HSBC 2010 Annual Report Download - page 225

223
Overview Operating & Financial Review Governance Financial Statements Shareholder Information
Executive Directors’ remuneration
The table below sets out our policy relating to and the purpose of each element of the remuneration package for
executive Directors.
Element Delivery Policy Purpose Timing
Fixed
Base salary • Cash
• Monthly
• Pensionable
• Reviewed annually • Reflects the market competitive
rate for the role and relative
responsibility
• Paid during the
year
Variable
Annual Bonus • Comprises a non-
deferred and a deferred
element. See below
• Total annual bonus award
(including cash and deferred
elements) of up to four times
salary
• Fully discretionary
• Awarded in the
following
financial year
Annual bonus
(non-deferred)
• Either cash or awards
of Restricted Shares
under the HSBC Share
Plan
• Non pensionable
• At least 50% of non-deferred
variable remuneration is
awarded in Restricted Shares
in line with FSA regulations
• Such share-based variable
remuneration is subject to a
6-month retention period
• Reflects the extent to which the
individual and the Group’s
annual objectives have been met
under the balanced scorecard
approach, risk appetite
framework, our absolute and
relative performance to our
peers and competitive market
practice
• Awarded in the
following
financial year
Annual bonus
(deferred)
• Either deferred cash or
awards of Restricted
Shares under the HSBC
Share Plan
• Non pensionable
• 40% - 60% of variable
remuneration is deferred over a
period of 3 years, in line with
FSA regulations
• At least 50% of deferred
variable remuneration is
awarded in Restricted Shares
in line with FSA regulations
• Such share-based variable
remuneration is subject to a
6-month retention period
• 33% vest on each of the first
and second anniversaries of an
award, the balance (34%)
vesting on third anniversary1
• See above
• Also contributes to retention and
encourages alignment with
shareholders
• Awarded in the
following
financial year
Performance
Shares
• Performance Shares
awarded under the
HSBC Share Plan
• Non pensionable
• Face value at grant of up to a
maximum of seven times salary
• Vesting of awards based on
three independent performance
measures (relative total
shareholder return (‘TSR’) 40%,
economic profit 40% and growth
in earnings per share (‘EPS’)
20%) and an over-riding
‘sustained improvement’
judgement by the Committee
• Performance conditions are
measured over a three year
period
• Performance targets are
reviewed annually to ensure that
they remain appropriate and
challenging, and to consider
whether they should be
recalibrated for future awards
• To reflect our relative and
absolute performance over the
long-term. This takes account of
an external measure of value
creation, a measure of the extent
to which the return on capital
invested in HSBC is in excess of
a benchmark return and a direct
measure of the profits generated
for shareholders
• Rewards the creation of
sustained growth in shareholder
value and encourages alignment
with shareholders
• Normally awarded
in the following
financial year
Benefits
Pension • Deferred cash or cash
allowance
• Employer contributions based
on percentage of salary
• Provides market competitive
post-retirement benefits
• Paid or accrued
during the year
Other benefits • Benefits in kind or cash
allowance
• Non pensionable
• Benefits include provision of
medical and other insurance,
accountancy advice and travel
assistance
• Provides market competitive
benefits
• Received during
the year
1 By exception, V H C Cheng’s 2010 award has a vesting date three years from the date of award.