Banking giant HSBC was rebuked by shareholders today over plans that could see chief executive Stuart Gulliver earn up to £12.5m this year.
Around a fifth of shareholders voted against the company’s remuneration report, which contained new arrangements for paying board members in the wake of protests at last year’s shareholder meeting.
At the bank’s AGM, chairman Douglas Flint strongly defended the plan but a number of major institutions still showed their disapproval.
Prior to the meeting in London, both the Association of British Insurers and shareholder lobby group Pirc expressed concerns about the scheme.
Scottish fund manager Standard Life, which last year fiercely criticised the bank’s pay structure, did vote for it this time, but said it wanted to review it again in three years.
Mr Flint said the introduction of a larger deferral and a new claw back arrangement were significant enhancements for aligning directors’ interests with shareholders.
Under the plans, directors have to wait for five years instead of three before getting bonus shares, which they will also have to keep until they leave or retire. The size of the bonus is also being reduced to six times salary from seven.
In the face of a barrage of criticism from HSBC’s small shareholders, Mr Flint, who took over at the start of the year, also defended the salaries paid to executive directors.
One shareholder claimed Mr Gulliver earned more than 470 times the bank’s lowest paid employees.
Mr Flint argued it was impossible to go against what was happening in the industry, adding that HSBC staff are “highly marketable” and its pay levels were necessary to retain the people just below the board level.
The purchase of US sub-prime group Household, which has cost the bank tens of billion of US dollars in write-offs was also fiercely criticised.
Mr Flint, who was on the board that approved the deal, admitted the purchase was a “black mark” for the bank, adding he “wished we hadn’t done it”.
He also agreed that shareholder returns over the past five years were “disappointing and inadequate”, but pointed to the strategic review recently unveiled by the bank as part of a process to redress this.
The bank is planning to cut back in areas where it does not have a significant presence and is reviewing its US credit cards and branch operations.
Mr Flint again stated that the UK was a core part of the business and a critical hub for commercial and global banking, though he added the government’s bank levy was unfair and if HSBC’s estimated $600m charge was reduced any money saved would be paid out in dividends.