“By MARGOT PATRICK And PATRICIA KOWSMANN LONDON—HSBC Holdings PLC opted not to give Chief Executive Officer Michael Geoghegan a big raise this year. But he will get a tidy sum to help with his relocation to Hong Kong from London. In a footnote to its annual report published this week, HSBC said it has started paying Mr. Geoghegan an extra £300,000 ($449,000) a year for "costs of living" adjustments related to his new Hong Kong home. Getty Images HSBC CEO Michael Geoghegan will get a tidy sum to help with his relocation to Hong Kong from London. Moreover, Mr. Geoghegan's £1.07 million salary is to be paid this year in Hong Kong dollars rather than the battered British pound. The benefit arrangements highlight how banks and other companies are putting more money into the pockets of their executives without consulting with shareholders. The cost-of-living fee is on top of paying for his housing in Hong Kong, which the bank says is normal for the location, and other benefits such as accounting advice. The cost-of-living adjustment represents almost 30% of Mr. Geoghegan's base salary. HSBC's board considered giving Mr. Geoghegan a raise of as much as 40% this year, according to people close to the matter, but he realized it would be politically difficult to take both a significant salary increase and a bonus this year. HSBC said earlier this week that Mr. Geoghegan received a £4 million bonus, which he plans to donate to charity. A company spokesman said the CEO's move to Hong Kong is strategic for the group and wasn't based on personal gain. Moreover, the cost-of-living allowance won't be part of Mr. Geoghegan's bonus calculation. The spokesman added that HSBC "didn't need any taxpayer money during the crisis," saying "we continued to be profitable and to pay dividends." The cost of living in Hong Kong is 1% lower than it is in London, according to a recent survey from Mercer Consulting. Mercer also says the most generous allowance normally paid to executives relocating from more to less expensive cities is £30,000. Mr. Geoghegan stands to collect as much as £6.2 million this year from salary, bonus, pension payments and the living allowance, not taking into account additional performance-share awards he may receive in the year, or the vesting of existing ones. Executive pay has simmered on the back burner of shareholders' priorities for years, but is getting more attention because of the perception it played a role in making the financial system vulnerable to a near-collapse in 2008. HSBC doesn't need specific shareholder approval on increases to executive salaries, bonus payments or other benefits, but shareholders can reject the overall remuneration report prepared by a committee of directors each year. The disclosure came as HSBC Chairman Stephen Green on Monday said Mr. Geoghegan is underpaid relative to his peers with his salary of just £1.07 million. He said the board will look to raise the CEO's pay within 12 months. Large HSBC shareholders in February informally rejected an initial proposal by the bank last month to raise Mr. Geoghegan's pay by about £380,000 for 2010—just a bit more than the new cost-of-living allowance. If Mr. Geoghegan's salary does rise, it would in turn increase the potential bonus he could earn of up to 400% of the base. Mr. Geoghegan's 2009 total compensation was £5.68 million. The figure doesn't encompass the 725,000 shares he holds in the bank, currently worth about £5 million, or separate performance shares that vested in 2009 for roughly £240,000. Mr. Geoghegan's £1.07 million salary compares with Barclays PLC CEO John Varley's £1.075 million salary and the £1.035 million collected by Eric Daniels, Lloyds Banking Group PLC's CEO. Stephen Hester, CEO of Royal Bank of Scotland Group PLC, makes £1.2 million in salary. The British government owns more than 40% of Lloyds and more than 80% of RBS. The CEOs of Barclays, Lloyds and RBS all waived their 2009 bonuses, which would have averaged around £2.2 million. U.K. Chancellor of the Exchequer Alistair Darling has urged banks to show restraint over pay, and imposed a 50% tax on most 2009 banker bonuses above £25,000. Other governments, including the U.S. and France, have sought to curb payouts at banks, particularly at institutions that received direct government support during the crisis. The pay issue has galvanized the public in the U.K. Opposition politicians including Conservative Shadow Chancellor George Osborne say compensation needs to come down across the sector, possibly through a tax that could be agreed upon internationally. Mr. Geoghegan's move to Hong Kong could also result in personal tax benefits. The U.K. in April will introduce a 50% tax rate applying to earnings over £150,000. Hong Kong's personal tax rate tops out at 17%. The HSBC spokesman said the CEO will be subject to taxes in both the U.K. and Hong Kong. Write to Margot Patrick at margot.patrick@dowjones.com and Patricia Kowsmann at patricia.kowsmann@dowjones.com Copyright 2009 Dow Jones & Company, Inc. All Rights Reserved This copy is for your personal, non-commercial use only. Distribution and use of this material are governed by our Subscriber Agreement and by copyright law. For non-personal use or to order multiple copies, please contact Dow Jones Reprints at 1-800-843-0008 or visit www.djreprints.com More In Europe Email Printer Friendly Order Reprints Share: facebook Twitter Digg StumbleUpon Viadeo Orkut Yahoo! Buzz ”
