HSBC 2007 Annual Report Download - page 327

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salary. The individual awards received in any one
year are based on market competitive information
and individual performance. The face and expected
values of individual awards made in 2007 are set out
in the table below (awards made in 2006 are shown
for reference).
2007 awards
Face value Expected value1
2007
£000
2006
£000
2007
£000
2006
£000
D J Flint ........................................................................ 2,200 1,600 968 704
M F Geoghegan2 ........................................................... 5,000 2,000 2,200 880
S K Green3 .................................................................... 3,750 2,500 1,650 1,100
Total .............................................................................. 10,950 6,100 4,818 2,684
1 44 per cent of the face value.
2 M F Geoghegan’s 2006 award relates to his position as Chief Executive of HSBC Bank plc, prior to his current role as Group Chief
Executive of HSBC Holdings.
3 S K Green’s 2006 award relates to his position as Group Chief Executive.
Vesting of the awards is subject to the
performance conditions described in the next
section being met. Shares released will include
additional shares equivalent to the value of the
dividends payable on the vested shares over the
performance period.
Performance conditions
Arrangements from 2005 to 2007
Vesting of the awards of Performance Shares under
The HSBC Share Plan is based on two independent
measures, relative TSR and growth in EPS. The
performance conditions are measured over a three-
year performance period and awards forfeited to
the extent that they have not been met. The vesting
of 50 per cent of the awards is based on TSR and
the remaining 50 per cent on growth in EPS.
TSR award
The comparator group of 28 banks for the TSR
award comprises the largest banks in the world,
on the basis of their market capitalisation, their
geographic spread and the nature of their activities:
ABN AMRO Mitsubishi Tokyo Financial Group
Banco Santander Mizuho Financial Group
Bank of America Morgan Stanley
Bank of New York National Australia Bank
Barclays Royal Bank of Canada
BBVA Royal Bank of Scotland
BNP Paribas Société Générale
Citigroup Standard Chartered
Crédit Agricole UBS
Credit Suisse Group UniCredito Italiano
Deutsche Bank US Bancorp
HBOS Wachovia
JP Morgan Chase Wells Fargo
Lloyds TSB Westpac Banking Corporation
The extent to which the TSR award will vest
will be determined on a sliding scale based on
HSBC’s relative TSR ranking, measured over the
three years, against the comparator group as shown
below:
If HSBC’s performance
matches
Proportion of TSR Award
vesting1
Banks ranking 1st to 7th 100%
Bank ranking 8th 90%
Bank ranking 9th 80%
Bank ranking 10th 70%
Bank ranking 11th 60%
Bank ranking 12th 50%
Bank ranking 13th 40%
Bank ranking 14th 30%
Banks ranking below 14th nil
1 Vesting will occur in a straight line where HSBC’s
performance falls between these incremental steps.
EPS award
The method for calculating EPS growth has been
summarised in narrative form in the 2005 and 2006
Directors’ Remuneration Reports, as well as in the
circular containing the Notice of Annual General
Meeting for 2005.
This year’s Report sets out more information
(including a graph and an example) on the method
of calculation of EPS growth in light of some
questions from shareholders on the operation of
this element. The Committee regrets if there has
been any misunderstanding, but wishes to reassure
shareholders that the method of calculation, which
is set out in the rules of The HSBC Share Plan, has
remained unchanged since the Plan was adopted.
Further, before introducing the Plan in 2005, the
Committee consulted extensively with major
shareholders and their representative bodies in line
with best practice, and the rules of the Plan
including worked examples of the EPS calculation
were available for inspection at the time.