The earnings per share award accounts for 50 percent of each Performance Share award and is measured using a defined formula based on HSBC’s earnings per share growth over the three-year period as compared to the base-year earnings per share, which is earnings per share for the year prior to the year the Performance Shares are granted. None of the earnings per share Performance Shares will vest unless a minimum earnings per share is reached at the end of three years.
REMCO maintains discretion to determine that a Performance Share award will not vest unless satisfied that HSBC’s financial performance has shown sustained improvement since the date of the award. REMCO may also waive, amend or relax performance conditions if it believes the performance conditions have become unfair or impractical and believes it appropriate to do so. Due to the probability of one or both of the performance conditions not being met in part or in full, grants of Performance Shares are for a greater number of shares than Restricted Share grants. The expected value of Performance Shares is equal to 44 percent of the face value.
Within the Global Banking and Markets businesses, a portion of each discretionary bonus award is paid in Restricted Shares. The minimum deferral threshold, or the portion of each bonus award paid in Restricted Shares, and vesting schedules may vary by business unit within the parameters set by Global Banking and Markets for their businesses.
Mr. Lawrence has served as President and Chief Executive Officer of HUSI and HBUS since February 21, 2007. He has also served as Head of Global Banking and Markets, North America since October 2006.
Mr. Lawrence participates in general benefits available to executives of HUSI and HBUS and certain additional benefits available to HSBC’s international staff executives. Compensation packages for international staff executives are compared as a total package, consisting of base salary, a cash incentive award, stock awards and perquisites, against the Comparator Group as well as internal peers on a global basis and are awarded on a discretionary basis. In addition, in determining Mr. Lawrence’s total compensation, the HSBC CEO considered his individual performance measured against HUSI and HBUS’s annual operating plan, the performance of HUSI and HBUS and Mr. Lawrence’s leadership of HUSI and HBUS through a very difficult U.S. business environment. For 2007, Mr. Lawrence’s goals included implementing the annual operating plan of HUSI, improving collaboration across the HSBC North America business entities, achieving a targeted net income goal, executing cost containment initiatives to achieve a profit before tax target, managing reputational risk and developing talent and creating strong talent pools and succession plans. Mr. Lawrence’s cash compensation for 2007 was determined by REMCO on the recommendation of the HSBC CEO who consulted with HSBC Human Resources executives. As with all HUSI executives, REMCO has authority over Mr. Lawrence’s equity-based awards. The Compensation Committee did not review or make recommendations with respect to Mr. Lawrence’s compensation for 2007.
In March 2007, the HSBC CEO proposed and REMCO endorsed an award to Mr. Lawrence of Restricted Shares with a grant date value of $434,324 and Restricted Shares with a grant date value of $400,000. The awards were made in recognition of Mr. Lawrence’s 2006 performance. In January 2008, the HSBC CEO proposed and REMCO endorsed an award to Mr. Lawrence of Restricted Shares with a grant date value of $1,461,243. The January 2008 discretionary award, which is granted in March 2008, was made in recognition of Mr. Lawrence’s 2007 performance and reflects the HSBC CEO’s view of the value of Mr. Lawrence’s long-term contribution to and leadership within HSBC, including HUSI and the Global Banking and Markets business in North America, and HSBC’s desire to retain Mr. Lawrence and to motivate and reward his outstanding performance. The 2008 Restricted Share award is also consistent with maintaining Mr. Lawrence’s total compensation at a competitive market pay level in respect of his performance and long-term value to the HSBC Group. The awards are each subject to a three-year vesting schedule.
In January 2008, the HSBC CEO proposed and REMCO endorsed a discretionary bonus award to Mr. Lawrence of $1,555,243. The HSBC CEO proposed the award in recognition of Mr. Lawrence’s performance in his role as President and Chief Executive Officer of HUSI and HBUS. In considering Mr. Lawrence’s bonus award, the HSBC CEO considered Mr. Lawrence’s personal contribution to the achievement of the business objectives of HUSI and HBUS, as described above. In addition, the award recognizes his contribution across other Group businesses. The discretionary bonus award was considered as part of the overall assessment of Mr. Lawrence’s total compensation, which was based on his 2007 performance and benchmarked against HUSI and HBUS’s Comparator Group.
In conformance with HSBC’s total compensation philosophy, Mr. Lawrence also received perquisites relating to housing, education, travel and tax equalization, that were significant when compared to other compensation received by other executive officers within HUSI and HBUS. These amounts are consistent, however, with perquisites paid to similarly-placed HSBC international staff executives, who are subject to appointment to HSBC locations globally as deemed appropriate by HSBC senior management. The additional perquisites and benefits available to HSBC international staff executives, as described below in the Summary Compensation Table, are intended to compensate executives for the significant cost and expense incurred in connection with global postings.
Compensation of Sandra L. Derickson, Former Chief Executive Officer
On February 20, 2007, Ms. Derickson resigned as the President and Chief Executive Officer of HUSI. Until that time, she participated in the same programs and generally received compensation based on the same factors as the other executive officers. Ms. Derickson had an employment agreement with HSBC Finance Corporation pursuant to which she was to serve as President and Chief Executive Officer of HUSI until March 28, 2008. However, upon Ms. Derickson’s resignation, the employment agreement was terminated and replaced with a separation agreement entered into on February 20, 2007 between Ms. Derickson and HSBC Finance Corporation. The Compensation Committee did not review or make recommendations with respect to Ms. Derickson’s compensation for 2007.
Pursuant to the separation agreement, Ms. Derickson received $18,846, representing all base salary earned but unpaid as of February 20, 2007, and $19,295 in respect of vacation earned but not taken prior to her departure. In addition, Ms. Derickson was entitled to receive $1,300,500 on the first day of September 2007, reflecting, in substantial part, a bonus to the 2006 executive bonus pool to which she was entitled in accordance with the terms of her employment agreement but did not receive. In addition, Ms. Derickson continues to receive her base salary, at a rate of $700,000 per annum through March 28, 2008. On January 2, 2008 she received payments for guaranteed bonuses in the amounts of $1,275,000 for the period January 1, 2007 through December 31, 2007 and $318,750 for the period January 1, 2008 through March 28, 2008. Ms. Derickson is also to receive interest on all payments to which she is entitled to but has not received at a rate of seven percent from the date they would be due until the date each such payment is made.
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Pursuant to the separation agreement, Ms. Derickson was entitled to the payment of premiums for medical and dental insurance, continued coverage in HSBC Finance Corporation’s life insurance plan and allowances for umbrella liability insurance, automobile and financial counseling until the earlier of such time as Ms. Derickson becomes eligible to participate in similar plans or policies of another employer and March 28, 2008. All options to purchase shares granted to Ms. Derickson prior to November 20, 2002 pursuant to the Household International 1996 Long-Term Executive Incentive Compensation Plan are fully vested and remain exercisable for the full ten-year and one-day term. All options to purchase shares granted on and after November 20, 2002 pursuant to the 1996 plan are fully vested and exercisable for the full ten-year and one-day term.
Ms. Derickson’s separation agreement included a non-competition provision for the five-month period following her departure. In addition, the agreement contained a non-solicitation provision that stated that, subject to some exceptions, during the one-year period starting February 20, 2007, Ms. Derickson would not directly or indirectly induce any employee of HUSI or its affiliates to terminate employment with any such entity, and would not, directly or indirectly, hire, employ or offer employment or assist in hiring, employing or offering employment, to any person who is or was employed by HUSI or an affiliate.
Compensation of Gerard Mattia, Chief Financial Officer
Mr. Mattia has served as Senior Executive Vice President and Chief Financial Officer of HUSI and HBUS since March 2007. He has also served as Chief Financial Officer of Global Banking and Markets, North America since September 2004. As a result, his compensation package was considered and approved by both the HUSI CEO and the Head of Global Banking and Markets. The Compensation Committee did not review or make recommendations with respect to Mr. Mattia’s compensation for 2007.
Mr. Mattia participates in general benefits available to executives of HUSI and HBUS. Mr. Mattia’s total compensation in 2007 was $1,655,000. In recommending Mr. Mattia’s 2007 compensation package, HUSI Human Resources executives and Global Banking and Markets senior management considered the performance of HUSI and HBUS as well as the Global Banking and Markets businesses locally and globally and their judgment of competitive compensation levels within the relevant markets. The recommendation also reflected senior management’s view of Mr. Mattia’s contribution to the business in 2007, his fundamental role in supporting both the Global Banking and Markets businesses in North America and HUSI and HBUS generally, and the desire to retain Mr. Mattia within HSBC. The Head of Global Banking and Markets and the HUSI CEO agreed with senior management’s recommendation and approved Mr. Mattia’s total compensation package.
As described above, the allocation of compensation between base salary and incentive compensation within Global Banking and Markets, as well as between long-term and short-term incentives, is recommended by senior management in its discretion and reviewed and approved by the HSBC CEO. Mr. Mattia’s 2007 compensation package was also reviewed and approved by the HUSI CEO after consultation with HUSI Human Resources executives. For 2007, Mr. Mattia’s compensation package consisted of $255,000, or approximately 15 percent of his total compensation, in base salary and $1,400,000, or approximately 85 percent, as a discretionary bonus award. Of the discretionary bonus award, Mr. Mattia received $910,000 in cash and the balance will be deferred through a grant of Restricted Shares in March 2008 with a grant date value of $490,000. The Restricted Share award is also consistent with maintaining Mr. Mattia’s total compensation at a competitive market pay level in respect of his performance and long-term value to the HSBC Group. The Restricted Share award is subject to a three-year vesting schedule.
Other compensation paid to Mr. Mattia, including the perquisites described below in the Summary Compensation Table, is consistent with perquisites paid to similarly-placed executive officers within and outside of HSBC.
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Compensation of John J. McKenna, Former Chief Financial Officer
Mr. McKenna served as Senior Executive Vice President and Chief Financial Officer of HUSI and HBUS from October 2005 to March 2007. In March 2007, Mr. Mattia succeeded Mr. McKenna as Chief Financial Officer of HUSI and HBUS. In October 2007, Mr. McKenna accepted a position as chief financial officer of an HSBC affiliate in Australia. Prior to that date, Mr. McKenna participated in general benefits available to executives of HUSI and HBUS. Mr. McKenna’s base salary for 2006 was $325,040. In determining his base salary for 2007, the HUSI CEO reviewed competitive compensation levels and found Mr. McKenna’s base salary to be slightly below the 50th percentile among similarly-placed executives in salary survey data as well as internal peers on a global basis. In keeping with the HSBC reward strategy of maintaining executive base salaries in the 50th percentile, a recommendation was made to the HUSI CEO and Chief Executive Officer of HNAH and Mr. McKenna’s base salary was increased by five percent to $341,303.
In February 2007, the HUSI CEO, in consultation with the Chief Executive Officer of HNAH and HUSI Human Resources executives, approved an award to Mr. McKenna of Restricted Shares with a grant date value of $350,000. In 2008, a share award was not recommended for Mr. McKenna. The award is subject to a three-year vesting schedule.
In January 2008, the HUSI CEO proposed a discretionary bonus award to Mr. McKenna of $162,726. The discretionary bonus award was considered as part of the overall assessment of Mr. McKenna’s total compensation, which was based on his 2007 performance and benchmarked against HUSI’s Comparator Group.
Other compensation paid to Mr. McKenna, including the perquisites described below in the Summary Compensation Table, is consistent with perquisites paid to similarly-placed executive officers within and outside of HSBC.
Compensation of Janet L. Burak, Senior Executive Vice President & General Counsel
Ms. Burak has served as Senior Executive Vice President & General Counsel of HUSI and HBUS since April 2004. She also served as Secretary of HUSI and HBUS from April 2004 to September 1, 2007. In addition to her role as General Counsel, Ms. Burak was assigned the additional responsibility for the North American compliance function on July 1, 2007. She was appointed Senior Executive Vice President & General Counsel of HNAH, HUSI and HBUS’s North American parent, as of December 1, 2007.
Ms. Burak participates in general benefits available to executives of HUSI and HBUS. Ms. Burak’s 2007 compensation was determined as a total compensation package and included base salary, a cash incentive award, stock awards and perquisites. In determining Ms. Burak’s total compensation for 2007, the Compensation Committee considered the performance of HUSI and Ms. Burak’s individual performance and contributions to the North American businesses in 2007, which included, among others, efforts towards the development of a “best practices” approach to regulatory management and corporate governance processes, significant contributions in addressing the various challenges to the North American operations arising out of general market and economic developments during the second half of 2007, process and structure improvements in the North American compliance function, and overall leadership in the further development of the performance and consultative skills of the North American legal function. The HUSI CEO determined Ms. Burak’s equity-based awards, which recommendation was approved by the HSBC CEO and endorsed by REMCO.
