneration Committee retains discretion to
recommend early release of the shares to the Trustee
in certain instances, e.g. in the event of redundancy,
retirement on grounds of injury or ill health, early
retirement, retirement on or after contractual
retirement or if the business is no longer part of
HSBC Holdings. Awards will normally be forfeited
if the participant is dismissed or resigns from HSBC.
Where events occur which cause the
Remuneration Committee to consider that the
performance condition has become unfair or
impractical, the right is reserved to the
Remuneration Committee to make such adjustments
as in its absolute discretion it deems appropriate to
make.