HSBC 2015 Annual Report Download - page 303

HSBC HOLDINGS PLC
301
Strategic Report Financial Review Corporate Governance Financial Statements Shareholder Information
Adjustment, malus and clawback
Where there are instances of conduct breaches, the
following actions can be taken. The Committee has
exclusive discretion to apply the malus and clawback under
the policies that it has adopted, taking into consideration
an individual’s proximity to, and responsibility for, the issue
in question. Where possible, an adjustment will be made to
current year variable pay, before the application of malus,
then clawback.
This is in line with the PRA and FCA regulatory requirements.
Type of
action
Type of variable pay
award affected Circumstances where it may apply (including, but not limited to):
Adjustment Current year
variable pay
• Detrimental conduct or conduct which brings the business into disrepute.
• Involvement in Group-wide events resulting in significant operational losses, including
events which have caused or have the potential to cause significant harm to HSBC.
• Non-compliance with HSBC Values and other mandatory requirements.
Adjustment
under the
downward
override policy
Current year variable
pay for executive
Directors and other
senior executives
• Based on the recommendations received from the independent Monitor, the Committee
introduced the policy in 2014.
• The criteria used to determine the downward adjustment will include:
‒ insufficient yearly progress in developing an effective AML and sanctions compliance
programme; or
‒ non-compliance with the US DPA and other relevant orders.
• In deciding the application and degree of any such downward override to reduce variable
pay awards, the Committee will factor in the Financial System Vulnerabilities Committee’s
recommendations and the feedback from the Monitor in relation to cooperation with their
review and progress in developing an effective AML and sanctions compliance programme.
Malus Unvested deferred
awards granted in
prior years
• Detrimental conduct or conduct which brings the business into disrepute.
• Past performance being materially worse than originally reported.
• Restatement, correction or amendment of any financial statements.
• Improper or inadequate risk management.
Clawback Vested or paid awards • Applicable only to awards granted to MRTs on or after 1 January 2015 for seven years. May
be extended to ten years for employees under the Senior Manager Regime in the event of
ongoing internal/regulatory investigation at the end of the seven-year period.
• Participation in or responsibility for conduct which results in significant losses.
• Failing to meet appropriate standards of fitness and propriety.
• Reasonable evidence of misconduct or material error that would justify, or would have
justified, summary termination of a contract of employment.
• HSBC or a business unit suffers a material failure of risk management within the context
of Group-risk management standards, policies and procedures.