HSBC 2010 Annual Report Download - page 8

HSBC HOLDINGS PLC
Report of the Directors: Overview (continued)
Group Chairman’s Statement / Group Chief Executive’s Business Review
6
be applied to the consolidated balance sheet, it
applies beyond the legal boundary of the domestic
institution to include overseas operations conducted
through separately capitalised subsidiaries. This
therefore constitutes an additional cost of basing a
growing multinational banking group in the UK.
We intend to clarify in each set of results going
forward the impact of the levy, split between UK and
overseas operations, and Stuart Gulliver covers this
in more detail in his review. We regard the levy,
which is not tax deductible, as akin to a distribution
of profits. For this reason, we intend to add to future
shareholder dividends that would otherwise be paid,
any amount saved in the event that the levy is
restructured or relieved in due course.
The role of banks in society
The recent crisis has caused a proper introspection
as to the role that banks play in society and at HSBC
we welcome this. Banking is not simply about
money. It is about helping individuals and
organisations within society to meet personal and
corporate objectives by facilitating access to
financial capital and protecting value for those who
make capital available. Payment mechanisms, the
provision of long-term credit, trade finance, hedging
and other risk management products, deposit,
investment and retirement services are but a few of
the activities through which banking groups contribute
to today’s financial system. Society cannot function
without an effective financial system that delivers
value to those it serves at an intermediation cost that
is proportionate to the value created. Somehow,
many participants and not just banks, lost sight of
this basic principle in the run-up to the recent
financial crisis and the consequences for all have,
inevitably, been far reaching. There is no doubt that
the scale of regulatory reform will bring many
challenges, but it will also open new opportunities.
At HSBC, we shall not forget what happened to
precipitate the scale of reform now underway. Although
the financial turmoil arising from the events of 2007-
2008 has largely moderated, in large part as a result
of co-ordinated government action and support to the
financial system, we enter 2011 with humility, ready
to apply right across HSBC all of the lessons
learned, notwithstanding that HSBC itself neither
sought nor received support from any government.
Society has a right to ask if banks ‘get it’. At
HSBC, we do – and we are focused on embedding
the necessary changes in our business model for
long-term sustainable value creation. But we also do
not forget that value creation depends upon HSBC
recruiting, training and retaining the right talent in
order to manage the risks we accept through
intermediating customer flows; design solutions to
address complex financial problems; build enduring
relationships with core customers; build confidence
in the Group’s financial strength; and create the
strategic options that offer the next generation fresh
opportunities to continue building sustainable value.
In this globalised world, there is intense
competition for the best people and, given our long
history within and connections into the faster-
growing developing markets, our best people are
highly marketable. It would be irresponsible to allow
our comparative advantages to wither by ignoring
the market forces that exist around compensation,
even though we understand how sensitive this subject
is. Reform in this area can only be achieved if there
is concerted international agreement on limiting the
quantum of pay as well as harmonising pay structures
but there appears to be no appetite to take the
initiative on this. Our duty to shareholders is to build
sustainable value in the economic and competitive
environment in which we operate and our principal
resource for achieving this is human talent. Under
the governance of the Board, we will continue to
operate and apply remuneration policies and practices
that take full recognition of best practice and are
aligned with the long-term interests of shareholders.
HSBC’s people
Finally, I want to pay tribute to my 307,000
colleagues. So many of HSBC’s people have
exemplified commitment and endeavour again in
2010, helping our customers and clients to meet their
financial objectives while taking on the additional
burden of preparing for regulatory change. This has
been done against a backdrop of continuing broad-
based fiscal support to many economies, with public
opinion consistently and highly critical of our
industry. As I look forward, it is the combination of
the capabilities of HSBC’s people, their
determination to do the right thing for our customers
and their deep sense of responsibility to the
communities they serve that makes me confident that
HSBC will play a leading role in rebuilding the trust
that our industry has lost and, by doing so, will build
sustainable value for you, our shareholders.
D J Flint, Group Chairman
28 February 2011