HSBC planning to reduce bonuses for top bosses

Banking giant HSBC today announced plans to reduce maximum bonuses for top bosses, but revealed its chief executive would still be in line for a package worth up to £12.5m (€14.2m) this year.

The group unveiled a raft of new measures it claims will reduce total potential remuneration following a near year-long review.

HSBC suffered a shareholder protest at last year’s annual meeting when nearly one in four investor votes failed to back its pay report.

Under today’s proposals, which will be put to the vote at next month’s AGM, HSBC wants to cut the maximum payout for its long-term bonus plan from seven times salary to six and trim annual bonus payouts from up to four times salary to three.

Shares awarded under its long-term scheme will also be deferred over five years, up from three, while directors will have to hold on to the shares once vested until they retire or leave the bank.

However, the plans would still see boss Stuart Gulliver entitled to a potentially mammoth pay deal this year.

On top of his £1.25m (€1.4m) salary, he could earn up to £7.5m (€8.5m) in long-term bonus shares, plus a possible £3.75m (€4.25m)annual bonus.

HSBC claims this is £2.5m (€2.8m)less than under its current scheme.

But it is thought not all of HSBC’s shareholders are convinced by the changes being made, with concerns reportedly focusing on how long-term bonus shares are granted.

While they will be subject to clawbacks set against performance targets each year, there are said to be concerns that the shares are awarded at a set amount rather than a notional maximum that is subject to performance criteria that will determine the actual payout on vesting.

HSBC said: “We believe these proposals will lead the way on better alignment of employee incentivisation with strategy and long-term sustainable value creation for shareholders.”

HSBC was slammed last year for making an £800,000 (€906,000) award to cover former chief executive Michael Geoghegan’s relocation costs to Hong Kong.

It was also heavily criticised for paying a £9m (€10.2m) deferred shares bonus to Mr Gulliver, who was then head of its investment bank.

Shareholders will have the chance to vote on the latest proposals at the meeting on May 27.

One of its top 10 shareholders has already come out in favour of the new plans for having a greater long-term focus.

Standard Life Investment said the new approach “demonstrates that HSBC has taken to heart the lessons from the banking crisis and provides a platform to reward and incentivise prudential and profitable growth”.