FINSwire May 27 2011

Pay Top Issue at HSBC Annual Meeting

By kit chellel

HSBC's leadership faced difficult questions over executive compensation at the bank's annual general meeting today, as nearly a fifth of shareholders voted against its 2010 pay awards.

At the meeting in London's Barbican Centre, 18.7% of voting shareholders rejected the remuneration report presented by chairman Douglas Flint, more than at rival Barclays, where 9.6% voted against the pay scheme presented at its recent AGM.

A number of shareholders raised objections to HSBC's compensation of executives and directors, which saw Flint awarded 4 million pounds and new chief executive Stuart Gulliver a total of 6.2 million pounds in 2010.

One individual investor told Flint that total shareholder return at the bank over the past five years did not warrant an increase in pay, adding: "For those five years you have been paying this board of directors for failure."

Including dividends, HSBC has returned 3.4% to shareholders over the past five years, compared to an average of 26.3% for the FTSE 100, according to the bank's annual report.

Another investor asked: "How much is enough and how greedy is this board of directors?"

Around 81.3% of shareholders taking part in the vote supported the remuneration report, down from 87% at last year's meeting.

Responding to the criticism, Flint said: "In today's globalized world there is intense competition for the best people. I believe it would be irresponsible to allow our competitive advantages to wither."

He added: "So much of what has been awarded, going forward, will be subject to clawback first of all and then deferred."

A number of companies have faced investor anger over executive pay in recent months. In February, 55% of shareholders in budget airline Easyjet rejected its remuneration report, while 34.5% voted against a payrise for executives at betting firm William Hill.

Judging by disclosures made under the Project Merlin agreement, HSBC pays its senior staff less than U.K. rivals. The bank's five best-paid employees outside the board earned 12.35 million pounds in 2010, compared with 38.29 million pounds at Barclays.

According to pay consultancy Obermatt, HSBC ranks in the middle of the scale for international banks in terms of its performance over the last year.

Obermatt uses shareholder return and group profit to assign companies a performance ranking compared to their peers, and then calculates whether executives are over or underpaid within their industry.

Using Obermatt's pay scale, Mike Geoghegan, HSBC's chief executive in 2010 before he was replaced by Gulliver, was overpaid by around $2.1 million based on the bank's relative performance.

Kit Chellel is a reporter for Financial News, where this story originally appeared. Write to him here.

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