Annual Financial Report - Part 7 - HSBC Holdings PLC | RNS

RNS Number : 4607C

HSBC Holdings PLC

22 February 2022

Directors' remuneration report
	Page
Committee Chair's statement	254
Directors' remuneration policy	257
Annual report on Directors' remuneration	268
Our approach to workforce remuneration	278
Additional regulatory remuneration disclosures	284

All disclosures in the Directors' remuneration report are unaudited unless otherwise stated. Disclosures marked as audited should be considered audited in the context of financial statements taken as a whole.

'The remuneration outcomes for 2021 reflect the improvement in the Group's financial performance, our strong cost controls and execution of our strategy at pace.'

Dear shareholder

I am pleased to present our 2021 Directors' remuneration report on behalf of the members of the Group Remuneration Committee.

During 2021 the Group's financial performance improved against a backdrop of continuing challenging circumstances, including the emergence of new Covid-19 variants and ongoing low interest rates. We continued to execute our strategy at pace. The decisions the Committee has taken reflect the improvement in the Group's performance and progress towards its strategic targets. I have summarised our decisions in this statement.

At the 2022 Annual General Meeting ('AGM'), we will be seeking shareholder approval for a renewed Directors' remuneration policy. Our current policy received 97% of votes cast in favour at our 2019 AGM and its implementation received strong support with more than 96% of votes cast in favour in both 2020 and 2021. The Committee reviewed the remuneration policy, considering carefully whether it provides a fair and competitive remuneration opportunity to incentivise long-term performance. We also noted that the UK regulatory requirements currently restrict us from using a structure with a greater focus on variable pay and lower fixed pay.

Based on this review, engagement with our largest shareholders, and the premise that the policy, within our regulatory framework, supports the execution of our strategy, we have decided to roll forward our current policy with no changes to the fixed or variable pay structure and approach.

Membership
	Member since	Meeting attendance in 2021
Pauline van der Meer Mohr (Chair)	Jan 2016	6/6
Rachel Duan	Sept 2021	2/2
Dame Carolyn Fairbairn	Sept 2021	2/2
James Forese	May 2020	6/6
José Antonio Meade Kuribreña	May 2021	4/4
Henri de Castries¹	May 2017	2/3
Irene Lee¹	Apr 2018	3/3
David Nish¹	May 2017	2/2

1 David Nish stepped down from the Committee on 23 February 2021; Henri de Castries and Irene Lee stepped down from the Committee on 28 May 2021.

Performance in 2021

Financial performance

The Group's financial performance improved in 2021 and all regions were profitable. Reported profit before tax of $18.9bn was up $10.1bn from 2020. Adjusted profit before tax of $21.9bn was up $9.6bn, with net ECL releases more than offsetting the impact of lower revenue, which reflected continuing external pressures during 2021. We continued to demonstrate strong cost control. Despite inflationary pressures and continued investment in technology, our adjusted costs were $32.1bn. Our return on tangible equity ('RoTE') improved from 3.1% in 2020 to 8.3%. We also achieved a $104bn RWA reduction in legacy assets and low-return areas and we have now achieved 95% of the $110bn reduction targeted by the end of 2022. We were able to restart our dividend payments to shareholders and we remain well placed to fund growth and step up capital returns.

Workforce pay

Support for our colleagues

The well-being of our people remained a critical focus, specifically as the operating environment continued to be challenging for many colleagues and their families. The pandemic, which remains a presence in all of our lives, continued to impact our customers, colleagues and communities and we have continued to provide support to our colleagues.

While we have sustained our employee engagement scores, which remain above pre-pandemic levels, we are monitoring carefully the well-being of our people. Our survey results showed that overall well-being has remained stable with 82% of our colleagues reporting positive mental health. We are moving to a hybrid working model wherever possible, giving people the flexibility to work in a way that balances the needs of our customers, their teams and their personal preferences.

To help people to develop skills for the changing world around us, we launched Future Skills in September 2021, supporting colleagues to explore new personal, digital, data and sustainability skills through a series of learning activities and events.

Group variable pay pool

2021 was characterised by a sharp economic rebound and an extraordinarily competitive labour market. Our financial performance was strong, and it is critical for our long-term performance that we continue to attract and retain the talent necessary to deliver our strategic priorities. As a Committee, we reflected on this throughout the year, and particularly when we reviewed and agreed the Group variable pay pool of $3,495m, a year-on-year increase of 31%.

In deciding the Group variable pay pool, we reviewed performance against financial and non-financial metrics set out in the Group risk framework, including conduct. We took into account the improvement in the Group's financial performance with adjusted profit before tax up 79%, our strong capital position, the reinstatement of dividends and the capital return to shareholders through the up to $2bn buy-back announced in October 2021. Subsequently, the Group has announced that it intends to initiate a further up to $1bn share buy-back, to commence after the existing buy-back has concluded. We also took into account the operating environment and the challenges created by a very competitive market for talent manifesting through higher than normal voluntary attrition rates.

The pool was determined in line with our countercyclical funding methodology, whereby variable pay as a percentage of profits generally reduces as performance increase. In 2020, the variable pay pool was reduced by 20% when the adjusted profit before tax was down 45% to recognise the need to remain competitive in retaining talent even in challenging circumstances. In 2021, our countercyclical approach meant that while the adjusted profit before tax was up 79%, the pool increased by 31%.

As part of the year-end pay review, the Committee considered the remuneration outcomes. Overall, total compensation across all our businesses was up relative to 2020. For our junior colleagues, the increase is slightly lower, as their outcomes last year were broadly stable in order to protect their outcomes against material year-on-year volatility. Outcomes correlated well with performance and behaviours, with the largest increase in variable pay for those who performed most strongly and who acted as role models for our values. Fixed pay increases were targeted towards junior colleagues to help address the impact of rising inflation in many of our locations. The outcomes were in line with our pay principles and the approach decided by the Committee for 2021.

Key remuneration decisions for Directors

Executive Directors' annual performance assessment

The financial measures in the executive Directors' 2021 scorecards were growing revenue in Asia, meeting the Group's adjusted cost target and our strategic priority of reducing RWAs in legacy assets and low-return areas. Strategic performance measures were customer satisfaction, employee engagement and diversity and personal objectives aligned with delivery of our strategy.

Overall, the Committee considered the executive Directors delivered a strong performance. The adjusted cost performance was above the minimum set for the year. As noted earlier, strong performance in RWA reduction, with 95% of our end-2022 target already achieved, led to a maximum payout against the RWA performance metrics. We did not meet the target for revenue growth in Asia, primarily due to the impact of low interest rates on certain business lines.

We also made good progress on strategic measures, by improving customer satisfaction, maintaining the high level of employee engagement from 2020, exceeding our gender representation target in senior leadership roles and executing our strategy at pace (see page 268 for details).

Executive Directors' annual incentive scorecard outcome

This resulted in an overall annual incentive outcome of 57.30% for Noel Quinn and 60.43% for Ewen Stevenson (further details are provided on page 262). These are slightly below the 2020 scorecard outcomes and results in an annual incentive award of £1.59m for Noel Quinn (2020: £1.60m before voluntarily waiver of cash bonus) and £0.98m for Ewen Stevenson (2020: £0.90m before voluntary waiver of cash bonus).

Long-term incentive ('LTI') for executive Directors

Noel Quinn and Ewen Stevenson will receive LTI awards of £4.13m and £2.41m respectively, in respect of their performance for 2021 and subject to a three-year forward-looking performance period from 1 January 2022 to 31 December 2024. The Committee decided to retain the RoTE, relative total shareholder return ('TSR'), capital reallocation to Asia and transition to net zero measures in the LTI scorecard given their strong alignment with the Group's strategy. Details of the measures and targets are set out on page 271.

Executive Directors' fixed pay for 2022

We have increased the base salary of our executive Directors by 3.5%, effective from 1 March 2022. The Committee considered the increase was necessary to ensure that the total remuneration opportunity of our executive Directors does not fall further behind desired levels based on the size, complexity and international peer group of the Group. This was discussed with shareholders during our engagement with them on the new Directors' remuneration policy. The increase is in line with the average salary increase for our wider workforce.

New Directors' remuneration policy

We are proposing to roll forward our current remuneration policy for shareholder approval at the 2022 AGM. During the year, we undertook a review of the policy based on the key principles that it should be easy to understand, align reward with stakeholder interests, incentivise long-term performance, be competitive and meet expectations of investors and regulators.

As part of the review, the Committee considered whether the current policy provides a remuneration opportunity that is appropriate given the size and complexity of the Group's operations and is commensurate with its aim of fairly remunerating executives for delivering its strategic priorities. The review clearly demonstrated that over time, HSBC's overall remuneration opportunity has fallen significantly behind desired levels to reflect the calibre of the executives and positioning against international peers. The Committee also noted that the UK regulatory requirements currently restrict us from using a remuneration structure with a greater focus on variable pay for performance, which is typically used by our international peers.

We engaged with our shareholders to take into account their views on our policy and remuneration structure. As ever, we found engagement with our shareholders to be very helpful and we were pleased with the level of feedback and support received. Noting the strong support from shareholders for our current policy and on the basis that it supports the execution of our strategy within our regulatory framework, we are proposing to roll forward our current policy for shareholders' approval at the 2022 AGM. We will keep the issue on appropriate positioning of our executive Directors' total remuneration opportunity under review for the duration of the policy. Further details of the remuneration policy and how each element supports the Group's strategy are set out on page 257.

On behalf of the Committee I would like to thank our shareholders for their engagement and feedback. The Committee looks forward to maintaining an open and transparent dialogue in 2022.

Our annual report on remuneration

The section on Directors' remuneration policy provides an overview of our remuneration policy for our Directors, for which we are seeking shareholder approval at the 2022 AGM.

In the annual report section, we provide details of decisions made for executive Directors in respect of their 2021 remuneration for which, along with this statement, we will seek shareholder approval with an advisory vote at the 2022 AGM.

We also provide details of our remuneration framework for our Group colleagues. In the additional remuneration disclosure section of this report, we provide other related disclosures.

As Chair of the Committee, I hope you will support our remuneration policy and the 2021 Directors' remuneration report.

Finally, as announced in January, I will step down as Chair of this Committee and from the Board at the conclusion of the 2022 AGM. An update on my successor will be announced in due course.

Pauline van der Meer Mohr

Chair

Group Remuneration Committee

22 February 2022

Summary 2021 remuneration outcomes for executive Directors

An overview of the 2021 remuneration outcomes and the release profile of remuneration for executive Directors is set out below. Further details are available on page 268.

Noel Quinn

Total remuneration (£000)

Ewen Stevenson

Total remuneration (£000)

Annual incentive outcome

Shareholding (% of salary)¹

1 Executive Directors are expected to meet their shareholding guidelines within five years of the date of their appointment. Noel Quinn and Ewen Stevenson were appointed on 5 August 2019 and 1 January 2019 respectively.

Illustration of release profile

The following chart provides an illustrative release profile of the remuneration awarded for executive Directors in respect of 2021.

2021

2022

2023

2024

2025

2026

2027

2028

2029

2030

Salary and benefits

• Received during 2021.

Fixed pay allowance

• Released in five equal annual instalments starting from March 2022.

Annual incentive

• Paid 50% in cash and 50% in immediately vested shares subject to a retention period of one year.

• Subject to clawback provisions for seven years from grant, which may be extended to 10 years in the event of an ongoing internal/regulatory investigation.

Perform-ance period

Retained shares

Clawback

Long-term incentive

• Award granted taking into consideration performance over the prior year and subject to three-year forward-looking performance conditions.

• Subject to performance outcome, awards will vest in five equal annual instalments starting from the third anniversary of the grant date.

• On vesting, shares are subject to a retention period of one year.

• Unvested awards subject to malus provisions.

• Subject to clawback provisions for seven years from grant, which may be extended to 10 years in the event of an ongoing internal/regulatory investigation.

Performance period

Vesting period

Retention period

Malus

Clawback

Directors' remuneration policy

This section sets outs the Directors' remuneration policy proposed for shareholders' approval at the AGM on 29 April 2022. We have made no changes to the remuneration structure or to the maximum opportunity payable for each element of remuneration and are seeking to roll forward our current policy. Minor changes have been made to provide the Committee with sufficient flexibility to implement the policy as intended over its term. Subject to receiving shareholder approval, the policy is intended to apply immediately for three years to the end of the AGM in 2025, although we may seek shareholders' approval for a new policy during the period depending on regulatory developments, changes to our strategy or competitive pressures.

Remuneration policy - key principles

The Committee is responsible for reviewing and recommending to the Board the Directors' remuneration policy to be put forward for approval by shareholders.

The guiding principles that form the basis of our review of the remuneration policy for Directors are as follows:

• The rationale and operation of the policy should be easy to understand and transparent.

• There should be a strong alignment between reward and the interests of our stakeholders, including shareholders, customers and employees.

• The policy should maintain a focus on long-term performance.

• The total compensation package should be competitive to ensure we can retain and attract talent to deliver our strategic priorities.

• The structure should meet the expectations of investors and our regulators.

Setting the policy

The Committee undertook a detailed review of the Group's remuneration policy during 2021 to assess whether it continues to be appropriate based on the size and complexity of its operations, investor feedback, best practice and market developments. Input was received from the Group Chairman and management while ensuring that conflicts of interest were suitably mitigated. Input was also provided by the Committee's appointed independent advisers throughout the process.

As highlighted in the 2020 Directors' remuneration report, the Committee - while conscious of external sentiment - planned to focus the review on whether overall remuneration levels remain appropriate and support the delivery of our strategic priorities.

The Committee has become increasingly concerned that, over time, the remuneration opportunity of our executive Directors has fallen behind desired levels to reflect their calibre and positioning against our international peers. This is supported by benchmarked data for comparable roles in organisations similar in size, geographical presence and with whom we compete for talent.

The Committee noted that UK regulatory requirements restrict us from using a remuneration structure with a greater focus on variable pay for performance, which is typically used by our international peers. Our preference would be to use such a structure to improve the total compensation opportunity of our executive Directors. This view was supported by a number of our shareholders, who also expressed a preference for a structure with lower fixed pay and higher variable pay opportunity, but understood that UK regulatory rules impact our ability to use such a structure.

The Committee also noted that our current policy and its implementation have received strong support from shareholders over the last few years. This was reaffirmed during our engagement with shareholders on the new policy.

Based on the review and taking into account the feedback received during our discussions with shareholders, we are proposing to roll forward our current policy for shareholders' approval at the 2022 AGM. We will keep the issues on appropriate positioning of our executive Directors' total remuneration opportunity under review throughout the duration of the policy.

Other matters considered as part of policy review

We also reviewed the remuneration structure, fixed and variable pay mix, the deferral and post-vesting retention periods and our shareholding guidelines to ensure there is strong alignment between reward and interests of our stakeholders. We also considered whether a formal post-employment shareholding policy should be introduced. For this purpose, the Committee took into consideration the following features of our existing policy:

• Shares delivered to executive Directors as part of the fixed pay allowance ('FPA') have a five-year retention period, which continues to apply following a departure of an executive Director.

• Shares delivered as part of an annual incentive award are subject to a one-year retention period, which continues to apply following a departure of an executive Director.

• LTI awards have a seven-year vesting period with a one-year post-vesting retention period, which is not accelerated on departure. The weighted average holding period of an LTI award within HSBC is therefore six years, in excess of the five-year holding period typically implemented by FTSE-listed companies. When an executive Director ceases employment, if they are treated as a good leaver under our policy, any LTI awards granted will continue to be released over a period of up to eight years, subject to the outcome of performance conditions.

Reflecting on the above, and the in-employment shareholding requirement of up to 400% of salary for executive Directors, we agreed our existing policy structure achieves the objective of ensuring there is ongoing alignment of executive Directors' interests with shareholder experience post-cessation of their employment. We discussed this with major shareholders during our consultation on the new policy.

Remuneration policy - executive Directors

Fixed pay

Base salary	To attract, retain and develop key talent by being market competitive and rewarding ongoing contribution to role.
Operation	The base salary for an executive Director is designed to reflect the individual's role, experience and responsibility. Base salaries are normally benchmarked on an annual basis against relevant comparator groups and may be reviewed more frequently at the discretion of the Committee. The Committee reviews and approves changes, taking into consideration factors such as scope of the role, local requirements, employee increases and market competitiveness.
Maximum opportunity	In normal circumstances, the base salary for the current executive Directors will not increase by more than 15% above the level at the start of the policy period in total for the duration of this policy. The Committee may determine larger increases in exceptional circumstances, such as a change in responsibility, where the overall remuneration opportunity has been set lower than the market and when it is justified based on skills, experience and performance in the role.
Fixed pay allowance ('FPA')	To deliver a level of fixed pay required to reflect the role, skills and experience of the executive Directors and to maintain a competitive total remuneration package for executive Directors.
Operation	FPAs are non-pensionable and will normally be granted in three instalments of immediately vested shares per year, or at any other frequency that the Committee deems appropriate. Shares equivalent to the net number of shares delivered (after those sold to cover any income tax and social security) will be subject to a retention period and normally released on a pro-rata basis over five years, starting from the March immediately following the end of the financial year in respect of which the shares are granted. Dividends will be paid on the vested shares held during the retention period. The Committee retains the discretion to amend the retention period and/or pay the FPA in cash if required to do so to meet any regulatory requirements or for any other reason the Committee deems appropriate.
Maximum opportunity	FPAs are determined based on the role, skills and responsibility of each individual and taking into account factors such as market competitiveness of the total remuneration opportunity and other elements of remuneration set out in this policy. Other than in exceptional circumstances, the FPA for the duration of this policy will be capped at 150% of base salary levels at the start of this policy.
Cash in lieu of pension	To help executive Directors build retirement savings
Operation	Directors receive a cash allowance in lieu of a pension entitlement.
Maximum opportunity	The maximum opportunity will be aligned with the maximum contribution rate that HSBC could make for the majority of employees in the relevant jurisdiction. This is currently set at 10% of base salary in line with the maximum contribution rate, as a percentage of salary, that HSBC could make for a majority of employees who are defined contribution members of the HSBC Bank (UK) pension scheme in the UK.

Benefits and all employee share plans

Benefits	To provide support for physical, mental and financial health in accordance with local market practice.
Operation	Benefits take account of local market practice and include, but are not restricted to: • taxable benefits (gross value before payment of tax) including provision of medical insurance, accommodation, car, club membership, independent legal advice in relation to a matter arising out of the performance of employment duties for HSBC, tax return assistance or preparation, and travel assistance (including any associated tax due, where applicable); and • non-taxable benefits including the provision of a health assessment, life assurance and other insurance coverage. The Group Chief Executive is also eligible to be provided with accommodation and car benefits in Hong Kong. Any tax and/or social security due on these benefits will be paid by HSBC. Additional benefits may also be provided when an executive is relocated or spends a substantial proportion of their time in more than one jurisdiction for business needs, or in such other circumstances as the Committee may determine in its discretion. Such benefits could include, but are not restricted to, airfare, accommodation, shipment, storage, utilities, and any tax and social security that may be due in respect of such benefits.
Maximum opportunity	The maximum opportunity is determined by the nature of the benefit provided. The benefit amount will be disclosed in the single figure of remuneration table for the relevant year.
All employee share plans	To promote share ownership by all employees.
Operation	Executive Directors are entitled to participate in all employee share plans, such as the HSBC Sharesave, on the same basis as all other employees. Under the Sharesave, executive Directors can make monthly savings over a period of three or five years towards the grant of an option over HSBC shares. The option price can be at a discount, currently up to 20%, on the share price at the time that the option is granted.
Maximum opportunity	The maximum number of options is determined by the maximum savings limit set by HM Revenue and Customs. This is currently £500 per month.

Variable pay Adhering to the values-aligned behaviours is a prerequisite to be considered for any variable pay. Executive Directors receive a performance and behaviour rating that is considered by the Committee in determining the variable pay awards.

Annual incentive	To drive and reward performance against annual financial and non-financial objectives that are consistent with the strategy and align to shareholder interests.
Operation	Annual incentive awards are discretionary and can be delivered in any combination of cash and shares under the HSBC Share Plan 2011 ('HSBC Share Plan'). Shares will not represent less than 50% of any award and are normally immediately vested. On vesting, shares equivalent to the net number of shares that vested (after those sold to cover any income tax and social security payable) must be held for a retention period up to one year, or such other period as required by regulators. The awards will be subject to clawback (i.e. repayment or recoupment of paid/vested awards) on or after vesting for a period of seven years from the date of award. This may be extended to 10 years in the event of an ongoing internal/regulatory investigation at the end of the seven-year period. Details of the clawback provision are set out in the following section on LTI awards. The Committee retains the discretion to: • apply a longer retention period; • increase the proportion of the award to be delivered in shares; and • defer the vesting of a portion of the awards, subject to such conditions that the Committee may determine at its discretion (which may include continued employment). The deferred awards will be subject to malus (i.e. reduction and/or cancellation of unvested awards) provisions during any applicable deferral period. Any deferred shares may be entitled to dividend equivalents during the vesting period, which will be paid on vesting. Where awards do not receive dividend equivalents during the vesting period (to meet regulatory requirements), the number of shares to be awarded will be determined using a share price discounted for the expected dividend yield. Any deferred cash award may be entitled to notional returns during the deferral period, or any appropriate adjustment to reflect such notional returns, as determined by the Committee. The Committee may adjust and amend awards in accordance with the relevant plan rules.
Maximum opportunity	The maximum opportunity for the annual incentive award, in respect of a financial year, is up to 215% of base salary.
Performance metrics	Performance is measured against an annual scorecard, based on targets set for financial and non-financial measures. The scorecards may vary by individual. Measures with financial targets will generally have a weighting of 60% for the Group Chief Executive and 50% for the Group Chief Financial Officer. The Committee will review the scorecard annually and may vary the measures, weighting and targets each year. The overall payout of the annual incentive could be between 0% (for below threshold performance) and 100% of the maximum. At threshold level of performance set in the scorecard for each measure, 25% of the award opportunity for that measure will pay out. An achievement of maximum performance set in the scorecard means a payout of 100% of the award. The Committee exercises its judgement to determine performance achieved and awards at the end of the performance period, which in normal circumstances will be one financial year, to ensure that the outcome is fair in the context of overall Group and individual performance. The Committee can adjust the payout based on the outcome of the performance measures, if it considers that the payout determined does not appropriately reflect the overall position and performance of the Group for the relevant performance period. The scorecard outcome may also be subject to a risk and compliance modifier and/or a capital underpin under which the Committee will have the discretion to adjust down the overall scorecard outcome, taking into account performance against those factors. The Committee has the discretion to: • change the overall weighting of the financial and non-financial measures; • vary the measures and their respective weightings within each category. The specific performance measures will be disclosed in the 'annual report on remuneration' for the relevant year; and • make adjustments to performance targets, measures, weighting and/or outcomes in exceptional circumstances. This may be to reflect significant one-off items that occur during the measurement period and/or where the Committee determines that original measures, targets or conditions are no longer appropriate or that amendment is required so that the measures, targets or conditions achieve their original purpose. Full and clear disclosure of any such adjustments will be made in the 'annual report on remuneration' for the relevant year, subject to commercial confidentiality.


