HSBC Holdings Plc is seeking backing from investors to pay Chief Executive Officer Stuart Gulliver as much as 13.3 million pounds ($22 million) this year, two people with knowledge of the talks said.
The award, including a base salary of 1.25 million pounds, would be slightly less than the 13.5 million-pound package that his predecessor Michael Geoghegan received for 2010, which included a 1.08 million-pound salary. The bank’s compensation committee, which meets with investors this week, also is proposing to tie Gulliver’s long-term incentive plan to measures like strategy execution and reputation as well as return on equity and capital strength, said the people, who declined to be identified because the terms aren’t public.
“The principles underpinning the review include incentivizing long-term sustainable performance linked to risk and continued improvement of alignment with shareholders,” HSBC spokesman Robert Bailhache said. “Any new scheme will be subject to shareholder approval” at the annual meeting in May.
The British government is pushing banks to curb pay after it was forced to bail out the industry during the credit crisis and as it enacts the deepest-ever reductions in public spending. HSBC, which didn’t receive a direct bailout, said this month it would prefer to keep its headquarters in London after the Sunday Telegraph said the lender may move back to Hong Kong because of the U.K.’s growing tax and regulatory burdens.
Gulliver, 52, was traveling and unavailable to comment, according to his office in London.
The compensation panel, overseen by former Goldman Sachs Group Inc. President John Thornton, is seeking permission to grant Gulliver a bonus of as much as three times the base salary and a long-term incentive payment equal to six times his salary, the people said. That’s a reduction from Geoghegan’s pay plan, which granted a bonus that was four times base salary and a long-time incentive payment equal to seven times salary.
Unlike the new plan, Geoghegan’s long-term incentive payment was tied only to financial measures such as earnings-per-share growth and total shareholder return, the people said.
Awards under the new long-term incentive payment would vest after five years and be subject to so-called malus provisions during those five years under which HSBC could withhold them, the people said. Gulliver would have to keep the awards until he retires from the financial services industry, they said. Under the old plan, average annual vesting was 27 percent of face value.
The plan is a step “in the right direction,” said Stilpon Nestor, managing director of corporate governance advisers Nestor Advisors Ltd. in London. “There’s a much tighter cap on the overall pay package in terms of maximum opportunity on the performance-based side. The downside is whether you will be able to attract people with these terms when times get better.”
The change is likely to meet opposition from some HSBC investors, the person said. Some shareholders have indicated they may object to the bank’s proposals to base bonus payments on past performance, said an investor with knowledge of the situation. At present, bonuses reward performance against set criteria in future years, said the investor, who declined to be identified because the talks are private.
Barclays Plc investors will vote next month on a new share-incentive plan for directors. The proposed criteria include pretax profit, customer satisfaction and the bank’s relationships with regulators. Directors wouldn’t receive their shares from the plan for at least three years.
HSBC also will make a contribution to Gulliver’s pension of about 625,000 pounds, or half his base salary, the same as his predecessor. Excluding the pension, Gulliver’s pay package is valued at as much as 12.7 million pounds, less than Geoghegan’s 12.9 million-pound plan, one of the people said.
Gulliver’s 2011 base pay is less than Barclays CEO Robert Diamond’s 1.35 million-pound salary, and about equal to Royal Bank of Scotland Group Plc CEO Stephen Hester’s 1.22 million-pound base pay, company filings show. Hester, who didn’t receive a cash bonus for 2010, also will get about 6.5 million pounds in shares vesting between 2012 and 2014, the Edinburgh-based lender said this month.
Gulliver received a 2.9 million-pound bonus for 2010, less than the 6.5 million-pound bonus Barclays gave Diamond for the same year.