HSBC 2008 Annual Report Download - page 13

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industry must respond to the requirement for a more
sober and reasonable approach to compensation. At
HSBC, we are committed to the principle of sensible
market-related pay, structured to align executive
actions with long-term shareholder interests. A small
number of individuals in a market system will
inevitably receive compensation that is high in
absolute terms, but this must be genuinely linked to
long-term shareholder interests. It is clear that the
banking industry got it wrong in the go-go years:
we will play our part in helping the industry
respond appropriately to the new realities.
It is right therefore that in HSBC’s case, I
outline our present position. As Chairman I elected
in 2007 to no longer receive any cash bonus award;
any variable compensation would be delivered
through performance share awards – which would
only vest if performance hurdles are met. And no
performance share awards will be made in the Group
in respect of 2008. Mike Geoghegan, Group Chief
Executive, and Stuart Gulliver, Chief Executive
Global Banking and Markets, and Douglas Flint,
Group Finance Director, have asked the
Remuneration Committee not to consider them for
any bonus award for 2008. No cash bonus award will
be made to any Executive Director for 2008. Full
details on Directors’ remuneration can be found in
the Annual Report.
Learning the lessons
We are living through a genuinely global crisis; it
cannot be solved by one nation alone. Governments
need to work together with our industry to tackle the
root causes of the crisis, while maintaining the open,
globalised markets that have helped spread
prosperity in the last two decades. Protectionism,
both in trade and in capital flows, is a threat and in
all its forms must be resisted.
We must also urgently improve governance and
regulation to create a more stable financial
framework. The globalisation of financial markets
contrasts sharply with the domestic agenda of the
regulatory regimes that underpin it. We support
intergovernmental efforts to enhance the
coordination of regulatory oversight, since we
believe that this is essential to the stable
development of the international capital markets for
the benefit of the common good.
Continued economic strain
The coming twelve months will be difficult. We
expect parts of Asia, the Middle East and Latin
America to continue to outperform Western
economies, but to be constrained by the global
downturn.
We see unemployment rising through 2009 into
2010 in both the US and the UK, together with
continuing declines in housing markets. We should
remember that the US is the driver of the global
economy and global growth depends on the US
recovery.
We remain confident that HSBC is well-placed
in today’s environment and that our strength leads to
opportunity. Our strategy has served HSBC well and
positions it for long-term growth with attractive
returns. HSBC continues to combine its position as
the world’s leading emerging markets bank with an
extensive international network across both
developed and faster growing markets. At the same
time, as the financial system exhibits stress, our
competitive position is improving as the capacity
and capabilities of financial institutions are
constrained by lack of capital and funding; many of
them are also focusing more on their domestic
markets.
Further strengthening our capital base will
enhance our ability to deal with the impact of an
uncertain economic environment and to respond to
unforeseen events, as well as giving us options
regarding opportunities which will undoubtedly
present themselves to those with superior financial
strength.
S K Green, Group Chairman
2 March 2009