Mention bankers' bonuses these days and many people automatically see red. Given the disappointing full-year results announced by HSBC, the GBP38 million (HK$440 million) pay bonanza handed out to its six top directors has surprisingly met with a mute public response. It certainly helps the bank's image that chief executive Michael Geoghegan is giving his GBP4 million bonus to charity, something he has apparently been doing since the start of his career. The gesture has had the intended public relations effect, but it is nevertheless to be applauded.
Also, chairman Stephen Green, who will receive no bonus, has been an outspoken critic of outsized executive pay in the financial sector. It is commendable that the two top directors at the bank have a sense of corporate responsibility and are acting on it.
Europe's largest bank took no bailout money. Even during the worst period of the financial crisis, it managed to make a profit, however meagre. This contrasts sharply with many of its peers who received large bonuses despite their institutions having become wards of the state in Britain and the US. A Christian and an author, Green has rightly denounced this kind of financial parasitism that has given the banking industry a bad name.
However, unlike members of the public, HSBC shareholders may not take such a favourable view. Pretax profits, at US$7.1 billion, are way below what analysts had forecast. The US$5.8 billion net income in 2009 was just 2 per cent higher than that from the year before. Its operations in the US continue to take massive losses and are expected to drag on overall profits for at least another two years. HSBC is cutting its gross dividend payout by half - this from a bank once known for raising dividends year after year.
With the substantial dividend cut that shareholders have to suffer, especially those who did not subscribe to the rights issue last year, they may rightly ask why the bank's top directors continue to receive generous pay instead of sharing the pain. They are entitled to push them for better results even if the public may not do the same.
