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Remuneration of Directors, Senior Management and Key Personnel

 

The Bank’s policy on remuneration is to maintain fair and competitive packages based on business needs and industry practice.

 

Remuneration of Directors

 

The level of fees paid to NEDs is determined by reference to factors including Directors’ responsibilities and commitment, and fees paid by comparable institutions.


As regards Executive Directors (“EDs”), the following factors are considered when determining their remuneration packages:


business objectives
general business and economic conditions
changes in appropriate markets such as supply/demand fluctuations and changes in competitive conditions
individual contributions to results as confirmed in the performance appraisal process
retention consideration and individual potential

 

No individual Director will be involved in decisions relating to his/her own remuneration.


The current scale of Director’s fees, and fees for chairmen and members of the Non-executive Board Committees, namely, Audit Committee, Risk Committee, Remuneration Committee and Nomination Committee, are set out below:


 

 

Non-deferred

  Deferred
  (HK$)   (HK$)
Board of Directors Note 1   Remuneration Committee/ Nomination Committee
 
Chairman 650,000
Chairman
90,000
Non-executive Directors 500,000
Members
60,000
Audit Committee / Risk Committee
     
Chairman 290,000
   
Members 180,000
   

Note 1
In line with the remuneration policy of HSBC Group, no Director’s fee is payable to those Directors who are full time employees of the Bank and its subsidiaries.

 

Remuneration of Senior Management and Key Personnel

 

According to HKMA’s Supervisory Policy Manual CG-5 “Guideline on a Sound Remuneration System”, authorised institutions are required to make disclosures in relation to their remuneration systems as appropriate. The Bank has fully complied with HKMA’s disclosure requirements set out in Part 3 of the said Guideline.

 

There are 17 employees being classified as Senior Management Note 2  and four employees identified as Key Personnel  Note 3 during the year. The aggregate amount of remuneration Note 4 of the Senior Management and Key Personnel during the year, split into fixed and variable remuneration, is set out below:

 

  2018Note 5
(21 employees)
2017Note 5
(20 employees)
Amount (HK$ '000) Non-deferred Deferred

Non-deferred

Deferred
Fixed remuneration
Cash 58,080
- 68,947
-
Shares - - - -
Variable remuneration
Cash 21,496
10,447
16,905
7,422
Shares 10,342
13,884
7,973
9,993

Note 2

Senior Management refers to those executives who are (a) EDs of the Bank; (b) Alternate Chief Executives of the Bank; (c) Members of the Executive Committee of the Bank; and (d) Head(s) of the Bank’s principal subsidiary/subsidiaries with offshore operations and with total assets representing more than 5% of the Bank’s total assets.

 

Note 3

Key Personnel refers to employees classified as “Identified Staff and Material Risk Takers” under the UK Prudential Regulation Authority Remuneration Code.

 

Note 4

Remuneration refers to all remuneration payable to employees during the year with reference to their tenure as Senior Management and Key Personnel. The forms of variable remuneration and the proportion deferred are based on the seniority, role and responsibilities of employees and their level of total variable compensation. As the total number of Senior Management and Key Personnel involved is relatively small, to avoid individual figures being deduced from the disclosure, aggregate figures are disclosed in this section.

 

Note 5
No deferred variable remuneration had been reduced through performance adjustments in 2018 and 2017. No Senior Management or Key Personnel has been awarded or paid guaranteed bonus and new sign-on during the years of 2018 and 2017. No Senior Management or Key Personnel has been awarded or paid for the termination of services in 2018. In 2017, a total payment of HK$11,433,000 (Highest payment: HK$8,368,000) in respect of the termination of services had been paid to two Senior Management, who were Directors, of the Bank.

 

The aggregate amount of deferred variable remuneration, split into (a) vested and paid during the year and (b) outstanding and unvested at the end of the year, is set out below:

 

  2018 2017
Amount 
(HK$ '000)
Awarded for Performance
Year 2018
Awarded for Prior Performance Years Awarded for Performance
Year 2017
Awarded for Prior Performance Years
Vested and paid out during the yearNote 7
Cash - 9,148
- 7,577
Shares - 25,173
- 24,465
Outstanding and unvested at the end of the yearNotes 6 & 8
Cash 10,447
17,452
7,422
18,409
SharesNotes 9 13,884
37,929
9,993
52,648

Note 6

Outstanding, unvested, deferred remuneration is exposed to ex post explicit adjustments via malus.

 

Note 7

Paid and vested variable pay made to Material Risk Takers is subject to clawback.

 

Note 8

There is no reduction of deferred remuneration and retained remuneration exposed due to ex post explicit adjustments during 2018 and 2017 via the application of malus and/or clawback.

 

Note 9
Outstanding, unvested, deferred shares are exposed to ex post implicit adjustments. The total amount of amendments due to ex post implicit adjustments were -HK$5,986,000 and +HK$7,704,000 for 2018 and 2017 respectively. The total value of these shares was calculated based on the closing market share price of HSBC Holding plc (London) as at 31 December of the respective financial years. HSBC’s share price was 15.6% lower as at 31 December 2018 when compared to that of 31 December 2017.