Long-term incentives ('LTI')	To incentivise sustainable long-term performance and alignment with shareholder interests.
Operation	LTI awards are discretionary and are granted if the Committee considers that there has been satisfactory performance over the prior year. The awards are granted as rights to receive shares under the HSBC Share Plan, normally subject to a forward-looking three-year performance period from the start of the financial year in which the awards are granted. At the end of the performance period, the performance outcome will be used to assess the percentage of the awards that will vest. These shares will then normally vest in five equal instalments, with the first vesting on or around the third anniversary of the grant date and the last instalment vesting on or around the seventh anniversary of the grant date, in accordance with the UK's Prudential Regulation Authority's ('PRA') remuneration rules. On each vesting, shares equivalent to the net number of shares that vested (after those sold to cover any income tax and social security payable) must be held for a retention period up to one year (or such other period as required by regulators). Awards are subject to malus provisions prior to vesting. The awards will also be subject to clawback on or after vesting for a period of seven years from the date of award. This may be extended to 10 years in the event of an ongoing internal/regulatory investigation at the end of the seven-year period. Details of the malus and clawback provisions are set out in the bottom section of this table. Awards may be entitled to dividend equivalents during the vesting period, which will be paid on vesting. Where awards do not receive dividend equivalents during the vesting period (to meet regulatory requirements), the number of shares to be awarded will be determined using a share price discounted for the expected dividend yield. The Committee may adjust or amend awards in accordance with the rules of the HSBC Share Plan.
Maximum opportunity	The maximum opportunity for the LTI award, in respect of a financial year, is up to 320% of base salary.
Performance metrics	The Committee will take into consideration prior performance when assessing the value of the LTI grant. Forward-looking performance is measured against a long-term scorecard. Financial measures will generally have a weighting of 60% or more. For each measure, the Committee will determine the extent of achievement based on actual performance against the target set and other relevant factors that the Committee considers appropriate to take account of in order to better reflect the Group's underlying performance. The overall payout level could be between 0% (for below threshold performance) and 100% of the maximum. At threshold level of performance set in the scorecard for each measure, 25% of the award opportunity for that measure will vest. 100% of the award will vest for achieving the maximum level of performance set for each measure. Where performance achieved is between the threshold, target and maximum level of performance set in the scorecard, the number of awards that will vest will be determined on a straight-line basis. The Committee can adjust the LTI payout based on the outcome of the performance measures, if it considers that the payout determined does not appropriately reflect the overall position and performance of the Group during the performance period. The scorecard outcome may also be subject to a risk and compliance modifier and/or a capital underpin under which the Committee will have the discretion to adjust down the overall scorecard outcome, taking into account performance against those factors. Performance targets will normally be set annually for each three-year cycle. The Committee has the discretion to: • change the overall weighting of the financial and non-financial measures; • vary the measures and their respective weightings within each category. The specific performance measures will be disclosed in the 'annual report on remuneration' for the relevant year; • vary the risk and compliance and/or any underpin measures; and • make adjustments to performance targets, measures, weighting and/or outcomes in exceptional circumstances. This may be to reflect significant one-off items that occur during the measurement period and/or where the Committee determines that original measures, targets or conditions are no longer appropriate or that an amendment is required so that the measures, targets or conditions achieve their original purpose. Revised targets/measures will be, in the opinion of the Committee, no less difficult to satisfy had they been set at the same time as the original targets. Full and clear disclosure of any such adjustments will be made within the 'annual report on remuneration' for the relevant year, subject to commercial confidentiality.
Malus and clawback (applicable to both annual incentive and LTI)	The Committee has the discretion to operate malus and clawback provisions. Malus can be applied to unvested awards in circumstances including: • detrimental conduct, including conduct that brings the business into disrepute; • past performance being materially worse than originally reported; • restatement, correction or amendment of any financial statements; and • improper or inadequate risk management. Clawback can be applied to vested or paid awards for a period of seven years from the grant date. This may be extended to 10 years in the event of ongoing internal/regulatory investigation at the end of the seven-year period. Clawback may be applied in circumstances including: • participation in, or responsibility for, conduct that results in significant losses; • failing to meet appropriate standards and propriety; • reasonable evidence of misconduct or material error that would justify, or would have justified, summary termination of a contract of employment; • a material failure of risk management suffered by HSBC or a business unit in the context of Group risk management standards, policies and procedures; and • any other circumstances required by local regulatory obligations to which any member of the HSBC Group or its subsidiary is subject.

Other

Shareholding guidelines	To ensure appropriate alignment with the interest of our shareholders.
Operation	Executive Directors are expected to satisfy the following shareholding requirement as a percentage of base salary within five years from the date of their appointment: • Group Chief Executive: 400% • Group Chief Financial Officer: 300% For this purpose, unvested shares which are not subject to forward-looking performance conditions (on a net of tax basis) will count towards the shareholding requirement. HSBC operates an anti-hedging policy under which individuals are not permitted to enter into any personal hedging strategies in relation to HSBC shares subject to a vesting and/or retention period.
Maximum opportunity	Not applicable.

The Committee reserves the right to make any remuneration payments and payments for loss of office, notwithstanding that they are not in line with the policy set out above, where the terms of the payment were agreed:

• before the policy set out above or any previous policy came into effect;

• at a time where a previous policy, approved by shareholders, was in place provided the payment is in line with the terms of that policy; or

• at a time when the relevant individual was not a Director of the Group and the payment was not in consideration for the individual becoming a Director of the Group.

For these purposes, payments include the Committee satisfying awards of variable remuneration. This means making payments in line with the terms that were agreed at the time the award was granted.

In addition to the specific discretions expressly set out in the policy, the incentive plans include a number of operational discretions available to the Committee, including:

• the right to grant awards in the form of conditional share awards or options (including nil-cost options);

• the right to amend a performance condition in accordance with

its terms, or if anything happens that causes the Committee to consider it appropriate to do so;

• the right to settle the award in cash, based on the relevant share price, or shares as appropriate; and

• the right to adjust the award on a variation of share capital or other corporate event that affects the current or future value of the award, or alternatively, the right to vest the award early in such circumstances.

Choice of performance measures and targets

The performance measures selected for the annual incentive and LTI awards will be set on an annual basis by the Committee, taking into account the Group's strategic priorities and any feedback received from our shareholders. The following table sets out the performance measures we currently consider for inclusion in our scorecards. The Committee retains the discretion to choose other measures that are considered to be appropriate for achieving our strategic priorities and meeting any regulatory expectation.

The targets for the performance measures will be set taking into account a number of factors, including the targets set in our financial and resource plan, our strategic priorities, shareholder expectations, the economic environment and risk appetite.

Performance measures

Financial measures	• Adjusted profit before tax • Operating profit • RoTE • Revenue growth • Volume growth • Adjusted costs	• RoTE • Total shareholder return • Underpin to maintain a minimum CET1 ratio	Measures are selected to incentivise the achievement of our financial targets as set out in our strategic priorities and financial and resource plan.
Strategic measures	• Customer satisfaction • Employee engagement • Succession planning and diversity • Carbon reduction and sustainable finance	• Reduce carbon emissions • Sustainable finance • Capital reallocation to areas of strategic focus	Measures are selected to support the delivery of our strategic priorities.
Risk and compliance measures, modifier and/or underpin	• Sustained delivery of global conduct outcomes • Effective financial crime risk management • Effective management of material operational risks in support of strategic priorities • Risk metrics to identify when business activities are outside of tolerance level for a significant period of time • Failures in risk management that have resulted in significant customer detriment, reputational damage and/or regulatory censure. • CET1 level	• Modifier linked to risk and compliance performance	Measures are chosen to ensure a high level of accountability of risk and conduct, to promote an effective risk management environment and to embed a robust governance system.

Approach to recruitment remuneration - executive Directors

On the recruitment or appointment of a new executive Director, the Committee would adhere to the following principles:

• Remuneration packages should be in line with the approved policy for executive Directors.

• Remuneration packages must meet any applicable local regulatory requirements.

• Where necessary, compensation may be provided in respect of forfeiture of awards from an existing employer (for example, buy-out awards).

Outlined in the following table are all components that would be considered for inclusion in the remuneration package of a new executive Director appointment and, for each, the approach that would be adopted.

In the case of an internal appointment, any existing commitments will be honoured and any variable element awarded in respect of the prior role will be allowed to be paid out according to its existing terms.

Components of remuneration package of a new executive Director

Fixed pay	The base salary and FPA will reflect the individual's role, experience and responsibility, and will be set in the context of market practice. The maximum cash in lieu of pension allowance will be no more than the maximum contribution, as a percentage of salary, that can be made for the majority of employees in the relevant jurisdiction.
Benefits	Benefits to be provided will be dependent on circumstances while in line with Group policy and the remuneration policy table, including the global mobility policy (where applicable) and local regulations.
Variable pay awards	New appointments will be eligible to be considered for variable pay awards consisting of an annual incentive and/or LTI award (or any other element which the Committee considers appropriate given the particular circumstances but not exceeding the maximum level of variable remuneration set out below). For the year in which the individual commences providing services as an executive Director, the Committee retains the discretion to determine the proportion of variable pay to be deferred, the deferral and retention period, whether any performance and/or continued employment conditions should be applied, and the period over which such performance should be assessed. In exercising this discretion, the Committee will take into account the circumstances in which the individual is appointed (for example, if it is promotion of an internal candidate or an external appointment), expectation of shareholders and any regulatory requirements. Total variable pay awarded for the year in which the individual is newly appointed as an executive Director will be limited to 535% of base salary. This limit excludes buy-out awards and is in line with the aggregate maximum variable pay opportunity set out in the remuneration policy table. Guaranteed bonuses are only permitted by exception and in very rare and limited circumstances (for example, where the individual loses a variable pay opportunity with the previous employer as a result of joining HSBC and such an award is considered essential to attract and hire the candidate). If such an award is provided then, in line with the PRA remuneration rules, it will be limited to the first year of service, subject to the Group deferral policy and performance requirements.
Buy-out	The Committee may make an award to buy out remuneration terms forfeited on resignation from the previous employer. The Group buy-out policy is in line with the PRA remuneration rules, which state that both the terms and amount of any replacement awards will not be more generous than the award forfeited on departure from the former employer. In considering buy-out levels and conditions, the Committee will take into account the type of award, performance measures and likelihood of performance conditions being met in setting the quantum of the buy-out. Buy-out awards will match the terms of forfeited awards with the previous employer as closely as possible, subject to proof of forfeiture and other relevant documentation. Where the vesting time is fewer than 90 days, cash or deferred cash may be awarded for administrative purposes. Where appropriate, the Committee retains the discretion to utilise the provisions provided in the UK Listing Rules for the purpose of making buy-out awards.

Policy on payments for loss of office - executive Directors

The following table sets out the basis on which payments on loss of office may be made. Other than as set out in the table, there are no further obligations that could give rise to remuneration payments or payments for loss of office:

Payments on loss of office

Fixed pay and benefits	Executive Directors may be entitled to payments in lieu of: • notice, which may consist of base salary, FPA, cash in lieu of pension allowance, pension entitlements and other contractual benefits, or an amount in lieu of; and/or • accrued but untaken holiday entitlement. Payments may be made in instalments or a lump sum, and may be subject to mitigation, and subject to applicable tax and social security deductions.
Annual incentive and LTI	In exceptional circumstances, as determined by the Committee, an executive Director may be eligible for the grant of annual and/or long-term incentives under the HSBC Share Plan, taking into account the time worked in the performance year and based on the individual's contribution.
Unvested awards	All unvested awards will be forfeited when an executive Director ceases employment voluntarily and is not deemed a good leaver. An executive Director may be considered a good leaver, under the HSBC Share Plan, if their employment ceases in specified circumstances, which include: • ill heath, injury or disability, as established to the satisfaction of the Committee; • retirement with the agreement and approval of the Committee; • the employee's employer ceasing to be a member of the Group; • redundancy with the agreement and approval of the Committee; or • any other reason at the discretion of the Committee. If an executive Director is considered a good leaver, unvested awards will normally continue to vest in line with the applicable vesting dates, subject to performance conditions, the share plan rules, and malus and clawback provisions. Unless the Committee determined otherwise, awards made subject to forward-looking performance conditions, including LTI awards, will normally be subject to time pro-rating for time in employment during the performance period. In the event of death, unvested awards will vest and will be released to the executive Director's estate as soon as practicable. In respect of outstanding unvested awards, the Committee may determine that good leaver status is contingent upon the Committee being satisfied that the executive has no current or future intention at the date of leaving HSBC of being employed by any competitor financial services firm. The Committee determines the list of competitor firms from time to time, and the length of time for which this restriction applies. If the Committee becomes aware of any evidence to the contrary before vesting, the award will lapse.
Post-departure benefits	Executive Directors can be provided certain benefits for up to a maximum of seven years from date of departure for those who depart under good leaver provisions under the HSBC Share Plan, in accordance with the terms of the policy. Benefits may include, but are not limited to, medical coverage, tax return preparation assistance and legal expenses.
Other	Where an executive Director has been relocated as part of their employment, the Committee retains the discretion to pay the repatriation costs. This may include, but is not restricted to, airfare, accommodation, shipment, storage, utilities, and any tax and social security that may be due in respect of such benefits. Except in the case of gross misconduct or resignation, an executive Director may also receive retirement gifts.
Legal claims	The Committee retains the discretion to make payments (including professional and outplacement fees) in connection with an executive Director's cessation of office or employment. This may include payments that are made in good faith in discharge of an existing legal obligation (or by way of damages for breach of such an obligation) or by way of settlement of any claim arising in connection with the cessation of that executive Director's office or employment.
Change of control	In the event of a change of control, outstanding awards will be treated in line with the provisions set out in the respective plan rules.

Other directorships

Executive Directors may accept appointments as non-executive Directors of companies that are not part of HSBC if so authorised by either the Board or the Nomination & Corporate Governance Committee.

When considering a request to accept a non-executive appointment, the Board or the Nomination & Corporate Governance Committee will take into account, among other

things, the expected time commitment associated with the proposed appointment.

The time commitment for external appointments is also routinely reviewed to ensure that it will not compromise the Director's commitment to HSBC. Any remuneration receivable in respect of an external appointment of an executive Director is normally paid to the Group unless otherwise approved by the Nomination & Corporate Governance Committee or the Board.

Remuneration scenarios

The following charts show how the total value of remuneration and its composition would vary under different performance scenarios for executive Directors under the proposed policy, which will be effective from the date of the 2022 AGM, subject to shareholders' approval. Benefits in the charts below represents value of regular benefits as per the 2021 single figure table of remuneration. Additional benefits may arise but will always be provided in line with the shareholder approved policy.

The charts set out:

• the minimum level of remuneration receivable under the policy for each performance year;

•
the remuneration level for achieving target level of performance (which assumes 50% of maximum variable pay opportunity is realised); and

• the maximum level of remuneration (which assumes 100% of the variable pay opportunity is realised), as well as the maximum value assuming a 50% increase in share price for LTI awards.

The charts have been prepared using 2022 salaries and, therefore, the annual incentive and LTI opportunities have been computed as percentages of 2022 salaries.

Group Chief Executive (£000)

						Fixed pay	Benefits	Annual incentive	LTI
							£12,621
				£10,483			51%
				41%

		£6,909
	5%	31%
		31%
£3,336
			2%		2%			1%
Proposed policy		Proposed policy		Proposed policy		Proposed policy with 50% share price increase
Minimum		Target			Maximum

Group Chief Financial Officer (£000)

						Fixed pay	Benefits	Annual incentive	LTI
							£7,401
				£6,155			50%
				40%

		£4,071
	2%	30%
		30%
£1,987
			1%		1%			1%
Proposed policy		Proposed policy		Proposed policy		Proposed policy with 50% share price increase
Minimum		Target			Maximum

Service contracts

The service contracts of executive Directors do not have a fixed term. The notice periods of executive Directors are set at the discretion of the Committee, taking into account market practice, governance considerations, and the skills and experience of the particular candidate at that time.

Service agreements for each executive Director are available for inspection at HSBC Holdings' registered office. Consistent with

the best interests of the Group, the Committee will seek to minimise termination payments. Directors may be eligible for a payment in relation to statutory rights.

	Contract date (rolling)	Notice period (Director and HSBC)
Noel Quinn	18 March 2020	12 months
Ewen Stevenson	1 December 2018	12 months

Remuneration policy - non-executive Directors

The Nomination & Corporate Governance Committee has reviewed and revised the time commitments required for all non-executive Directors as the Board supports HSBC through its ambitious agenda of governance reform, growth and organisational

development in an environment of increasing regulatory, political and organisational complexity.

The following table sets out the framework that will be used to determine the fees for non-executive Directors during the term of this policy.


Fees To reflect the time commitment and responsibilities of a non-executive Director of HSBC Holdings.	The policy for non-executive Directors is to pay: • base fees; • further fees for additional Board duties, including but not limited to chairmanship, membership of a committee, or acting as the Senior Independent Director and/or Deputy Chairman; and • travel allowances. Fees are paid in cash. The Board retains the discretion to pay in shares rather than cash where appropriate. The non-executive Group Chairman will be paid a fixed annual fee for all Board responsibilities based on their experience and the time commitments expected for the role, together with such other benefits as the Group Remuneration Committee may in its absolute discretion determine. A newly appointed non-executive Director would be paid in line with the policy on a time-apportioned basis in the first year as necessary. No sign-on payments are offered to non-executive Directors. The Board (excluding the non-executive Directors) has discretion to approve changes to the fees. The Board may also introduce any new component of fees for non-executive Directors, subject to the principles, parameters and other requirements set out in this remuneration policy. Certain non-executive Directors may be entitled to receive fees for their services as directors of subsidiary companies of HSBC Holdings plc. Such additional remuneration is determined by the Board of Directors of each relevant subsidiary within a framework set by the Committee.	The Board will normally review the amount of each component of fees periodically to assess whether, individually and in aggregate, they remain competitive and appropriate in light of changes in roles, responsibilities and/or time commitment of the non-executive Directors, and to ensure that individuals of the appropriate calibre are retained or appointed. Other than in exceptional circumstances, during the term of this policy, fees will not increase by more than 20% above the 2022 levels. Travel allowances are set at an appropriate level, taking into account the time requirement for non-executive Directors to travel to overseas meetings. Any new fees, allowance or component part (for example, for a new committee) would be set and then subject to a maximum of 20% increase for the duration of the policy, subject to the exceptional circumstances referred to above.
Expenses/benefits	Any taxable or other expenses incurred in performing their role are reimbursed, as well as any related tax cost on such reimbursement. Non-executive Directors may on occasion receive reimbursement for costs incurred in relation to the provision of professional advice. These payments, if made, are taxable benefits to the non-executive Directors and the tax arising is paid by the Group on the Directors' behalf.	Not applicable
Shareholding guidelines To ensure appropriate alignment with the interests of our shareholders.	Non-executive Directors, individually or with their connected persons, are expected to satisfy a shareholding guideline of 15,000 shares within five years from their appointment. The Committee reviews compliance with the guidelines annually. The Committee has full discretion in determining any consequences in cases of non-compliance.	Not applicable

Service contracts

Non-executive Directors are appointed for fixed terms not exceeding three years, which may be renewed subject to their re-election by shareholders at AGMs. Non-executive Directors do not have service contracts, but are bound by letters of appointment issued for and on behalf of HSBC Holdings, which are available for inspection at HSBC Holdings' registered office. There are no obligations in the non-executive Directors' letters of appointment that could give rise to remuneration payments or payments for loss of office.

Policy on payments on loss of office - non-executive Directors

There are no obligations in the non-executive Directors' letters of appointment that could give rise to remuneration payments or payments for loss of office.

Non-executive Directors are entitled to notice under their letter of appointment. Non-executive Directors' current terms of appointment will expire as follows:

2022 AGM	2023 AGM	2024 AGM
José Antonio Meade Kuribreña	David Nish	Mark Tucker
Rachel Duan¹	Jackson Tai	James Forese
Dame Carolyn Fairbairn¹		Steven Guggenheimer
		Eileen Murray

1 Rachel Duan and Dame Carolyn Fairbairn were appointed following the 2021 AGM and therefore their initial three-year appointment terms are subject to approval of their election by shareholders at the 2022 AGM. Their initial three-year term of appointment will end at the conclusion of the 2025 AGM, subject to annual re-election by shareholders' at the relevant AGMs.
Remuneration arrangements for colleagues

Our remuneration arrangements for our colleagues, including the executive Directors, are driven by the Group reward strategy. The Committee reviews the Group reward strategy to ensure it continues to support HSBC's overall ability to attract, retain, develop and motivate the best people, who are aligned to HSBC's values and committed to maintaining a long-term career within the Group. Full details of our remuneration framework for our colleagues are disclosed on page 279.

Our executive Directors' remuneration policy aligns with our remuneration policy for our colleagues as follows:

• Externally sourced market data is used to help guide pay decisions for colleagues, including executive Directors.

• The base salary increases for executive Directors take into consideration base salary increases of colleagues across the Group, and relevant market conditions.

• The cash in lieu of pension allowance for executive Directors will not exceed the maximum contribution (as a percentage of salary) that can be made for the majority of colleagues in the relevant jurisdiction.

• All colleagues are eligible to be considered for an annual incentive award based on their performance and behaviour ratings. The variable pay for all colleagues, including executive Directors, is funded from a Group variable pay pool that is determined by reference to Group performance. Colleagues who receive a variable pay award above a certain level have a portion of their award deferred over a period of three to seven years.

• LTI awards are considered for senior management, given their ability to influence directly the long-term performance.

The Board gathers views from our colleagues through a number of engagement channels. Our management engages with colleagues, either on a Group-wide basis or in the context of smaller focus groups, to solicit feedback generally on a wide range of matters, including pay. Our annual survey on pay seeks the views of all colleagues on their performance and pay outcomes. The Committee reviews the outcomes of the survey and determines the key remuneration priorities for the forthcoming year. Many of our colleagues are also shareholders and therefore have the opportunity to vote on the policy at the 2022 AGM.

As part of our annual calendar, the Committee Chair also hosts a forum attended by the chairs of our principal subsidiaries boards and remuneration committees. This event allows the Committee to understand local market factors and feedback gathered from employees, within the regions where we operate, on pay and

performance matters. This helps both management and the Committee to determine the prioritisation of pay budgets, and allows the Committee to ensure that funding is directed to the areas of need in support of the Group's strategic ambitions.

In 2022, the Committee has requested that a detailed review of the reward strategy be conducted to reflect the changes in the Group's strategy, and our employee value proposition as a result of the Covid-19 pandemic, as well as to ensure that we are well positioned versus developments in the market, both within financial services and more broadly. This will include engagement with colleagues to ensure their feedback on the various elements of our reward strategy can be taken into account as part of the Committee's decision making. An update will be provided as part of next year's Directors' remuneration report.

