HSBC 2010 Annual Report Download - page 223

221
Overview Operating & Financial Review Governance Financial Statements Shareholder Information
employment conditions of our employees compared
to our Directors and senior executives.
Management of risk
The integration of risk management with reward
commenced in 2008 when our Group Risk function
became involved in the approval of relevant
incentive plans. Subsequently, the concept of
imputing the cost of capital in the determination of
bonus funding was expanded across HSBC, starting
with GB&M, and it now applies throughout the
Group.
Since 2009, the Group Chief Risk Officer
has provided advice to the Committee on the
implications of the remuneration policy on risk and
risk management. As outlined in ‘Overall principles’
on page 222, risk mitigation objectives are included
in objectives.
From 2010, we have used a risk appetite
framework which describes the quantum and types
of risk that we are prepared to take in executing our
strategy. It shapes our integrated approach to
business, risk and capital management and supports
us in achieving our return on equity objectives. The
risk appetite framework is agreed by the HSBC
Holdings Board and cascaded across businesses
and geographies. It provides an important input
into the Committee’s deliberations with regard to
remuneration. In addition, individual performance is
also reviewed against key risk appetite targets for
credit, market, operational and information and
security risks to ensure that proposed individual
remuneration is appropriate against these aspects.
In February 2010, the Group Risk Committee
was established, which advises the Board on risk
appetite and also on aligning reward structures with
risk appetite. The Group Risk Committee receives
information on risk related aspects of reward
structures to be proposed by the Committee. The
Group Chief Risk Officer regularly reports to, and
attends meetings of, the Group Risk Committee.
Further information relating to our approach to
risk management in general is set out on page 198.
Regulation
2010 has seen further significant change to the
regulatory environment. Regrettably there is still a
wide divergence in how regulations operate globally
and this presents significant challenges to HSBC,
which operates in 87 countries and territories
worldwide. In order to deliver long-term
sustainable performance, it is imperative we have
market-competitive remuneration in order to attract,
motivate and retain talented and committed
employees.
We work to ensure our remuneration policies
are aligned with both new regulatory practices and
the interests of shareholders and confirm that HSBC
is fully compliant with the Financial Stability Board
and the Financial Services Authority (‘FSA’)
guidance and rules on remuneration.
Senior management changes
In September 2010, we announced that our Group
Chairman, Lord Green, would retire from the Group
on 3 December 2010 and that the Group Chief
Executive and Chairman of The Hongkong and
Shanghai Banking Corporation, M F Geoghegan,
would step down as Group Chief Executive with
effect from 31 December 2010 and provide advisory
support to the Group until his retirement on
31 March 2011. M F Geoghegan will then act as an
external consultant up to 30 June 2011. Succession
to these positions affecting the executive Directors is
set out below.
D J Flint was appointed Group Chairman with
effect from 3 December 2010 and continues to be
based in London.
S T Gulliver was appointed Group Chief
Executive and Chairman of The Hongkong and
Shanghai Banking Corporation with effect from
1 January 2011. In keeping with the policy
established in September 2009, his principal office
is located in Hong Kong.
A A Flockhart was appointed Chairman, Europe,
Middle East, Africa, Latin America, Commercial
Banking and Chairman of HSBC Bank plc with
effect from 1 January 2011. He has relocated from
Hong Kong to London to take up this remit.
I J Mackay was appointed an executive Director
and the Group Finance Director with effect from
3 December 2010. He has relocated from Hong
Kong to London to take up this remit.
2011 remuneration activities
As announced in 2010, the Committee is considering
how HSBC can continue to improve the alignment
between shareholders and senior management with
regard to incentivising long-term sustainable
performance. The Committee is currently in the
process of consulting with major shareholders on
this subject. Any material changes to our approach
which result from this consultation will be explained
to shareholders in the Chairman’s letter
accompanying the Notice of the Company’s 2011
Annual General Meeting.