HSBC is in last-minute talks with shareholders to reach a deal over its chairman's pay and head off a damaging revolt at next week's annual general meeting.
The bank is poised to stage a partial climbdown over plans to pay Douglas Flint a bonus in shares of up to £2.25m. HSBC has said his extra workload on regulatory reform justifies putting him in line for the payout this year.
When Flint, a former finance director, was made chairman in 2010, HSBC said he would be paid his salary but no bonuses. In this year's annual report, HSBC said he was eligible for the group performance share plan in exceptional circumstances.
The bank's remuneration committee decided the level of attention on financial regulation and bank employees' conduct was exceptional and that Flint's extra work should be rewarded.
The committee proposed paying him a maximum share bonus equivalent to his £1.5m salary and £750,000 pension payment "given his executive role in leading the group's interactions on regulatory policy and providing leadership and tone to drive an improvement in the group's compliance, conduct and behaviour".
Big shareholders are unhappy about the award because building relationships with watchdogs and governments, leading on regulatory reform and upholding HSBC's reputation and character are already in Flint's job description, which is unchanged from the year before.
Talks are still going on between the bank and these shareholders before the 23 May meeting in London. In an attempt to head off a revolt, HSBC is likely to pledge that any payment under the share plan will be for this year only.
HSBC declined to comment on its talks with shareholders over Flint's pay, but an investor in the bank said: "The word is it's going to be a one-off."
Limiting Flint's maximum award to less than 100% and giving clearer guidance on how he will qualify for the bonus are also said to be under discussion.
Flint earned £2.43m last year but his pay would almost double if he got the maximum award proposed. If he was paid the bonus under the performance share plan, he would not get the shares for five years and be required to hold on to them until he retires.
Flint's pay terms are contained in HSBC's pay policy, set out under new requirements from the business secretary, Vince Cable. The policy is subject to a binding vote at the AGM whereas the vote on the remuneration report for last year remains advisory only.
Pirc, the corporate governance consultant, has urged shareholders to vote against the pay policy because HSBC introduced new fixed pay allowances to bypass a EU cap on annual bonuses. Pirc did not refer to Flint's pay.
Company pPay is under extra scrutiny at this year's round of company meetings, which are the first since Cable forced boards to set out their policies for shareholder approval.
Standard Chartered, HSBC's rival emerging markets bank, last week suffered the biggest revolt on a pay policy so far when 41% of shareholder votes opposed its proposed bonus terms for top executives.
Flint's potential bonus is a smaller part of the overall pay policy than the executive bonuses at Standard Chartered, which investors thought were too short term.
Investors said HSBC was unlikely to suffer as big a rebellion but that the plan for Flint's pay could harden the opinions of shareholders already dissatisfied with the bank's performance. At last year's AGM, 11% of shareholder votes went against HSBC's remuneration report.
HSBC has awarded its chief executive, Stuart Gulliver, £1.7m in "fixed pay allowances" to get around the EU's rule capping bank bonuses at one times salary or double salary with shareholder approval. Flint does not qualify for the allowances.
Governance advisers Manifest said pay at HSBC was above expectations given the bank's size and performance.
HSBC said last week that trading profit for the first three months of the year fell 13% and warned that business would remain difficult in the second quarter.
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