HSBC 2008 Annual Report Download - page 379

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Performance Share awards
Performance Shares are awarded to executive Directors and other senior executives after taking into account
individual performance in the previous year. For awards made prior to 2008, each award is divided into two equal
parts for testing attainment against pre-determined benchmarks. One half of the award is subject to a TSR measure,
based on HSBC’s ranking against a comparator group of 28 major banks; the other half is subject to an earnings per
share target. For each element of the award, shares are released to the employee on a sliding scale from 30 to 100 per
cent of the award, depending on the scale of achievement against the benchmarks, providing that the minimum
criteria for each performance measure has been met.
For awards made during 2008 and prospectively, each award is divided into three parts for testing attainment against
pre-determined benchmarks. 40 per cent of the award is subject to a TSR measure, based on HSBC’s ranking against
a comparator group of 26 major banks; 40 per cent is subject to an economic profit measure, calculated as the average
annual difference between return on invested capital and HSBC’s benchmark cost of capital; and 20 per cent is
subject to an earnings per share target. For the TSR and EPS elements of the awards, shares are released to the
employee on a sliding scale from 20 to 100 per cent of the award, depending on the scale of achievement against the
benchmarks. For the economic profit element of the awards, shares are released to the employee on a sliding scale
from zero to 100 per cent, depending on the scale of achievement against the benchmark. In all cases, shares are only
released when the minimum criteria for each performance measure has been met.
In determining whether HSBC Holdings has achieved such sustained improvement the Remuneration Committee will take
account of all relevant factors, in particular, comparisons against the TSR comparator group in areas such as revenue growth
and mix, cost efficiency, credit performance, cash return on cash invested, dividend performance and TSR.
2008 2007
Number Number
(000s) (000s)
Outstanding at 1 January ................................................................................................................... 12,318 10,367
Additions during the year ................................................................................................................... 5,664 3,263
Released in the year ........................................................................................................................... (2,246) –
Forfeited in the year ........................................................................................................................... (4,117) (1,312)
Outstanding at 31 December ............................................................................................................. 11,619 12,318
The weighted average fair value of shares awarded by HSBC for performance share awards in 2008 was US$13.61
(2007: US$13.24).
Restricted share awards
Restricted shares are awarded to other employees on the basis of their performance, potential and retention
requirements, to aid recruitment or as a part-deferral of annual bonuses. Shares are awarded without corporate
performance conditions and generally vest between one and three years from the date of award, providing the
employees have remained continually employed by HSBC for this period.
2008 2007
Number Number
(000s) (000s)
Outstanding at 1 January ................................................................................................................... 79,256 43,420
Additions during the year ................................................................................................................... 72,120 52,790
Released in the year ........................................................................................................................... (17,092) (8,781)
Forfeited in the year ........................................................................................................................... (12,078) (8,173)
Outstanding at 31 December ............................................................................................................. 122,206 79,256
The weighted average fair value of shares awarded by HSBC for restricted share awards in 2008 was US$14.64
(2007: US$17.92).
Share options
Share options were granted in 2005 under the HSBC Share Plan to employees in France on the basis of their
performance in the previous year. The share options are subject to the corporate performance conditions, which
consist of an absolute earnings per share measure and a TSR measure based on HSBC Holdings’ ranking against a
comparator group of 28 major banks. The options may vest after three years and are exercisable up to the tenth
anniversary of the date of grant, after which they will lapse.