The table below details how the Group Remuneration Committee addresses the principles set out in the UK Corporate Governance Code in respect of the Directors' remuneration policy.


Clarity	• The Committee regularly engages and consults with key shareholders to take into account shareholder feedback and to ensure there is transparency on our policy and its implementation. • Details of our remuneration practices and our remuneration policy for Directors are published and available to all our employees.
Remuneration arrangements should be transparent and promote effective engagement with shareholders and the workforce.
Simplicity	• Our Directors' remuneration policy has been designed so that it is easy to understand and transparent, while complying with the provisions set out in the UK Corporate Governance Code and the remuneration rules of the UK's PRA and FCA, as well as meeting the expectations of our shareholders. The objective of each remuneration element is explained and the amount paid in respect of each element of pay is clearly set out.
Remuneration structures should avoid complexity and their rationale and operation should be easy to understand.
Risk	• In line with regulatory requirements, our remuneration practices promote sound and effective risk management while supporting our business objectives (see page 281). • The Group Chief Risk and Compliance Officer attends Committee meetings and updates the Committee on the overall risk profile of the Group. The Committee also seeks inputs from the Group Risk Committee when making remuneration decisions. • Risk and conduct considerations are taken into account in setting the variable pay pool, from which any executive Director variable pay is funded. • Executive Directors' annual incentive and LTI scorecards include a mix of financial and non-financial measures. Financial measures in the scorecards are subject to a CET1 capital underpin to ensure CET1 capital remains within risk tolerance levels while achieving financial targets. In addition, the overall scorecard outcome is subject to a risk and compliance modifier. • The deferred portion of any awards granted to executive Directors is subject to a seven-year deferral period during which our malus policy can be applied. All variable pay awards that have vested are subject to our clawback policy for a period of up to seven years from the award date (extending to 10 years where an investigation is ongoing).
Remuneration structures should identify and mitigate against reputational and other risks from excessive rewards, as well as behavioural risks that can arise from target-based incentive plans.
Predictability	• The charts set out on page 264 show how the total value of remuneration and its composition vary under different performance scenarios for executive Directors.
The range of possible values of rewards to individual Directors and any other limits or discretions should be identified and explained at the time of approving the policy.
Proportionality	• The annual incentive and LTI scorecards reward achievement of our financial and resource plan targets, as well as long-term financial and shareholder value creation targets. • The Committee retains the discretion to adjust the annual incentive and LTI payout based on the outcome of the relevant scorecards, if it considers that the payout determined does not appropriately reflect the overall position and performance of the Group during the performance period.
The link between individual awards, the delivery of strategy and the long-term performance of the Group should be clear and outcomes should not reward poor performance.
Alignment with culture	• In order for any annual incentive award to be made, each executive Director must achieve a required behaviour rating. • Annual incentive and LTI scorecards contain non-financial measures linked to our wider social obligations. These include measures related to reducing the environmental impact of our operations, improving customer satisfaction, diversity and employee engagement. • Each year senior employees participate in a 360 degree survey, which gathers feedback on values-aligned behaviours from peers, direct reports, skip level reports and managers.
Incentive schemes should drive behaviours consistent with the Group's purpose, values and strategy.

Group Remuneration Committee

The Group Remuneration Committee is responsible for setting the overarching principles, parameters and governance of the Group's remuneration framework for our colleagues, and the remuneration of executive Directors, the Group Chairman and other senior Group colleagues. The Committee regularly reviews the framework to ensure it supports the Group's purpose, values, culture and strategy, as well as promoting sound risk management. The Committee also reviews the framework to satisfy itself that it complies with the regulatory requirements of multiple jurisdictions.

All members of the Committee are independent non-executive Directors of HSBC Holdings. No Directors are involved in deciding their own remuneration. A copy of the Committee's terms of reference can be found on our website at www.hsbc.com/our-approach/corporate-governance/board-committees.

The Committee met six times during 2021. Rachel Duan, Dame Carolyn Fairbairn and José Antonio Meade Kuribreña were appointed as members of the Committee during 2021. David Nish, Henri de Castries and Irene Lee stepped down as members of the Committee during 2021. The following is a summary of the Committee's key activities during 2021.

Matters considered during 2021
	Jan	Feb	May	Jul	Sep	Dec
Remuneration framework and governance
Group variable pay pool, workforce performance and pay matters, gender pay gap report, and employee surveys	l	ô	l	l	l	l
Directors' remuneration policy design	ô	ô	l	l	l	l
Executive Director remuneration policy implementation, scorecards and pay proposals	l	l	l	ô	l	l
Remuneration for other senior executives of the Group	l	l	l	l	l	l
Directors' remuneration report	l	l	ô	ô	ô	l
Regulatory, risk and governance
Information on material risk and audit events, and performance and remuneration impacts for individuals involved	l	ô	l	l	l	l
Regulatory updates, including approach and outcomes for the identification of Material Risk Takers	l	l	l	l	l	l
Governance matters	l	l	l	l	l	l
Principal subsidiaries
Matters from subsidiary committees	l	l	l	l	l	l

Advisers

The Committee received input and advice from different advisers on specific topics during 2021. Deloitte LLP's engagement with the Committee was extended during 2021. Deloitte provided benchmarking data on remuneration policy matters and independent advice to the Committee. Deloitte also provided tax compliance and other advisory services to the Group. Deloitte is a founding member of the Remuneration Consultants Group and voluntarily operates under the code of conduct in relation to executive remuneration consulting in the UK.

The Committee also received advice from Willis Towers Watson on market data and remuneration trends. Willis Towers Watson was appointed by management after considering invited proposals from similar consultancy firms. It provides actuarial support to Global Finance and benchmarking data and services related to benefits administration for our Group employees. The Committee was satisfied the advice provided by Deloitte and Willis Towers Watson was objective and independent in 2021.

For 2021, total fees of £176,550 and £35,060 were incurred in relation to remuneration advice provided by Deloitte and Willis Towers Watson, respectively. This was based on pre-agreed fees and a time-and-materials basis.

Attendees and interaction with other Board committees

During the year, Noel Quinn as the Group Chief Executive provided regular briefings to the Committee. In addition, the Committee engaged with and received updates from the following:

• Mark Tucker, Group Chairman;

• Elaine Arden, Group Chief Human Resources Officer;

• Jenny Craik, Group Head of Performance Management, Reward and Employee Relations;

• Alexander Lowen, Former Group Head of Performance Management and Reward;

• Pam Kaur, Group Chief Risk and Compliance Officer;

• Colin Bell, former Group Chief Compliance Officer;

• Bob Hoyt, Group Chief Legal Officer;

• Shawn Chen, Group General Counsel for Litigation and Regulatory Enforcement; and

• Aileen Taylor, Group Company Secretary and Chief Governance Officer.

The Committee also received feedback and input from the Group Risk Committee and Group Audit Committee on risk, conduct and compliance-related matters relevant to remuneration.

Committee effectiveness

The annual review of the effectiveness of the Committee was internally facilitated for 2021. The review concluded that the Committee continued to operate effectively, with a number of positive aspects of the Committee's operation and practices highlighted. Areas identified for focus during 2022 included:

• The Committee needs to receive suitable and relevant data and insight to support its discussion and decision making on pay, including for the wider workforce.

• It should facilitate the right level of preparation for its members.

• The Committee should consider how best the Committee's advisers and other external consultants could add value and insights on developing market context and stakeholder views to its discussions.

The Committee discussed the outcomes of the evaluation in January 2022, and endorsed the findings and actions to be taken. The outcomes of the evaluation have been reported to the Board and the Committee will track progress on the recommendations through the year.

Voting results from Annual General Meeting

The table below shows the voting results from our last AGM.

2021 Annual General Meeting voting results
	For	Against	Withheld
Remuneration report (votes cast)	97.30 %	2.70%	--
Remuneration report (votes cast)	8,898,898,415	246,557,676	12,404,292
Remuneration policy (2019) (votes cast)	97.36 %	2.64%	--
Remuneration policy (2019) (votes cast)	9,525,856,097	258,383,075	47,468,297

Annual report on Directors' remuneration

This section sets out how our approved Directors' remuneration policy was implemented during 2021.

Determining executive Directors' incentive outcomes

(Audited)

The maximum 2021 annual incentive opportunity for our two executive Directors, Noel Quinn and Ewen Stevenson, was set at 215% of salary.

In order for any annual incentive award to be made, each executive Director must achieve a minimum values-aligned behaviour rating. For 2021, both executive Directors met this requirement.

The level of award is determined by applying the outcome of their annual incentive scorecard to the maximum opportunity. The scorecard measures, weighting and targets were determined at the start of the financial year taking into account the Group's plan for 2021 and the Group's strategic priorities and commitments.

The financial targets were set at the start of the financial year when there was significant uncertainty and challenging circumstances, including the emergence of new Covid-19 variants and ongoing low interest rates. For strategic measures, the performance assessment involved considering performance against targets set in line with our commitments, such as employee diversity, survey results for employee experience and customer satisfaction measures, as well as an assessment of the progress made and momentum generated to achieve our strategic priorities.

The Group's financial performance improved in 2021. In particular, the Committee noted:

• reported profit before tax was $18.9bn, which represented an increase of 115% compared with 2020 and an increase of 42% compared with 2019;

• strong cost controls were demonstrated, despite inflationary pressures and continued investment in technology, with adjusted costs at $32.15bn;

• RoTE was 8.3%; and

•
there was a more positive shareholder experience, including share price performance and shareholder returns through dividends and capital returns.

As set out in the scorecard assessment table below, while cost performance was towards the lower end of the target range, it was broadly in line with the Group's revised adjusted cost guidance of $32bn, reflecting increases in technology investment and inflationary pressures. Adjusted revenue in Asia was down, due mainly to the impact of interest rate cuts. However, wealth and trade revenues grew, while loans and advances increased by $33bn for the year, indicating that demand remains high. We made strong progress towards our core objective of reducing RWAs in low-return franchises, achieving $104bn by the end of 2021 and more than 95% of our cumulative target for the end of 2022. We also made good progress on strategic measures, by improving customer satisfaction, maintaining the high level of employee engagement from 2020 and exceeding our gender representation target in senior leadership roles.

Overall, this level of performance resulted in a payout of 57.30% of the maximum for Noel Quinn and 60.43% for Ewen Stevenson.

The annual incentive scorecard is subject to a risk and compliance modifier, which provides the Committee with the discretion to adjust down the overall scorecard outcome, taking into account information such as any risk metrics being outside of tolerance for a significant period of time and any risk management failures that have resulted in significant customer detriment, reputational damage and/or regulatory censure. Taking into account the Group's performance against the risk metrics, inputs from the Group Risk Committee and overall performance of the executive Directors, the Committee determined that the application of the risk modifier was not required for 2021.

The Committee also reviewed these outcomes in the context of a number of internal and external considerations to determine whether it should exercise its discretion to reduce the formulaic outcome. The Committee determined that the 2021 formulaic outcome appropriately rewards the executive Directors for their performance within the context of Group's financial performance and overall stakeholder experience.

Annual incentive assessment
				Noel Quinn			Ewen Stevenson
	Minimum (25% payout)	Maximum (100% payout)	Performance	Weighting (%)	Assessment (%)	Outcome (%)	Weighting (%)	Assessment (%)	Outcome (%)
Adjusted cost ($bn)	32.27	31.47	32.15	20.00	36.25	7.25	20.00	36.25	7.25
Revenue growth in Asia (%)	0.44%	0.89%	-5.96 %	20.00	-	-	15.00	-	-
RWA reduction in legacy assets/low-return areas ($bn)¹	38.35	42.40	43.00	20.00	100.00	20.00	15.00	100.00	15.00
Customer satisfaction	See following section for non-financial performance commentary			15.00	67.00	10.05	15.00	67.00	10.05
Employee experience				15.00	75.00	11.25	15.00	75.00	11.25
Personal objectives				10.00	87.50	8.75	20.00	84.40	16.88
Total				100.00		57.30	100.00		60.43
Maximum annual incentive opportunity (£000)						£2,776			£1,619
Annual incentive outcome (£000)						£1,590			£978

1 As set out in our February 2020 business update, one of our objectives has been to reduce RWAs in low-return franchises and redeploy capital in areas of faster growth and higher returns, with a target of achieving a $100bn reduction in RWAs by the end of 2022. This target was subsequently amended during 2021, following a change to the methodology of capturing RWA saves. Following this amendment in methodology, the Committee adjusted the original target range of $28.35bn to $32.4bn and increased it to $38.35bn to $42.40bn.

Non-financial performance

Shared objectives for Noel Quinn and Ewen Stevenson

Customer satisfaction Maintain and improve net promoter score ('NPS') in the UK and Hong Kong	15%	67%	• In Wealth and Personal Banking, our NPS ranking in Hong Kong remained in third place, and in the UK our NPS increased and our overall rank improved by one place (assessed at 65%). • In Commercial Banking, our overall NPS ranking was fourth in Hong Kong, and we ranked in the top three among our large corporate customers. In the UK, overall we declined one rank position in 2021. We continued to have a top placed NPS ranking for mid-market enterprises, and we maintained our NPS ranks for large corporates and small business banking clients, while our ranking fell for business banking customers (assessed at 57%). • For Global Banking and Markets, we improved our overall NPS ranking in Asia from third to first place, and our rank improved by one place in Europe among priority clients (assessed at 80%).
Employee experience Improve engagement, diversity and inclusion	15%	75%	Employee engagement (assessed at 100%) • We met our stretch target to sustain last year's historically strong employee engagement score of 72%. The result is four points above the global financial services benchmark and five points above 2019 levels. • The index comprises three areas: willingness to recommend HSBC as a great place to work, feeling proud to work for HSBC, and feeling valued by HSBC. • Commentary from our survey suggests that focus on employee well-being, flexible work arrangements and our response to the Covid-19 pandemic have had a strong positive impact on employee engagement. Gender representation in leadership roles (assessed at 100%) • At the end of 2021, we had 31.7% of our senior leadership roles held by female colleagues, exceeding our target of 31.0% for the year and on track to achieving our new goal of 35.0% by 2025. • This has been achieved through a focus on the hiring, retention and career development of female colleagues. Black employees' representation in leadership roles (assessed at 100%) • The number of Black heritage employees in senior leadership increased by 17.5%. • We are reliant on our colleagues' choice to self-identify or not, noting that we have made good progress on this ethnicity data with 78.1% of UK colleagues and 95.2% of US colleagues having self-identified. This improvement has enabled a much clearer picture of where to focus attention and we are using it as part of progress check-ins with executives. Engagement among colleagues identifying as part of an ethnic minority and who identify as having a disability (assessed at 0%) • At a global level, we have not closed the gap in employee engagement scores between ethnic minority and non-ethnic-minority colleagues, or between colleagues with disabilities versus those who do not have a disability. • While delivering meaningful change will take time, we are deepening our understanding of where differences arise - in particular looking at how engagement is shaped by the way diverse groups are represented differently across our businesses, geographies and job types. • We have also introduced an inclusion index to help understand the sentiment of all colleagues, including diverse groups. This includes questions related to a sense of belonging, speak-up, trust, career, fair treatment and self-expression.

Personal objectives for Noel Quinn and Ewen Stevenson

Noel Quinn • Launch of refreshed purpose and values • Delivery of strategy	10%	87.5%	Launch of refreshed purpose and values • Our refreshed purpose and values were successfully deployed with strong leadership tone from the Group Chief Executive and Group Executives internally and externally. • Our employee survey to test awareness and understanding of our new purpose, values and strategy found that 82% of respondents said that HSBC has the right purpose, strategy and values to drive success, and 76% believed that the purpose and values will lead to meaningful changes in how we work. The strategy index is at 72%, two points ahead of the financial services benchmark that has trended downwards. • The purpose and values have been embedded into our onboarding and induction processes for 26,500 new joiners, our recognition framework and performance management approach. Delivery of strategy • We are making progress across the four strategic pillars: Focus on our strengths, digitise at scale, energise for growth and transition to net zero. • Focus on our strengths: - In Wealth and Personal Banking, we saw growth of 138% in net new invested assets for Asia wealth. In asset management, our funds under management rose 5% to $630bn. In insurance, the value of new business in Singapore, mainland China, and Hong Kong (including Hang Seng Bank) increased 40% from 2020, to reach $917m. - In Commercial Banking, we saw strong growth in fee income in 2021, reaching $3.6bn, a growth of 9% compared with 2020. Our customer lending volume increased 3% to $349bn. We made progress on improving SME propositions in our key markets. Since the launch of Kinetic in the UK in 2020 we have reached 24,000 customers at the end of 2021. - In Global Banking and Markets, we reduced adjusted RWAs by 10% to $236bn at 31 December 2021, driven by saves in our Western franchise, comprising of our Europe and Americas businesses. Overall, Global Banking and Markets revenue reached approximately $15bn, driven by strong performance in Equities, Capital Markets and Advisory, and Securities Services. - We made progress on restructuring our US business and HSBC Bank plc, our non-ring-fenced bank in Europe and the UK. We announced three key acquisitions in 2021 to further strengthen our wealth franchise in Asia. We entered into an agreement to acquire AXA Singapore, pending regulatory approval, with the intention to merge the business with the operations of our existing HSBC Life Singapore franchise. We agreed to fully acquire L&T Investment Management, the 12th largest mutual fund management company in India. We received regulatory approval to acquire the remaining 50% stake in HSBC Life China, bringing our shareholder ownership to 100% upon completion. • Digitise at scale: We made good progress on automating our organisation at scale. Our Cloud adoption rate, which is the percentage of our technology services on the private or public Cloud, increased from approximately 20% in 2020 to 27% in 2021. At the end of 2021, 43% of our customers were 'mobile active' users, who are customers that had logged onto a mobile app at least once in the last 30 days. This is an improvement compared with 38% in 2020. • Energise for growth: We continue to help to energise our colleagues through initiatives that help develop their future skills and learning opportunities, in areas including data, digital and sustainability. • Transition to net zero: In 2021, we reduced our organisation's absolute greenhouse gas emissions in our operations to 341,000 CO2 tonnes, a decrease of 50% using 2019 as the baseline. We provided and facilitated $82.6bn of sustainable finance and investment, taking the cumulative amount to $126.7bn since 1 January 2020, as part of our $750bn to $1tn by 2030 ambition.
Ewen Stevenson • Finance on the Cloud deployment • Climate stress test • Resolvability assessment framework attestation • Reduce Global Finance function costs and number of FTEs	20%	84.4%	• The Finance on the Cloud programme entered into the implementation phase in 2021. The RWA and liquidity Cloud migrations from the legacy Platfora solution was completed and the UK Cloud transformation was extended to liquidity. All regulatory obligations in relation to this were met. We also made progress with the global roll-out of the Cloud solution in Hong Kong and the US. • We significantly developed our climate scenario capabilities, largely driven by the climate biennial exploratory scenario exercise and through developing a framework to incorporate client adaptation plans into climate scenario analysis to address insufficient client data issues. We developed reporting that includes the Group's carbon reduction metrics, with reporting of high-risk sectors included in the quarterly Group Executive Committee update. We also enhanced disclosures to cover quantitative risk metrics aligned with the climate risk appetite statement. • We built capabilities to support the resolvability assessment framework and met all regulatory deadlines during 2021 in relation to this. • The Global Finance function costs were marginally above target due to market pay challenges and the target for full-time equivalent colleagues was largely met.

Single figure of remuneration

(Audited)

The following table shows the single figure of total remuneration of each executive Director for 2021, together with comparative figures.

Single figure of remuneration

(£000)	2021	2020	2021	2020
Base salary¹	1,288	1,266	751	738
Fixed pay allowance ('FPA')¹	1,700	1,700	1,062	950
Cash in lieu of pension	129	127	75	74
Taxable benefits²	95	186	3	12
Non-taxable benefits²	71	59	42	32
Total fixed	3,283	3,338	1,933	1,806
Annual incentive³	1,590	799	978	450
Notional returns⁴	22	17	-	-
Replacement award⁵	-	-	754	1,431
Total variable	1,612	816	1,732	1,881
Total fixed and variable	4,895	4,154	3,665	3,687

1 Executive Directors made the personal decision to donate 100% of their base salary increases for 2021 to charity given the ongoing challenging external environment. Ewen Stevenson also donated his FPA increase for 2021 to charity. Figures shown in the table above are the gross figures before charitable donations.

2 Taxable benefits include the provision of medical insurance, car and tax return assistance (including any associated tax due, where applicable). Non-taxable benefits include the provision of life assurance and other insurance cover.

3 Noel Quinn and Ewen Stevenson both voluntarily waived the cash portion of their 2020 annual incentive. Without this voluntary waiver, the 2020 annual incentive of Noel Quinn and Ewen Stevenson would have been £1,598,000 and £900,000, respectively.

4 The deferred cash awards granted in prior years includes a right to receive notional returns for the period between the grant and vesting date. This is determined by reference to a rate of return specified at the time of grant and paid annually, with the amount disclosed on a paid basis.

5 In 2019 Ewen Stevenson was granted replacement awards to replace unvested awards, which were forfeited as a result of him joining HSBC. The awards, in general, match the performance, vesting and retention periods attached to the awards forfeited. The values included in the table for 2020 relate to his 2017 LTI award granted by the Royal Bank of Scotland Group plc ('RBS'), now renamed as NatWest Group plc ('NatWest'), for performance year 2016, which was determined by applying the performance assessment outcome of 56.25% as disclosed in NatWest's Annual Report and Accounts 2019 (page 91) to the maximum number of shares subject to performance conditions. This resulted in a payout equivalent to 78.09% of NatWest award shares that were forfeited and replaced with HSBC shares. A total of 313,608 shares were granted in respect of his 2017 LTI replacement award at a share price of £6.643. The HSBC share price was £5.845 when the awards ceased to be subject to performance conditions, with no value attributable to share price appreciation. The value included in the table for 2021 relates to Ewen Stevenson's 2018 LTI replacement award granted by NatWest for performance year 2017 and was subject to a pre-vest performance test assessed and disclosed by NatWest in its Annual Report and Accounts 2020 (page 135). As no adjustment was proposed for Ewen Stevenson by NatWest, a total of 177,883 shares granted in respect of his 2018 LTI replacement award ceased to be subject to performance conditions. These awards were granted at a share price of £6.643 and the HSBC share price was £4.240 when the awards ceased to be subject to performance conditions, with no value attributable to share price appreciation.

Benefits

The values of the significant benefits in the single figure table are set out in the following table.¹


(£000)	2021	2020
Insurance benefit (non-taxable)	67	51
Car and driver (UK and Hong Kong)²	87	139

1 The insurance and car benefits for Ewen Stevenson are not included in the above table as they were not deemed significant.

2 The 2021 car and driver benefit was lower than 2020 due to the impact of travel restrictions during the Covid-19 pandemic.

