HSBC shareholders stage bonus revolt

By Simon Duke for MailOnline
Updated: 08:33 EDT, 28 May 2011

HSBC has suffered an embarrassing investor revolt over the 'obscene' levels of boardroom bonuses.

Anger: Investors questioning disparity between their returns and boardroom pay

During a marathon annual meeting in London's Barbican yesterday, around a fifth of shareholders failed to endorse HSBC's executive pay policies.

Private investors attacked the contrast between lavish director deals and the mediocre returns they have had in recent years.

There was further setback for Doug Flint, who appeared to bear the brunt of the widespread 'dismay' over a messy boardroom putsch last year, which elevated him from the finance director's role to chairman.

Flint admitted that shareholders had every right to be disheartened by the 'disappointing and inadequate' returns that HSBC had delivered since the credit crisis struck in 2007.

A £100 investment in HSBC shares in 2006 would have been worth £103.50 by the start of 2011. That compares to more than £125 for a similar bet on the FTSE 100, said the bank's annual report.

Flint insisted the bank was 'committed to making it better' following a recent change of strategic tack from new chief executive Stuart Gulliver, who wants to jettison underperforming divisions.

Yet the olive branch did nothing to prevent a barrage of criticism from the floor over 'wildly excessive' and 'obscene' executive rewards. Gulliver, who until recently ran HSBC's investment bank, earned a total of £6.2m last year, including long-term bonuses.

Shareholder John Farmer said if HSBC 'aspired to be a company of integrity' it should take a lead in 'closing the escalating disparity' between boardroom and shopfloor pay.

Flint said HSBC would 'wither' away if it unilaterally cut salaries and bonuses for its senior executives.

'Going against the grain' would see its 'highly marketable' staff defect to rivals, he added.

The revolt came despite a yearlong lobbying campaign over a new executive incentive scheme. This will impose lower ceilings on long-term bonuses and could prevent staff from selling shares until they leave the bank.

The new executive bonus arrangement won the public backing of major shareholder Standard Life. But Jonathan Cobb, an executive at the investment giant, told the AGM he had 'not been alone in being dismayed at the manner and timing' of the boardroom changes last year, which led to the departure of previous boss Mike Geoghegan. Cobb suggested that there should be greater independent scrutiny of executive board members.

HSBC (up 6.6p to 630.5p) does not have a separate deputy chairman and senior independent director, with Sir Simon Robertson fulfilling both roles.

Some 10% of shareholders failed to endorse Flint's elevation to the chair.