HSBC faces rebellion over £120m executive bonus plan
Monday 26 May 2008
HSBC is set to be the next big British company to feel the wrath of its shareholders over directors' pay, when plans to make as much as £120m in bonuses available to its executive team will be presented at the bank's annual general meeting on Friday.
The payments, available over the next three years in cash and shares, would be linked to performance but a number of investors are already raising the stakes of the meeting by criticising the move in advance. Eric Knight, who runs Knight Vinke Asset Management, and who last year wrote to HSBC's chairman Stephen Green saying he thought the bank was as much as 50 per cent undervalued, will be at the meeting and has already been critical of the package.
Mr Green, who earns a basic salary of £1.25m a year, will not benefit from the bonus scheme. The bank's chief executive, Mike Geoghegan, could earn as much as 4m in bonuses, on top of his £1m-a-year salary, and up to £7m as part of the bank's long-term incentive plan, according to the proposals. Douglas Flint, the fin-ance director, the Asia chief executive Sandy Flockhart and chairman Vincent Cheng are also proposed beneficiaries. Stuart Gulliver, HSBC's markets head, and the highest paid executive at the bank, is not included in the new structure.
The bank said in a letter to shareholders that the move would put it on a more equal footing with the world's biggest banks and that "the objective was to ensure closer alignment of remuneration arrangements with HSBC's business strategy, taking into account competitive market practice". Mr Knight said on his website that this did not take shareholders' interests into account, adding: "This means that HSBC is measuring itself against the largest banks instead of measuring itself against the best performing banks." HSBC did not return calls yesterday.
The decision to increase senior executives' bonuses will be taken just a week after Hector Sants, the chief executive of the Financial Services Authority, said that the City watchdog is planning to take bankers' bonuses into account when it assesses banks' exposure to risk.
Shareholders at a number of FTSE 100 companies have expressed anger at pay awards in recent weeks. Last Wednesday, GlaxoSmithKline stockholders protested at a 2.5m retention payment made to its head of pharmaceuticals Chris Viehbach-er, who lost out to Andrew Witty in the race to succeed Jean-Pierre Garnier as chief executive. Only 61 per cent of votes cast were in favour of the payment.
Royal Dutch Shell shareholders also protested last week at plans to give three directors 1m each. A third of those voting on the plan last Tuesday rejected it.
While HSBC shareholders are likely to mount a protest on Friday, the resolution will almost certainly be backed. A spokesman for Mr Knight said that while the issue of directors' pay was important, more of an objection would be made about other areas where the bank was underperforming, such as the United States.
The bank reported this month than first-quarter profits were up on last year after growth in its emerging markets business. In March, it reported writedowns of $17.2bn, largely from its exposure to the US housing market.
Meanwhile, Knight Vinke's European Corporate Governance Fund underperformed the FTSE All World Europe Index in the fourth quarter of 2007 as its investments in HSBC and Project Adriatica investments in four European energy companies weighed on returns, according to data prepared for Calpers, the California pension fund. The return in the fourth quarter was -1.2 per cent compared with a benchmark return of 0.3 per cent, the report said.
- 1 BBC told new political editor must be 'impartial' with Nick Robinson reportedly stepping down
- 2 Number of young homeless people in Britain is 'more than three times the official figures'
- 3 Humans of New York image of crying gay teen receives best response yet from Ellen DeGeneres
- 4 The map showing the most dangerous tourist destinations in Europe, according to the Foreign Office
- 5 Swedish minister gives strongest case yet on why EU should stop turning away asylum seekers
BBC told new political editor must be 'impartial' with Nick Robinson reportedly stepping down
Isis propaganda video shows 25 Syrian soldiers executed by teenage militants in Palmyra
Number of young homeless people in Britain is 'more than three times the official figures'
Humans of New York image of crying gay teen receives best response yet from Ellen DeGeneres
The map showing the most dangerous tourist destinations in Europe, according to the Foreign Office
More Britons believe that multiculturalism makes the country worse - not better, says poll
Nathan Collier: Montana man inspired by same-sex marriage ruling requests right to wed two wives
Greece crisis: IMF was pushed around by Angela Merkel and Nicholas Sarkozy – and now it is being humiliated
'I wish the BBC would stop calling it Islamic State' – David Cameron unleashes frustration at broadcaster
Forget little green men – aliens will look like humans, says Cambridge University evolution expert
Girl, 7, stares down hate preacher at Ohio festival with pro-LGBT rainbow flag gesture
iJobs Money & Business
£15000 - £17000 per annum: Recruitment Genius: This company offers a range of ...
£15000 - £16000 per annum: Recruitment Genius: Customer Service Advisors are r...
£20000 - £25000 per annum + OTE £45K: SThree: SThree were established in 1986....
£40000 - £60000 per annum: Recruitment Genius: A Compliance Manager is require...