Long-term incentive awards

(Audited)

Long-term incentive in respect of 2021

After taking into account performance for 2021, the Committee decided to grant Noel Quinn and Ewen Stevenson LTI awards of £4,131,000 and £2,410,000, respectively.

The 2021 LTI awards will have a three-year performance period starting 1 January 2022. During this period, performance will be assessed based on four equally weighted measures: two financial measures to incentivise value creation for our shareholders; a measure linked to our climate ambitions; and a measure for relative total shareholder return ('TSR'). This is consistent with the measures used for our last LTI award.

RoTE is a key measure of our financial performance and how we generate returns that deliver value for our shareholders. The target range for this measure is aligned with our medium-term objective of achieving a RoTE of 10% or more.

Capital reallocation to Asia remains one of the key levers of our strategy and business transformation plan. This measure will be assessed based on the share of Group tangible equity allocated to Asia at the end of the performance period. The target range for this measure is aligned with our long-term strategic plan.

The transition to net zero scorecard measures are aligned to our strategic priority of bringing carbon emissions in our own operations to net zero by 2030 and supporting our customers in the transition to a more sustainable future, by providing and facilitating $750bn to $1tn of sustainable finance and investment over the same time period. Targets are linked to this climate ambition and performance will be assessed based on the reduction in our carbon footprint and the financing we provide to our clients in their net zero transition.

Relative TSR rewards executive Directors based on comparison of the TSR performance of the Group and a relevant peer group. No changes were made to the peer group for this LTI award. The Committee will review the TSR peer group for future LTI awards to ensure the peer group remains appropriate, taking into account the progress in the execution of our strategic shifts in our geographical and business mix, notably future growth investment in Asia and wealth business.

The LTI continues to be subject to a risk and compliance modifier, which gives the Committee the discretion to adjust down the overall outcome to ensure that the Group operates soundly when achieving its financial targets. For this purpose, the Committee will receive information including any risk metrics outside of tolerance for a significant period of time and any risk management failures that have resulted in significant customer detriment, reputational damage and/or regulatory censure.

The RoTE and capital reallocation to Asia measures are also subject to a CET1 underpin. If the CET1 ratio at the end of the performance period is below the CET1 risk tolerance level set in the risk appetite statement, then the assessment for these measures will be reduced to nil.

As the awards are not entitled to dividend equivalents in

accordance with regulatory requirements, the number of shares to be awarded will be adjusted to reflect the expected dividend yield of the shares over the vesting period.

To the extent performance conditions are satisfied at the end of the three-year performance period, the awards will vest in five equal annual instalments commencing from around the third anniversary of the grant date. On vesting, shares equivalent to the net number of shares that have vested (after those sold to cover any income tax and social security payable) will be held for a retention period of up to one year, or such period as required by regulators.

Performance conditions for LTI awards in respect of 2021 (performance period 1 January 2022 to 31 December 2024)

RoTE (with CET1 underpin)²		8.0%	9.5%	11.0%	25.0
Capital reallocation to Asia (with CET1 underpin)³		46.0%	48.0%	50.0%	25.0
Transition to net zero⁴	Carbon reduction	52.0%	56.0%	60.0%	25.0
Transition to net zero⁴	Sustainable finance and investment	$285.0bn	$340.0bn	$370.0bn	25.0
Relative TSR⁵		At the median of the peer group	Straight-line vesting between minimum and maximum	At the upper quartile of the peer group	25.0

1 Awards will vest on a straight-line basis for performance between the minimum, target and maximum levels of performance set in this table.

2 To be assessed based on RoTE at the end of the performance period. This metric will be subject to the CET1 underpin outlined above.

3 To be assessed based on share of Group tangible equity (on a constant currency basis and excluding associates) allocated to Asia by 31 December 2024. This metric will be subject to the CET1 underpin outlined above.

4 Carbon reduction will be measured based on percentage reduction in total energy and travel emissions achieved by 31 December 2024 using 2019 as the baseline. The sustainable finance and investment metric will assess cumulative financing provided over the period commencing on
1 January 2020 and ending on 31 December 2024.

5 The peer group for the 2021 award is: Bank of America, Barclays, BNP Paribas, Citigroup, Credit Suisse Group, DBS Group Holdings, Deutsche Bank, J.P. Morgan Chase & Co., Lloyds Banking Group, Morgan Stanley, Standard Chartered and UBS Group.

2018 long-term incentive performance

The 2018 LTI award was granted to John Flint (former Group Chief Executive) and Marc Moses (former Group Chief Risk Officer).

Based on the scorecard outcome, 78,071 shares will vest for John Flint and 54,932 shares will vest for Marc Moses (determined by pro-rating their awards for time in employment during the performance period of 1 January 2019 to 31 December 2021). The awards will vest in five equal annual instalments commencing in March 2022. Using the average daily closing share prices over the three months to 31 December 2021 of £4.339 the value of awards to vest to John Flint and Marc Moses is £338,750 and £238,350, respectively.

Assessment of the LTI award in respect of 2018 (performance period 1 January 2019 to 31 December 2021)

Average RoTE (with CET1 underpin) (75%)	10.0%	11.0%	12.0%	6.6%	0.0%	0.00%
Employer advocacy¹ (12.5%)	65%	70%	75%	70%	50.0%	6.25%
Environmental, social and governance rank² (12.5%)	At median of the peer group	Straight-line vesting between minimum and maximum	At upper quartile of peer group	Above upper quartile	100.0%	12.50%
Total³						18.75%

1 Assessed based on results of the 2021 employee Snapshot survey question: 'I would recommend this company as a great place to work'.

2 Based on Sustainalytics ratings. Peer group for this measure included Bank of America, Barclays, BNP Paribas, Citigroup, Credit Suisse Group, Deutsche Bank, DBS Group Holdings, J.P. Morgan Chase & Co., Lloyds Banking Group, Standard Chartered, UBS Group, ICBC, Itau and Santander.

3 The award was subject to a risk and compliance underpin which gives the Committee the discretion to adjust down the overall scorecard outcome, taking into account performance against risk and compliance factors during the performance period for the award. Taking into account inputs received from Group Risk and Compliance and the Group Risk Committee, the Committee considered the application of the risk and compliance underpin was not required.

Scheme interests awarded during 2021

(Audited)

The table below sets out the scheme interests granted to executive Directors during 2021 in respect of performance year 2020, as disclosed in the 2020 Directors' remuneration report. No non-executive Directors received scheme interests during the financial year.

Scheme awards in 2021
(Audited)
	Type of interest awarded	Basis on which award made	Date of award	Face value awarded¹ £000	Percentage receivable for minimum performance	Number of shares awarded	End of performance period
Ewen Stevenson	LTI deferred shares²	% of salary²	1 March 2021	2,716	25	637,197	31 December 2023
Noel Quinn	LTI deferred shares²	% of salary²	1 March 2021	4,767	25	1,118,554	31 December 2023

1 The face value of the award has been computed using HSBC's closing share price of £4.262 taken on 26 February 2021. LTI awards are subject to a three-year forward-looking performance period and vest in five equal annual instalments, between the third and seventh anniversary of the award date, subject to performance achieved. On vesting, awards will be subject to a one-year retention period. Awards are subject to malus during the vesting period and clawback for a maximum period of 10 years from the date of the award.

2 In line with regulatory requirements, scheme interests awarded during 2021 were not eligible for dividend equivalents. In accordance with the remuneration policy approved by shareholders at the 2019 AGM, the LTI award was determined at 293% of salary for Noel Quinn and 286% of salary for Ewen Stevenson. The number of shares to be granted was determined by taking HSBC's closing share price of £4.262 taken on 26 February 2021, and applying a discount based on HSBC's expected dividend yield of 5% per annum for the vesting period (£3.324).

The above table does not include details of shares issued as part of the fixed pay allowance and shares issued as part of the 2020 annual incentive award that vested on grant and were not subject to any further service or performance conditions. Details of the performance measures and targets for the LTI award in respect of 2020 are set out below:

Performance conditions for LTI awards in respect of 2020 (performance period 1 January 2021 to 31 December 2023)

RoTE (with CET1 underpin)²		8.0%	9.0%	10.0%	25.0
Capital reallocation to Asia (with CET1 underpin)³		45.0%	47.0%	50.0%	25.0
Environment and sustainability⁴	Carbon reduction	42.0%	48.0%	51.0%	25.0
Environment and sustainability⁴	Sustainable finance and investment	$200.0bn	$240.0bn	$260.0bn	25.0
Relative TSR⁵		At median of the peer group	Straight-line vesting between minimum and maximum	At upper quartile of peer group	25.0

1 Awards will vest on a straight-line basis for performance between the minimum, target and maximum levels of performance set in this table.

2 To be assessed based on RoTE at the end of the performance period. The measure will also be subject to a CET1 underpin. If the CET1 ratio at the end of the performance period is below the CET1 risk tolerance level set in the risk appetite statement, then the assessment for this measure will be reduced to nil.

3 To be assessed based on share of Group tangible equity (on a constant currency basis and excluding associates) allocated to Asia by 31 December 2023. This metric will be measured on an organic basis and will exclude changes in Group tangible equity allocation resulting from acquisitions and disposals (and also part-acquisitions or part-disposals) of businesses and is subject to the CET1 underpin outlined above.

4 Carbon reduction will be measured based on percentage reduction in total energy and travel emissions achieved by 31 December 2023 using 2019 as the baseline. The sustainable finance and investment metric will assess cumulative financing provided over the period commencing on
1 January 2020 and ending on 31 December 2023.

5 The peer group for the 2020 award is: Bank of America, Barclays, BNP Paribas, Citigroup, Credit Suisse Group, DBS Group Holdings, Deutsche Bank, J.P. Morgan Chase & Co., Lloyds Banking Group, Morgan Stanley, Standard Chartered and UBS Group.

Executive Directors' interests in shares

(Audited)

The shareholdings of executive Directors in 2021, including the shareholdings of their connected persons, at 31 December 2021 (or the date they stepped down from the Board, if earlier) are set out below. The following table shows the comparison of shareholdings with the company shareholding guidelines. There have been no changes in the shareholdings of the executive Directors from 31 December 2021 to the date of this report.

Individuals have five years from their appointment date to build up the recommended levels of shareholding. In line with investor guidance, for executive Directors, unvested shares which are not subject to forward-looking performance conditions (on a net of tax basis) will count towards their shareholding requirement under the new policy proposed for shareholder approval at the 2022 AGM.

The Committee reviews compliance with the shareholding requirement and has full discretion in determining if any unvested shares should be taken into consideration for assessing compliance with this requirement, taking into account shareholder expectations and guidelines. The Committee also has full discretion in determining any penalties for non-compliance.

With regard to post-employment shareholding arrangements,

we believe that our remuneration structure achieves the objective of ensuring there is ongoing alignment of executive Directors' interests with shareholder experience post-cessation of their employment due to the following features of the policy:

• Shares delivered to executive Directors as part of the FPA have a five-year retention period, which continues to apply following a departure of an executive Director.

• Shares delivered as part of an annual incentive award are subject to a one-year retention period, which continues to apply following a departure of an executive Director.

• LTI awards have a seven-year vesting period with a one-year post-vesting retention period, which is not accelerated on departure. The weighted average holding period of an LTI award within HSBC is therefore six years, in excess of the five-year holding period typically implemented by FTSE-listed companies. When an executive Director ceases employment as a good leaver under our policy, any LTI awards granted will continue to be released over a period of up to eight years, subject to the outcome of performance conditions.

HSBC operates an anti-hedging policy under which individuals are not permitted to enter into any personal hedging strategies in relation to HSBC shares subject to a vesting and/or retention period.

Shares
(Audited)
	Shareholding guidelines (% of salary)	Shareholding at 31 Dec 2021² (% of salary)	At 31 Dec 2021
				Scheme interests
			Share interests (number of shares)	Share options³	Shares awarded subject to deferral¹
			Share interests (number of shares)	Share options³	without performance conditions⁴	with performance conditions⁵
Executive Directors
Noel Quinn⁶	400%	380%	1,131,278	-	481,634	1,118,554
Ewen Stevenson⁶	300%	483%	838,154	-	506,743	1,113,954

1 The gross number of shares is disclosed. A portion of these shares will be sold at vesting to cover any income tax and social security that falls due at the time of vesting.

2 The value of the shareholding is calculated using an average of the daily closing share prices in the three months to 31 December 2021 (£4.339).

3 At 31 December 2021, Noel Quinn and Ewen Stevenson did not hold any options under the HSBC Holdings Savings-Related Share Option Plan (UK).

4 The amount for Ewen Stevenson reflects the award granted in May 2019, replacing the 2015 to 2018 LTIs forfeited by the Royal Bank of Scotland Group plc, now renamed as NatWest Group plc ('NatWest'), and is subject to any performance adjustments assessed and disclosed in the relevant NatWest Annual Report and Accounts.

5 LTI awards granted in February 2020 and 2021 are subject to the performance conditions as set out on page 273.

6 All Group Executives and executive Directors are expected to meet their shareholding guidelines within five years of the date of their appointment (Noel Quinn and Ewen Stevenson were appointed on 5 August 2019 and 1 January 2019 respectively). For Group Executives, their shareholding requirement is 250% of salary and unvested shares that are not subject to forward-looking performance conditions (on a net of tax basis) are counted towards their shareholding requirement.

Total pension entitlements

(Audited)

No employees who served as executive Directors during the year have a right to amounts under any HSBC final salary pension scheme for their services as executive Directors or are entitled to additional benefits in the event of early retirement. There is no

retirement age set for Directors, but the normal retirement age for colleagues is 65.

Payments to past Directors

(Audited)

Details of the 2018 LTI outcome, in which John Flint (former Group Chief Executive) and Marc Moses (former Group Chief Risk Officer) participated, are outlined on page 272. No payments were made to, or in respect of, former Directors in the year in excess of the minimum threshold of £50,000 set for this purpose.

Payments for loss of office

(Audited)

No payments for loss of office were made to, or in respect of, former or current Directors in the year.

External appointments

During 2021, executive Directors did not receive any fees from external appointments.

Implementation of remuneration policy in 2022 for executive Directors

The base salary of our executive Directors will increase by 3.5% with effect from 1 March 2022. The Committee determined the increase was necessary to ensure that the total remuneration opportunity of our executive Directors does not fall further behind desired levels based on the size, complexity and international peer group of the Group. This was discussed with shareholders during our engagement with them on the new Directors' remuneration policy.

The increase is in line with the average salary increase of our wider workforce. There is no other change to the remuneration elements of our executive Directors.

The following table summarises how the maximum opportunity for each element of our remuneration policy for executive Directors will be implemented in 2022.

Implementation of remuneration policy in 2022
	Summary of operation	Noel Quinn	Ewen Stevenson
Base salary	3.5% increase with effect from 1 March 2022 (in line with the increase for the wider workforce)	£1,336,000	£779,000
Fixed pay allowance	No change	£1,700,000	£1,085,000
Cash in lieu of pension	No change	10% of base salary
Benefits	No change	Same benefit provisions will be made available
Annual incentive	No change in maximum opportunity	Maximum opportunity will be 215% of base salary
Long-term incentive	No change in maximum opportunity	Maximum opportunity will be 320% of base salary

2022 annual incentive scorecards

The 2022 annual incentive scorecard measures for our executive Directors have been set to deliver growth and business transformation. The targets for the measures have been set, reflecting on the Group's plan for 2022 and the macroeconomic uncertainty, including the interest rate environment and inflation.

The Committee will continue to retain discretion to adjust the formulaic outcomes of scorecards, taking into account factors such as Group profits, wider business performance and stakeholder experience, to ensure executive reward is aligned with underlying Group performance and the broader stakeholder experience.

The weightings and performance measures for the 2022 annual incentive award for executive Directors are disclosed below. The performance targets are commercially sensitive and it would be detrimental to the Group's interests to disclose them at the start of the financial year. Subject to commercial sensitivity, we will disclose the targets for a given year in the Annual Report and Accounts for that year in the Directors' remuneration report.

Executive Directors will be eligible for an annual incentive award of up to 215% of base salary.

The 2022 annual incentive scorecards for members of our Group Executive Committee include similar measures as for the executive Directors to drive performance in each of our businesses, functions and regions that contribute to the overall success of the Group. The Group Executives' LTI awards in respect of 2021 will also be subject to the same three-year forward-looking scorecard measures and targets as set out on page 271.

2022 annual incentive scorecard measures and weightings
	Noel Quinn	Ewen Stevenson
Measures	Weighting %	Weighting %
Group adjusted profit before tax	20.0	15.0
Growth in Group lending and net new invested assets	15.0	10.0
RoTE	15.0	15.0
Group adjusted costs	10.0	10.0
Customer satisfaction in the UK, Hong Kong and key growth markets	15.0	15.0
Employee experience through maintaining and improving engagement, increasing diversity and improving inclusion	15.0	15.0
Personal objectives Group Chief Executive • Technology transformation, growth initiatives, restructuring of the Group and driving innovation programmes. Group Chief Financial Officer • Finance of the future, creating strong corporate development and Group transformation functions, Global Finance function employee experience and Global Finance function efficiency.	10.0	20.0
Total	100.0	100.0

The Group adjusted profit before tax, Group lending and net new invested assets growth, RoTE and Group adjusted costs measures will be subject to a CET1 underpin. If the CET1 ratio on 31 December 2022 is below the CET1 risk tolerance level set in the risk appetite statement, then the assessment for these measures will be reduced to nil. The 2022 annual incentive scorecard is subject to a risk and compliance modifier, which allows the

Committee the discretion to adjust down the overall scorecard outcome to ensure that the Group operates soundly when achieving its financial targets. For this purpose, the Committee will receive information including any risk thresholds outside of tolerance for a significant period of time and any risk management failures that have resulted in significant customer detriment, reputational damage and/or regulatory censure.

Non-executive Directors

(Audited)

The following table shows the total fees and benefits of non-executive Directors for 2021, together with comparative figures for 2020.

Fees and benefits
(Audited)	Fees¹		Benefits²		Total
(£000)	2021	2020	2021	2020	2021	2020
Henri de Castries³	82	202	22	1	104	203
Laura Cha^{3, 4}	242	587	18	-	260	587
Rachel Duan⁵	67	-	-	-	67	-
Dame Carolyn Fairbairn⁶	80	-	-	-	80	-
James Forese⁷	572	160	-	-	572	160
Steven Guggenheimer⁸	250	134	-	-	250	134
Irene Lee⁹	556	546	-	-	556	546
José Antonio Meade Kuribreña¹⁰	223	202	-	4	223	206
Heidi Miller^{3, 11}	251	632	19	7	270	639
Eileen Murray¹²	266	120	-	-	266	120
David Nish¹³	482	480	10	8	492	488
Jackson Tai	350	355	-	12	350	367
Mark Tucker¹⁴	1,500	1,500	33	52	1,533	1,552
Pauline van der Meer Mohr¹⁵	291	312	-	2	291	314
Total (£000)	5,212	5,230	102	79	5,314	5,309
Total ($000)	7,169	6,958	140	105	7,309	7,063

1 Fees are in line with the Directors' remuneration policy that was approved at the 2019 AGM. Fees include a travel allowance of £4,000 for non-UK based non-executive Directors and for all non-executive Directors effective from 1 June 2019. Given the travel restrictions in place, the Board was unable to travel to attend meetings in person. Therefore, no travel allowance was paid to non-executive Directors during 2021.

2 Benefits include taxable expenses such as accommodation, travel and subsistence relating to attendance at Board and other meetings at HSBC Holdings' registered offices. Amounts disclosed have been grossed up using a tax rate of 45%, where relevant.

3 Retired from the Board on 28 May 2021.

4 Includes fees of £177,000 (2020: £423,800) for her role as non-executive Chair and member of the Nomination Committee of The Hongkong and Shanghai Banking Corporation Limited.

5 Appointed to the Board and as a member of the Group Remuneration Committee and Nomination & Corporate Governance Committee on 1 September 2021.

6 Appointed to the Board and as a member of the Group Risk Committee, Group Remuneration Committee and Nomination & Corporate Governance Committee on 1 September 2021.

7 Includes fees of £332,000 (2020: £nil) in relation to his role as a non-executive Director of HSBC North America Holdings, Inc. He was appointed as non-executive Chair on 28 May 2021.

8 Appointed as Co-Chair of the Technology Governance Working Group on 1 March 2021.

9 Includes fees of £380,000 (2020: £546,000) in relation to her roles as a Director, Remuneration Committee Chair, Audit Committee member and Risk Committee member of The Hongkong and Shanghai Banking Corporation Limited and in relation to her role as non-executive Chair of Hang Seng Bank Limited.

10 Appointed to the Group Remuneration Committee on 28 May 2021.

11 Includes fees of £169,000 (2020: £431,000) in relation to her role as non-executive Chair of HSBC North America Holdings, Inc.

12 Appointed as Co-Chair of the Technology Governance Working Group on 1 March 2021. Stepped down as a member of the Group Audit Committee on 28 May 2021.

13 Stepped down as a member of Group Remuneration Committee on 23 February 2021.

14 As previously announced in 2020, a part of the fee for 2021 was donated to charity. The fee shown in the single figure of remuneration is the gross fee before charitable donations.

15 Stepped down as a member of the Group Risk Committee on 28 May 2021.

Non-executive Directors' interests in shares

(Audited)

The shareholdings of persons who were non-executive Directors in 2021, including the shareholdings of their connected persons, at
31 December 2021, or date of cessation as a Director if earlier, are

set out below.

Non-executive Directors are expected to meet the shareholding guidelines within five years of the date of their appointment. All non-executive Directors who had been appointed for five years or more at 31 December 2021 met the guidelines.

Shares
	Shareholding guidelines (number of shares)	Share interests (number of shares)
Laura Cha (retired on 28 May 2021)	15,000	16,200
Henri de Castries (retired on 28 May 2021)	15,000	19,251
Rachel Duan (appointed to the Board on 1 Sep 2021)	15,000	-
Dame Carolyn Fairbairn (appointed to the Board on 1 Sep 2021)	15,000	-
James Forese	15,000	115,000
Steven Guggenheimer	15,000	15,000
Irene Lee	15,000	15,000
José Antonio Meade Kuribreña	15,000	15,000
Heidi Miller (retired on 28 May 2021)	15,000	15,700
Eileen Murray	15,000	75,000
David Nish	15,000	50,000
Jackson Tai	15,000	66,515
Mark Tucker	15,000	307,352
Pauline van der Meer Mohr	15,000	15,000

2022 fees for non-executive Directors

The table below sets out the 2022 fees for non-executive Directors.

		2022 fees
Position		£
Non-executive Group Chairman¹		1,500,000
Non-executive Director (base fee)		127,000
Senior Independent Director		200,000
Group Risk Committee	Chair	150,000
	Member	40,000
Group Audit Committee and Group Remuneration Committee	Chair	75,000
	Member	40,000
Nomination & Corporate Governance Committee	Chair	--
	Member	33,000
Technology Governance Working Group	Co-Chair	60,000

1 The Group Chairman does not receive a base fee or any other fee in respect of chairing of the Nomination & Corporate Governance Committee.