Ms. Burak’s base salary for 2006 was $400,208. In determining Ms. Burak’s base salary for 2007, the Compensation Committee reviewed competitive compensation levels and found Ms. Burak’s base salary to be slightly below the 50th percentile among similarly-placed executives in salary survey data as well as internal peers on a global basis. In keeping with the HSBC reward strategy of maintaining executive base salaries in the 50th percentile, a recommendation was made to the HSBC CEO and Ms. Burak’s base salary was increased by five percent to $420,218. Her base salary was increased to $500,000 on July 1, 2007 in consideration of her additional responsibilities with respect to the North American compliance function and further increased to $550,000 on December 1, 2007 in consideration of her additional responsibilities as General Counsel of HNAH.
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In March 2007, the HSBC CEO, upon the recommendation of the Compensation Committee in consultation with HUSI Human Resources executives, proposed and REMCO endorsed an award to Ms. Burak of Restricted Shares with a grant date value of $500,000. The award was made in recognition of Ms. Burak’s 2006 performance. In March 2008, the HSBC CEO, upon the recommendation of the Compensation Committee, proposed and REMCO endorsed an award to Ms. Burak of Restricted Shares with a grant date value of $600,000. The March 2008 award was made in recognition of Ms. Burak’s 2007 performance and reflects the HUSI CEO’s and the HSBC CEO’s view of the value of Ms. Burak’s long-term contribution to HSBC, including the North American operations, and HSBC’s desire to retain Ms. Burak and to motivate and reward her outstanding performance. The 2008 Restricted Share award is also consistent with maintaining Ms. Burak’s total compensation at a competitive market pay level in respect of her performance and long-term value to the HSBC Group. The awards are each subject to a three-year vesting schedule.
In January 2008, the Compensation Committee, upon the recommendation of the HUSI CEO, proposed, and the HSBC CEO approved, a discretionary bonus award to Ms. Burak of $800,000. The HUSI CEO recommended the award in recognition of Ms. Burak’s personal contributions to the North American businesses. The discretionary bonus award was considered as part of the overall assessment of Ms. Burak’s total compensation, which was based on her 2007 performance, as described above, and benchmarked against HUSI’s Comparator Group.
Other compensation paid to Ms. Burak, including the perquisites described below in the Summary Compensation Table, is consistent with perquisites paid to similarly-placed executive officers within and outside of HSBC.
Compensation of David Dew, Senior Executive Vice President – Chief Operating Officer
Mr. Dew has served as Senior Executive Vice President and Chief Operating Officer of HUSI and HBUS since March 2007. He served as Chief Administrative Officer of HUSI and HBUS from February to March 2007 and as Senior Executive Vice President, Audit for HSBC North America Inc. (HNAI) from January 2006 to February 2007.
Mr. Dew participates in general benefits available to executives of HUSI and HBUS and certain additional benefits available to HSBC’s international staff executives. Compensation packages for international staff executives are compared as a total package, consisting of base salary, a cash incentive award, stock awards and perquisites, against the Comparator Group as well as internal peers on a global basis and are awarded on a discretionary basis. In determining Mr. Dew’s total compensation for 2007, the HUSI CEO and the HSBC CEO considered the performance of HUSI and Mr. Dew’s individual performance and contributions in implementing HUSI’s 2007 annual operating plan, which included, among others, implementing a more integrated operational infrastructure across customer groups and support functions, implementing cost containment initiatives to support achievement of established profit before tax targets, pursuing greater transparency and enhanced accountability for senior executives within the support functions while maintaining positive working relationships with functional executives, and efforts supporting collaboration across the HSBC North America business entities and customer groups. The HUSI CEO determined Mr. Dew’s equity-based awards, which recommendation was approved by the HSBC CEO and endorsed by REMCO.
Mr. Dew’s base salary for 2007 was $554,338. In determining Mr. Dew’s base salary for 2007, the HUSI CEO reviewed the salary levels of Mr. Dew’s internal peers of equivalent experience level on a global basis. In accordance with the HSBC reward strategy where the focus is on using variable compensation to reward performance, Mr. Dew’s base salary was positioned around the 50th percentile of the market rate. No salary adjustment was made on Mr. Dew’s appointment as Chief Operating Officer of HUSI and HBUS.
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In March 2007, the HSBC CEO, upon the recommendation of the HUSI CEO, proposed and REMCO endorsed an award to Mr. Dew of Restricted Shares with a grant date value of $98,710. The award was made in recognition of Mr. Dew’s 2006 performance. In January 2008, the HSBC CEO, upon the recommendation of the HUSI CEO, proposed and REMCO endorsed an award to Mr. Dew of Restricted Shares with a grant date value of $250,000. The January 2008 award was made in recognition of Mr. Dew’s 2007 performance and reflects the HUSI CEO and the HSBC CEO’s view of the value of Mr. Dew’s long-term contribution to HSBC, including HUSI and HBUS, and HSBC’s desire to retain Mr. Dew and to motivate and reward his outstanding performance. The 2008 Restricted Share award is also consistent with maintaining Mr. Dew’s total compensation at a competitive market pay level in respect of his performance and long-term value to the HSBC Group. The awards are each subject to a three-year vesting schedule.
In January 2008, the HUSI CEO recommended, and the HSBC CEO approved, a discretionary bonus award to Mr. Dew of $550,000. The HUSI CEO proposed the award in recognition of Mr. Dew’s performance in his role as Chief Operating Officer of HUSI and HBUS. In considering Mr. Dew’s discretionary bonus award, the HUSI CEO considered Mr. Dew’s personal contribution to the achievement of the business objectives of HUSI and HBUS. The discretionary bonus award was considered as part of the overall assessment of Mr. Dew’s total compensation, which was based on his 2007 performance, as described above, and benchmarked against HUSI’s Comparator Group.
In conformance with HSBC’s total compensation philosophy, Mr. Dew also received perquisites relating to housing, education, travel and tax equalization, that were significant when compared to other compensation received by other executive officers within HUSI. These amounts are consistent, however, with perquisites paid to similarly-placed HSBC international staff executives, who are subject to appointment to HSBC locations globally as deemed appropriate by HSBC senior management. The additional perquisites and benefits available to HSBC international staff executives, as described below in the Summary Compensation Table, are intended to compensate executives for the significant cost and expense incurred in connection with global postings.
Compensation of Kevin Newman, Senior Executive Vice President – Personal Financial Services
Mr. Newman has served as Group General Manager and Senior Executive Vice President, Personal Financial Services since December 2006. Prior to that, he served as Senior Executive Vice President, Personal Financial Services from September 2005 to October 2006 and as Executive Vice President, Personal Financial Services from December 2003 to September 2005. Mr. Newman was named a Group General Manager in April 2005.
Mr. Newman participates in general benefits available to executives of HUSI and HBUS. Mr. Newman’s 2007 compensation was determined as a total compensation package and included base salary, a cash incentive award, stock awards and perquisites. In determining Mr. Newman’s total compensation for 2007, the Compensation Committee considered the performance of HUSI and Mr. Newman’s individual performance and contributions to the Personal Financial Services business in 2007, which included, among others, efforts in connection with the re-launch of the Premier proposition, both locally and globally, leadership of HSBC Direct, improvements to the Wealth Management and Small Business operations, improved efficiencies and performance of the branch network and reduced average time to profitability of new branches, and overall leadership of the Personal Financial Services business in 2007 as it made considerable progress in building core capabilities. The HUSI CEO determined Mr. Newman’s equity-based awards, which recommendation was approved by the HSBC CEO and endorsed by REMCO.
Mr. Newman’s base salary for 2006 was $500,000. In determining Mr. Newman’s base salary for 2007, the Compensation Committee reviewed competitive compensation levels and found Mr. Newman’s base salary to be slightly below the 50th percentile among similarly-placed executives in salary survey data as well as internal peers on a global basis. In keeping with the HSBC reward strategy of maintaining executive base salaries in the 50th percentile, the Compensation Committee recommended a base salary increase of four percent to $520,000, which recommendation was approved by the HSBC CEO and endorsed by REMCO.
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In March 2007, the HSBC CEO, upon the recommendation of the Compensation Committee, proposed and REMCO endorsed an award to Mr. Newman of Restricted Shares with a grant date value of $748,000. The award was made in recognition of Mr. Newman’s 2006 performance. In January 2008, the HSBC CEO, upon the recommendation of the Compensation Committee, proposed and REMCO endorsed an award to Mr. Newman of Restricted Shares with a grant date value of $1,000,000. The January 2008 award was made in recognition of Mr. Newman’s 2007 performance and reflects REMCO and the HSBC CEO’s view of the value of Mr. Newman’s long-term contribution to HSBC, including HUSI and HBUS, and HSBC’s desire to retain Mr. Newman and to motivate and reward his outstanding performance. The 2008 Restricted Share award is also consistent with maintaining Mr. Newman’s total compensation at a competitive market pay level in respect of his performance and long-term value to the HSBC Group. The awards are each subject to a three-year vesting schedule.
In January 2008, the HSBC CEO, upon the recommendation of the Compensation Committee, proposed, and REMCO endorsed, a discretionary bonus award to Mr. Newman of $1,000,000. The HSBC CEO recommended the award in recognition of Mr. Newman’s personal contributions to the Group’s PFS franchise and leadership in pursuit of the achievement of PFS business objectives in North America. The discretionary bonus award was considered as part of the overall assessment of Mr. Newman’s total compensation, which was based on his 2007 performance, as described above, and benchmarked against HUSI’s Comparator Group.
Other compensation paid to Mr. Newman, including the perquisites described below in the Summary Compensation Table, is consistent with perquisites paid to similarly-placed executive officers within and outside of HSBC.
Compensation Committee Interlocks and Insider Participation
The primary purpose of the Compensation Committee is to assist the Board of Directors in discharging its responsibilities related to the compensation of the Chief Executive Officer, other officers of HUSI holding a title of executive vice president and above and such other officers as may be designated by the Board of Directors. The Compensation Committee is comprised of the following directors: Dr. Frances D. Fergusson (Chair), Donald K. Boswell and James L. Morice. All members of the Compensation Committee are independent directors under HUSI’s Corporate Governance Standards. Additional information with regard to the Compensation Committee, including a description of the committee’s responsibilities under its charter, is contained in the section of this Form 10-K entitled Item 10. Directors, Executive Officers and Corporate Governance – Corporate Governance.
Compensation Committee Report
We, the Human Resources & Compensation Committee of the Board of Directors of HSBC USA Inc., have reviewed and discussed the Compensation Discussion and Analysis (“2007 CD&A”) set forth above with management and, based on such review and discussion, have recommended to the Board of Directors that the 2007 CD&A be included in this Annual Report on Form 10-K.
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| Human Resources & Compensation Committee |
| Dr. Frances D. Fergusson (Chair) |
| Donald K. Boswell |
| James L. Morice |
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The following tables and narrative text discuss the compensation awarded to, earned by or paid to (i) Mr. Paul J. Lawrence, who has served as HUSI’s Chief Executive Officer since February 21, 2007, (ii) Ms. Sandra L. Derickson, who served as HUSI’s Chief Executive Officer from January 1, 2007 to February 20, 2007 and who served as Chief Executive Officer-Designate from September 1, 2006 to December 31, 2006, (iii) Mr. Gerard Mattia, who has served as HUSI’s Chief Financial Officer since March 27, 2007, (iv) Mr. John J. McKenna who served as Chief Financial Officer during 2006 and from January 1, 2007 to March 26, 2007, and (v) the next three most highly compensated executive officers (other than the chief executive officer and chief financial officer) who were serving as executive officers as of December 31, 2007.
