HSBC 2015 Annual Report Download - page 293

HSBC HOLDINGS PLC
291
Strategic Report Financial Review Corporate Governance Financial Statements Shareholder Information
Purpose and link to strategy Operation Maximum opportunity Performance metrics
Long-term incentive (‘LTI’)
To incentivise sustainable
long-term performance
and long-term alignment
with shareholder interests.
Awards are discretionary and
are awarded in shares under
the HSBC Share Plan 2011,
subject to a forward-looking
three-year performance period
from the start of the financial
year in which the awards are
granted.
At the end of the performance
period, the performance
outcomes will be used to assess
what percentage of the awards
will vest. These awards will vest
in five equal instalments with
the first vesting on or around the
third anniversary of the grant
and the last instalment vesting
on or around the seventh
anniversary of the grant date.
This is based on the PRA’s
requirements.
On each vesting, the shares (net
of shares sold to cover any
income tax and social security)
will be subject to a minimum
retention period of six months
if required by regulators.
Awards are discretionary and
are subject to malus during the
vesting period and clawback for
a period of seven to ten years
from the date of award.
Dividend equivalents will be paid
on the vested deferred shares,
equal to the dividends paid or
payable between the grant and
vesting date. These will normally
be paid in the form of additional,
i.e. scrip, shares. If not permissible
under regulatory requirements,
the number of shares to be
awarded may be based on a
share price discounted based on
a historical dividend yield.
The Committee may adjust and
amend awards in accordance
with the rules of the HSBC Share
Plan 2011.
The maximum opportunity for
LTI award is up to 320% of base
salary.
The Committee will assess and
judge performance against the
targets set to determine the
level of achievement.
The overall payout level could
be between 0% and 100% of the
maximum.
25% of the maximum award
opportunity will vest at threshold
performance and up to 50%
will vest for target performance.
100% of the award will vest for
maximum performance.
The Committee can reduce (to
zero if appropriate) the LTI
payout based on the outcome
of the performance measures,
if it considers that the payout
determined does not
appropriately reflect the overall
position and performance of
the Company during the
performance period.
The Committee will take into
consideration prior performance
when assessing the value of the
LTI grant.
Forward-looking performance is
measured against a long-term
scorecard with financial
outcomes (60% weighting) and
non-financial outcome, including
risk and strategy-related
measures (40% weighting).
Relative Total Shareholder
Return (‘TSR’) will have a
weighting of one-third of the
total financial measures. One-third
will be based on achieving return
on equity targets and one-third
will be based on the attainment
of cost-efficiency targets.
Performance targets are set
annually for each three-year
cycle by the Committee.
The Committee has the
discretion to:
• change the overall weighting
of the financial and non-
financial measures;
• vary the measures and their
respective weightings within
each category. The specific
performance measures will be
disclosed in the ‘Annual report
on remuneration’ for the
relevant year; and
• make adjustments to
performance targets to
reflect significant one-off
items which occur during the
measurement period. Full and
clear disclosure of any such
adjustments will be made
within the ‘Annual report on
remuneration’, subject to
commercial confidentiality.