Follow TopicFollow Contributor Share Feedback
HSBC Shareholders Vote to Lift Bonus Cap

HSBC Shareholders Vote to Lift Bonus Cap

by Starling Insights

Starling Insights Editorial Board

May 07, 2024


As reported by The Banker's Amalia Illgner, HSBC shareholders were set to vote on a proposal to lift the bank's bonus cap last week. While many supported the move, some have expressed concerns about increasing compensation with the bank's long history of culture and governance failures.

In November 2023, the UK repealed the limit on bankers' bonuses to a maximum of double their base salary. The cap was implemented in 2014 by the EU, at which time the UK was a member. Many executives argue that allowing for greater variable compensation will improve UK businesses' talent retention and economic competitiveness. "It will enable banks like HSBC to have greater flexibility over their cost base to deal with downturns," said Mardi MacGregor, a Partner at law firm Fox Williams. “In the longer term it could enable banks to reduce their fixed costs — their real fixed pay.”

Stephen Scott, Starling's Founder and CEO, offered a more cautious view given the frequent misconduct scandals banks have found themselves in over the past decade. "HSBC nearly went to the wall in 2012 when it was forced to pay $1.9bn after lapses in its anti-money laundering programme made it the bank of choice for drug cartels," Scott said in comments provided to The Banker. While HSBC has made a "remarkable turnaround against significant headwinds,” he acknowledged, it would not be unreasonable for shareholders to question whether such a compensation increase is appropriate.

HSBC Shareholders went on to approve the proposal on Friday. It remains to be seen how this impacts the bank's competitiveness and risk management environment. However, if HSBC executives are to ensure that higher variable pay does not incentivize excessive risk-taking behavior, they would be wise to attend to the cultural and social incentives that actually drive employee behavior.

Join The Discussion

See something that doesn't look quite right?

We strive to provide high quality and accurate content at all times. With that said, we realize that sometimes links break, new information becomes available, or there is something that you feel we may have missed.

If you see something that you think we should be aware of, we would love to hear from you. Feel free to drop us a note below and leave your name and contact info if you'd like to hear back from us.

Thank you for being a key part of the Starling Insights community!