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Summary Compensation Table |
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Name and principal
position | | Year | | Salary | | Bonus (2) | | Stock
Awards
(3) | | Option
Awards
(4) | | Non-Equity
Incentive Plan
Compensation
(5) | | Change in
Pension Value
and
Nonqualified
Deferred
Compensation
Earnings (6) | | All Other
Compensation
(7) | | Total | |
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Paul J. Lawrence
President and
Chief Executive Officer | | 2007 | | $ | 642,986 | | $ | 1,555,243 | | $ | 508,634 | | $ | — | | $ | — | | $ | 502,728 | | $ | 847,730 | | $ | 4,057,321 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
Sandra L. Derickson (1) | | 2007 | | | 102,308 | | | — | | | — | | | — | | | — | | | 110,899 | | | 3,720,131 | | | 3,933,338 | |
Former President and
Chief Executive Officer | | 2006 | | | 233,333 | | | — | | | — | | | — | | | — | | | 63,386 | | | 192,632 | | | 489,351 | |
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Gerard Mattia
Senior Executive
Vice President and
Chief Financial Officer | | 2007 | | | 255,000 | | | 910,000 | | | 232,027 | | | — | | | | | | 8,287 | | | 15,245 | | | 1,420,559 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
John J. McKenna | | 2007 | | | 325,676 | | | — | | | 306,177 | | | — | | | 162,726 | | | 78,661 | | | 64,413 | | | 937,653 | |
Former Senior Executive
Vice President and
Chief Financial Officer | | 2006 | | | 321,196 | | | — | | | 222,114 | | | — | | | 381,934 | | | 92,238 | | | 16,685 | | | 1,034,167 | |
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Kevin Newman
Senior Executive Vice
President, Personal
Financial Services | | 2007 | | | 516,928 | | | — | | | 674,092 | | | — | | | 1,000,000 | | | 231,145 | | | 18,810 | | | 2,440,975 | |
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David Dew (8)
Senior Executive
Vice President and
Chief Operating Officer | | 2007 | | | 554,338 | | | 550,000 | | | 180,161 | | | — | | | — | | | 532,279 | | | 647,307 | | | 2,464,085 | |
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Janet L. Burak | | 2007 | | | 431,287 | | | — | | | 333,317 | | | — | | | 800,000 | | | 383,822 | | | 74,253 | | | 2,022,679 | |
Senior Executive
Vice President and
General Counsel | | 2006 | | | 395,176 | | | — | | | 415,346 | | | — | | | 736,383 | | | 368,753 | | | 92,597 | | | 2,008,255 | |
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(1) | Sandra L. Derickson resigned as President and Chief Executive Officer on February 20, 2007. The amount shown for Ms. Derickson is the pro rata portion of her annual base salary of $700,000. |
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(2) | The amount disclosed for Messrs. Lawrence, Mattia and Dew represent the discretionary cash bonus relating to 2007 performance but paid in February 2008. |
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(3) | Reflects the amounts of compensation expense amortized in 2007 for accounting purposes under FAS 123R for outstanding restricted stock grants made in the years 2003 through 2007. A portion of the expense reflected for Messrs. Lawrence, Newman and Dew relates to Performance Shares granted in 2005 and 2006 that will vest in whole or in part three years from the date of grant if all or some of the performance conditions are met, as follows: 50 percent of the award is subject to a total shareholder return measure (“TSR”) and will vest in whole or in part (based on a sliding scale of 0 to 100 percent) depending upon how the growth in HSBC’s share value, plus declared dividends, compares to the average shareholder return of a defined competitor group, which for 2006 grants was comprised of 28 major banking institutions, including ABN AMRO Holding N.V., Banco Bilbao Vizcaya Argentaria, S.A., Banco Santander Central Hispano S.A., Bank of America Corporation, The Bank of New York Mellon Company, Inc., Barclays PLC, BNP Paribas S.A., Citigroup, Inc., Credit Agricole SA, Credit Suisse Group, Deutsche Bank AG, HBOS plc, JP Morgan Chase, Lloyds TSB Group plc, Mitsubishi Tokyo Financial Group Inc., Mizuho Financial Group Inc., Morgan Stanley, National Australia Bank Limited, Royal Bank of Canada, The Royal Bank of Scotland Group plc, Société Générale, Standard Chartered PLC, UBS AG, Unicredito Italiano, US Bancorp, Wachovia |
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| Corporation, Wells Fargo & Company and Westpac Banking Corporation. The remaining 50 percent of the award is subject to satisfaction of an earnings per share measure (“EPS”) and may vest based on an incremental EPS percentage in accordance with a defined formula. If the aggregate incremental EPS is less than 24 percent, the EPS portion will be forfeited. If it is 52 percent or more, the EPS component will vest in full. We have reduced the amount of expense related to the Performance Shares that would have been recorded by 50 percent due to the probability of a 0 percent vest on the TSR portion and a 100 percent vest on the EPS portion for both years 2005 and 2006. HUSI records expense over the three-year period based on the fair value, which is 100 percent of the face value on the date of the award. The remaining grants are non-performance-based awards and are subject to various time vesting conditions as disclosed in the footnotes to the Outstanding Equity Awards at Fiscal Year End Table and will be released as long as the named executive officer is still in the employ of HUSI at the time of vesting. HUSI records expense based on the fair value over the vesting period, which is 100 percent of the face value on the date of the award. Dividend equivalents, in the form of cash or additional shares, are paid on all underlying shares of restricted stock at the same rate as paid to ordinary share shareholders. |
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(4) | The current philosophy of HSBC and HUSI, including within the Global Banking and Markets businesses, is to reward executive officers with awards of restricted shares rather than stock options. |
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(5) | The amounts disclosed for Messrs. McKenna and Newman and Ms. Burak represent the incentive bonus earned in 2007 but paid in February 2008 under the Management Incentive Program. |
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(6) | The HSBC-North America (U.S.) Retirement Income Plan (“RIP”), the Household Supplemental Retirement Income Plan (“SRIP”), the HSBC Bank Supplemental Plans (“Excess Plans”), and the HSBC International Staff Retirement Benefit Scheme (Jersey) (“ISRBS”) are described under Savings and Pension Plans on page 195. |
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| Increase in values by plan for each participant are: Ms. Derickson – $5,941 (RIP), $44,756 (SRIP); Mr. Mattia – $4,914 (RIP); Mr. McKenna – $39,552 (RIP), $39,109 (BEP); Mr. Newman – $37,316(RIP), $60,807 (SRIP); Ms. Burak – $23,805 (RIP), $350,856 (SRIP); and Mr. Lawrence – $502,728, and Mr. Dew – $532,279 (ISRBS, net of mandatory 2007 contribution). |
| |
(7) | Components of All Other Compensation are disclosed in the aggregate. All Other Compensation includes perquisites and other personal benefits received by each named executive officer, such as financial planning services, physical exams, club initiation fees, expatriate benefits and car allowances, to the extent such perquisites and other personal benefits exceeded $10,000 in 2007. The following itemizes perquisites and other benefits for each named executive officer who received perquisites and other benefits in excess of $10,000: Executive Tax Services for Mr. Lawrence was $804, for Mr. Dew was $787 and for Ms. Derickson was $6,228. The following executives received physical exams at the cost listed next to each of their names: Mr. Lawrence $9,868, Ms. Derickson $14,277, Mr. McKenna $541, and Ms. Burak $11,816. Car allowance for Mr. McKenna was $1,062 in 2007. Club Dues and Membership fees for Mr. Dew were $770. Ms. Derickson received Executive Umbrella Liability Coverage at a cost of $1,750 for 2007. In 2007, Messrs. Lawrence and Dew received $288,681 and $277,232, respectively, for Housing Allowances, and, Mr. Dew also received reimbursement on his foreign utilities expenses in the amount of $2,253. In 2007, Mr. Lawrence had $156,779 in Children’s Education Allowance. In 2007, Mr. Dew received $13,770 representing a Relocation Allowance. Ms. Burak received $8,462 as additional compensation for vacation earned, not taken, and sold back to the company. Messrs. Lawrence and Dew received $63,371 and $29,050, respectively, in Executive Travel Allowance, $34,872 and $18,588, respectively, in Loan Subsidy and Mr. Dew received $7,484 of Additional Income. Messrs. Lawrence and Dew received expat benefits at a cost to the company of $293,355 and $246,115, respectively. Mr. Dew also received a miscellaneous reimbursement of $1,009, plus $50,249 in tax gross ups. Mr. McKenna received an expat premium of $14,418 and cost of living adjustment of $968, plus tax equalization payments totaling $31,683. |
| |
| In addition, under the terms of her separation agreement, Ms. Derickson received the balance of her salary for 2007 in the amount of $597,692, pay for vacation earned but not taken in the amount of $19,295, $1,300,500 reflecting a bonus to cover 2006, a guaranteed bonus of $1,275,000 for 2007, $175,000 covering salary to be received in 2008 along with a prorated 2008 bonus of $318,750. |
| |
| The total in the All Other Compensation column includes life insurance premiums paid by HUSI in 2007 for the benefit of executives, as follows: Ms. Derickson, $2,868; Mr. Mattia, $1,745; Mr. McKenna, $2,241; Mr. Newman, $5,310; and Ms. Burak, $5,175. All Other Compensation also includes HUSI’s contribution for the named executive officer’s participation in the HSBC-North America (U.S.) Tax Reduction Investment Plan (“TRIP”) in 2007, as follows: Ms. Derickson had a $6,696 contribution; and Messrs. McKenna, Mattia and Newman and Ms. Burak each had a $13,500 contribution. In addition, Ms. Derickson and Ms. Burak each had a company contribution in the Supplemental Tax Reduction Investment Plan (“STRIP”) of $2,075 and $35,301, respectively, in 2007. TRIP and STRIP are described under Savings and Pension Plans – Deferred Compensation Plans on page 199. |
| |
(8) | David Dew was named to his position effective as of March 26, 2007, transferred from HSBC plc, and his salary is prorated for his time in position. |
191
|
Grants Of Plan-Based Awards Table |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | All Other
Stock
Awards:
Number
of Shares
of Stock
or Units
(#) | | All Other
Option
Awards:
Number of
Securities
Underlying
Options
(#) | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | Exercise
or Base
Price of
Option
Awards
($/Sh) | | Grant Date
Fair Value
of Stock
and Option
Awards
($) (2) (3) | |
| | | | | Estimated Future Payouts Under
Non-Equity Incentive Plan Awards (1) | | | Estimated Future Payouts Under
Equity Incentive Plan Awards (2) | | | | | |
| | | | | | | | | | | |
| | | | |
| | |
| | | | | |
| | | | Threshold
($) | | Target
($) | | Maximum
($) | | | Threshold
(#) | | Target
(#) | | Maximum
(#) | | | | | |
Name | | Grant Date | | | | | | | | | | | | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Paul J. Lawrence | | | 03/30/07 | | N/A | | | N/A | | | N/A | | | N/A | | | N/A | | | N/A | | | 24,699 | | | N/A | | | N/A | | $ | 431,740 | |
President and
Chief Executive Officer | | | 03/05/07 | | N/A | | | N/A | | | N/A | | | N/A | | | N/A | | | N/A | | | 22,798 | | | N/A | | | N/A | | | 400,000 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Sandra L. Derickson
Former President and
Chief Executive Officer | | | N/A | | N/A | | | N/A | | | N/A | | | N/A | | | N/A | | | N/A | | | N/A | | | N/A | | | N/A | | | N/A | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Gerard Mattia
Senior Executive
Vice President and
Chief Financial Officer | | | 03/05/07 | | N/A | | | N/A | | | N/A | | | N/A | | | N/A | | | N/A | | | 17,953 | | | N/A | | | N/A | | | 315,000 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
John J. McKenna
Former Senior Executive
Vice President and
Chief Financial Officer | | | 03/30/07 | | N/A | | | 255,977 | | | 511,955 | | | N/A | | | N/A | | | N/A | | | 20,022 | | | N/A | | | N/A | | | 350,000 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Kevin Newman
Senior Executive Vice
President, Personal
Financial Services | | | 03/30/07 | | N/A | | | 520,000 | | | 1,040,000 | | | N/A | | | N/A | | | N/A | | | 42,791 | | | N/A | | | N/A | | | 748,000 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
David Dew
Senior Executive Vice
President & Chief
Operating Officer | | | 03/30/07 | | N/A | | | N/A | | | N/A | | | N/A | | | N/A | | | N/A | | | 5,613 | | | N/A | | | N/A | | | 98,115 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Janet L. Burak
Senior Executive
Vice President and
General Counsel | | | 03/30/07 | | N/A | | | 550,000 | | | 1,100,000 | | | N/A | | | N/A | | | N/A | | | 28,603 | | | N/A | | | N/A | | | 500,000 | |
