HSBC 2007 Annual Report Download - page 329

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and fifth anniversaries of the date of award if
the performance target was not met at the third
anniversary. The awards made in 2004 had a
three-year performance period with no re-testing.
The table below describes the outcome of the
performance tests for the 2002, 2003 and 2004
awards:
2002 award 2003 award 2004 award
First test (third anniversary) .. March 2005, performance
target met, awards vested in
2007
March 2006, performance
target not met
March 2007, performance
target not met, and therefore
award forfeited
First re-test (fourth
anniversary) .......................
Already vested
March 2007, performance
target not met No re-test
Second test (fifth
anniversary) ....................... Already vested March 2008 No re-test
In addition to these performance conditions,
none of the outstanding awards will vest unless the
Remuneration Committee is satisfied that, during the
performance period, HSBC Holdings has achieved
sustained growth. The Remuneration Committee
retains discretion to recommend early release of
shares awarded in certain circumstances, for
example, retirement, redundancy or ill health.
When events occur which cause the Remuneration
Committee to consider that the performance
conditions have become unfair or impractical, the
right is reserved for the Committee to amend or
substitute the performance conditions.
Funding
The Company’s policy is to fund long-term incentive
awards of Performance Shares and Restricted Shares
under The HSBC Share Plan through employee
benefit trusts which undertake market purchases of
HSBC Holdings’ shares. The dilution limits set out
in the HSBC share plans comply with the
Association of British Insurers’ guidelines.
Total Shareholder Return
The graphs below show how HSBC has performed
against the benchmark TSR used to determine
vesting for the 2004 Performance Share awards
and the FTSE 100 Index.
Graph 1: HSBC TSR and Benchmark TSR
HSBC TSR TSR Benchmark
Mar 2004 Mar 2005 Mar 2006
100%
110%
120%
130%
140%
150%
Mar 2007
Graph 2: HSBC TSR and FTSE 100 Index
100%
110%
120%
130%
140%
150%
160%
170%
180%
190%
200%
Dec 2002 Dec 2003 Dec 2004 Dec 2005 Dec 2006 Dec 2007
HSBC TSR FTSE 100
Source: Datastream
Pursuant to the Directors’ Remuneration Report
Regulations 2002, Graph 2 shows HSBC’s TSR
performance against the FTSE 100 Index, for the
five-year period ended 31 December 2007. The
FTSE 100 has been chosen as this is a recognised
broad equity market index of which HSBC Holdings
is a member.
Pensions
The normal retirement age for executive Directors
is 65. The pension entitlements earned by the
executive Directors during the year are set out on
page 330.
Share ownership guidelines
In line with a focus on highly leveraged variable pay,
HSBC operates a formal share ownership policy,
expressed as a number of shares, for the executive
Directors and the Group Managing Directors. The
Committee believes that material levels of share
ownership by executives create a community of
interest between the leadership team and
shareholder. The executive Directors and Group
Managing Directors are therefore required to build
and retain the following shareholdings: