HSBC 2012 Annual Report Download - page 413

411
Overview Operating & Financial Review Corporate Governance Financial Statements Shareholder Information
Share-based payments
HSBC share awards
Award Policy Purpose
Restricted
share awards
(including
GPSP awards)
• Vesting of awards generally subject to continued
employment with HSBC.
• Vesting is generally staggered over three years. GPSP
awards vest after five years.
• Certain shares subject to a retention requirement post-
vesting. In the case of GPSP awards retention applies
until cessation of employment.
• Awards generally not subject to performance conditions.
• Awards granted from 2010 onwards are subject to
clawback provision prior to vesting.
• Rewards employee performance and potential and
supports retention of key employees.
• To defer variable pay.
Movement on HSBC share awards
Restricted share awards1 Performance share awards2
2012 2011 2012 2011
Number
(000s)
Number
(000s)
Number
(000s)
Number
(000s)
Outstanding at 1 January .............................................................. 262,241 229,092 – 4,425
Additions during the year ............................................................. 107,928 100,819 – 154
Released in the year ...................................................................... (193,692) (56,301) – (883)
Forfeited in the year ...................................................................... (10,888) (11,369) – (3,696)
Outstanding at 31 December ........................................................ 165,589 262,241 – –
Weighted average fair value of awards granted (US$) ................ 8.93 10.11 – –
1 Restricted share awards include awards granted under the Group Performance Share Plan (‘GPSP’).
2 Additions during 2011 comprised reinvested dividend equivalents. The last award of performance shares was made in 2008, and shares
under the plan were released in March 2011.
HSBC share option plans
Main plans Policy Purpose
Savings-
related share
option plans
• Exercisable within three months following the first
anniversary of the commencement of a one-year savings
contract or within six months following either the third or
fifth anniversaries of the commencement of three-year or
five-year contracts, respectively.
• The exercise price is set at a 20% (2011: 20%) discount to
the market value immediately preceding the date of
invitation (except for the one-year options granted under
the US sub-plan where a 15% discount is applied).
• Eligible employees save up to £250 per month (or its
equivalent in US dollars, Hong Kong dollars or euros),
with the option to use the savings to acquire shares.
• To align the interests of all employees with the creation of
shareholder value.
HSBC
Holdings
Group share
option plan
• Plan ceased in May 2005.
• Exercisable between third and tenth anniversaries of the
date of grant.
• Long-term incentive plan between 2000 and 2005 during
which certain HSBC employees were awarded share
options.
The table on page 412 shows the movement on HSBC share option plans during the year.
Calculation of fair values
The fair values of share options at the date of grant of the option are calculated using a Black-Scholes model.
The fair value of a share award is based on the share price at the date of the grant. The fair value of a share option
is inherently subjective and uncertain due to the assumptions made and the limitations of the model used.