| |
(1) | Messrs. McKenna and Newman and Ms. Burak participate in the Management Incentive Program. As discussed in the 2007 CD&A, the Management Incentive Program is an annual cash incentive plan that is comprised of both quantitative and qualitative individual, business unit or company objectives that are determined at the beginning of the year with each objective being assigned a target and maximum payout based upon a percentage of base salary. The percentage of target and maximum payout is determined by market data for the position the executive officer holds and will not change unless the executive officer changes into a position that has a different target and maximum payout. Typically, the maximum payout is a 1x, 2x or 3x multiplier of target. Actual awards for the 2007 performance year for Messrs. McKenna and Newman and Ms. Burak were $162,726, $1,000,000 and $800,000, respectively, and were paid in February 2008. These amounts are included in the Summary Compensation Table above under “Non-Equity Incentive Plan Compensation”. |
| |
(2) | The total grant date fair value reflected is based on 100% of the fair market value of the underlying HSBC ordinary shares on March 30, 2007 (the date of grant) of GBP8.25 and converted into U.S. dollars using the GBP exchange rate as of the time of funding the of the grant was 1.96254. |
| |
(3) | The total grant date fair value reflected is based on 100% of the fair market value of the underlying HSBC ordinary shares on March 5, 2007 (the date of grant) of GBP8.9079 and converted into U.S. dollars using the GBP exchange rate as of the time of funding the of the grant was 1.9622. |
192
|
Outstanding Equity Awards At Fiscal Year-End Table |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Option Awards | | Stock Awards | |
| |
| |
| |
Name | | Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable | | | Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable | | | Equity
Incentive
Plan
Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options (#) | | Option
Exercise
Price | | Option
Expiration
Date | | Number
of Shares
or Units
of Stock
That Have
Not
Vested
(#) (1) | | Market
Value of
Shares or
Units of
Stock that
Have Not
Vested
($) (2) | | Equity
Incentive
Plan
Awards:
Number of
Unearned
Shares,
Units or
Other
Rights That
Have Not
Vested
(#) (1) | | Equity
Incentive
Plan Awards:
Market or
Payout Value
of Unearned
Shares,
Units or
Other Rights
That Have
Not Vested
($) (2) | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Paul J. Lawrence | | | | | | | | | | | | | | | | | | 22,798 | (6) | $ | 380, 904 | | | 10,706 | (3) | $ | 178,874 | |
President and | | | | | | | | | | | | | | | | | | 24,699 | (7) | | 412,666 | | | 23,734 | (4) | | 396,543 | |
Chief Executive Officer | | | | | | | | | | | | | | | | | | | | | | | | 30,274 | (5) | | 505,812 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Sandra L. Derickson | | | 133,750 | | (8 ) | | | | | | $ | 21.37 | | | 11/12/2011 | | | | | | | | | | | | | |
Former President and | | | 267,500 | | (8 ) | | | | | | $ | 10.66 | | | 11/20/2012 | | | | | | | | | | | | | |
Chief Executive Officer | | | 204,000 | | (8 ) | | | | | | | GBP9.1350 | | | 11/03/2013 | | | | | | | | | | | | | |
| | | | | | | | | 102,000 | (9) | | GBP8.2830 | | | 04/30/2014 | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Gerard Mattia | | | | | | | | | | | | | | | | | | 4,496 | (10) | | 75,118 | | | | | | | |
Senior Executive | | | | | | | | | | | | | | | | | | 7,221 | (11) | | 120,647 | | | | | | | |
Vice President and | | | | | | | | | | | | | | | | | | 17,953 | (15) | | 299,955 | | | | | | | |
Chief Financial Officer | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
John J. McKenna | | | | | | | | | | | | | | | | | | 9,456 | (12) | | 157,989 | | | 8,280 | (3) | | 138,341 | |
Former Senior Executive | | | | | | | | | | | | | | | | | | 23,611 | (13) | | 394,488 | | | | | | | |
Vice President and | | | | | | | | | | | | | | | | | | 20,022 | (7) | | 334,524 | | | | | | | |
Chief Financial Officer | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Kevin Newman | | | | | | | | | | | | | | | | | | 40,358 | (12) | | 674,293 | | | 15,294 | (3) | | 255,529 | |
Senior Executive Vice | | | | | | | | | | | | | | | | | | 35,416 | (13) | | 591,723 | | | | | | | |
President, Personal | | | | | | | | | | | | | | | | | | 42,791 | (7) | | 714,943 | | | | | | | |
Financial Services | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
David Dew (16) | | | 5,250 | | (8) | | | | | | | GBP7.46 | | | 04/03/2010 | | | 5,613 | (7) | | 93,781 | | | 17,800 | (4) | | 297,399 | |
Senior Executive | | | 5,250 | | (8) | | | | | | | GBP8.71 | | | 04/23/2011 | | | | | | | | | 12,927 | (5) | | 215,982 | |
Vice President and | | | 7,000 | | (8) | | | | | | | GBP8.41 | | | 05/07/2012 | | | | | | | | | | | | | |
Chief Operating Officer | | | 7,000 | | (8) | | | | | | | GBP6.91 | | | 05/02/2013 | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Janet L. Burak (16) | | | 26,750 | | (8) | | | | | | $ | 13.71 | | | 11/09/2008 | | | 6,667 | (14) | | 111,391 | | | 20,004 | (9) | | 334,223 | |
Senior Executive | | | 26,750 | | (8) | | | | | | $ | 16.96 | | | 11/08/2009 | | | 31,678 | (12) | | 529,270 | | | | | | | |
Vice President and | | | 26,750 | | (8) | | | | | | $ | 18.40 | | | 11/13/2010 | | | 29,513 | (13) | | 493,097 | | | | | | | |
General Counsel | | | | | | | | | | | | | | | | | | 28,603 | (7) | | 477,893 | | | | | | | |
| |
(1) | Share amounts do not include additional awards accumulated over the vesting periods. |
| |
(2) | The market value of the shares on December 31, 2007 was GBP8.42 and the exchange rate from GBP to U.S. dollars was 1.9843, which equates to a U.S. dollar share price of $16.7078 per share. |
| |
(3) | This award will vest in full on April 2, 2008, if the performance conditions are met. |
| |
(4) | This award will vest in full on March 31, 2008, if the performance conditions are met. |
| |
(5) | This award will vest in full on March 31, 2009, if the performance conditions are met. |
| |
(6) | This award will vest one-third on March 5, 2008, one-third on March 5, 2009, and one-third on March 5, 2010. |
| |
(7) | This award will vest in full on March 30, 2010. |
| |
(8) | Reflects fully vested options. |
| |
(9) | This award will vest, subject to satisfaction of performance conditions, two-thirds on the fourth anniversary of the date of grant, which was April 30, 2004. If the performance conditions are not satisfied on that date, it will be re-tested on the fifth anniversary of the date of grant, and if the performance conditions are met, will vest 100%. If the performance conditions are not met on the fifth anniversary of the date of grant, the options will be forfeited. |
| |
(10) | This award will vest in full on March 3, 2008. |
| |
(11) | This award will vest in full on February 28, 2008. |
| |
(12) | This award will vest in full on March 31, 2008. |
| |
(13) | This award will vest in full on March 31, 2009. |
| |
(14) | Thirty-three percent of this award vested on October 31, 2006, and thirty-three percent vested on October 31, 2007. Thirty-three percent of the award will vest on October 31, 2008. |
| |
(15) | This award will vest one-half on March 5, 2008, one-quarter on February 28, 2009 and one-quarter on February 28, 2010. |
| |
(16) | Option awards shown for Mr. Dew and Ms. Burak were awarded prior to joining HUSI. |
193
|
Option Exercises and Stock Vested Table |
|
| | | | | | | | | | | | | |
| | Option Awards | | Stock Awards | |
| |
| |
| |
Name | | Number of Shares
Acquired on
Exercise (#) | | Value Realized
on Exercise
($) (1) | | Number of Shares
Acquired on Vesting
(#)(2) | | Value Realized
on Vesting
($) (1) | |
|
|
|
|
|
|
|
|
|
|
Paul J. Lawrence | | | | | | | | | | | | | |
President and | | | | | | | | | | | | | |
Chief Executive Officer | | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Sandra L. Derickson | | | 107,000 | (3) | $ | 90,030 | | | 483,121 | (4) | $ | 8,383,152 | |
Former President and | | | | | | | | | | | | | |
Chief Executive Officer | | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Gerard Mattia | | | | | | | | | 7,537 | (5) | | 129,662 | |
Senior Executive | | | | | | | | | | | | | |
Vice President and | | | | | | | | | | | | | |
Chief Financial Officer | | | | | | | | | | | | | |
| | | | | | | | | | | | | |
John J. McKenna | | | | | | | | | | | | | |
Former Senior Executive | | | | | | | | | | | | | |
Vice President and | | | | | | | | | | | | | |
Chief Financial Officer | | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Kevin Newman | | | | | | | | | 15,796 | (6) | | 291,035 | |
Senior Executive Vice | | | | | | | | | | | | | |
President, Personal | | | | | | | | | | | | | |
Financial Services | | | | | | | | | | | | | |
| | | | | | | | | | | | | |
David Dew | | | | | | | | | | | | | |
Senior Executive | | | | | | | | | | | | | |
Vice President and | | | | | | | | | | | | | |
Chief Operating Officer | | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Janet L. Burak | | | | | | | | | 12,018 | (7) | | 221,746 | |
Senior Executive | | | | | | | | | | | | | |
Vice President and | | | | | | | | | | | | | |
General Counsel | | | | | | | | | | | | | |
| |
(1) | Value realized on exercise or vesting uses the GBP fair market value on the date of exercise/release and the exchange rate from GBP to U.S. dollars on the date of settlement. |
| |
(2) | Includes the release of additional awards accumulated over the vesting period. |
| |
(3) | Includes the exercise of stock options granted on November 13, 2000. |
| |
(4) | The amount shown for Ms. Derickson reflects equity awards received while an executive of HSBC Finance Corporation and prior to her appointment as President and Chief Executive Officer of HUSI and includes the release of 141,420 shares granted on April 15, 2003 and 302,481 shares granted on May 25, 2005. The remaining shares reflect the release of additional awards accumulated over the vesting period. |
| |
(5) | Includes the release of 7,537 shares granted on March 6, 2006. |
| |
(6) | Includes the release of 12,658 shares granted on April 15, 2002. Remaining shares are a release of additional awards accumulated over the vesting period. |
| |
(7) | Includes the release of 5,351 shares granted on November 20, 2002 and 6,667 shares granted on November 3, 2003. |
194
| | | | | | | | | | | |
Name | | Plan Name (1) | | Number of
Years Credited
Service (#) | | Present Value
of Accumulated
Benefit ($) | | Payments
During Last
Fiscal Year ($) | |
|
Paul J. Lawrence (2) | | ISRBS | | 24.9 | | $ | 2,347,686 | | $ | — | |
President and | | | | | | | | | | | |
Chief Executive Officer | | | | | | | | | | | |
| | | | | | | | | | | |
Sandra L. Derickson | | RIP-Account Based | | 7.3 | | | 36,481 | | | — | |
Former President and | | SRIP-Account Based | | 7.3 | | | 240,639 | | | — | |
Chief Executive Officer | | | | | | | | | | | |
| | | | | | | | | | | |
Gerard Mattia | | RIP-Account Based | | 2.3 | | | 13,691 | | | — | |
Senior Executive | | | | | | | | | | | |
Vice President and | | | | | | | | | | | |
Chief Financial Officer | | | | | | | | | | | |
| | | | | | | | | | | |
John J. McKenna (3) | | RIP-HSBC Old | | 21.2 | | | 300,994 | | | — | |
Former Senior Executive | | Excess-HSBC Old | | 21.2 | | | 76,356 | | | — | |
Vice President and | | | | | | | | | | | |
Chief Financial Officer | | | | | | | | | | | |
| | | | | | | | | | | |
Kevin Newman | | RIP-HSBC New | | 15.0 | | | 257,437 | | | — | |
Senior Executive Vice | | BEP-HSBC New | | 15.0 | | | 334,574 | | | — | |
President, Personal | | | | | | | | | | | |
Financial Services | | | | | | | | | | | |
| | | | | | | | | | | |
David Dew (4) | | ISRBS | | 29.7 | | | 3,578,760 | | | — | |
Senior Executive | | | | | | | | | | | |
Vice President and | | | | | | | | | | | |
Chief Operating Officer | | | | | | | | | | | |
| | | | | | | | | | | |
Janet L. Burak | | RIP-Household New | | 15.8 | | | 304,453 | | | — | |
Senior Executive | | SRIP-Household New | | 15.8 | | | 1,277,889 | | | — | |
Vice President and | | | | | | | | | | | |
General Counsel | | | | | | | | | | | |
| |
(1) | Plan described under Savings and Pension Plans below. |
| |
(2) | Value of age 53 benefit. Participant is also eligible for an immediate early retirement benefit with a value of $3,120,916. |
| |
(3) | Value of age 53 benefit. Participant is also eligible for an immediate early retirement benefit with a value of $3,809,515. |
| |
(4) | Value of age 53 benefit. Participant is also eligible for an immediate early retirement benefit with a value of $3,809,515. |
Savings and Pension Plans
Retirement Income Plan (RIP)
The HSBC-North America (U.S.) Retirement Income Plan (“RIP”) is a non-contributory, defined benefit pension plan for employees of HSBC North America and its U.S. subsidiaries who are at least 21 years of age with one year of service and not part of a collective bargaining unit. Benefits are determined under a number of different formulas that vary based on year of hire and employer.
195
Supplemental Retirement Income Plan (SRIP)
HSBC Bank (HBUS) Supplemental Plans (Excess Plans)
Supplemental Retirement Income Plan (“SRIP”) is a non-qualified retirement plan that is designed to provide benefits that are precluded from being paid to legacy Household employees by the RIP due to legal constraints applicable to all qualified plans. The HBUS Supplemental Benefit Plan and the Benefit Equalization Plan (the “Excess Plans”) are designed to provide benefits that are precluded from being paid to legacy HBUS employees by the defined benefit formula under the Retirement Income Plan (RIP) due to legal constraints applicable to all qualified plans. For example, the maximum amount of compensation during 2007 that can be used to determine a qualified plan benefit is $225,000 and the maximum annual benefit commencing at age 65 in 2007 is $180,000. SRIP and Excess Plan benefits are calculated without regard to these limits. The resulting benefit is then reduced by the value of qualified benefits payable by RIP so that there is no duplication of payments. Benefits are paid in a lump sum for retired executives covered by a Household Old, Household New, or Account Based Formula, and in the same manner as elected for the qualified plan for executives covered by a HBUS Old or New Plan Formula.
Formulas for Calculating Benefits
HBUS Old Plan Formula: Applies to executives who were participants in the HBUS pension plan before January 1, 1989. The normal retirement benefit is the sum of A and B below:
| | | |
| A. | A benefit determined under the HBUS New Plan Formula, provided service for this purpose is limited to 30 years reduced by years of service used in B. |
| | | |
| B. | A benefit determined by multiplying (a) by (b) as described below: |
| | | |
| | (a) | The gross benefit prior to offset by an integration amount is equal to two percent of average salary multiplied by the first 30 years of service. This gross benefit is then reduced by an integration amount equal to 2/3 of one percent of Social Security multiplied by the first 30 years of service. However, the integration amount cannot reduce the gross benefit by more than 50 percent. Average salary, service, and Social Security for the gross benefit and integration amount are determined as of December 31, 1988. |
| | | |
| | (b) | The benefit in (a) is multiplied by a fraction (but not less than one), the numerator of which is average salary at date of retirement and the denominator is average salary on December 31, 1988. |
For this purpose, salary includes base wages but excludes bonuses. The formula uses an average of salaries for the 60 highest consecutive months selected from the 120 consecutive months preceding date of retirement. Executives who are at least age 60 with 30 or more years of service are eligible to retire with unreduced benefits. Executives who are at least age 55 with 10 or more years of service may retire before age 65 in which case the benefit is reduced 3/12 of one percent for the first 60 months and 5/12 of one percent for the next 60 months that payment precedes age 65.
HBUS New Plan Formula: Applies to executives who were hired prior to January 1, 1997 by HBUS and became participants in the pension plan after December 31, 1988. The normal retirement benefit at age 65 is the sum of (i) 1.55 percent of average salary and (ii) 0.4 percent of average salary in excess of the integration amount. The total of (i) and (ii) is then multiplied by the first 30 years of service. For this purpose, the integration amount is an average of the Social Security taxable wage bases for the 35 year period ending with the year in which full benefits are available; any such wage bases that have to be estimated are based on the current wage base for the year of retirement. Salary includes base wages but excludes bonuses. The formula uses an average of salaries for the 60 highest consecutive months selected from the 120 consecutive months preceding date of retirement. Executives who are at least age 60 with 30 or more years of service are eligible to retire with unreduced benefits. Executives who are at least age 55 with 10 or more years of service may retire before age 65 in which case the benefit is
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reduced 3/12 of one percent for the first 60 months and 5/12 of one percent for the next 60 months that payment precedes age 65.
Household Old Formula: Applies to executives who were hired prior to January 1, 1990 by Household International. The benefit at age 65 is determined under whichever formula, A or B below, provides the higher amount.
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| A. | The normal retirement benefit at age 65 is the sum of (i) 51 percent of average salary that does not exceed the integration amount and (ii) 57 percent of average salary in excess of the integration amount. For this purpose, the integration amount is an average of the Social Security taxable wage bases for the 35 year period ending with the year of retirement. The benefit is reduced pro rata for executives who retire with less than 15 years of service. If an executive has more than 30 years of service, the benefit percentages in the formula, (the 51 percent and 57 percent) are increased 1/24 of 1 percentage point for each month of service in excess of 30 years, but not more than 5 percentage points. The benefit percentages are reduced for retirement prior to age 65. |
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| B. | The normal retirement benefit at age 65 is determined under (a) below, limited to a maximum amount determined in (b): |
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| | (a) | 55 percent of average salary, reduced pro rata for less than 15 years of service, and increased 1/24 of 1 percentage point for each month in excess of 30 years, but not more than 5 percentage points; the benefit percentage of 55 percent is reduced for retirement prior to age 65. |
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| | (b) | The amount determined in (a) is reduced as needed so that when added to 50 percent of the primary Social Security benefit, the total does not exceed 65 percent of the average salary. This maximum is applied for payments following the age at which full Social Security benefits are available. |
Both formulas use an average of salaries for the 48 highest consecutive months selected from the 120 consecutive months preceding date of retirement; for this purpose, salary includes total base wages and bonuses.
For executives who were participants on January 1, 1978, had attained age 35 and had at least 10 years of employment, the minimum normal retirement benefit is 55 percent of final average salary. For this purpose, salary does not include bonuses and the average is based on 60 consecutive months, rather than 48.
Executives who are at least age 50 with 15 years of service or at least age 55 with 10 years of service may retire before age 65, in which case the benefits are reduced.
Household New Formula: Applies to executives who were hired after December 31, 1989, but prior to January 1, 2000, by Household International. The normal retirement benefit at age 65 is the sum of (i) 51 percent of average salary that does not exceed the integration amount and (ii) 57 percent of average salary in excess of the integration amount. For this purpose, salaries include total base wages and bonuses and are averaged over the 48 highest consecutive months selected from the 120 consecutive months preceding date of retirement. The integration amount is an average of the Social Security taxable wage bases for the 35 year period ending with the year of retirement. The benefit is reduced pro rata for executives who retire with less than 30 years of service. If an executive has more than 30 years of service, the percentages in the formula, (the 51 percent and 57 percent) are increased 1/24 of 1 percentage point for each month of service in excess of 30 years, but not more than 5 percentage points. Executives who are at least age 55 with 10 or more years of service may retire before age 65 in which case the benefit percentages (51 percent and 57 percent) are reduced.
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Account Based Formula: Applies to executives who were hired by Household International after December 31, 1999. It also applies to executives who were hired by HBUS after December 31, 1996 and became participants in the Retirement Income Plan on January 1, 2005, or were hired by HSBC after March 28, 2003. The formula provides for a notional account that accumulates two percent of annual salary for each calendar year of employment. For this purpose, salary includes total base wages and bonuses. At the end of each calendar year, interest is credited on the notional account using the value of the account at the beginning of the year. The interest rate is based on the lesser of average yields for 10-year and 30-year Treasury bonds during September of the preceding calendar year. The notional account is payable at termination of employment for any reason after three years of service although payment may be deferred to age 65.
Provisions Applicable to All U.S. Formulas: The amount of salary used to determine benefits is subject to an annual maximum that varies by calendar year. The limit for 2007 is $225,000. The limit for years after 2007 will increase from time-to-time as specified by IRS regulations. Benefits are payable as a life annuity, or for married participants, a reduced life annuity with 50 percent continued to a surviving spouse. Participants (with spousal consent, if married) may choose from a variety of other optional forms of payment, which are all designed to be equivalent in value if paid over an average lifetime. Retired executives covered by a Household Old, Household New or Account Based Formula may elect a lump sum form of payment (spousal consent is needed for married executives).
HSBC International Staff Retirement Benefits Scheme
The HSBC International Staff Retirement Benefits Scheme (Jersey) (“ISRBS”) is a defined benefit plan maintained for certain international managers. Each member during his service must contribute five percent of his salary to the plan but each member who has completed 20 years of service or who enters the senior management or general management sections during his service shall contribute 6 2/3 percent of his salary. In addition, a member may make voluntary contributions, but the total of voluntary and mandatory contributions cannot exceed 15 percent of his total compensation. Upon leaving service, the value of the member’s voluntary contribution fund, if any, shall be commuted for a retirement benefit.
The annual pension payable at normal retirement is 1/480 of the member’s final salary for each completed month in the executive section, 1.25/480 of his final salary for each completed month in the senior management section, and 1.50/480 of his final salary for each completed month in the general management section. A member’s normal retirement date is the first day of the month coincident with or next following his 53rd birthday. Payments may be deferred or suspended but not beyond age 75.
If a member leaves before normal retirement with at least 15 years of service, he will receive a pension which is reduced by 0.25 percent for each complete month by which termination precedes normal retirement. If he terminates with at least 5 years of service, he will receive an immediate lump sum equivalent of his reduced pension.
Present Value of Accumulated Benefits
For the Account Based formula: The value of the notional account balances currently available on December 31, 2007.
For other formulas: The present value of the benefit payable at assumed retirement using interest and mortality assumptions consistent with those used for financial reporting purposes under SFAS 87 with respect to the company’s audited financial statements for the period ending December 31, 2007. However, no discount has been assumed for separation prior to retirement due to death, disability or termination of employment. Further, the amount of the benefit so valued is the portion of the benefit at assumed retirement that has accrued in proportion to service earned on December 31, 2007.
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Deferred Compensation Plans
Tax Reduction Investment Plan HNAH maintains the HSBC-North America (U.S.) Tax Reduction Investment Plan (“TRIP”), which is a deferred profit-sharing and savings plan for its eligible employees. With certain exceptions, a U.S. employee who has been employed for 30 days and who is not part of a collective bargaining unit may contribute into TRIP, on a pre-tax and after-tax basis, up to 40 percent (15 percent if highly compensated) of the participant’s cash compensation (subject to a maximum annual pre-tax contribution by a participant of $15,500, as adjusted for cost of living increases, and certain other limitations imposed by the Internal Revenue Code) and invest such contributions in separate equity or income funds.
If the employee has been employed for at least one year, HUSI contributes three percent of compensation on behalf of each participant who contributes one percent and matches any additional participant contributions up to four percent of compensation. However, matching contributions will not exceed six percent of a participant’s compensation if the participant contributes four percent or more of compensation. The plan provides for immediate vesting of all contributions. With certain exceptions, a participant’s after-tax contributions which have not been matched by us can be withdrawn at any time. Both our matching contributions made prior to 1999 and the participant’s after-tax contributions which have been matched may be withdrawn after five years of participation in the plan. A participant’s pre-tax contributions and our matching contributions after 1998 may not be withdrawn except for an immediate financial hardship, upon termination of employment, or after attaining age 59 1/2. Participants may borrow from their TRIP accounts under certain circumstances.
Supplemental Tax Reduction Investment Plan HNAH also maintains the Supplemental Tax Reduction Investment Plan (“STRIP”), which is an unfunded plan for eligible employees of HUSI and its participating subsidiaries who are legacy Household employees and whose participation in TRIP is limited by the Internal Revenue Code. Only matching contributions required to be made by us pursuant to the basic TRIP formula are invested in STRIP through a credit to a bookkeeping account maintained by us which deems such contributions to be invested in equity or income funds selected by the participant.
Non-Qualified Deferred Compensation Plan HNAH maintains a Non-Qualified Deferred Compensation Plan for the highly compensated employees in the organization, including executives of HUSI. The named executive officers are eligible to contribute up to 80 percent of their salary and/or cash bonus compensation in any plan year. Participants are required to make an irrevocable election with regard to an amount or percentage of compensation to be deferred and the timing and manner of future payout. Two types of distributions are permitted under the plan, either a scheduled in-service withdrawal which must be scheduled at least 2 years after the end of the plan year in which the deferral is made, or payment upon termination of employment. For either the scheduled in-service withdrawal or payment upon termination, the participant may elect either a lump sum payment or if the participant has made at least $25,000 of contributions and has over 10 years of service, he may request installment payments over 10 years. Due to the unfunded nature of the plan, participant elections are deemed investments whose gains or losses are calculated by reference to actual earnings of the investment choices. In order to provide the participants with the maximum amount of protection under an unfunded plan, a Rabbi Trust has been established where the participant contributions are segregated from the general assets of HUSI. The Investment Committee for the plan endeavors to invest the contributions in a manner consistent with the participant’s deemed elections reducing the likelihood of an underfunded plan.
