HSBC 2010 Annual Report Download - page 224

HSBC HOLDINGS PLC
Directors’ Remuneration Report (continued)
Remuneration Committee – members and advisers / Overall principles / Executive Directors’ remuneration
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Remuneration Committee –
members and advisers
The Committee meets regularly to consider human
resource issues relating to terms and conditions of
employment, remuneration and retirement benefits.
Within the authority delegated by the Board, the
Committee is responsible for approving
remuneration policy and in doing so takes into
account the pay and conditions across our Group.
This includes the terms of bonus plans, share plans,
other long-term incentive plans and the individual
remuneration packages of executive Directors and
other senior Group employees, including all in
positions of significant influence and those having
an impact on our risk profile. No Directors are
involved in deciding their own remuneration.
The members of the Committee during 2010
were J D Coombe, W S H Laidlaw, G Morgan and
J L Thornton. Sir Mark Moody-Stuart retired as a
Director of HSBC Holdings and ceased to be a
member and chairman of the Committee on 28 May
2010. J L Thornton was appointed chairman on
28 May 2010.
There were nine meetings of the Committee
during 2010. The table on page 190 gives details of
Directors’ attendance at these meetings. Following
each meeting the Committee reports to the Board on
its activities. The terms of reference of the
Committee are available at
www.hsbc.com/boardcommittees.
The Committee received independent advice on
executive remuneration issues from Deloitte LLP
and remuneration data from Towers Watson. Each of
these firms also provided other consulting services to
various parts of the Group. Other consultants are
used from time to time to advise on specific issues.
Going forward, the Committee has agreed to use
advisers only as and when required and that these
would be separate from the Company’s advisers.
During the year, the Group Chief Executive provided
regular briefings to the Committee and the
Committee received advice from the Group
Managing Director, Human Resources, A Almeida,
the Head of Group Performance and Reward,
T Roberts and B Robertson, then the Group Chief
Risk Officer.
Overall principles
Our global reward strategy provides a framework for
the Committee to carry out its responsibilities during
the year.
HSBC reward strategy How achieved
A rounded approach to
measuring performance
• We assess performance with reference to clear and relevant objectives set within a holistic balanced
scorecard framework. Under this framework, objectives are set under four categories – financial, process
(including risk mitigation), customer and people. Significant importance is given to the achievement of
efficiency and risk objectives as well as financial objectives. Objectives relating to customer development
and the productivity of our human capital are key to sustained financial performance and the development
of the Group over the short and medium term.
A focus on total
remuneration with variable
pay differentiated by
performance
• Reward is delivered through a combination of fixed and variable pay (salary, bonus, other long-term
incentives). The variable pay element is differentiated by performance over both the short and long-term.
The performance-related elements of pay comprise a material proportion of the total remuneration package
for executive Directors, whilst maintaining an appropriate balance between fixed and variable elements.
Remuneration is structured to provide an opportunity for market top quartile total remuneration for higher
levels of market referenced performance.
Aligning individual rewards
with Group performance and
shareholders
• A significant proportion of variable pay is deferred into, predominantly, awards of HSBC Holdings
Restricted Shares to align recipients to the future performance of the Group and to retain key talent. For
Code Staff (as defined under FSA rules) 50% of deferred variable pay is delivered in the form of deferred
cash.
• Executive Directors and other senior executives are subject to share ownership guidelines.
Competitive and cost
effective packages to attract
and retain staff
• A total remuneration package (salary, bonus, long-term incentives and other benefits) which is competitive
in relation to comparable organisations in each of the markets in which we operate.
Effective management of
risk
• Discretion is used in order to assess the extent to which performance has been achieved, rather than
applying a formulaic approach which, by its nature, may encourage inappropriate risk taking.
• Performance is assessed taking risk into account using a combination of quantitative and qualitative
measures as informed by the risk appetite framework.
• Affordability is assessed (including the cost and quantity of capital and liquidity considerations).
• All Restricted Share awards made from 2010 onwards are, prior to vesting, subject to clawback as are
deferred cash awards made from 2011 onwards.
Stakeholder interest • Consideration of shareholder interests together with consideration of the wider environment and societal
aspects.
• Consideration of the pay and employment conditions of the Group’s employees compared to its Directors
and senior executives.