Summary of shareholder return and Group Chief Executive remuneration

The following graph shows HSBC TSR performance (based on the daily spot Return Index in sterling) against the FTSE 100 Total Return Index for the 10-year period ended 31 December 2021.

The FTSE 100 Total Return Index has been chosen as a recognised broad equity market index of which HSBC Holdings is a member. The single figure remuneration for the Group Chief Executive over the past 10 years, together with the outcomes of the respective annual incentive and LTI awards, are presented in the following table.

HSBC TSR and FTSE 100 Total Return Index

	2012	2013	2014	2015	2016	2017	2018		2019		2020	2021
Group Chief Executive	Stuart Gulliver	Stuart Gulliver	Stuart Gulliver	Stuart Gulliver	Stuart Gulliver	Stuart Gulliver	Stuart Gulliver	John Flint	John Flint	Noel Quinn	Noel Quinn	Noel Quinn
Total single figure £000	7,532	8,033	7,619	7,340	5,675	6,086	2,387	4,582	2,922	1,977	4,154	4,895
Annual incentive¹ (% of maximum)	52%	49%	54%	45%	64%	80%	76%	76%	61%	66%	32%	57%
Long-term incentive^1,2,3 (% of maximum)	40%	49%	44%	41%	-%	-%	100%	-%	-%	-%	-%	- %

1 The 2012 annual incentive figure for Stuart Gulliver used for this table includes 60% of the annual incentive disclosed in the 2012 Directors' remuneration report, which was deferred for five years and subject to service conditions and satisfactory completion of the five-year deferred prosecution agreement with the US Department of Justice, entered into in December 2012 ('AML DPA') as determined by the Committee. The AML DPA performance condition was met and the award vested in 2018. The value of the award at vesting was included in the 2018 single figure of remuneration and included as long-term incentive for 2018.

2 Long-term incentive awards are included in the single figure for the year in which the performance period is deemed to be substantially completed. For Group Performance Share Plan ('GPSP') awards, this is the end of the financial year preceding the date of grant. GPSP awards shown in 2012 to 2015 are therefore related to awards granted in 2013 to 2016.

3 The GPSP was replaced by the LTI in 2016 and the value for GPSP is nil for 2016 as no GPSP award was made for 2016. LTI awards have a three-year performance period and the first LTI award was made in February 2017. The value of the LTI awards expected to vest will be included in the total single figure of remuneration of the year in which the performance period ends. Noel Quinn did not receive the 2018 LTI award that had a performance period ended on 31 December 2021.

Relative importance of spend on pay

The following chart shows the change in:

• total staff pay between 2020 and 2021; and

• dividends and share buy-backs in respect of 2020 and 2021.

In 2021, total spend on pay was up from 2020, and the distribution to shareholders also increased from 2020 with the reinstatement of dividends (following the suspension of dividend payments during 2020) and the capital return to shareholders through the up to $2bn share buy-back announced in October 2021. In addition, the Group has announced the intention to initiate a further up to $1bn buy-back, to commence after the existing buy-back has concluded. Dividends include an approximation of the amount payable on 28 April 2022 in relation to the second interim dividend of $0.18 per ordinary share.

Relative importance of spend on pay


Total return to shareholder	2021 -		$2,000m	$7,070m		ì
						131.1%
	2020 -
						ì
Employee pay	2021 -

	2020 -					3.7%


		Employee pay	Dividends		Share buy-back

Our approach to workforce remuneration

Remuneration principles

Our performance and pay strategy aims to competitively reward long-term sustainable performance. Our goal is to attract, motivate and retain the very best people, regardless of gender, ethnicity,

age, disability or any other factor unrelated to performance or experience. This supports the long-term interests of our stakeholders, including our customers and the communities we serve, our shareholders and our regulators.

Our approach to performance and pay in 2021 for the broader workforce was underpinned by our remuneration principles.

Fair, appropriate and free from bias

• We help managers to make informed, consistent and fair pay decisions. Variable pay for 92% of our employees is either set centrally or based on a starting point recommendation from HR.

• Communications and reporting encourage our managers to: challenge their assessments; question whether they were objective; and use facts to make decisions.

• Managers in similar roles complete 'fairness reviews' where they discuss the performance and values-aligned behaviour ratings of their teams. They help each other to make objective decisions by providing a diverse range of examples, facts and viewpoints, and challenge each other to mitigate the risk of unconscious bias.

• During the annual review process, HR and management perform checks to ensure outcomes are in line with our principles and are equitable. We use data to identify employees whose pay is lower than their comparable peer group. If there is no objective reason for these variances, such as performance or skills and experience, we make adjustments.

A culture of continuous feedback through manager and employee empowerment

• We seek to create a culture where our people can fulfil their potential, gain new skills and develop their careers for the future.

• In 2021, we further improved our culture of continuous feedback, with 66% of our colleagues saying that conversations with their managers across the year had a positive impact on their performance and 62% reporting positive effects on their well-being.

• Our continuous feedback tool, including a mobile app, makes it easier for our colleagues to share feedback with each other in the moment, providing a structure so that they can share what went well and what they could do better in specific situations.

• We encourage colleagues to use our online career planning tools to help them with their thinking about future roles and the capabilities they require and to drive conversations.

Reward and recognition of sustainable performance and values-aligned behaviour

• Individual performance is assessed against clear and relevant financial and non-financial objectives. These set out expectations for each colleague in terms of performance and development.

• We recognise our colleagues not just for results, but also for demonstrating our values. As such, subject to local law, our colleagues receive a behaviour rating as well as a performance rating.

• Group and business performance is used to determine the Group variable pay pool and that of each business. Where performance in a year is weak, as measured by both financial and non-financial metrics, this will impact the relevant pool. The final pool also considers the external operating environment and the expectations of our stakeholders.

• We undertake analytical reviews to ensure there is clear pay differentiation across both performance and behaviour ratings. This is provided to senior management and the Committee as part of their oversight of the remuneration outcomes for the Group.

• We recognise examples of exceptional positive conduct through an increase in variable pay, and apply a reduction in variable pay for misconduct or inappropriate behaviour that exposes us to financial, regulatory or reputational risk.

• We promote employee share ownership through variable pay deferrals and voluntary enrolment in an all-employee share plan.

Balanced, simple and transparent total reward packages, which support employee well-being

• Paying our colleagues fairly and appropriately is critical to delivering on our strategic commitments. We work extensively with our external market benchmarking consultants to get the latest insights on market pay levels and areas of potential risk. That guides us as we make pay decisions, allowing us to focus on managing people risks and areas critical to our strategy.

• We maintain an appropriate balance between fixed pay, variable pay and employee benefits, taking into consideration an employee's seniority, role, individual performance and the market. Decisions are informed, but not driven, by market position and practice.

• We are committed to employee well-being and offer employee benefits that support the mental, physical and financial health of a diverse workforce.

• We review pay based on gender to uphold our commitment to inclusion and pay equity.

• All HSBC employees that work in a jurisdiction with a legal minimum wage are paid at or above this amount. In 2014, HSBC in the UK was formally accredited by the Living Wage Foundation for having adopted the 'Living Wage' and the 'London Living Wage'. In nine of our jurisdictions where a 'living wage' has been defined, our employees are paid at or above that level. We also undertake regular reviews of equal pay for gender.

• As part of our commitment to the World Economic Forum ('WEF') metrics on measuring stakeholder capitalism, we review entry level wages in key markets to compare both men and women against the local minimum wage. This provided an indication of fairness at point of career entry. We have included data from the UK, US and Mexico where we have sufficient entry-level colleagues and good quality gender disclosures to allow for meaningful analysis (see table below). In line with expectations, the data shows broad consistency between male and female outcomes.

Average standard entry level vs. minimum wage by gender as at 31 December 2021

UK	115%	114%	114%
US	153%	162%	158%
Mexico	259%	250%	254%

To calculate the above, we have used an average of annualised fixed pay to allow for a like-for-like comparison to include colleagues who work part-time. For colleagues based in the UK, we have compared the entry level wage against the UK national minimum wage. For the US, our comparison is against the respective state minimum wage, which is slightly higher than the federal minimum wage. In Mexico, we have used the minimum wage, which is regulated by the National Minimum Wage Commission.

Supporting colleagues in 2021

The well-being of our people remained a critical focus, in particular as the operating environment continued to be challenging for many colleagues and their families. The pandemic was a key influence on our activities during the year and our country-based approach allowed us to respond quickly and flexibly to specific situations in each of our markets. In India, we took urgent steps during the second wave of the pandemic to help our colleagues and their dependants with access to support via a Covid-19 taskforce consisting of employee volunteers working in collaboration with partners. Our offices in India were set up to manage vaccination drives for employees and their families and we provided financial support to local non-profit organisations delivering the relief effort on the ground.

Our global well-being programme covered three pillars: mental, physical and financial well-being. Despite the immense challenges, sentiment remained high. A total of 82% of colleagues rated their mental well-being as positive, 75% rated their physical well-being positively and 64% of colleagues reported their financial well-being as positive in our December survey.

Our survey suggests that work-life balance has improved, with 76% of colleagues saying they can integrate their work and personal life positively, compared with 74% in 2020.

The pandemic offered us the opportunity to take the best of what we learnt and rethink the future of work. To support our approach, we created three guiding principles:

• Customer focus: We aim to make sure the way we work helps deliver the best commercial outcomes for our customers.

• Team commitment: We will connect with each other, build our community and collaborate.

• Flexibility: We will provide our colleagues with more choice on how, when and where we work, suitable to the roles we do.

Considering the challenges colleagues faced, it was encouraging to see that check-ins happened regularly, with 60% of colleagues having frequent conversations with their managers, an increase

from 56% in 2020. Our colleagues tell us that these have a positive impact on their performance, development and well-being, and are important in motivating them to perform at their best.

We also measure our colleagues' sentiment on performance and pay matters through our annual pay review surveys. In the most recent survey, a significant proportion of the respondents' comments indicated they believed they were paid fairly for what they do. It also highlighted challenges on market positions and potential retention issues in certain areas. Noting this sentiment of our colleagues, the extraordinarily competitive market for talent and material improvement in the Group's financial performance, we agreed a Group variable pay pool of $3,495m. This was determined using our countercyclical funding methodology under which a ceiling is used to limit the increase in variable pay pool at higher levels of performance. Therefore, while adjusted profit before tax rose 79%, the year-on-year increase in Group variable pay pool was 31%, following a reduction of 20% in 2020. In addition, fixed pay increases were targeted towards junior colleagues to help address the impact of rising inflation in many of our locations.

Throughout the year we also recognise our colleagues for demonstrating our values. The 'At Our Best' recognition online platform allows for real-time recognition and communication of positive behaviours by colleagues, in line with our refreshed purpose and values. We ran a special 'Spotlight on valuing difference' campaign to recognise the exceptional actions of our colleagues in being empathetic, championing inclusivity, listening and seeking out different perspectives. An additional points budget was allocated and there were over 130,000 recognitions during the campaign.

Remuneration structure for Group employees

Total compensation, which comprises fixed and variable pay, is the key focus of our remuneration framework, with variable pay differentiated by performance and demonstration of values-aligned behaviours. We set out below the key features and design characteristics of our remuneration framework, which apply on a Group-wide basis, subject to compliance with local laws:

Overview of remuneration structure for employees

Fixed pay

Attract and retain employees with market competitive pay for the role, skills and experience required.

• May include salary, fixed pay allowance, cash in lieu of pension and other cash allowances in accordance with local market practice.

• Based on predetermined criteria, non-discretionary, transparent and not reduced based on performance.

• Represents a higher proportion of total compensation for more junior employees.

• May change to reflect an individual's position, role or grade, cost of living in the country, individual skills, capabilities and experience.

• Fixed pay is generally delivered in cash on a monthly basis.

• Consistent with approach for Group colleagues except fixed pay allowance paid in shares.

Benefits

Support the physical, mental and financial health of a diverse workforce in accordance with local market practice.

• Benefits may include, but are not limited to, the provision of a pension, medical insurance, life insurance, health assessment and relocation support.

• Provision of medical insurance, life insurance, car and tax return assistance. Group Chief Executive is eligible to receive accommodation and a car benefit in Hong Kong.

Annual incentive

Incentivise and reward performance based on annual financial and non-financial measures consistent with the medium- to long-term strategy, stakeholder interests and values-aligned behaviours.

• All employees are eligible to be considered for a discretionary variable pay award. Individual awards are determined against objectives for performance set at the start of the year.

• Represents a higher proportion of total compensation for more senior employees and will be more closely aligned to Group and business performance as seniority increases.

• Variable pay for Group employees identified as Material Risk Takers ('MRTs') under European Union Regulatory Technical Standard ('RTS') 2021/923 is limited to 200% of fixed pay, as approved by shareholders at the 2014 AGM held on 23 May 2014 (98% in favour).

• Awards are generally paid in cash and shares. For MRTs, at least 50% of the awards are in shares and/or where required by regulations, in units linked to asset management funds.

• Annual incentive is determined based on the outcomes of annual scorecard of financial and non-financial measures.

• Executive Directors and Group Executives are also eligible to be considered for a long-term incentive award, which is subject to three-year forward-looking performance measures. See details on page 257.

Deferral

Align employee interests with the medium- to long-term strategy, stakeholder interests and values-aligned behaviours.

• A Group-wide deferral approach is applicable to all employees. A portion of annual incentive awards above a specified threshold is deferred in shares vesting annually over a three-year period with 33% vesting on the first and second anniversaries of grant and 34% on the third anniversary.

• For MRTs awards are generally subject to a minimum 40% deferral (60% for awards of £500,000 or more) over a minimum period of four years.

• A deferral period of five years is applied for senior management and individuals identified in specified roles with managerial responsibilities as prescribed under the PRA and FCA remuneration rules.

• A deferral period of seven years is applied for individuals in PRA-designated senior management functions.

• In accordance with the terms of the PRA and FCA remuneration rules, and subject to compliance with local regulations, the deferral requirement for MRTs is not applied to individuals where their total variable pay is £44,000 or less and variable pay is not more than one-third of total compensation. For these individuals, the Group standard deferral applies.

• Individuals based outside the UK and identified as MRTs under local regulations, would be subject to local requirements where necessary.

• All deferred awards are subject to malus provisions, subject to compliance with local laws. Awards granted to MRTs on or after 1 January 2015 are subject to clawback.

• HSBC operates an anti-hedging policy for all employees, which prohibits employees from entering into any personal hedging strategies in respect of HSBC securities.

• For Group and local MRTs, excluding executive Directors where deferral is typically in the form of shares only, a minimum of 50% of the deferred awards is in HSBC shares and the balance is deferred into cash. Local regulatory requirements would also apply where necessary.

• For some employees in our asset management business, where required by the regulations applicable to asset management entities within the Group, at least 50% of the deferred award is linked to fund units reflective of funds managed by those entities, with the remaining portion of deferred awards being in the form of deferred cash awards.

• Variable pay awards made in HSBC shares or linked to relevant fund units granted to MRTs are generally subject to a one-year retention period post-vesting.

• MRTs who are subject to a five-year deferral period, except senior management or individuals in PRA- and FCA-designated senior management functions, have a six-month retention period applied to their awards.

• Where an employee is subject to more than one regulation, the requirement specific to the sector and/or country in which the individual is working is applied.

• All of the LTI award, or at least 60% of the total variable award (including LTI), is deferred. The deferred awards will vest in five equal annual instalments, with the first vesting on or around the third anniversary of the grant date and the last instalment vesting on or around the seventh anniversary of the grant date.

• All deferred awards are in HSBC shares and subject to a post-vesting retention period of one year.

Buy-out awards

Support recruitment of key individuals.

• Buy-out awards may be offered if an individual holds any outstanding unvested awards that are forfeited on resignation from the previous employer.

• The terms of the buy-out awards will not be more generous than the terms attached to the awards forfeited on cessation of employment with the previous employer.

• For new hires, the approach is consistent with the approach taken for employees and policy approved by shareholders.

Guaranteed variable remuneration

Support recruitment of key individuals.

• Guaranteed variable remuneration is awarded in exceptional circumstances for new hires, and is limited to the individual's first year of employment only.

• The exceptional circumstances would typically involve a critical new hire and would also depend on factors such as the seniority of the individual, whether the new hire candidate has any competing offers and the timing of the hire during the performance year.

• For new hires, the approach is consistent with the approach taken for employees and policy approved by shareholders.

Severance payments

Adhere to contractual agreements with involuntary leavers.

• Where an individual's employment is terminated involuntarily for gross misconduct then, subject to compliance with local laws, the Group's policy is not to make any severance payment in such cases and all outstanding unvested awards are forfeited.

• For other cases of involuntary termination of employment, the determination of any severance will take into consideration the performance of the individual, contractual notice period, applicable local laws and circumstances of the case.

• Generally, all outstanding unvested awards will normally continue to vest in line with the applicable vesting dates. Where relevant, any performance conditions attached to the awards, and malus and clawback provisions, will remain applicable to those awards.

• Severance amounts awarded to MRTs are not considered as variable pay for the purpose of application of the deferral and variable pay cap rules under the PRA and FCA remuneration rules where such amounts include: (i) payments of fixed remuneration that would have been payable during the notice and/or consultation period; (ii) statutory severance payments; (iii) payments determined in accordance with any approach applicable in the relevant jurisdictions; and (iv) payments made to settle a potential or actual dispute.

• Any payments will be in line with the policy on loss of office as noted on page 274.

Link between risk, performance and reward

Our remuneration practices promote sound and effective risk management while supporting our business objectives and the delivery of our strategy.

We set out below the key features of our framework, which help enable us to achieve alignment between risk, performance and reward, subject to compliance with local laws and regulations:

Alignment between risk and reward

Variable pay pool	The Group variable pay pool is expected to move in line with Group performance, based on a range of financial, non-financial and contextual factors. We also use a countercyclical funding methodology, with both a floor and a ceiling, with the payout ratio generally reducing as performance increases to avoid pro-cyclicality. The floor recognises that even in challenging times, remaining competitive is important. The ceiling recognises that at higher levels of performance it is not always necessary to continue to increase the variable pay pool, thereby limiting the risk of inappropriate behaviour to drive financial performance. The main quantitative and qualitative performance and risk metrics used for assessment of performance include: • Group and business unit financial performance, including capital requirements; • current and future risks, taking into consideration performance against the risk appetite, financial and resourcing plan and global conduct outcomes; and • fines, penalties and provisions for customer redress, which are automatically included in the Committee's definition of profit for determining the pool. In the event that the Group was unable to distribute dividends to shareholders for reasons such as capital adequacy, then the Group may determine that as a year of weak performance. In such a year, the Group may withhold some, or all, variable pay for employees including unvested share awards, using the metrics outlined above as a basis for that determination.
Individual performance scorecard	• Assessment of individual performance is made with reference to clear and relevant financial and non-financial objectives. Objectives for senior management take into account appropriate measures linked to sustainability risks, such as: reduction in carbon footprint; facilitating financing to help clients with their transition to net zero; employee diversity targets; and risk and compliance measures. A mandatory global risk objective is included in the scorecard of all other employees. All employees receive a behaviour rating as well as a performance rating, which ensures performance is assessed not only on what is achieved but also on how it is achieved.
Control function staff	• The performance and reward of individuals in control functions, including risk and compliance employees, are assessed according to a balanced scorecard of objectives specific to the functional role they undertake. • Their remuneration is determined independent of the performance of the business areas they oversee. • The Committee is responsible for approving the remuneration for the Group Chief Risk and Compliance Officer and Group Head of Internal Audit. • Group policy is for control functions staff to report into their respective function. Remuneration decisions for senior functional roles are made by the global function head. • Remuneration is carefully benchmarked with the market and internally to ensure it is set at an appropriate level.
Variable pay adjustments and conduct recognition	• Variable pay awards may be adjusted downwards in circumstances including: - detrimental conduct, including conduct that brings HSBC into disrepute; - involvement in events resulting in significant operational losses, or events that have caused or have the potential to cause significant harm to HSBC; and - non-compliance with the values-aligned behaviours and other mandatory requirements or policies. • Rewarding positive conduct may take the form of use of our global recognition programme, At Our Best, or positive adjustments to variable pay awards.
Malus	Malus can be applied to unvested deferred awards granted in prior years in circumstances including: • detrimental conduct, including conduct that brings the business into disrepute; • past performance being materially worse than originally reported; • restatement, correction or amendment of any financial statements; and • improper or inadequate risk management.
Clawback	Clawback can be applied to vested or paid awards granted to MRTs on or after 1 January 2015 for a period of seven years, extended to 10 years for employees in PRA and FCA designated senior management functions in the event of ongoing internal/regulatory investigation at the end of the seven-year period. Clawback may be applied in circumstances including: • participation in, or responsibility for, conduct that results in significant losses; • failing to meet appropriate standards and propriety; • reasonable evidence of misconduct or material error that would justify, or would have justified, summary termination of a contract of employment; and • a material failure of risk management suffered by HSBC or a business unit in the context of Group risk-management standards, policies and procedures.
Sales incentives	• We generally do not operate commission-based sales plans.
Identification of MRTs	• We identify individuals as MRTs based on the qualitative and quantitative criteria set out in the RTS and using the following key principles that underpin HSBC's identification process: - MRTs are identified at Group, HSBC Bank (consolidated) and HSBC UK Bank level. - MRTs are also identified at other solo regulated entity level as required by the regulations. - When identifying an MRT, HSBC considers an employee's role within its matrix management structure. The global business and function that an individual works within takes precedence, followed by the geographical location in which they work. • We also identify additional MRTs based on our own internal criteria, which include compensation thresholds and individuals in certain roles and grades who otherwise would not be identified as MRTs under the criteria prescribed in the RTS.

Comparison of Directors' and employees' pay

The following table compares the changes in each Director's salary, taxable benefits and annual incentive between 2020 and 2021 with the percentage change in each of those elements of pay for UK-based employees of HSBC Group Management Services Limited, the employing entity of the executive Directors.

There were no changes to the fees or benefits of the non-executive Directors between 2021 and 2020. The year-on-year percentage change in fees noted in the table below is primarily driven by any

pro-rated fees received by the non-executive Director for 2021 and/or 2020 based on time served by them on the Board and the relevant Board committees and any additional responsibilities taken on by the non-executive Director during each year. The value of benefits received by the non-executive Directors reflect the taxable expense reimbursements claimed, and the associated gross-up tax, in relation to attending the Board meetings in each year. Non-executive Directors who joined after 1 January 2021 are not included.