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Nonqualified Defined Contribution and Other Nonqualified Deferred Compensation Plans |
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| | Nonqualified
Deferred
Compensation
Plan (1) | | Supplemental
Tax Reduction
Investment
Plan (2) | | | | | | | |
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Name | | Executive
Contributions in
2007 | | HUSI
Contributions in
2007 | | Aggregate
Earnings in 2007 | | Aggregate
Withdrawals/
Distributions | | Aggregate
Balance at
12/31/2007 | |
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Paul J. Lawrence | | $ | N/A | | $ | N/A | | $ | N/A | | $ | N/A | | $ | N/A | |
President and | | | | | | | | | | | | | | | | |
Chief Executive Officer | | | | | | | | | | | | | | | | |
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Sandra L. Derickson | | | 14,942 | | | 2,075 | | | 60,202 | | | — | | | 2,660,290 | |
Former President and | | | | | | | | | | | | | | | | |
Chief Executive Officer | | | | | | | | | | | | | | | | |
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Gerard Mattia | | | 36,000 | | | — | | | 3,373 | | | — | | | 76,179 | |
Senior Executive | | | | | | | | | | | | | | | | |
Vice President and | | | | | | | | | | | | | | | | |
Chief Financial Officer | | | | | | | | | | | | | | | | |
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John J. McKenna | | | N/A | | | N/A | | | N/A | | | N/A | | | N/A | |
Former Senior Executive | | | | | | | | | | | | | | | | |
Vice President and | | | | | | | | | | | | | | | | |
Chief Financial Officer | | | | | | | | | | | | | | | | |
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Kevin Newman | | | 1,566,900 | | | N/A | | | 133,022 | | | — | | | 2,803,094 | |
Senior Executive | | | | | | | | | | | | | | | | |
Vice President, Personal | | | | | | | | | | | | | | | | |
Financial Services | | | | | | | | | | | | | | | | |
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David Dew | | | N/A | | | N/A | | | N/A | | | N/A | | | N/A | |
Senior Executive | | | | | | | | | | | | | | | | |
Vice President and | | | | | | | | | | | | | | | | |
Chief Operating Officer | | | | | | | | | | | | | | | | |
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Janet L. Burak | | | 59,901 | | | 35,301 | | | 9,161 | | | — | | | 774,019 | |
Senior Executive | | | | | | | | | | | | | | | | |
Vice President and | | | | | | | | | | | | | | | | |
General Counsel | | | | | | | | | | | | | | | | |
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(1) | The Nonqualified Deferred Compensation Plan is described under Savings and Pension Plans on page 199. |
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(2) | The Supplemental Tax Reduction Investment Plan (STRIP) is described under Savings and Pension Plans on page 199. Company contributions are invested in STRIP through a credit to a bookkeeping account, which deems such contributions to be invested in equity or income mutual funds selected by the participant. For this purpose, compensation includes amounts that would be compensation but for the fact they were deferred under the terms of the HSBC North America Non-Qualified Deferred Compensation Plan. Distributions are made in a lump sum upon termination of employment. These figures are also included in the “Change in Pension Value and Nonqualified Deferred Compensation Earnings” column of the Summary Compensation Table on page 190. |
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Potential Payments Upon Termination Or Change-In-Control |
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The following tables describe the payments that HUSI would be required to make as of December 31, 2007 to Mr. Lawrence, Mr. McKenna, Mr. Mattia, Mr. Newman, Mr. Dew and Ms. Burak as a result of their termination, retirement, disability or death or a change in control of the company as of that date. The specific circumstances that would trigger such payments are identified in the tables. The amounts and terms of such payments are defined by HSBC’s employment and severance policies, and the particular terms of any equity-based awards.
Paul J. Lawrence
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Executive Benefits
and Payments
Upon Termination | | Voluntary
Termination | | Disability | | Normal
Retirement | | Involuntary Not
for Cause
Termination | | For Cause
Termination | | Voluntary
for Good
Reason
Termination | | Death | | Change in
Control
Termination | |
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Cash Compensation | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Base Salary | | | — | | | — | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | |
Short Term Incentive | | | — | | | — | | | — | | | $ | 1,555,243 | (1) | | | — | | | | — | | | | — | | | | — | | |
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Long Term Incentive | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Performance Shares | | | — | | $ | 926,999 | (2) | $ | 926,999 | (2) | | | 926,999 | (2) | | | — | | | $ | 926,999 | (2) | | $ | 1,220,118 | (3) | | $ | 926,999 | (2) | |
Stock Options: Unvested and Accelerated | | | — | | | — | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | |
Restricted Stock: Unvested and Accelerated | | | — | | | 216,273 | (4) | | 216,273 | (4) | | | 216,273 | (4) | | | — | | | | 216,273 | (4) | | | 820,634 | (5) | | | 216,273 | (4) | |
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(1) | Assumes a termination date of December 31, 2007, and represents the 2007 bonus awarded but not paid until 2008. |
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(2) | Assumes performance conditions have been met. This amount represents accelerated vesting of a pro-rata portion of the outstanding restricted shares assuming a termination date of December 31, 2007, and are calculated using the closing price of HSBC ordinary shares and exchange rate on December 31, 2007. |
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(3) | Performance conditions would be waived. This amount represents a full vesting of the outstanding restricted shares assuming a termination date of December 31, 2007, and are calculated using the closing price of HSBC ordinary shares and exchange rate on December 31, 2007. |
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(4) | This amount represents accelerated vesting of a pro-rata portion of the outstanding restricted shares assuming a termination date of December 31, 2007, and are calculated using the closing price of HSBC ordinary shares and exchange rate on December 31, 2007. |
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(5) | This amount represents a full vesting of the outstanding restricted shares assuming a termination date of December 31, 2007, and are calculated using the closing price of HSBC ordinary shares and exchange rate on December 31, 2007. |
John J. McKenna
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Executive Benefits
and Payments
Upon Termination | | Voluntary
Termination | | Disability | | Normal
Retirement | | Involuntary
Not for Cause
Termination | | For Cause
Termination | | Voluntary
for Good Reason
Termination | | Death | | Change in
Control
Termination | |
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Cash Compensation | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Base Salary | | | — | | | — | | | — | | | | $275,668 | (1) | | | — | | | | — | | | | — | | | | — | | |
Short Term Incentive | | | — | | | — | | | — | | | | 162,726 | (1) | | | — | | | | — | | | | — | | | | — | | |
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Long Term Incentive | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Performance Shares | | | — | | | $169,451 | (2) | | $169,451 | (2) | | | 169,451 | (2) | | | — | | | | $169,451 | (2) | | | $169,451 | (3) | | | $169,451 | (2) | |
Restricted Stock: Unvested and Accelerated | | | — | | | 458,572 | (4) | | 458,572 | (4) | | | 496,869 | (4) | | | — | | | | 496,869 | (4) | | | 946,915 | (3) | | | 496,869 | (4) | |
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(1) | Under the terms of the HSBC Severance Policy, Mr. McKenna would receive 42 weeks of his current salary upon separation from the company and a pro-rata amount of his earned bonus. The figures above represent the bonus payment earned in 2007 assuming a termination date of December 31, 2007. |
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(2) | The figures above represent accelerated vesting of 100 percent of the outstanding Performance Shares assuming “good leaver” status is granted by REMCO, a termination date of December 31, 2007 and that the performance test has been passed using the month end prior to exit date as the performance period. The amount has been calculated using the closing price of HSBC ordinary shares and exchange rate on December 31, 2007. If the performance test is not passed, 100 percent of the award remains outstanding and the performance condition is re-tested on the third, fourth and fifth anniversary of the award date. If the performance condition is not passed by the fifth anniversary, the shares are forfeited. |
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(3) | The figures above represent a full vest of the outstanding shares assuming a termination date of December 31, 2007, and are calculated using the closing price of HSBC ordinary shares and exchange rate on December 31, 2007. |
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(4) | The figures represent a pro-rata portion of the outstanding restricted share awards based on the number of months elapsed between the date of grant and date of termination assuming a termination date of December 31, 2007, and are calculated using the closing price of HSBC ordinary shares and exchange rate on December 31, 2007. |
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Gerard Mattia
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Executive Benefits
and Payments
Upon Termination | | Voluntary
Termination | | Disability | | Normal
Retirement | | Involuntary
Not for
Cause
Termination | | For Cause
Termination | | Voluntary for
Good Reason
Termination | | | Death | | Change in
Control
Termination | |
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Cash Compensation | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Base Salary | | | — | | | — | | | — | | | $127,500 | (1) | | — | | | | — | | | | — | | | | — | |
Short Term Incentive | | | — | | | — | | | — | | | 910,000 | (1) | | — | | | | — | | | | — | | | | — | |
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Long Term Incentive | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Restricted Stock: Unvested and Accelerated | | | — | | $ | 251,964 | (2) | $ | 251,964 | (2) | | 251,964 | (2) | | — | | | $ | 251,964 | (2) | | $ | 533,377 | (3) | | $ | 251,964 | (2) |
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(1) | Under the terms of the HSBC Severance Policy, Mr. Mattia would receive 26 weeks of his current salary upon separation from the company and a pro-rata amount of his earned bonus. The Short Term Incentive amount represents the bonus payment earned in 2007 assuming a termination date of December 31, 2007. |
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(2) | The figures represent a pro-rata portion of the outstanding restricted share awards based on the number of months elapsed between the date of grant and date of termination assuming a termination date of December 31, 2007, and are calculated using the closing price of HSBC ordinary shares and exchange rate on December 31, 2007. |
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(3) | The figures above represent a full vest of the outstanding restricted shares assuming a termination date of December 31, 2007, and are calculated using the closing price of HSBC ordinary shares and exchange rate on December 31, 2007. |
Kevin Newman
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Executive Benefits
and Payments
Upon Termination | | Voluntary
Termination | | Disability | | Normal
Retirement | | Involuntary
Not for
Cause
Termination | | For Cause
Termination | | Voluntary for
Good Reason
Termination | | | Death | | Change in
Control
Termination | | |
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Cash Compensation | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Base Salary | | | — | | | — | | | — | | $ | 280,000 | (1) | | — | | | | — | | | | — | | | | — | | |
Short Term Incentive | | | — | | | — | | | — | | | 1,000,000 | (1) | | — | | | | — | | | | — | | | | — | | |
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Long Term Incentive | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Performance Shares | | | — | | $ | 312,994 | (2) | $ | 312,994 | (2) | | 312,994 | (2) | | — | | | $ | 312,994 | (2) | | $ | 312,994 | (3) | | $ | 312,994 | (2) | |
Restricted Stock: Unvested and Accelerated | | | — | | | 1,238,833 | (4) | | 1,238,833 | (4) | | 1,238,833 | (4) | | — | | | | 1,238,833 | (4) | | | 2,110,663 | (3) | | | 1,238,833 | (4) | |
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(1) | Under the terms of the HSBC Severance Policy, Mr. Newman would receive 28 weeks of his current salary upon separation from the company. The Short Term Incentive amount is based on an assumed termination date of December 31, 2007, and represents the 2007 bonus awarded but not paid until 2008. |
