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ASB4904: HSBC Holdings Plc - CEO Compensation - Business Project Assessment Answers
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Internal Code: 1IDBC
Task: Executive Compensation Consultants - Business Project Assignment
“Our pay strategy is designed to attract and motivate the very best people, regardless of gender, ethnicity, age, disability or any other factor unrelated to performance or experience. We aim to attract and motivate the very best people who are committed to maintaining a long-term career with us and to performing their role in the long-term interests of stakeholders. The following key principles guide our remuneration decisions. We aim to:- Focus on total compensation with a strong link between pay and performance
- Judge not only what is achieved, but also how it is achieved, and whether it is in line with the HSBC Values
- Operate a thorough performance management and HSBC Values assessment process
- Recognise and reward our employees for outstanding positive behaviour
- Design our policy to align compensation with long-term stakeholder interests
- Apply consequence management to strengthen the alignment between risk and reward
- Executive compensation contracts should provide efficient incentives for CEOs to maximise shareholder value. Examine contrasting claims in the managerial power approach and optimal contracting theory that pay-for-performance relations are broken. The notion of pay-for-performance continues to underpin arguments on how best to reform executive compensation arrangements. Critically evaluate the debate on the reform of executive compensation in banking and explain how the introduction of concepts, such as, malus and clawback, a greater use of debt and deferred compensation, and long-term incentives might be a step in the right direction.
- Several countries have or are in the process of setting quotas for female participation on boards either by introducing new legislation or by companies’ voluntary adherence to best practice in codes of corporate governance. Evaluate this policy and in your answer, consider whether the outrage over CEO pay following financial crisis and corporate scandals be as severe if the CEOs were female i.e. would increasing the proportion of female executives improve firm performance via its effect on risk-taking?