Annual percentage change in remuneration


Executive Directors
Noel Quinn¹	151.7%	353.7%	20.2%	1.7%	-48.9%	99.0%
Ewen Stevenson	2.6%	-25.0%	-58.4%	1.8%	-75.0%	117.3%
Non-executive Directors³
Kathleen Casey (retired on 24 April 2020)	-65.0%	200.0%	-	-	-	-
Laura Cha⁴	97.0%	-	-	-58.8%	-	-
Henri de Castries^4,5	4.1%	-75.0%	-	-59.4%	2,100.0%	-
James Forese⁶	-	-	-	257.5%	-	-
Steven Guggenheimer⁷	-	-	-	86.6%	-	-
Irene Lee	20.3%	-100.0%	-	1.8%	-	-
José Antonio Meade Kuribreña⁸	28.7%	100.0%	-	10.4%	-100.0%	-
Heidi Miller^4,5	1.1%	-100.0%	-	-60.3%	171.4%	-
Eileen Murray⁷	-	-	-	121.7%	-	-
David Nish	108.7%	-50.0%	-	0.4%	25.0%	-
Sir Jonathan Symonds (retired on 18 February 2020)	-86.5%	-4.8%	-	-	-	-
Jackson Tai⁸	-10.8%	-78.9%	-	-1.4%	-100.0%	-
Mark Tucker	-	-77.5%	-	-	-36.5%	-
Pauline van der Meer Mohr⁸	17.7%	-75.0%	-	-6.7%	-100.0%	-
Employee group⁹	2.0%	2.3%	-20.0%	1.0%	1.3%	25.2%

1 Noel Quinn succeeded John Flint as interim Group Chief Executive with effect from 5 August 2019 and was appointed permanently into the role on 17 March 2020. The annual percentage change in 2020 for Noel Quinn is based on remuneration reported in his 2019 single figure of remuneration (for the period 5 August 2019 to 31 December 2019) and his 2020 single figure of remuneration (for the period 1 January 2020 to 31 December 2020). Based on his annualised 2019 compensation as an executive Director, his percentage change in salary, benefits and annual incentive was 2.1%, 85.2% and -50.9%, respectively for 2020.

2 Noel Quinn and Ewen Stevenson both voluntarily waived the cash portion of their 2020 annual incentive. The year-on-year percentage change between 2020 and 2021 would be -1% for Noel Quinn and 9% for Ewen Stevenson without this cash waiver.

3 In some instances, non-executive Directors may have served only part of the year resulting in large year-on-year percentage changes in fees and/or benefits. Page 275 provides the underlying single figure of remuneration for non-executive Directors used to calculate the figures above.

4 Retired from the Board during 2021 and therefore fees received during 2021 were lower than the fees received in 2020.

5 There was no change to the benefit provided. The year-on-year change reflected the increase in taxable expense reimbursement claimed in 2021 for attending Board and other meetings at HSBC Holdings' registered offices.

6 In 2021, James Forese was appointed as non-executive Chair of HSBC North America Holdings, Inc. Fees for 2021 included fees in relation to this role.

7 Joined the Board during 2020 and therefore received fees for only part of 2020.

8 Received no taxable benefits in 2021, resulting in a 100% reduction from 2021.

9 Employee group consists of individuals employed by HSBC Group Management Services Ltd, the employing entity of the executive Directors, as no individuals are employed directly by HSBC Holdings.

Pay ratio

The following table shows the ratio between the total pay of the Group Chief Executive and the lower quartile, median and upper quartile pay of our UK employees.

Total pay ratio

2021	A	154:1	90:1	46:1
2020	A	139:1	85:1	43:1
2019	A	169:1	105:1	52:1

Total pay and benefits amounts used to calculate the ratio


2021	A	31,727	27,666	54,678	41,500	106,951	84,000
2020	A	29,833	23,264	48,703	36,972	96,386	75,000
2019	A	28,920	24,235	46,593	41,905	93,365	72,840

The increase in median ratio is primarily driven by a higher annual incentive payout than 2020 when the Group Chief Executive voluntarily decided to waive the cash portion of his annual incentive award and we protected the outcomes for junior colleagues against material year-on-year volatility when the Group variable pay pool was down 20%. The 2021 annual incentive award of the Group Chief Executive was higher than in 2020, reflecting the improvement in the financial performance of the Group and execution of our strategy at pace.

The total pay and benefits for the median employee for 2021 was £54,678, a 12.3% increase compared with 2020.

Our UK workforce comprises a diverse mix of employees across different businesses and levels of seniority, from junior cashiers in our retail branches to senior executives managing our global business units. We aim to deliver market-competitive pay for each role, taking into consideration the skills and experience required for the business. Our approach to pay 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 actively promote learning and development opportunities for our employees to provide a framework for them to develop their career. To help people to develop skills for the changing world around us, we launched Future Skills in September 2021, supporting colleagues to explore new personal, digital, data and sustainability skills through a series of learning activities and events. As an individual progresses in their career we would expect their total compensation opportunity to also increase, reflecting their role and responsibilities.

Pay structure varies across roles in order to deliver an appropriate mix of fixed and variable pay. Junior employees have a greater portion of their pay delivered in a fixed component, which does not vary with performance and allows them to predictably meet their day-to-day needs. Our senior management, including executive Directors, generally have a higher portion of their total compensation opportunity structured as variable pay and linked to the performance of the Group, given their role and ability to influence the strategy and performance of the Group. Executive Directors also have a higher proportion of their variable pay delivered in shares, which vest over a period of seven years with a post-vesting retention period of one year. During this deferral and retention period, the awards are linked to the share price so the value of award realised by them after the vesting and retention period will be aligned to the performance of the Group.

We are satisfied that the median pay ratio is consistent with the pay, reward and progression policies for our UK workforce, taking into account the diverse mix of our UK employees, the compensation structure mix applicable to each role and our objective of delivering market competitive pay for each role subject to Group, business and individual performance.

Our ratios have been calculated using the option 'A' methodology prescribed under the UK Companies (Miscellaneous Reporting) Regulations 2018. Under this option, the ratios are calculated using full-time equivalent pay and benefits of all employees providing services in the UK at 31 December 2021. We believe this approach provides accurate information and representation of the ratios. The ratio has been computed taking into account the pay and benefits of over 37,000 UK employees, other than the

individual performing the role of Group Chief Executive. We calculated our lower quartile, median and upper quartile pay and benefits information for our UK employees using:

• full-time equivalent annualised fixed pay, which includes salary and allowances, at 31 December 2021;

• variable pay awards for 2021;

• return on deferred cash awards granted in prior years. The deferred cash portion of the annual incentive granted in prior years includes a right to receive notional returns for the period between the grant date and vesting date, which is determined by reference to a rate of return specified at the time of grant. A payment of notional return is made annually and the amount is disclosed on a paid basis in the year in which the payment is made;

• gains realised from exercising awards from taxable employee share plans; and

• full-time equivalent value of taxable benefits and pension contributions.

For this purpose, full-time equivalent fixed pay and benefits for each employee have been calculated by using each employee's fixed pay and benefits at 31 December 2021. Where an employee works part-time, fixed pay and benefits are grossed up, where appropriate, to full-time equivalent. One-off benefits provided on a temporary basis to employees on secondment to the UK have not been included in calculating the ratios as these are not permanent in nature and in some cases, depending on individual circumstances, may not truly reflect a benefit to the employee.

Total pay and benefits for the Group Chief Executive used for this purpose is the total remuneration for Noel Quinn as reported in the single figure of remuneration table. Total remuneration does not include an LTI as he has not received an LTI award with a performance period that ended during 2021. In a year in which the value of an LTI is included in the single figure table of remuneration, the ratios could be higher.

Given the different business mix, size of the business, methodologies for computing pay ratios, estimates and assumptions used by other companies to calculate their respective pay ratios, as well as differences in employment and compensation practices between companies, the ratios reported may not be comparable to those reported by other listed peers on the FTSE 100 and our international peers.

Additional regulatory remuneration disclosures

This section provides disclosures required under the Hong Kong Ordinances, Hong Kong Listing Rules and the Pillar 3 remuneration disclosures.

For the purpose of the Pillar 3 remuneration disclosures, executive Directors and non-executive Directors are considered to be members of the management body. Members of the Group Executive Committee other than the executive Directors are considered as senior management.

MRT remuneration disclosures

The following tables set out the remuneration disclosures for

individuals identified as MRTs for HSBC Holdings.

Remuneration information for individuals who are only identified as MRTs at HSBC Bank plc, HSBC UK Bank plc or other solo-regulated entity levels is included, where relevant, in those entities' disclosures.

The 2021 variable pay information included in the following tables is based on the market value of awards. For share awards, the market value is based on HSBC Holdings' share price at the date of grant (unless indicated otherwise). For cash awards, it is the value of awards expected to be paid to the individual over the deferral period.

Remuneration awarded for the financial year (REM1)
		Supervisory function	Management function	Other senior management	Other identified staff
Fixed remuneration	Number of identified staff	14.0	2.0	22.9	1,020.7
	Total fixed pay ($m)	7.2	6.9	48.9	619.6
	Of which: cash-based ($m)¹	7.2	3.1	48.9	619.6
	Of which: shares or equivalent ownership interests ($m)²	-	3.8	-	-
	Of which: share-linked instruments or equivalent non-cash instruments ($m)	-	-	-	-
	Of which: other instruments ($m)	-	-	-	-
	Of which: other forms ($m)	-	-	-	-
Variable remuneration³	Number of identified staff	14.0	2.0	22.9	1,020.7
	Total variable remuneration ($m)^4,5	-	15.1	76.3	637.5
	Of which: cash-based ($m)	-	1.8	27.1	307.2
	Of which: deferred ($m)	-	-	16.2	161.6
	Of which: shares or equivalent ownership interests ($m)²	-	13.3	49.2	318.1
	Of which: deferred ($m)	-	11.5	38.3	178.2
	Of which: share-linked instruments or equivalent non-cash instruments ($m)	-	-	-	8.8
	Of which: deferred ($m)	-	-	-	4.7
	Of which: other instruments ($m)	-	-	-	-
	Of which: deferred ($m)	-	-	-	-
	Of which: other forms ($m)	-	-	-	3.4
	Of which: deferred ($m)	-	-	-	2.1
Total remuneration ($m)		7.2	22.0	125.2	1,257.1

1 Cash-based fixed remuneration is paid immediately.

2 Paid in HSBC shares. Vested shares are subject to a retention period of up to one year.

3 Variable pay awarded in respect of 2021. In accordance with shareholder approval received on 23 May 2014 (98% in favour), for each MRT the variable component of remuneration for any one year is limited to 200% of fixed component of the total remuneration.

4 The Group has used the discount rate under PRA remuneration rule 15.13 for 15 individuals for the purpose of calculating the ratio between fixed and variable components of 2021 total remuneration.

5 13 identified staff members were exempt from the application of the remuneration structure requirements for MRTs under the PRA and FCA remuneration rules. Their total remuneration is $4.2m, of which $3.6m is fixed pay and $0.6m is variable remuneration.

Special payments to staff whose professional activities have a material impact on institutions' risk profile (REM2)
	Supervisory function	Management function	Other senior management	Other identified staff
Guaranteed variable remuneration awards¹
Number of identified staff	-	-	-	-
Total amount ($m)	-	-	-	-
Of which guaranteed variable remuneration awards paid during the financial year, that are not taken into account in the bonus cap ($m)	-	-	-	-
Severance payments awarded in previous periods, that have been paid out during the financial year²
Number of identified staff	-	-	-	-
Total amount ($m)	-	-	-	-
Severance payments awarded during the financial year²
Number of identified staff	-	-	-	64.6
Total amount ($m)	-	-	-	68.2
Of which paid during the financial year ($m)	-	-	-	54.3
Of which deferred ($m)	-	-	-	-
Of which severance payments paid during the financial year, that are not taken into account in the bonus cap ($m)	-	-	-	68.2
Of which highest payment that has been awarded to a single person ($m)	-	-	-	5.0

1 No guaranteed variable remuneration was awarded in 2021. HSBC would offer a guaranteed variable remuneration award in exceptional circumstances for new hires, and for the first year of employment only. It would typically involve a critical new hire, and would also depend on factors such as the seniority of the individual, whether the new hire candidate has any competing offers and the timing of the hire during the performance year.

2 Includes payments such as payment in lieu of notice, statutory severance, outplacement service, legal fees, ex-gratia payments and settlements (excludes pre-existing benefit entitlements triggered on terminations).

Deferred remuneration at 31 December¹ (REM3)
$m	Total amount of deferred remuneration awarded for previous performance periods	Of which: due to vest in the financial year	Of which: vesting in subsequent financial years	Amount of performance adjustment made in the financial year to deferred remuneration that was due to vest in the financial year	Amount of performance adjustment made in the financial year to deferred remuneration that was due to vest in future performance years	Total amount of adjustment during the financial year due to ex post implicit adjustments	Total amount of deferred remuneration awarded before the financial year actually paid out in the financial year	Total of amount of deferred remuneration awarded for previous performance period that has vested but is subject to retention periods
Supervisory function	-	-	-	-	-	-	-	-
Cash-based	-	-	-	-	-	-	-	-
Shares	-	-	-	-	-	-	-	-
Share-linked instruments	-	-	-	-	-	-	-	-
Other instruments	-	-	-	-	-	-	-	-
Other forms	-	-	-	-	-	-	-	-
Management function	24.7	1.9	22.8	-	-	2.0	1.9	0.2
Cash-based	3.5	0.3	3.2	-	-	-	0.3	-
Shares	21.2	1.6	19.6	-	-	2.0	1.6	0.2
Share-linked instruments	-	-	-	-	-	-	-	-
Other instruments	-	-	-	-	-	-	-	-
Other forms	-	-	-	-	-	-	-	-
Other senior management	82.5	13.2	69.3	-	-	4.6	13.3	1.8
Cash-based	40.2	7.2	33.0	-	-	-	7.2	-
Shares	40.6	4.9	35.7	-	-	4.3	5.0	1.3
Share-linked instruments	1.7	1.1	0.6	-	-	0.2	1.1	0.5
Other instruments	-	-	-	-	-	-	-	-
Other forms	-	-	-	-	-	0.1	-	-
Other identified staff	717.9	173.0	544.9	-	-	39.8	175.4	35.6
Cash-based	349.9	94.3	255.6	-	-	-	95.3	-
Shares	350.4	70.4	280.0	-	-	38.5	71.6	31.8
Share-linked instruments	11.8	5.4	6.4	-	-	1.0	5.5	2.0
Other instruments	-	-	-	-	-	-	-	-
Other forms	5.8	2.9	2.9	-	-	0.3	3.0	1.8
Total amount	825.1	188.1	637.0	-	-	46.4	190.6	37.6

1 This table provides details of balances and movements during performance year 2021. For details of variable pay awards granted for 2021, refer to the 'Remuneration awarded for the financial year' table. Deferred remuneration is made in cash and/or shares. Share-based awards are made in HSBC shares.

Identified staff - remuneration by band¹ (REM4)
	Identified staff that are high earners as set out in Article 450(i) CRR
€1,000,000 - 1,500,000	243
€1,500,000 - 2,000,000	85
€2,000,000 - 2,500,000	54
€2,500,000 - 3,000,000	25
€3,000,000 - 3,500,000	11
€3,500,000 - 4,000,000	8
€4,000,000 - 4,500,000	6
€4,500,000 - 5,000,000	5
€5,000,000 - 6,000,000	4
€6,000,000 - 7,000,000	4
€7,000,000 - 8,000,000	3
€8,000,000 - 9,000,000	-
€9,000,000 - 10,000,000	2
€10,000,000 - 11,000,000	-
€11,000,000 - 12,000,000	1

1 Table prepared in euros in accordance with Article 450 of the European Union Capital Requirements Regulation, using the exchange rates published by the European Commission for financial programming and budget for December of the reported year as published on its website.

Information on remuneration of staff whose professional activities have a material impact on institutions' risk profile (REM5)
	Management body			Business areas						Total
	Supervisory function	Management function	Total	Investment banking	Retail banking	Asset management	Corporate function	Independent internal control function	All other	Total
Total number of identified staff										1,059.6
Of which members of the Board	14.0	2.0	16.0
Of which senior management				2.0	3.0	-	7.9	4.0	6.0
Of which other identified staff				504.5	162.0	30.0	110.6	142.6	71.0
Total remuneration of identified staff ($m)	7.2	22.0	29.2	741.3	186.3	39.7	167.3	118.7	129.0
Of which variable remuneration ($m)¹	-	15.1	15.1	410.7	87.5	21.0	82.8	48.5	63.3
Of which fixed remuneration ($m)	7.2	6.9	14.1	330.6	98.8	18.7	84.5	70.2	65.7

1 Variable pay awarded in respect of 2021. In accordance with shareholder approval received on 23 May 2014 (98% in favour), for each MRT the variable component of remuneration for any one year is limited to 200% of fixed component of the total remuneration.

Directors' emoluments

The details of compensation paid to executive and non-executive Directors for the year ended 31 December 2021 are set out below.

Emoluments
	Noel Quinn		Ewen Stevenson		Non-executive Directors
	2021	2020	2021	2020	2021	2020
	£000	£000	£000	£000	£000	£000
Directors' base salary, allowances and benefits in kind	3,283	3,338	1,933	1,806
Non-executive Directors' fees and benefits in kind					5,314	5,309
Pension contributions	-	-	-	-	-	-
Performance-related pay paid or receivable¹	5,721	4,517	3,388	2,568	-	-
Inducements to join paid or receivable	-	-	754	1,431	-	-
Compensation for loss of office	-	-	-	-	-	-
Notional return on deferred cash	22	17	-	-	-	-
Total	9,026	7,872	6,075	5,805	5,314	5,309
Total ($000)	12,414	10,097	8,356	7,446	7,309	7,063

1 Includes the value of the deferred and LTI awards at grant.

The aggregate amount of Directors' emoluments (including both executive Directors and non-executive Directors) for the year ended 31 December 2021 was $28,079,057. As per our policy, benefits in kind may include, but are not limited to, the provision of medical insurance, income protection insurance, health assessment, life assurance, club membership, tax assistance, car benefit, travel assistance, provision of company owned-accommodation and relocation costs (including any tax due on these benefits, where applicable). Post-employment medical insurance benefit was provided to former Directors, including Douglas Flint valued at £6,477 ($8,909), Stuart Gulliver valued at £6,477 ($8,909), John Flint valued at £10,303 ($14,171), and Marc Moses valued at £15,310 ($21,058). Tax return support was also provided to John Flint £8,292 ($11,405), and Marc Moses £2,500 ($3,439). The total aggregate value of benefits provided to former executive Directors was £49,359 ($67,891). The aggregate value of Director retirement benefits for current Directors is nil. Amounts are converted into US dollars based on the average year-to-date exchange rates for the respective year.

There were payments under retirement benefit arrangements with two former Directors of $435,131. The provision at 31 December 2021 in respect of unfunded pension obligations to former Directors amounted to $8,162,646. This relates to unfunded unapproved retirement benefits schemes.

Emoluments of senior management and five highest paid employees

The following tables set out the details of emoluments paid to senior management, which in this case comprises executive Directors and members of the Group Executive Committee, for the year ended 31 December 2021, or for the period of appointment in 2021 as a Director or member of the Group Executive Committee. Details of the remuneration paid to the five highest paid employees, comprising one executive Director and four Group Executives, for the year ended 31 December 2021, are also presented.

Emoluments
£000s	Five highest paid employees	Senior management
Basic salaries, allowances and benefits in kind	13,070	37,816
Pension contributions	22	303
Performance-related pay paid or receivable¹	21,870	54,033
Inducements to join paid or receivable	6,388	7,039
Compensation for loss of office	-	-
Total	41,350	99,191
Total ($000)	56,873	136,428

1 Includes the value of deferred shares awards at grant.

Emoluments by bands
Hong Kong dollars	US dollars	Number of highest paid employees	Number of senior management
$0 - $1,000,000	$0 - $128,652	-	1
$5,000,001 - $5,500,000	$643,262 - $707,588	-	1
$6,000,001 - $6,500,000	$771,915 - $836,241	-	1
$12,500,001 - $13,000,000	$1,608,156 - $1,672,482	-	1
$14,000,001 - $14,500,000	$1,801,134 - $1,865,461	-	1
$19,000,001 - $19,500,000	$2,444,397 - $2,508,723	-	1
$24,500,001 - $25,000,000	$3,151,985 - $3,216,311	-	1
$25,500,001 - $26,000,000	$3,280,638 - $3,344,964	-	1
$26,500,001 - $27,000,000	$3,409,290 - $3,473,616	-	2
$27,500,001 - $28,000,000	$3,537,943 - $3,602,269	-	1
$38,000,001 - $38,500,000	$4,888,793 - $4,953,119	-	1
$39,500,001 - $40,000,000	$5,081,772 - $5,146,098	-	1
$40,000,001 - $40,500,000	$5,146,098 - $5,210,424	-	1
$41,500,001 - $42,000,000	$5,339,077 - $5,403,403	-	1
$42,000,001 - $42,500,000	$5,403,403 - $5,467,729	-	1
$45,500,001 - $46,000,000	$5,853,687 - $5,918,013	-	1
$56,500,001 - $57,000,000	$7,268,864 - $7,333,190	-	1
$58,000,001 - $58,500,000	$7,461,842 - $7,526,168	-	1
$65,500,001 - $66,000,000	$8,426,736 - $8,491,062	-	1
$68,000,001 - $68,500,000	$8,748,367 - $8,812,693	1	1
$76,500,001 - $77,000,000	$9,841,913 - $9,906,239	1	1
$77,500,001 - $78,000,000	$9,970,565 - $10,034,891	1	1
$96,000,001 - $96,500,000	$12,350,636 - $12,414,962	1	1
$122,500,001 - $123,000,000	$15,759,926 - $15,824,252	1	1

Share capital and other related disclosures

Share buy-back programme

On 26 October 2021, HSBC Holdings commenced a share buy-back to purchase its ordinary shares of $0.50 each up to a maximum consideration of $2.0bn. This programme will end no later than 20 April 2022. The purpose of the programme is to reduce HSBC's number of outstanding ordinary shares. As at

31 December 2021, 120,366,714 ordinary shares had been purchased and cancelled representing a nominal value of $60,183,357 and an aggregate consideration paid by HSBC of £524,301,527. The shares cancelled represented 0.58% of the shares in issue and 0.59% of the shares in issue, excluding treasury shares.

The table that follows outlines details of the shares purchased and cancelled on a monthly basis during 2021.

	Number of shares	Highest price paid per share	Lowest price paid per share	Average price paid per share	Aggregate price paid
Month		£	£	£	£
Share buy-back of 2021
Oct-21	5,260,011	4.4800	4.4155	4.4553	23,435,159
Nov-21	67,010,270	4.4750	4.1525	4.3602	292,178,124
Dec-21	48,096,433	4.5280	4.0990	4.3390	208,688,243
	120,366,714				524,301,527

Dividends

Dividends for 2021

An interim dividend of $0.07 for the 2021 half-year was paid on 30 September 2021. For further details of the dividends approved in 2021, see Note 8 on the financial statements.

