Bosses pay row shakes up HSBC
HSBC received a bloody nose from shareholders yesterday as almost a third refused to back the lavish awards handed out to its top staff.
A string of scandals at the bank, as well as its spluttering performance, has made the issue of executive pay increasingly sensitive for investors.
At HSBC’s annual general meeting in Westminster, they had their first chance to vent their frustration since explosive allegations emerged in February that the bank helped thousands of wealthy clients evade tax in Swiss bank accounts.
Sir Simon Robertson, who heads up the remuneration committee, faced calls from the audience to resign over concerns he had failed to put the brakes on pay in light of the latest scandal.
Shareholders registered their disapproval, with 23.7pc voting to reject the remuneration report.
Including votes withheld, 29pc of investors refused to endorse the report. Just 2.5pc of Barclays’ shareholders rejected its pay report at the rival lender’s annual general meeting on Thursday.
Profits at HSBC fell 17pc last year to £12.3bn as the bank was hit by spiralling costs for misconduct, including the rigging of foreign currency rates and payment protection insurance mis-selling.
But Robertson defended the generous pay packages for top staff, which included £7.6m for chief executive Stuart Gulliver, describing this as an ‘essential component of our ability to attract and retain the best people’.
One investor, a pensioner, told the AGM: ‘While I accept the need to employ the best people in an international forum, I think you might reflect on the impact of the share price on shareholders and pensioners.’
An investor who bought £1,000 of shares three years ago would have made a profit of £183, assuming dividends are reinvested.
This compared with a £1329 profit for Lloyds. Of the ‘big five’ banks, only Standard Chartered has fared worse, according to figures compiled by Hargreaves Lansdown.
Robertson responded: ‘I’m just as disappointed as you about the share performance, but we have maintained a good level of dividend.’
Another bone of contention for shareholders was the £513,000 in fees handed to part-time non-executive director Rona Fairhead, who is also the chairman of the BBC Trust. She has come under pressure to resign due to the fact she sat on the board while alleged tax evasion routinely took place in HSBC’s Swiss Private Bank during the last decade.
A shareholder described her pay as ‘obscene’. Another shouted ‘resign’ when she stood up for reelection. Robertson defended fellow members of the board, including chief executive Stuart Gulliver, Douglas Flint and Fairhead, saying: ‘I want to make it absolutely clear the board has full confidence in both Douglas and Stuart and the rest of the management team.’
Yesterday HSBC confirmed Fairhead would stand for relection but that she intends to step down after a year. The bank stunned investors and politicians by announcing it has launched a review into whether it should move its headquarters from London.
Both the board and shareholders have become increasingly concerned by the mounting cost of operating from the UK – particularly the bank levy. Flint also referred to the ‘economic uncertainties’ around leaving the European Union – referring to Tory plans to hold an in-out referendum by 2017.
The prospect of HSBC upping sticks appeared to excite investors, as shares jumped nearly 3pc (17.5p) to 629.7p.
Laith Khalaf, senior analyst at Hargreaves Lansdown said: ‘The positive r eaction t o HSBC’s announcement underlines the downward pressure the bank levy places on all bank shares.’