HSBC Holdings Plc’s annual report should be opposed by shareholders and they should vote down Chairman Douglas Flint’s re-election, Pensions & Investment Research Consultants Ltd. said.
The reliability and audit quality of the accounts of Europe’s biggest bank may be affected by the International Financial Reporting Standards used, PIRC said in a statement today. Flint’s position as executive chairman is an “obstacle” to his independence, the corporate-governance advisory firm said.
There “is a problem with the standards, which may significantly impact on audit quality and the reliability of accounts, particularly in relation to net assets and profits,” said PIRC. “This might have been less of a problem if HSBC had not used IFRS throughout the whole group.”
The adviser last month criticized U.K. competitor Barclays Plc’s commitment to IFRS at the cost of producing a “true and fair view” of the bank, which meant profits were overstated. The PIRC advice comes amid greater shareholder activism. About 27 percent of shareholders last month opposed the pay report of Barclays, the U.K.’s second-largest bank by assets.
Bonuses paid to HSBC’s employees “are disclosed but not charged to the accounts, or accrued,” PIRC said. A spokesman for HSBC declined to comment.
ISS, a shareholder adviser, said HSBC investors should approve all its resolutions at the annual meeting on May 25.
-- Editors: Jon Menon, Steve Bailey