On 22 February 2022, the Directors approved a second interim dividend for 2021 of $0.18 per ordinary share, making a total of $0.25 for the 2021 full year. The second interim dividend for 2021 will be payable on 28 April 2022 in cash in US dollars, or in sterling or Hong Kong dollars at exchange rates to be determined on 19 April 2022. As the second interim dividend for 2021 was approved after 31 December 2021, it has not been included in the balance sheet of HSBC as a liability. The distributable reserves of HSBC Holdings at 31 December 2021 were $32.2bn.

A quarterly dividend of £0.01 per Series A sterling preference share was paid on 15 March, 15 June, 15 September and 15 December 2021. The Series A dollar preference shares were redeemed on 13 January 2021.

Dividends for 2022

The Group has reviewed whether it will revert to paying quarterly dividends and is currently not intending to pay quarterly dividends during 2022. The Group will continue to review whether to revert to paying quarterly dividends in future years, and a further update

will be given at or ahead of the 2022 results announcement in February 2023.

A dividend of £0.01 per Series A sterling preference share was approved on 22 February 2022 for payment on 15 March 2022.

Share capital

Issued share capital

The nominal value of HSBC Holdings' issued share capital paid up at 31 December 2021 was $10,315,760,219.50 divided into 20,631,520,439 ordinary shares of $0.50 each and one non-cumulative preference share of £0.01, representing approximately 100.00% and 0.00% respectively of the nominal value of HSBC Holdings' total issued share capital paid up at 31 December 2021. The 1,450,000 non-cumulative preference shares of $0.01 each were redeemed on 13 January 2021.

Rights, obligations and restrictions attaching to shares

The rights and obligations attaching to each class of ordinary and non-cumulative preference shares in our share capital are set out in full in our Articles of Association. The Articles of Association may be amended by special resolution of the shareholders and can be found on our website at www.hsbc.com/who-we-are/leadership-and-governance/board-responsibilities.

Ordinary shares

HSBC Holdings has one class of ordinary share, which carries no right to fixed income. There are no voting restrictions on the issued ordinary shares, all of which are fully paid. On a show of hands, each member present has the right to one vote at general meetings. On a poll, each member present or voting by proxy is entitled to one vote for every $0.50 nominal value of share capital held.

There are no specific restrictions on transfers of ordinary shares, which are governed by the general provisions of the Articles of Association and prevailing legislation.

Information on the policy adopted by the Board for paying interim dividends on the ordinary shares may be found in the 'Shareholder information' section on page 397.

Dividend waivers

HSBC Holdings' employee benefit trusts, which hold shares in HSBC Holdings in connection with the operation of its share plans, have lodged standing instructions to waive dividends on shares held by them that have not been allocated to employees. Shares held by custodians in connection with the vesting of employee share awards also lodged instructions to waive dividends. The total amount of dividends waived during 2021 was $6.8m.

Preference shares

The preference shares, which have preferential rights to income and capital, do not, in general, confer a right to attend and vote at general meetings.

There are three classes of preference shares in the share capital of

HSBC Holdings: non-cumulative US dollar preference shares of $0.01 each ('dollar preference shares'); non-cumulative preference shares of £0.01 each ('sterling preference shares'); and non-cumulative preference shares of €0.01 ('euro preference shares').

The sterling preference share in issue is a Series A sterling preference share. There are no dollar preference shares or euro preference shares in issue.

Information on dividends approved for 2020 and 2021 may be found in Note 8 on the financial statements on page 340.

Further details of the rights and obligations attaching to the HSBC Holdings' issued share capital may be found in Note 31 on the financial statements.

Compliance with Hong Kong Listing Rule 13.25A(2)

HSBC Holdings has been granted a waiver from strict compliance with Rule 13.25A(2) of the Rules Governing the Listing of Securities on the Stock Exchange of Hong Kong.

Under this waiver, HSBC's obligation to file a Next Day Return following the issue of new shares, pursuant to the vesting of share awards granted under its share plans to persons who are not Directors, would only be triggered where it falls within one of the circumstances set out under Rule 13.25A(3).

Share capital changes in 2021

The following events occurred during the year in relation to the ordinary share capital of HSBC Holdings:

Scrip dividends

There were no scrip dividends issued during the year.

All-employee share plans
	Number	Aggregate nominal value	Exercise price
	Number	Aggregate nominal value	from	to
		$	£	£
HSBC Holdings Savings-Related Share Option Plan (UK)
HSBC ordinary shares issued in £	3,197,834	1,598,917	2.627	4.4037
Options over HSBC ordinary shares lapsed	19,287,652	9,643,826
Options over HSBC ordinary shares granted in response to approximately 11,183 applications from HSBC employees in the UK on 22 September 2021	15,410,381	7,705,191

	HSBC Holdings ordinary shares issued	Aggregate nominal value	Market value per share
	HSBC Holdings ordinary shares issued	Aggregate nominal value	from	to
		$	£	£
HSBC International Employee Share Purchase Plan	283,004	141,502	3.5975	4.4995

HSBC share plans
	HSBC Holdings ordinary shares issued	Aggregate nominal value	Market value per share
	HSBC Holdings ordinary shares issued	Aggregate nominal value	from	to
		$	£	£
Vesting of awards under the HSBC Share Plan 2011	54,785,215	27,392,608	4.052	4.555

Authorities to allot and to purchase shares and
pre-emption rights

At the AGM in 2021, shareholders renewed the general authority for the Directors to allot new shares up to 13,615,199,500 ordinary shares, 15,000,000 non-cumulative preference shares of £0.01 each, 15,000,000 non-cumulative preference shares of $0.01 each and 15,000,000 non-cumulative preference shares of €0.01 each. Shareholders also renewed the authority for the Directors to make market purchases of up to 2,042,279,925 ordinary shares. The Directors exercised this authority during the year and purchased 120,366,714 ordinary shares.

In addition, shareholders gave authority for the Directors to grant rights to subscribe for, or to convert any security into, no more than 4,084,559,850 ordinary shares in relation to any issue by HSBC Holdings or any member of the Group of contingent convertible securities that automatically convert into or are exchanged for ordinary shares in HSBC Holdings in prescribed circumstances. For further details on the issue of contingent convertible securities, see Note 31 on the financial statements.

Other than as disclosed in the tables above headed 'Share capital changes in 2021', the Directors did not allot any shares during 2020.

Debt securities

In 2021, HSBC Holdings issued the equivalent of $19.34bn of debt securities in the public capital markets in a range of currencies and maturities in the form of senior securities to ensure it meets the current and proposed regulatory rules, including those relating to the availability of adequate total loss-absorbing capacity. For details of capital instruments and subordinated bail-inable debt, see Notes 28 and 31 on pages 370 and 379.

Treasury shares

In accordance with the terms of a waiver granted by the Hong Kong Stock Exchange on 19 December 2005, HSBC Holdings will comply with the applicable law and regulation in the UK in relation to the holding of any shares in treasury and with the conditions of the waiver in connection with any shares it may hold in treasury. At 31 December 2021, pursuant to Chapter 6 of the UK Companies Act 2006, 325,273,407 ordinary shares were held in treasury. This was the maximum number of shares held at any time during 2021, representing 1.58% of the shares in issue as at 31 December 2021. The nominal value of shares held in treasury was $162,636,704.

Notifiable interests in share capital

During 2021, HSBC Holdings did not receive any notification of major holdings of voting rights pursuant to the requirements of Rule 5 of the Disclosure, Guidance and Transparency Rules. No further notifications had been received between 31 December 2021 and 11 February 2022. Previous notifications received are as follows:

• BlackRock, Inc. gave notice on 3 March 2020 that on
2 March 2020 it had the following: an indirect interest in HSBC Holdings ordinary shares of 1,235,558,490; qualifying financial instruments with 7,294,459 voting rights that may be acquired if the instruments are exercised or converted; and financial instruments with a similar economic effect to qualifying financial instruments, which refer to 2,441,397 voting rights, representing 6.07%, 0.03% and 0.01%, respectively, of the total voting rights at 2 March 2020.

• Ping An Asset Management Co., Ltd. gave notice on 6 December 2017 that on 4 December 2017 it had an indirect interest in HSBC Holdings ordinary shares of 1,007,946,172, representing 5.04% of the total voting rights at that date.

At 31 December 2021, according to the register maintained by HSBC Holdings pursuant to section 336 of the Securities and Futures Ordinance of Hong Kong:

• BlackRock, Inc. gave notice on 1 September 2020 that on
27 August 2020 it had the following interests in HSBC Holdings ordinary shares: a long position of 1,477,023,361 shares and a short position of 38,760,188 shares, representing 7.14% and 0.19%, respectively, of the ordinary shares in issue at that date.

• Ping An Asset Management Co., Ltd., gave notice on
25 September 2020 that on 23 September 2020 it had a long position of 1,655,479,531 in HSBC Holdings ordinary shares, representing 8.00% of the ordinary shares in issue at that date.

On 8 February 2022, pursuant to section 324 of Part XV of the

Securities and Futures Ordinance of Hong Kong, BlackRock, Inc. gave notice that on 3 February 2022 it had the following interests in HSBC Holdings ordinary shares: a long position of 1,638,892,657 shares and a short position of 13,731,141 shares, representing 7.96% and 0.07%, respectively, of the ordinary shares in issue at that date.

Sufficiency of float

In compliance with the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited, at least 25% of the total issued share capital has been held by the public at all times during 2021 and up to the date of this report.

Dealings in HSBC Holdings listed securities

The Group has policies and procedures that, except where permitted by statute and regulation, prohibit specified transactions in respect of its securities listed on The Stock Exchange of Hong Kong Limited. Except for dealings as intermediaries or as trustees by subsidiaries of HSBC Holdings, neither HSBC Holdings nor any of its subsidiaries has purchased, sold or redeemed any of its securities listed on The Stock Exchange of Hong Kong Limited during the year ended 31 December 2021.

Directors' interests

Pursuant to the requirements of the UK Listing Rules and according to the register of Directors' interests maintained by HSBC Holdings pursuant to section 352 of the Securities and Futures Ordinance of Hong Kong, the Directors of HSBC Holdings at 31 December 2021 had certain interests, all beneficial unless otherwise stated, in the shares or debentures of HSBC Holdings and its associated corporations.

Save as stated in the following table, no further interests were held by Directors, and no Directors or their connected persons were awarded or exercised any right to subscribe for any shares or debentures in any HSBC corporation during the year.

No Directors held any short position as defined in the Securities and Futures Ordinance of Hong Kong in the shares or debentures of HSBC Holdings and its associated corporations.

Directors' interests - shares and debentures
		At 31 Dec 2021 or date of cessation, if earlier
	At 1 Jan 2021, or date of appointment, if later	Beneficial owner	Child under 18 or spouse	Jointly with another person	Trustee	Total interests
HSBC Holdings ordinary shares
Laura Cha (retired on 28 May 2021)	16,200	16,200	-	-	-	16,200
Henri de Castries (retired on 28 May 2021)	19,251	19,251	-	-	-	19,251
Rachel Duan (appointed to the Board on 1 Sep 2021)	-	-	-	-	-	-
Dame Carolyn Fairbairn (appointed to the Board on 1 Sep 2021)	-	-	-	-	-	-
James Forese¹	115,000	115,000	-	-	-	115,000
Steven Guggenheimer¹	15,000	-	-	15,000	-	15,000
Irene Lee	11,904	15,000	-	-	-	15,000
José Antonio Meade Kuribreña¹	15,000	15,000	-	-	-	15,000
Heidi Miller¹ (retired on 28 May 2021)	15,700	15,700	-	-	-	15,700
Eileen Murray¹	75,000	75,000	-	-	-	75,000
David Nish	50,000	-	50,000	-	-	50,000
Noel Quinn²	778,958	1,131,278	-	-	-	1,131,278
Ewen Stevenson²	545,731	838,154	-	-	-	838,154
Jackson Tai^1,3	66,515	32,800	11,965	21,750	-	66,515
Mark Tucker	307,352	307,352	-	-	-	307,352
Pauline van der Meer Mohr	15,000	15,000	-	-	-	15,000

1 James Forese has an interest in 23,000, Steven Guggenheimer has an interest in 3,000, José Antonio Meade Kuribreña has an interest in 3,000, Heidi Miller has an interest in 3,140, Eileen Murray has an interest in 15,000 and Jackson Tai has an interest in 13,303 listed American Depositary Shares ('ADS'), which are categorised as equity derivatives under Part XV of the Securities and Futures Ordinance of Hong Kong. Each ADS represents five HSBC Holdings ordinary shares.

2 Executive Directors' other interests in HSBC Holdings ordinary shares arising from the HSBC Holdings Savings-Related Share Option Plan (UK) and the HSBC Share Plan 2011 are set out in the Scheme interests in the Directors' remuneration report on page 254. At 31 December 2021, the aggregate interests under the Securities and Futures Ordinance of Hong Kong in HSBC Holdings ordinary shares, including interests arising through employee share plans and the interests above were: Noel Quinn - 2,731,466; and Ewen Stevenson - 2,458,851. Each Director's total interests represents approximately 0.01% of the shares in issue and 0.01% of the shares in issue excluding treasury shares.

3 Jackson Tai has a non-beneficial interest in 11,965 shares of which he is custodian.

There have been no changes in the shares or debentures of the current Directors from 31 December 2021 to the date of this report.

Listing Rule 9.8.4 and other disclosures

This section of the Annual Report and Accounts 2021 forms part of and includes certain disclosures required in the Report of the Directors incorporated by cross-reference, including under Listing Rule 9.8.4 and otherwise as applicable by law.


Long-term incentives	271
Dividend waivers	287
Dividends	287
Share buy-back	24, 287
Emissions	46
Energy efficiency	46, 53, 55
Principal activities of HSBC	13, 30, 97, 362
Business review and future developments	12-41, 43, 122, 135, 388

Directors' governance

Appointment and re-election

A rigorous selection process is followed for the appointment of Directors. Appointments are made on merit and candidates are considered against objective criteria, having regard to the benefits of a diverse Board. Appointments are made in accordance with HSBC Holdings' Articles of Association. The Nomination & Corporate Governance Committee report sets out further details of the Board selection process. The number of Directors (other than any alternate Directors) must not be fewer than five nor exceed 25.

The Board may at any time appoint any person as a Director, either to fill a vacancy or as an addition to the existing Board. The Board may appoint any Director to hold any employment or executive office, and may revoke or terminate any such appointment.

Non-executive Directors are appointed for an initial three-year term and, subject to continued satisfactory performance based upon an assessment by the Group Chairman and the Nomination & Corporate Governance Committee, are proposed for re-election by shareholders at each AGM. They typically serve two three-year terms. The Board may invite a Director to serve additional periods but any term beyond six years is subject to review with an explanation to be provided in the Annual Report and Accounts.

Shareholders vote at each AGM on whether to elect and re-elect individual Directors. All Directors that stood for election and re-election at the 2021 AGM were elected and re-elected by shareholders.

None of the Directors who retired during the year or who are not offering themselves for re-election at the 2022 AGM have raised concerns about the operation of the Board or the management of the company.

No executive Director is involved in deciding their own remuneration outcome.

Commitments

The terms and conditions of the appointments of non-executive Directors are set out in a letter of appointment, which includes the expectations of them and the estimated time required to perform their role. Letters of appointment of each non-executive Director are available for inspection at the registered office of HSBC Holdings. The anticipated time commitment for non-executive Directors serving on the Board and as a member of any committees is no more than 75 days per annum. Directors who in addition chair a large committee should expect to commit up to 100 days per annum. Any additional time commitment connected with Board-related appointments will be confirmed separately.

Board approval is required for any non-executive Directors' external commitments, with consideration given to time commitments and conflicts of interest.

Conflicts of interest

The Board has an established policy and set of procedures to ensure that the Board's management of the Directors' conflicts of interest policy operates effectively. The Board has the power to authorise conflicts where they arise, in accordance with the Companies Act 2006 and HSBC Holdings' Articles of Association. Details of all Directors' conflicts of interest are recorded in the register of conflicts, which is maintained by the Group Company Secretary and Chief Governance Officer's office. The Board agreed for 2022 onwards that the conflicts register be reviewed annually by the Board and quarterly by the Nomination & Corporate Governance Committee. Upon appointment, new Directors are advised of the policy and procedures for managing conflicts. Directors are required to notify the Board of any actual or potential conflicts of interest and to update the Board with any changes to the facts and circumstances surrounding such conflicts. Directors are requested to review and confirm their own and their respective closely associated persons' outside interests and appointments twice a year. The Board has considered, and authorised (with or without conditions) where appropriate, potential conflicts as they have arisen during the year in accordance with the said policy and procedures. All non-executive Directors are re-vetted by the compliance team every three years from appointment and as part of such process all conflicts checks are refreshed.

Directors' indemnity

The Articles of Association of HSBC Holdings contain a qualifying third-party indemnity provision, which entitles Directors and other officers to be indemnified out of the assets of HSBC Holdings against claims from third parties in respect of certain liabilities.

HSBC Holdings has granted, by way of deed poll, indemnities to the Directors, including former Directors, against certain liabilities arising in connection with their position as a Director of HSBC Holdings or of any Group company. Directors are indemnified to the maximum extent permitted by law.

The indemnities that constitute a 'qualifying third-party indemnity provision', as defined by section 234 of the Companies Act 2006, remained in force for the whole of the financial year (or, in the case of Directors appointed during 2021, from the date of their appointment). The deed poll is available for inspection at the registered office of HSBC Holdings.

Additionally, Directors have the benefit of Directors' and officers' liability insurance.

Qualifying pension scheme indemnities have also been granted to the Trustees of the Group's pension schemes, which were in force for the whole of the financial year and remain in force as at the date of this report.

Contracts of significance

During 2021, none of the Directors had a material interest, directly or indirectly, in any contract of significance with any HSBC company. During the year, all Directors were reminded of their obligations in respect of transacting in HSBC securities and following specific enquiry all Directors have confirmed that they have complied with their obligations.

Shareholder engagement

The Board is directly accountable to, and gives high priority to communicating with, HSBC's shareholders. Information about HSBC and its activities is provided to shareholders in its Interim Reports and the Annual Report and Accounts as well as on www.hsbc.com.

To complement regular publications, there is continual dialogue between members of the Board and institutional investors throughout the year. For examples of such engagement see the Group Chairman's governance statement on page 218 and the Remuneration Committee Chair's letter on page 254.

Directors are encouraged to develop an understanding of the views of shareholders. Enquiries from individuals on matters relating to their shareholdings and HSBC's business are welcomed.

Any individual or institutional investor can make an enquiry by contacting the investor relations team, Group Chairman, Group Chief Executive, Group Chief Financial Officer and Group Company Secretary and Chief Governance Officer. Our Senior Independent Director is also available to shareholders if they have concerns that cannot be resolved or for which the normal channels would not be appropriate. He can be contacted via the Group Company Secretary and Chief Governance Officer at 8 Canada Square, London E14 5HQ.

Annual General Meeting

The AGM in 2022 is planned to be held in London at 11:00am on Friday, 29 April 2022. Information on how to participate, both in advance and on the day, can be found in the Notice of the 2022 AGM, which will be sent to shareholders on 25 March 2022 and be available on www.hsbc.com/agm. A live webcast will be available on www.hsbc.com. A recording of the proceedings will be available on www.hsbc.com shortly after the conclusion of the AGM. Due to the current environment, these arrangements may change. Shareholders should monitor our website and announcements for any updates. Shareholders may send enquiries to the Board in writing via the Group Company Secretary and Chief Governance Officer, HSBC Holdings plc, 8 Canada Square, London E14 5HQ or by sending an email to [email protected].

General meetings and resolutions

Shareholders may require the Directors to call a general meeting other than an AGM, as provided by the UK Companies Act 2006. A valid request to call a general meeting may be made by members representing at least 5% of the paid-up capital of HSBC Holdings as carries the right of voting at its general meetings (excluding any paid-up capital held as treasury shares). A request must state the general nature of the business to be dealt with at the meeting and may include the text of a resolution that may properly be moved and is intended to be moved at the meeting. At any general meeting convened on such request, no business may be transacted except that stated by the requisition or proposed by the Board.

Shareholders may request the Directors to send a resolution to shareholders for consideration at an AGM, as provided by the UK Companies Act 2006. A valid request must be made by
(i) members representing at least 5% of the paid-up capital of HSBC Holdings as carries the right of voting at its general meetings (excluding any paid-up capital held as treasury shares), or (ii) at least 100 members who have a right to vote on the resolution at the AGM in question and hold shares in HSBC Holdings on which there has been paid up an average sum, per member, of at least £100.

The request must be received by the company not later than (i) six weeks before the AGM in question; or (ii) if later, the time at which the notice of AGM is published.

A request may be in hard copy form or in electronic form, and must be authenticated by the person or persons making it. A request may be made in writing to HSBC Holdings at its UK address, referred to in the paragraph above or by sending an email to [email protected].

Events after the balance sheet date

For details of events after the balance sheet date, see Note 37 on the financial statements.

Change of control

The Group is not party to any significant agreements that take effect, alter or terminate following a change of control of the Group. The Group does not have agreements with any Director or employee that would provide compensation for loss of office or employment resulting from a takeover bid.

Branches

The Group provides a wide range of banking and financial services through branches and offices in the UK and overseas.

Research and development activities

During the ordinary course of business the Group develops new products and services within the global businesses.

Political donations

HSBC does not make any political donations or incur political expenditure within the ordinary meaning of those words. We have no intention of altering this policy. However, the definitions of political donations, political parties, political organisations and political expenditure used in the UK Companies Act 2006 are very wide. As a result, they may cover routine activities that form part of the normal business activities of the Group and are an accepted part of engaging with stakeholders. To ensure that neither the Group nor any of its subsidiaries inadvertently breaches the UK Companies Act 2006, authority is sought from shareholders at the AGM to make political donations.

HSBC provides administrative support to two political action committees ('PACs') in the US funded by voluntary political contributions by eligible employees. We do not control the PACs, and all decisions regarding the amounts and recipients of contributions are directed by the respective steering committee of each PAC, which are comprised of eligible employees. The PACs recorded combined political donations of $15,500 during 2021 (2020: $100,750).

Charitable contributions

For details of charitable contributions, see page 77.

Internal control

The Board is responsible for maintaining and reviewing the effectiveness of risk management and internal control systems, and for determining the level and type of risks the Group is willing to take in achieving its strategic objectives.

To meet this requirement and to discharge its obligations under the FCA Handbook and the PRA Handbook, procedures have been designed: for safeguarding assets against unauthorised use or disposal; for maintaining proper accounting records; and for ensuring the reliability and usefulness of financial information used within the business or for publication.

These procedures provide reasonable assurance against material misstatement, errors, losses or fraud. They are designed to provide effective internal control within the Group and accord with the Financial Reporting Council's guidance for Directors issued in 2014, on risk management, internal control and related financial and business reporting. The procedures have been in place throughout the year and up to 22 February 2022, the date of approval of the Annual Report and Accounts 2021.

