Knight Vinke, the investor group calling for a shake-up at HSBC, claims that the bank may have broken UK company law by paying top executives under a less testing bonus-share plan than the one that was voted for by shareholders.
The activist investor says that the share plan gives executives no incentive to question the bank's strategy, which Knight Vinke argues destroys value. The claims are aimed at causing embarrassment for Stephen Green, the chairman, and Michael Geoghegan, chief executive, who will update investors on the bank's strategy today.
Lord Grabiner QC, a top barrister, has advised Knight Vinke that the description that was given to HSBC shareholders was insufficient, and that the calculation that the bank used for the share plan was easier, and possibly significantly easier, than the one put to the 2005 annual general meeting.
An HSBC spokesman said: "The rules of the scheme voted on by shareholders at the 2005 AGM have not changed." The wording was changed for the 2005 annual report to reflect the original rules for clarity, he added.
Knight Vinke claims that the plan is legally void and must be put to shareholders again at next year's AGM. The investor says that the current plan puts top executives in line for big performance bonuses next year despite the bank writing down more than $20bn for credit and trading losses in the past two years.
"Dozens and dozens of shareholders are writing to the company about this and many more will do so," Eric Knight, the chief executive of Knight Vinke, said yesterday.
The plan measures "incremental" earnings per share over three years to decide whether to award shares to bosses. But it "triple counts" earnings in the first year and "double counts" those of the second year, Knight Vinke says. That formula is not the one put to shareholders, according to Lord Grabiner's advice.Reuse content