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(2) | The figures above represent accelerated vesting of 100 percent of the outstanding Performance Shares assuming “good leaver” status is granted by REMCO, a termination date of December 31, 2007 and that the performance test has been passed using the month end prior to exit date as the performance period. The amount has been calculated using the closing price of HSBC ordinary shares and exchange rate on December 31, 2007. If the performance test is not passed, 100 percent of the award remains outstanding and the performance condition is re-tested on the third, fourth and fifth anniversary of the award date. If the performance condition is not passed by the fifth anniversary, the shares are forfeited. |
| |
(3) | The figures above represent a full vest of the outstanding shares assuming a termination date of December 31, 2007, and are calculated using the closing price of HSBC ordinary shares and exchange rate on December 31, 2007. |
| |
(4) | The figures represent a pro-rata portion of the outstanding restricted share awards based on the number of months elapsed between the date of grant and date of termination assuming a termination date of December 31, 2007, and are calculated using the closing price of HSBC ordinary shares and exchange rate on December 31, 2007. |
202
David Dew
| | | | | | | | | | | | | | | | | | | | | | |
|
Executive Benefits
and Payments
Upon Termination | | Voluntary
Termination | | Disability | | | Normal
Retirement | | | Involuntary
Not for Cause
Termination | | | For Cause
Termination | | Voluntary for
Good Reason
Termination | | | Death | | | Change in
Control
Termination | |
|
Cash Compensation | | | | | | | | | | | | | | | | | | | | | | |
Base Salary | | — | | — | | | — | | | — | | | — | | — | | | — | | | — | |
Short Term Incentive | | — | | — | | | — | | | $550,000 | (1) | | — | | — | | | — | | | — | |
| | | | | | | | | | | | | | | | | | | | | | |
Long Term Incentive | | | | | | | | | | | | | | | | | | | | | | |
Performance Shares | | — | | $423,892 | (2) | | $423,892 | (2) | | 423,892 | (2) | | — | | $423,892 | (2) | | $567,285 | (3) | | $423,892 | (2) |
Restricted Stock: Unvested and Accelerated | | — | | 23,888 | (4) | | 23,888 | (4) | | 23,888 | (4) | | — | | 23,888 | (4) | | 95,552 | (3) | | 23,888 | (4) |
|
| |
(1) | The Short Term Incentive amount is based on an assumed termination date of December 31, 2007, and represents the 2007 bonus awarded but not paid until 2008. |
| |
(2) | The figures above represent accelerated vesting of 100 percent of the outstanding Performance Shares assuming “good leaver” status is granted by REMCO, a termination date of December 31, 2007 and that the performance test has been passed using the month end prior to exit date as the performance period. The amount has been calculated using the closing price of HSBC ordinary shares and exchange rate on December 31, 2007. If the performance test is not passed, 100 percent of the award remains outstanding and the performance condition is re-tested on the third, fourth and fifth anniversary of the award date. If the performance condition is not passed by the fifth anniversary, the shares are forfeited. |
| |
(3) | The figures above represent a full vest of the outstanding shares assuming a termination date of December 31, 2007, and are calculated using the closing price of HSBC ordinary shares and exchange rate on December 31, 2007. |
| |
(4) | The figures represent a pro-rata portion of the outstanding restricted share awards based on the number of months elapsed between the date of grant and date of termination assuming a termination date of December 31, 2007, and are calculated using the closing price of HSBC ordinary shares and exchange rate on December 31, 2007. |
Janet L. Burak
| | | | | | | | | | | | | | | | | | | | | | |
|
Executive Benefits
and Payments
Upon Termination | | Voluntary
Termination | | Disability | | | Normal
Retirement | | | Involuntary Not
for Cause
Termination | | | For Cause
Termination | | Voluntary
for
Good Reason
Termination | | | Death | | | Change in
Control
Termination | |
|
Cash Compensation | | | | | | | | | | | | | | | | | | | | | | |
Base Salary | | — | | — | | | — | | | $275,000 | (1) | | — | | — | | | — | | | — | |
Short Term Incentive | | — | | — | | | — | | | 800,000 | (1) | | — | | — | | | — | | | — | |
| | | | | | | | | | | | | | | | | | | | | | |
Long Term Incentive | | | | | | | | | | | | | | | | | | | | | | |
Performance Shares | | — | | $334,223 | (2) | | $334,223 | (2) | | 334,223 | (2) | | — | | $334,223 | (2) | | $334,223 | (3) | | $334,223 | (2) |
Restricted Stock: Unvested and Accelerated | | — | | 968,983 | (4) | | 968,983 | (4) | | 968,983 | (4) | | — | | 968,983 | (4) | | 1,602,378 | (5) | | 968,983 | (4) |
|
| |
(1) | Under the terms of the HSBC Severance Policy, Ms. Burak would receive 26 weeks of her current salary upon separation from HUSI and a pro-rata amount of her bonus. The figure above represents the bonus payment earned in 2007 assuming a termination date of December 31, 2007. |
| |
(2) | The figures above represent a full vest of the Performance Shares, assuming “good leaver” status is granted by REMCO, a termination date of December 31, 2007, and 100 percent of the performance condition being met on the fourth anniversary of the date of grant. If the performance condition is not passed on the fourth anniversary, the award is subject to a re-test provision on the fifth anniversary of the date of grant. If the performance condition is not passed on the fifth anniversary, the award is forfeited. The amount is calculated using the closing price of HSBC ordinary shares and exchange rate on December 31, 2007. |
| |
(3) | Performance conditions would be waived. The figure above represents a full vest of the Performance Shares that would vest three years from the date of grant assuming a termination date of December 31, 2007, and is calculated using the closing price of HSBC ordinary shares and exchange rate on December 31, 2007. |
| |
(4) | The figures above represent a pro-rata portion of the outstanding restricted share awards based on the number of months elapsed between date of grant and date of termination, assuming a termination date of December 31, 2007 and assuming “good leaver” status is granted by REMCO. The figures are calculated using the closing price of HSBC ordinary shares and exchange rate on December 31, 2007. |
| |
(5) | The figure above represents a full vest of the outstanding shares assuming a termination date of December 31, 2007, and is calculated using the closing price of HSBC ordinary shares and exchange rate on December 31, 2007. |
203
The following table and narrative text discusses the compensation awarded to, earned by or paid to our Directors in 2007.
Director Compensation
| | | | | | | | | | | | | | | |
|
Name | | Fees
Earned or
Paid in
Cash
($) (1) | | Stock
Awards
($) (2) | | Option
Awards
($) (3) | | Non-Equity
Incentive Plan
Compensation
($) (4) | | Change in
Pension Value
And
Nonqualified
Deferred
Compensation
Earnings ($) (5) | | All Other
Compensation
($) (6) | | Total
($) | |
|
Salvatore H. Alfiero | | $105,000 | | — | | — | | — | | $237,500 | | — | | $342,500 | |
Donald K. Boswell | | 85,000 | | — | | — | | — | | — | | $4,000 | | 89,000 | |
James H. Cleave | | 85,000 | | — | | — | | — | | — | | — | | 85,000 | |
Frances D. Fergusson | | 90,000 | | — | | — | | — | | 269,309 | | — | | 359,309 | |
Michael F. Geoghegan | | — | | — | | — | | — | | — | | — | | — | |
Stuart T. Gulliver | | — | | — | | — | | — | | — | | — | | — | |
Richard A. Jalkut | | 120,000 | | — | | — | | — | | 250,000 | | — | | 370,000 | |
Peter Kimmelman | | 85,000 | | — | | — | | — | | — | | — | | 85,000 | |
Paul J. Lawrence | | — | | — | | — | | — | | — | | — | | — | |
Charles G. Meyer, Jr. | | 90,000 | | — | | — | | — | | — | | — | | 90,000 | |
James L. Morice | | 85,000 | | — | | — | | — | | — | | — | | 85,000 | |
| |
(1) | The Directors’ fee schedule was revised effective January 1, 2007 (in response to the Nominating & Governance Committee’s recommendation that the compensation structure be reevaluated). In 2007, the non-management Directors of HUSI received an annual cash retainer of $75,000 for their services on the boards of HUSI and HBUS (with the exception of Mr. Jalkut, who as Lead Director and Chair of the Executive Committee, received a retainer of $100,000). In addition to the Board retainer, Mr. Cleave, Mr. Jalkut and Mr. Kimmelman each received an additional $10,000 for their membership in the Audit Committee, Mr. Alfiero received an additional $25,000 as Chair of the Audit Committee, Mr. Meyer received an additional $10,000 as Chair of the Fiduciary Committee, Dr. Fergusson received an additional $10,000 as Chair of the Human Resources & Compensation Committee, Mr. Jalkut received an additional $10,000 as Chair of the Nominating & Governance Committee. In addition, Dr. Fergusson, Mr. Alfiero and Mr. Meyer received an additional $5,000 each for membership on the Nominating & Governance Committee, and Mr. Boswell and Mr. Morice each received an additional $10,000 for membership on the Fiduciary and Human Resources & Compensation Committees. Other than as stated above, HUSI does not pay additional compensation for committee membership, or meeting attendance fees to its Directors. Directors who are employees of HUSI or any of its affiliates do not receive any additional compensation related to their Board service. Non-management Directors elected prior to 1999 may elect to participate in the HUSI/HBUS Plan for Deferral of Directors’ Fees. Under this plan, they may elect to defer receipt of all or a part of their retainer. The deferred retainers accrue interest on a quarterly basis at the one to two year Employee Extra CD rate in effect on the first business day of each quarter. Upon retirement from the Board, the deferrals plus interest are paid to the Director either in a lump sum or in quarterly or annual installments over a one, five or ten year period. No Director elected to defer receipt of their retainer for 2007. |
| |
(2) | HUSI does not grant stock awards to its non-management directors nor do any portions of employee directors’ stock awards reflect services related to their Board positions. |
| |
(3) | HUSI does not grant stock option awards to its non-management directors. |
| |
(4) | HUSI does not award non-equity incentive plan compensation to its non-management directors nor does any portion of the employee directors’ non-equity incentive plan compensation reflect compensation for services related to their Board positions. |
| |
(5) | The HUSI Directors’ Retirement Plan covers non-management directors elected prior to 1998 and excludes those serving as directors at the request of HSBC. Eligible directors with at least five years of service will receive quarterly retirement benefit payments commencing at the later of age 65 or retirement from the Board, and continuing for ten years. The annual amount of the retirement benefit is a percent of the annual retainer in effect at the time of the last Board meeting the director attended. The percentage is 50 percent after five years of service and increases by five percent for each additional year of service to 100 percent upon completion of 15 years of service. If a director who has at least five years of service dies before the retirement benefit has commenced, the director’s beneficiary will receive a death benefit calculated as if the director had retired on the date of death. If a retired director dies before receiving retirement benefit payments for the ten year period, the balance of the payments will be continued to the director’s beneficiary. The plan is unfunded and payment will be made out of the general funds of HUSI or HBUS. |
| |
(6) | Mr. Boswell also serves on the Western Region Board for which he received $4,000 during 2007. Non-management directors are offered, on terms that are not more favorable than those available to the general public, a MasterCard/Visa credit card issued by one of our subsidiaries with a credit limit of $15,000. HUSI guarantees the repayment of amounts charged on each card. Under HUSI’s Matching Gift Program, HUSI matches charitable gifts to qualified organizations (subject to a maximum of $10,000 per year), with a double match for the first $500 donated to higher education institutions (both public and private) and eligible non-profit organizations which promote neighborhood revitalization or economic development for low and moderate income populations. Each current independent Director may ask us to contribute up to $10,000 annually to charities of the Director’s choice which qualify under our philanthropic program. |
204
|
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters |
|
Security Ownership of Certain Beneficial Owners
HSBC USA Inc.’s common stock is 100 percent owned by HSBC North America Inc. (“HNAI”). HNAI is an indirect wholly owned subsidiary of HSBC.
Security Ownership by Management
The following table lists the beneficial ownership, as of January 31, 2008, of HSBC ordinary shares or interests in HSBC ordinary shares and HSBC’s American Depositary Shares, Series A, by each director and the executive officers named in the Summary Compensation Table on page 190, individually, and the directors and executive officers as a group. Each of the individuals listed below and all directors and executive officers as a group own less than one percent of the HSBC ordinary shares. No director or executive officer of HUSI owned any of HUSI’s outstanding series of preferred stock at January 31, 2008.