The key risk management and internal control procedures include the following:

Global principles

The Group's Global Principles set an overarching standard for all other policies and procedures and are fundamental to the Group's risk management structure. They inform and connect our purpose, values, strategy and risk management principles, guiding us to do the right thing and treat our customers and our colleagues fairly at all times.

Risk management framework

The risk management framework supports our Global Principles. It outlines the key principles and practices that we employ in managing material risks. It applies to all categories of risk and supports a consistent approach in identifying, assessing, managing and reporting the risks we accept and incur in our activities.

Delegation of authority within limits set by the Board

Subject to certain matters reserved for the Board, the Group Chief Executive has been delegated authority limits and powers within which to manage the day-to-day affairs of the Group, including the right to sub-delegate those limits and powers. Each relevant Group Executive Committee member or executive Director has delegated authority within which to manage the day-to-day affairs of the business or function for which he or she is accountable.

Delegation of authority from the Board requires those individuals to maintain a clear and appropriate apportionment of significant responsibilities and to oversee the establishment and maintenance of systems of control that are appropriate to their business or function. Authorities to enter into credit and market risk exposures are delegated with limits to line management of Group companies. However, credit proposals with specified higher-risk characteristics require the concurrence of the appropriate global function. Credit and market risks are measured and reported at subsidiary company level and aggregated for risk concentration analysis on a Group-wide basis.

Risk identification and monitoring

Systems and procedures are in place to identify, assess, control and monitor the material risk types facing HSBC as set out in the risk management framework. The Group's risk measurement and reporting systems are designed to help ensure that material risks are captured with all the attributes necessary to support well-founded decisions, that those attributes are accurately assessed and that information is delivered in a timely manner for those risks to be successfully managed and mitigated.

Changes in market conditions/practices

Processes are in place to identify new risks arising from changes in market conditions/practices or customer behaviours, which could expose the Group to heightened risk of loss or reputational damage. The Group employs a top and emerging risks framework, which contains an aggregate of all current and forward-looking risks and enables it to take action that either prevents them materialising or limits their impact.

During 2021 due to the prolonged impact of the Covid-19 pandemic on the global economy, banks continued to play an expanded role to support society and customers. The pandemic and its impact on the global economy have impacted many of our customers' business models and income, requiring significant levels of support from both governments and banks.

To meet the additional challenges, we supplemented our existing approach to risk management with additional tools and practices and these continue to be in place. We continue our focus on the quality and timeliness of the data used to inform management decisions, through measures such as early warning indicators, prudent active risk management of our risk appetite, and ensuring regular communication with our Board and other key stakeholders.

Responsibility for risk management

All employees are responsible for identifying and managing risk within the scope of their role as part of the three lines of defence model. This is an activity-based model to delineate management accountabilities and responsibilities for risk management and the control environment. The second line of defence sets the policy and guidelines for managing specific risk areas, provides advice and guidance in relation to the risk, and challenges the first line of defence (the risk owners) on effective risk management.

The Board delegated authority to the Group Audit Committee ('GAC') and it reviewed the independence, autonomy and effectiveness of the Group's policies and procedures on whistleblowing, including the procedures for the protection of staff who raise concerns of detrimental treatment.

Strategic plans

Strategic plans are prepared for global businesses, global functions and geographical regions within the framework of the Group's overall strategy. Financial resource plans, informed by detailed analysis of risk appetite describing the types and quantum of risk that the Group is prepared to take in executing its strategy, are prepared and adopted by all major Group operating companies and set out the key business initiatives and the likely financial effects of those initiatives.

The effectiveness of the Group's system of risk management and internal control is reviewed regularly by the Board, the GRC and the GAC.

During 2021, the Group continued to focus on operational resilience and invest in the non-financial risk infrastructure. There was a particular focus on material and emerging risks and areas undergoing strategic growth.

The GRC and the GAC received confirmation that executive management has taken or is taking the necessary actions to remedy any failings or weaknesses identified through the operation of the Group's framework of controls. In response to the prolonged Covid-19 pandemic, our business continuity responses have been successfully implemented and the majority of service level agreements continue to be maintained.

Internal control over financial reporting

HSBC is required to comply with section 404 of the US Sarbanes-Oxley Act of 2002 and assess its effectiveness of internal control over financial reporting at 31 December 2021. In 2014, the GAC endorsed the adoption of the COSO 2013 framework for the monitoring of risk management and internal control systems to satisfy the requirements of section 404 of the Sarbanes-Oxley Act.

The key risk management and internal control procedures over financial reporting include the following:

Entity level controls

The primary mechanism through which comfort over risk management and internal control systems is achieved is through assessments of the effectiveness of controls to manage risk, and the reporting of issues on a regular basis through the various risk management and risk governance forums. Entity level controls are a defined suite of internal controls that have a pervasive influence over the entity as a whole and meet the principles of the Committee of Sponsoring Organizations of the Treadway Commission ('COSO') framework. They include controls related to the control environment, such as the Group's values and ethics, the promotion of effective risk management and the overarching governance exercised by the Board and its non-executive committees. The design and operational effectiveness of entity level controls are assessed annually as part of the assessment of the effectiveness of internal controls over financial reporting. If issues are significant to the Group, they are escalated to the GRC and also to the GAC, if concerning financial reporting matters.

Process level transactional controls

Key process level controls that mitigate the risk of financial misstatement are identified, recorded and monitored in accordance with the risk framework. This includes the identification and assessment of relevant control issues against which action plans are tracked through to remediation. Further details on HSBC's approach to risk management can be found on page 121. The GAC has continued to receive regular updates on HSBC's ongoing activities for improving the effective oversight of end-to-end business processes, and management continued to identify opportunities for enhancing key controls, such as through the use of automation technologies.

Financial reporting

The Group's financial reporting process is controlled using documented accounting policies and reporting formats, supported by detailed instructions and guidance on reporting requirements, issued to all reporting entities within the Group in advance of each reporting period end. The submission of financial information from each reporting entity is supported by a certification by the responsible financial officer and analytical review procedures at reporting entity and Group levels.

Disclosure Committee

Chaired by the Group Chief Financial Officer, the Disclosure Committee supports the discharge of the Group's obligations under relevant legislation and regulation including the UK and Hong Kong listing rules, the UK Market Abuse Regulation and US Securities and Exchange Commission rules. In so doing, the Disclosure Committee is empowered to determine whether a new event or circumstance should be disclosed, including the form and timing of such disclosure, and review certain material disclosures made or to be made by the Group. The membership of the Disclosure Committee consists of senior management, including the Group Chief Financial Officer, Group Chief Legal Officer and Group Company Secretary and Chief Governance Officer. The Group's brokers, external auditors and its external legal counsel also attend as required. The integrity of disclosures is underpinned by structures and processes within the Global Finance and Global Risk and Compliance functions that support rigorous analytical review of financial reporting and the maintenance of proper accounting records. As required by the Sarbanes-Oxley Act, the Group Chief Executive and the Group Chief Financial Officer have certified that the Group's disclosure controls and procedures were effective as at the end of the period covered by the Annual Report and Accounts 2021.

The annual review of the effectiveness of the Group's system of risk management and internal control over financial reporting was conducted with reference to the COSO 2013 framework. Based on the assessment performed, the Directors concluded that for the year ended 31 December 2021, the Group's internal control over financial reporting was effective.

PwC has audited the effectiveness of HSBC's internal control over financial reporting and has given an unqualified opinion.

Going concern

The Board, having made appropriate enquiries, is satisfied that the Group as a whole has adequate resources to continue operations for a period of at least 12 months from the date of this report, and it therefore continues to adopt the going concern basis in preparing the financial statements.

For further details, see page 41.

Employees

At 31 December 2021, HSBC had a total workforce equivalent to 220,000 full-time employees compared with 226,000 at the end of 2020 and 235,000 at the end of 2019. Our main centres of employment were India with approximately 38,000 employees, the UK with 35,000, mainland China with 30,000, Hong Kong with 28,000, Mexico with 16,000 and the US with 7,000.

Our business spans many cultures, communities and continents. We aim to provide an environment where our colleagues can fulfil their potential by building their skills and capabilities while focusing on the development of a diverse and inclusive culture. We use confidential employee surveys to assess progress and make changes. We want to provide an open culture, where our colleagues feel connected, supported to speak up and where our leaders encourage and use feedback. Where we make organisational changes, we support our people, in particular where there are job impacts.

Employee relations

We consult with and, where appropriate, negotiate with employee representative bodies where we have them. It is our policy to maintain well-developed communications and consultation programmes with all employee representative bodies. There have been no material disruptions to our operations from labour disputes during the past five years.

We are committed to complying with the applicable employment law and regulations in the jurisdictions in which we operate. HSBC's global employment practices and relations policy provides the framework and controls through which we seek to uphold that commitment.

Diversity and inclusion

Our customers, colleagues and communities span many cultures and continents. We value difference, and believe that diversity makes us strong. We are dedicated to building a diverse and connected workforce where everyone feels a sense of belonging.

Our Group People Committee, which is made up of Group Executive Committee members, governs our diversity and inclusion agenda. It meets regularly to agree actions to improve diverse representation and build a more inclusive culture where our colleagues can bring the best of themselves to work, and deliver more equal outcomes for our stakeholders. Members of our Group Executive Committee are held to account for the actions they take on diversity via aspirational targets contained within their performance scorecards. Every colleague at HSBC must treat each other with dignity and respect to ensure an inclusive environment. Our policies make it clear that we do not tolerate unlawful discrimination, bullying or harassment on any grounds.

To align our approach to inclusion best practices, we participate in global diversity benchmarks that help us to identify improvement opportunities. We also track a large number of diversity and inclusion metrics, which enable us to pinpoint inclusion barriers, and take action where required. Our gender diversity statistics are set out on page 72.

Further details of our diversity and inclusion activity, together with our Gender and Ethnicity Pay Gap Report 2021, can be found at www.hsbc.com/diversitycommitments.

Employment of people with a disability

We strongly believe in providing equal opportunities for all employees. The employment of people with a disability is included in this commitment. The recruitment, training, development and promotion of people with a disability are based on the aptitudes and abilities of the individual. Should employees become disabled during their employment with us, efforts are made to continue their employment. Where necessary, we will provide appropriate training, facilities and reasonable equipment.

Employee development

We aim to build a dynamic, inclusive culture where the best want to develop the skills and experiences that help them fulfil their potential. This determines how we develop our people and recruit, identify and nurture talent. A range of resources bring this to life including:

• HSBC University, our platform for learning and development with specific business and technical academies;

• our My HSBC Career portal, which offers career development information and resources; and

• HSBC Talent Marketplace, our new online platform that uses AI to provide opportunities to learn as we work.

Each year, every employee is asked to complete global mandatory training. It plays a critical role in shaping our culture by ensuring everyone is focused on issues that are fundamental to working at HSBC, from sustainability, to financial crime risk, to our intolerance of bullying and harassment.

As the opportunities we face change, we provide development to key populations through business and technical academies. This includes our risk academy, which helps us to develop broad capabilities in traditional areas of risk like financial crime but also in emerging risk issues like climate risk and the ethics of AI and Big Data.

Our approach to learning is skills based. Our academies work with our businesses to identify the key skills and capabilities we need in the future. Alongside this, we help colleagues identify, assess and develop the skills that match their ambition and aspirations. In 2021, as part of our Future Skills programme a 'Focus 4' campaign encouraged colleagues to identify four future skills they want to prioritise in their development plans. Over four themed weeks, various events introduced colleagues to areas such as data, digital and sustainability skills, as well as personal skills like critical thinking and resilience.

Our new platform for learning content is Degreed. This helps colleagues identify, assess and develop key skills through internal and external training materials in a way that suits them. Content can range from quick videos, articles or podcasts to packaged programmes or learning pathways.

In 2021, we launched the HSBC Talent MarketPlace, an AI-based platform, which matches colleagues to projects and experiences based on their aspirations. By December, this had been rolled out to nearly 50,000 colleagues in the US, India, Singapore and the UK, and will be rolled out globally in 2022.

Effective people management and impactful leadership remain critical to our ability to energise for growth. In 2021, we launched a refreshed executive development curriculum for our most senior population. This combines internal programmes and business school activities with targeted technical programmes on key topics and skills.

Health and safety

We are committed to providing a safe and healthy working environment for everyone. We have adopted global policies, mandatory procedures, and incident and information reporting systems across the organisation that reflect our core values and are aligned to international standards. Our global health and safety performance is subject to ongoing monitoring and assurance.

Our chief operating officers have overall responsibility for engendering a positive health and safety culture and ensuring that global policies, procedures and systems are put into practice locally. They also have responsibility for ensuring all local legal requirements are met.

We delivered a range of programmes in 2021 to help us understand and manage our health and safety risks:

• We continued to provide enhancements to our workplaces globally to minimise the risks of Covid-19, including enhanced cleaning, improved ventilation and social distancing measures.

• We updated our advice and risk assessment methodology on working from home, providing more awareness and best practices on good ergonomics and well-being to be adopted as we transitioned to new ways of working.

• We delivered health and safety training and awareness to 220,000 of our employees and contractors globally, ensuring roles and responsibilities were clear and understood.

• We completed the annual safety inspection on all of our buildings globally, subject to local Covid-19 restrictions, to ensure we were meeting our standards and continuously improving our safety performance.

• We continued to focus on enhancing the safety culture in our supply chain through our SAFER Together programme, covering the five key elements of best practice safety culture, including speaking up about safety, and recognising excellence. Our 2021 safety climate survey results showed a continued high level of positive safety culture, significantly above the industry average.

• We commenced a targeted guidance and training programme for our construction partners in our key markets globally to help them understand and deliver industry leading health and safety performance, with over 130 construction workers receiving safety passporting training.

• Our Eat Well Live Well programme continued educating and informing our colleagues on how to make healthy food and drink choices. We enhanced the programme to provide digital educational and information resources, including a suite of videos and recipe ideas. The programme was a key component of HSBC's winning entry in the 2021 Global Healthy Workplace Awards.

• We put in place effective storm preparation controls and processes to ensure the protection of our people and operations. In 2021, there were 38 named storms that passed over 1,935 of our buildings, resulting in 0 injuries or material business impact.

Employee health and safety
	2021	2020	2019
Rate of workplace fatalities per 100,000 employees	-	-	-
Number of major injuries to employees¹	14	15	29
All injury rate per 100,000 employees	64	88	189

1 Fractures, dislocation, concussion, loss of consciousness, overnight admission to hospital.

Remuneration

HSBC's pay and performance strategy is designed to reward competitively the achievement of long-term sustainable performance and attract and motivate the very best people, regardless of gender, ethnicity, age, disability or any other factor unrelated to performance or experience with the Group, while performing their role in the long-term interests of our stakeholders.

For further details of the Group's approach to remuneration, see page 278.

Employee share plans

Share options and discretionary awards of shares granted under HSBC share plans align the interests of employees with the creation of shareholder value. The following table sets out the particulars of outstanding options, including those held by employees working under employment contracts that are regarded as 'continuous contracts' for the purposes of the Hong Kong Employment Ordinance. The options were granted at nil consideration. No options have been granted to substantial shareholders and suppliers of goods or services, nor in excess of the individual limit for each share plan. No options were cancelled by HSBC during the year.

A summary for each plan of the total number of the options that were granted, exercised or lapsed during 2021 is shown in the following table. Further details required to be disclosed pursuant to Chapter 17 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited are available on our website at www.hsbc.com/who-we-are/leadership-and-governance/remuneration and on the website of The Stock Exchange of Hong Kong Limited at www.hkex.com.hk, or can be obtained upon request from the Group Company Secretary and Chief Governance Officer, 8 Canada Square, London E14 5HQ.

Particulars of options held by Directors of HSBC Holdings are set out on
page 273.

Note 5 on the financial statements gives details of share-based payments, including discretionary awards of shares granted under HSBC share plans.

All-employee share plans

HSBC operates all-employee share option plans under which options are granted over HSBC ordinary shares. Subject to leaver provisions, options are normally exercisable after three or five years. During 2021, options were granted by reference to the average market value of HSBC Holdings ordinary shares on the five business days immediately preceding the invitation date, then applying a discount of 20%. The closing price for HSBC Holdings ordinary shares quoted on the London Stock Exchange on
21 September 2021, the day before the options were granted and as derived from the Daily Official List, was £3.5975.

The HSBC Holdings Savings-Related Share Option Plan (UK) will expire on 24 April 2030, by which time the plan may be extended with approval from shareholders, unless the Directors resolve to terminate the plan at an earlier date.

The HSBC International Employee Share Purchase Plan was introduced in 2013 and now includes employees based in
28 jurisdictions, although no options are granted under this plan.

During 2021, approximately 190,000 employees were offered participation in these plans.

HSBC Holdings Savings-Related Share Option Plan (UK)
						HSBC Holdings ordinary shares
Dates of awards		Exercise price		Usually exercisable		At	Granted	Exercised	Lapsed	At
from	to	from	to	from	to	1 Jan 2021	during year	during year¹	during year	31 Dec 2021
		(£)	(£)
20 Sep 2015	22 Sep 2021	2.6270	5.9640	1 Nov 2019	30 Apr 2027	130,952,539	15,410,381	3,878,418	19,287,652	123,196,850

1 The weighted average closing price of the shares immediately before the dates on which options were exercised was £4.3351.

Statement of compliance

The statement of corporate governance practices set out on pages 217 to 296 and the information referred to therein constitutes the 'Corporate governance report' and 'Report of the Directors' of HSBC Holdings. The websites referred to do not form part of this report.

Relevant corporate governance codes, role profiles and policies
UK Corporate Governance Code	www.frc.org.uk
Hong Kong Corporate Governance Code (set out in Appendix 14 to the Rules Governing the Listing of Securities on the Stock Exchange of Hong Kong Limited)	www.hkex.com.hk
Descriptions of the roles and responsibilities of the: - Group Chairman - Group Chief Executive - Senior Independent Director - Board	www.hsbc.com/who-we-are/leadership-and-governance/board-responsibilities
Board and senior management	www.hsbc.com/who-we-are/leadership-and-governance
Roles and responsibilities of the Board's committees	www.hsbc.com/who-we-are/leadership-and-governance/board-committees
Board's policies on: - diversity and inclusion - shareholder communication - human rights - remuneration practices and governance	www.hsbc.com/who-we-are/leadership-and-governance/board-responsibilities
Global Internal Audit Charter	www.hsbc.com/who-we-are/leadership-and-governance/corporate-governance-codes/internal-control

HSBC is subject to corporate governance requirements in both the UK and Hong Kong. During 2021, HSBC complied with the provisions and requirements of both the UK and Hong Kong Corporate Governance Codes.

Under the Hong Kong Code, the audit committee should be responsible for the oversight of all risk management and internal control systems. HSBC's Group Risk Committee is responsible for oversight of internal control, other than internal control over financial reporting, and risk management systems. This is permitted under the UK Corporate Governance Code.

HSBC Holdings has codified obligations for transactions in Group securities in accordance with the requirements of the UK Market Abuse Regulation and the rules governing the listing of securities on HKEx, save that the HKEx has granted waivers from strict compliance with the rules that take into account accepted practices in the UK, particularly in respect of employee share plans. During the year, all Directors were reminded of their obligations in respect of transacting in HSBC Group securities. Following specific enquiry all Directors have confirmed that they have complied with their obligations.

On behalf of the Board

Mark E Tucker

Group Chairman

HSBC Holdings plc

Registered number 617987

22 February 2022

Directors' responsibility statement

The Directors are responsible for preparing the Annual Report and Accounts 2021, the Directors' remuneration report and the financial statements in accordance with applicable law and regulations.

Company law requires the Directors to prepare financial statements for each financial year. Under that law, the Directors have prepared the parent company ('Company') and Group financial statements in accordance with UK-adopted international accounting standards. The company has also prepared financial statements in accordance with international financial reporting standards adopted pursuant to Regulation (EC) N0 1606/2002 as it applies in the European Union. In preparing these financial statements, the Directors have also elected to comply with International Financial Reporting Standards issued by the International Accounting Standards Board (IFRSs as issued by IASB). Under company law, the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and Group, and of the profit or loss of the Company and Group for that period. In preparing these financial statements, the Directors are required to:

• select suitable accounting policies and then apply them consistently;

• make judgements and accounting estimates that are reasonable and prudent;

• state whether applicable UK-adopted international accounting standards, international financial reporting standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union and IFRSs issued by IASB have been followed, subject to any material departures disclosed and explained in the financial statements; and

• prepare the financial statements on a going concern basis unless it is inappropriate to presume that the Company and Group will continue in business.

The Directors are also responsible for safeguarding the assets of the Company and the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions, and disclose with reasonable accuracy at any time the financial position of the Company and the Group and enable them to ensure that the financial statements and the Directors' remuneration report comply with the Companies Act 2006 and, as regards the Group financial statements, Article 4 of the IAS Regulation.

The Directors are responsible for the maintenance and integrity of the Annual Report and Accounts 2021 as they appear on the Company's website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

The Directors consider that the Annual Report and Accounts 2021, taken as a whole, is fair, balanced and understandable, and provides the information necessary for shareholders to assess the Company's position and performance, business model and strategy.

Each of the Directors, whose names and functions are listed in the 'Report of the Directors: Corporate governance report' on pages 220 to 223 of the Annual Report and Accounts 2021, confirms that, to the best of their knowledge:

• the Group financial statements, which have been prepared in accordance with UK-adopted international accounting standards, international financial reporting standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union and IFRSs issued by IASB, give a true and fair view of the assets, liabilities, financial position, and profit or loss of the Group; and

• the management report represented by the Report of the Directors includes a fair review of the development and performance of the business and the position of the Group, together with a description of the principal risks and uncertainties that it faces.

The Group Audit Committee has responsibility, delegated to it from the Board, for overseeing all matters relating to external financial reporting. The Group Audit Committee report on page 240 sets out how the Group Audit Committee discharges its responsibilities.

Disclosure of information to auditors

In accordance with section 418 of the Companies Act 2006, the Directors' report includes a statement, in the case of each Director in office as at the date the Report of the Directors is approved, that:

• so far as the Director is aware, there is no relevant audit information of which the Company's auditors are unaware; and

• they have taken all the steps they ought to have taken as a Director in order to make themselves aware of any relevant audit information and to establish that the Company's auditors are aware of that information.

On behalf of the Board

Mark E Tucker

Group Chairman

HSBC Holdings plc

Registered number 617987

22 February 2022

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END

ACSEALAAAFPAEFA

TIDM	HSBA
Share Price	GBX 1,308.80-1.00%
Market Cap	£233.18bn

Date	22 Feb 2022
Time	16:30:08
Category	Results
ID	4607C

TIDM	HSBA
Share Price	GBX 1,308.80-1.00%
Market Cap	£233.18bn

Date	22 Feb 2022
Time	16:30:08
Category	Results
ID	4607C

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