HSBC faced shareholder anger over executive pay at its annual general meeting yesterday and got into a row with Knight Vinke, an activist investor, over the funding and valuation of its US sub-prime business.
HSBC's chairman, Step-hen Green, faced a series of hostile questions about the bank's pay plan at a marathon meeting in London. The plan could pay out a maximum of £120m over three years to executive directors.
Brian Dodd, a small shareholder, repeatedly attacked the plan and accused the bank of changing the terms from the scheme that had been approved by shareholders in 2005. He also said "no competent person" could calculate shareholder returns in the way HSBC did. Facing jeers from restless shareholders in the hall, Mr Dodd declared he had a PhD in pure mathematics.
Mr Green said the plan had not been changed and that the description of it had changed to make it clearer to investors. He defended it, saying that, for HSBC to keep its top 200 managers, especially when other banks were looking for new leaders, the company had to pay the market rate.
Other shareholders at the three-hour meeting attacked the company for paying bonuses to Mr Green and other directors even though HSBC had lost billions of dollars from bad debts and writedowns caused by the US sub-prime meltdown. To applause, one shareholder said the board should follow the chief executive of British Airways, Willie Walsh, by waiving its bonuses.
Reverend David Haslam called on Mr Green and his colleagues to give their bonuses away and said increased inequality was scarring society. Mr Green, who is a lay preacher, said that wealthy people should accept personal responsibility but that whether they did so was a private matter.
About 18 per cent of shareholders withheld support from the bank's remuneration report by voting against or abstaining.
Michael Geoghegan, HSBC's chief executive, said after the meeting that he was pleased with the result, which was "a vast majority vote".
Mr Green and his colleagues had a tetchy exchange with Eric Knight, the head of Knight Vinke, which has been agitating for changes to HSBC's strategy and governance since buying a small stake in the bank last year.
Mr Knight said that he appreciated the cordial reception the bank had given him, but Mr Green and Douglas Flint, the finance director, were dismissive in their responses to his questions.
Mr Knight said HFC, the US sub-prime business HSBC bought in 2003, had consumed $62bn (£31.3bn) of capital and was valued by Goldman Sachs at minus $46bn. Mr Green replied that Mr Knight had "got the wrong end of the stick" by confusing capital and funding and that HFC was refinancing itself normally in the market. Mr Flint said Knight Vinke's use of the Goldman Sachs research was "an extraordinary misinterpretation". Goldman said that Mr Knight appeared to have misinterpreted its analyst's note.Reuse content