A shake up in the boardroom of Europe’s largest bank will result in three long-time non-executive directors stepping down after criticism that the length of their tenure no longer makes them independent, the Financial Times reports.
HSBC also said yesterday it was putting in place a new long-term incentive plan linked to performance for senior executives. The moves come just a day after HSBC annual report showed one of its bankers had been paid more than 9.9 million pounds ($19.7 million) in 2007, just below the previous year’s high-end salary.
The directors who will step down – Lady Dunn, Sir Brian Moffat, and Lord Butler –will be replaced by two non-executive directors: Safra Catz, the president and CFO of Oracle, the U.S. software group, and Narayana Murthy, one of the founders of Infosys, the Indian IT services group.
HSBC is also elevating three of its most senior executives to the board: Vincent Cheng, chairman of its Asian operations: Sandy Flockhart, its chief executive in Asia; and Stuart Gulliver, head of HSBC’s investment banking division.
Separately, HSBC Chairman Stephen Green said the bank was consulting shareholders about a long-term incentive plan for executives. This would measure performance based on return on equity, cost efficiency, capital ratios and total shareholder return relative to a group of rivals.
Top HSBC investors criticized the new pay plan, saying they had misgivings about both the size of the potential pay-outs and the ease with which it appeared that HSBC’s executives – whose pay already ranks in the top 25 percent – will be able to earn these rewards.
Shortcomings in the current plan have been highlighted by Knight Vinke, the activist investor that is agitating for change at HSBC. Knight Vinke has argued the bank should include emerging market banks – rather than just large U.S. and European banks – when measuring performance. Green said Monday it was “likely” HSBC would update its list of rival banks to reflect the shift in its strategy.