| | | | | | | | | | | | | |
|
| | Number of
HSBC
Ordinary
Shares
Beneficially
Owned (1) (2) | | HSBC Ordinary
Shares That
May Be Acquired
Within 60 Days
By Exercise of
Options (3) | | HSBC
Restricted
Shares
Released
Within 60
Days (4) | | Number of
HSBC Ordinary
Share
Equivalents (5) | | Total HSBC
Ordinary
Shares | | HSBC
Holdings plc
American
Depositary
Shares,
Series A (6) | |
|
Directors | | | | | | | | | | | | | |
Salvatore H. Alfiero | | 309,000 | | — | | — | | — | | 309,000 | | 450,000 | |
Donald K. Boswell | | 220 | | — | | — | | — | | 220 | | — | |
James H. Cleave | | 227,080 | | — | | — | | — | | 227,080 | | — | |
Dr. Frances D. Fergusson | | 100 | | — | | — | | — | | 100 | | — | |
Michael F. Geoghegan | | 386,946 | | — | | 1,135,652 | | — | | 1,522,598 | | — | |
Stuart T. Gulliver | | 2,022,961 | | — | | 1,168,396 | | — | | 3,191,357 | | — | |
Paul J. Lawrence | | 200 | | — | | — | | — | | 200 | | — | |
Richard A. Jalkut | | 250 | | — | | — | | — | | 250 | | — | |
Peter Kimmelman | | 5,540 | | — | | — | | — | | 5,540 | | — | |
Charles G. Meyer, Jr. | | 170 | | — | | — | | — | | 170 | | — | |
James L. Morice | | 1,500 | | — | | — | | — | | 1,500 | | — | |
| | | | | | | | | | | | | |
Named Executive Officers | | | | | | | | | | | | | |
Paul J. Lawrence | | 200 | | — | | — | | — | | 200 | | — | |
Sandra L. Derickson | | 44,895 | | 605,250 | | — | | 27,079 | | 677,224 | | — | |
Gerard Mattia | | 4,990 | | — | | 19,288 | | — | | 24,278 | | — | |
John J. McKenna | | 3,000 | | — | | — | | 1,550 | | 4,550 | | — | |
Janet L. Burak | | 21,667 | | 80,250 | | 35,654 | | 234 | | 137,805 | | — | |
David Dew | | 15,429 | | 24,500 | | — | | — | | 39,929 | | — | |
Kevin Newman | | — | | — | | 55,652 | | — | | 55,652 | | — | |
| | | | | | | | | | | | | |
All directors and executive officers as a group | | 3,077,739 | | 732,500 | | 2,480,955 | | 29,481 | | 6,320,675 | | 450,000 | |
| |
(1) | Directors and executive officers have sole voting and investment power over the shares listed above, except as follows. The number of ordinary shares held by spouses, children and charitable or family foundations for which a director or executive officer does not have voting and investment power and beneficial ownership of which is denied is as follows: Mr. Kimmelman, 1,822; and directors and executive officers as a group, 1,822. |
| |
(2) | Some of the shares included in the table above were held in American Depositary Shares, each of which represents five HSBC ordinary shares. |
| |
(3) | Represents the number of ordinary shares that may be acquired by HUSI’s directors and executive officers through April 1, 2008 pursuant to the exercise of stock options. |
| |
(4) | Represents the number of ordinary shares that may be acquired by HUSI’s directors and executive officers through April 1, 2008 pursuant to the satisfaction of certain conditions. |
205
| |
(5) | Represents the number of ordinary share equivalents owned by executive officers under HSBC-North America (U.S.) Tax Reduction Investment Plan and HSBC-North America Employee Non-Qualified Deferred Compensation Plan. Some of the shares included in the table above were held in American Depositary Shares, each of which represents five HSBC ordinary shares. |
| |
(6) | Each depositary share represents one-fortieth of a share of HSBC’s 6.20% Non-Cumulative Dollar Preference Shares, Series A. |
|
Item 13. Certain Relationships and Related Transactions, and Director Independence |
|
Transactions with Related Persons
During the fiscal year ended December 31, 2007, HUSI was not a participant in any transaction, and there is currently no proposed transaction, in which the amount involved exceeded or will exceed $120,000, and in which a director or an executive officer, or a member of the immediate family of a director or an executive officer, had or will have a direct or indirect material interest, other than the agreement with Ms. Derickson described in Item 11. Executive Compensation - Compensation Discussion and Analysis - Compensation of Officers Reported in the Summary Compensation Table. During 2007, HBUS provided loans to certain directors and executive officers of HUSI and its subsidiaries in the ordinary course of business. Such loans were provided on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable loans with persons not related to HUSI and do not involve more than the normal risk of collectibility or present other unfavorable features.
HUSI maintains a written Policy for the Review, Approval or Ratification of Transactions with Related Persons, which provides that any “Transaction with a Related Person” must be reviewed and approved or ratified in accordance with specified procedures. The term “Transaction with a Related Person” includes any transaction, arrangement or relationship, or series of similar transactions, arrangements or relationships, in which (1) the aggregate dollar amount involved will or may be expected to exceed $120,000 in any calendar year, (2) HUSI or any of its subsidiaries is, or is proposed to be, a participant, and (3) a director or an executive officer, or a member of the immediate family of a director or an executive officer, has or will have a direct or indirect material interest (other than solely as a result of being a director or a less than 10 percent beneficial owner of another entity). The following are specifically excluded from the definition of Transaction with a Related Person:
| |
• | compensation paid to directors and executive officers reportable under rules and regulations promulgated by the Securities and Exchange Commission; |
| |
• | transactions with other companies if the only relationship of the director, executive officer or family member to the other company is as an employee (other than an executive officer), director or beneficial owner of less than 10 percent of such other company’s equity securities; |
| |
• | charitable contributions, grants or endowments by HUSI or any of its subsidiaries to charitable organizations, foundations or universities if the only relationship of the director, executive officer or family member to the organization, foundation or university is as an employee (other than an executive officer) or a director; |
| |
• | transactions where the interest of the director, executive officer or family member arises solely from the ownership of HUSI’s equity securities and all holders of such securities received or will receive the same benefit on a pro-rata basis; |
| |
• | transactions where the rates or charges involved are determined by competitive bids; |
| |
• | loans made in the ordinary course of business on substantially the same terms (including interest rates and collateral requirements) as those prevailing at the time for comparable loans with persons not related to HUSI or any of its subsidiaries that do not involve more that the normal risk for collectibility or present other unfavorable features; and |
| |
• | transactions involving services as a bank depositary of funds, transfer agent, registrar, trustee under a trust indenture or similar services. |
206
The policy requires each director and executive officer to notify the Office of the General Counsel in writing of any Transaction with a Related Person in which the director, executive officer or an immediate family member has or will have an interest and to provide specified details of the transaction. The Office of the General Counsel, through the Corporate Secretary, will deliver a copy of the notice to the Chair of the Nominating & Governance Committee of the Board of Directors. The Nominating & Governance Committee will review the material facts of each proposed Transaction with a Related Person at each regularly scheduled committee meeting and approve, ratify or disapprove the transaction.
The vote of a majority of disinterested members of the Nominating & Governance Committee is required for the approval or ratification of any Transaction with a Related Person. The Nominating & Governance Committee may approve or ratify a Transaction with a Related Person if the committee determines, in its business judgment, based on the review of all available information, that the transaction is fair and reasonable to, and consistent with the best interests of, HUSI and its subsidiaries. In making this determination, the Nominating & Governance Committee will consider, among other things, (i) the business purpose of the transaction, (ii) whether the transaction is entered into on an arms-length basis and on terms no less favorable than terms generally available to an unaffiliated third-party under the same or similar circumstances, (iii) whether the interest of the director, executive officer or family member in the transaction is material and (iv) whether the transaction would violate any provision of the HSBC North America Holdings Inc. Statement of Business Principles and Code of Ethics, the HSBC USA Inc. Code of Ethics for Senior Financial Officers or the HSBC USA Inc. Corporate Governance Standards, as applicable.
In any case where the Nominating & Governance Committee determines not to approve or ratify a Transaction with a Related Person, the matter will be referred to the Office of the General Counsel for review and consultation regarding the appropriate disposition of such transaction including, but not limited to, termination of the transaction, rescission of the transaction or modification of the transaction in a manner that would permit it to be ratified and approved.
Director Independence
The HSBC USA Inc. Corporate Governance Standards, together with the charters of the committees of the Board of Directors, provide the framework for HUSI’s corporate governance. Director independence is defined in HUSI’s Corporate Governance Standards, which are based upon the rules of the New York Stock Exchange. The Corporate Governance Standards are incorporated by reference to Exhibit 99(i) of this Form 10-K and are available upon written request made to HSBC USA Inc., 452 Fifth Avenue, New York, New York 10018, Attention: Corporate Secretary.
According to HUSI’s Corporate Governance Standards, a majority of the members of the Board of Directors must be independent. The composition requirement for each committee of the Board of Directors is as follows:
| | | |
Committee | | Independence/ Member Requirements | |
| |
| |
Audit Committee | Chair and all voting members |
Fiduciary Committee | Chair and all voting members |
Human Resources & Compensation Committee | Chair and a majority of members |
Nominating & Governance Committee | Chair and all voting members |
Executive Committee | Chair and all voting members, other than |
| the Chief Executive Officer |
Messrs. Alfiero, Boswell, Cleave, Jalkut, Kimmelman, Meyer and Morice and Dr. Fergusson are considered to be independent directors. Mr. Geoghegan currently serves as Group Chief Executive Officer; Mr. Lawrence currently serves as President and Chief Executive Officer of HUSI and HBUS; and Mr. Gulliver currently serves as HSBC Managing Director and Head of Global Banking and Markets. Because of the positions held by Messrs. Geoghegan, Lawrence and Gulliver, they are not considered to be independent directors.
207
During a portion of 2007, Sandra L. Derickson and Siddharth N. (Bobby) Mehta served as directors of HUSI and HBUS. Ms. Derickson also served as President and Chief Executive Officer of HUSI and HBUS for part of 2007 and Mr. Mehta served as Chief Executive Officer of HSBC Finance Corporation, another principal subsidiary of HNAH, for part of 2007. Because of the positions held by Ms. Derickson and Mr. Mehta, they were not considered to be independent directors.
See Item 10. Directors, Executive Officers and Corporate Governance – Corporate Governance for more information about HUSI’s Board of Directors and its committees.
|
Item 14. Principal Accounting Fees and Services |
|
Fees billed to HUSI by its auditing firm, KPMG LLP, were as follows.
| | | | | | | |
|
|
|
|
|
|
Year Ended December 31 | | 2007 | | 2006 | |
|
|
|
|
|
|
(in thousands) | | | | | |
Audit fees: | | | | | | | |
Auditing of financial statements, quarterly reviews, statutory audits, preparation of comfort letters, consents and review of registration statements | | $ | 5,981 | | $ | 5,522 | |
| | | | | | | |
Audit related fees: | | | | | | | |
Employee benefit plan audits, due diligence assistance, internal control review assistance, and certain attestation services | | | 769 | | | 467 | |
| | | | | | | |
Tax fees: | | | | | | | |
Tax related research, general tax services in connection with transactions and legislation, and assistance with preparation of certain required filings | | | 22 | | | 34 | |
| |
|
| |
|
| |
| | | | | | | |
Total KPMG LLP fees | | $ | 6,772 | | $ | 6,023 | |
| |
|
| |
|
| |
Audit Committee Pre-approval Policies and Procedures
It is the practice of the Audit Committee of HUSI’s Board of Directors to approve the annual audit fees, including those covering audit services beyond HUSI’s financial statements, before any audit procedures are undertaken. Prior to 2003, management had the implicit pre-approval of the Audit Committee to engage KPMG LLP, or any other professional service firm, to perform tax and other services. Any such services provided by KPMG LLP were reported to the Audit Committee after the fact. Beginning in 2003, the Audit Committee assumed responsibility for pre-approving all auditing services and permitted non-auditing services, including the related fees and terms thereof.
208
PART IV
|
Item 15. Exhibits and Financial Statement Schedules and Reports on Form 8-K |
|
| | |
(a) | (1) | Financial Statements |
| | HSBC USA Inc.: |
| | Consolidated Balance Sheet |
| | Consolidated Statement of Income |
| | Consolidated Statement of Changes in Shareholders’ Equity |
| | Consolidated Statement of Cash Flows |
| | HSBC Bank USA, National Association: |
| | Consolidated Balance Sheet |
| | Notes to Financial Statements |
| | |
| (2) | Not applicable |
| | |
| (3) | Not applicable |
| | |
(b) | Exhibits | |
| | |
| 3 (i) | Articles of Incorporation and amendments and supplements thereto (incorporated by reference to Exhibit 3(a) to HUSI’s Annual Report on Form 10-K for the year ended December 31, 1999, filed with the Securities and Exchange Commission on March 30, 2000, Exhibit 3 to HUSI’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2000, filed with the Securities and Exchange Commission on November 9, 2000, Exhibits 3.2 and 3.3 to HUSI’s Current Report on Form 8-K dated March 30, 2005, filed with the Securities and Exchange Commission on April 4, 2005, Exhibit 3.2 to HUSI’s Current Report on Form 8-K dated October 11, 2005 and filed with the Securities and Exchange Commission on October 14, 2005 and Exhibit 3.1 to HUSI’s Current Report on Form 8-K dated May 16, 2006, filed with the Securities and Exchange Commission on May 22, 2006). |
| | |
| 3 (ii) | By-Laws (incorporated by reference to Exhibit 3(ii) to HUSI’s Annual Report on Form 10-K for the year ended December 31, 2006, filed with the Securities and Exchange Commission on March 5, 2007). |
| | |
| 4 (i) | Senior Indenture, dated as of October 24, 1996, by and between HUSI and Bankers Trust Company, as trustee, as amended and supplemented (incorporated by reference to Exhibits 4.1 and 4.2 to Post-Effective Amendment No. 1 to HUSI’s registration statement on Form S-3, Registration No. 333-42421, filed with the Securities and Exchange Commission on April 3, 2002, Exhibit 4.1 to HUSI’s Current Report on Form 8-K dated November 21, 2005 and filed with the Securities and Exchange Commission on November 28, 2005). |
| | |
| 4 (ii) | Subordinated Indenture, dated as of October 24, 1996, by and between HUSI and Bankers Trust Company, as trustee, as amended and supplemented (incorporated by reference to Exhibits 4.3, 4.4, 4.5 and 4.6 to Post-Effective Amendment No. 1 to HUSI’s registration statement on Form S-3, Registration No. 333-42421, filed with the Securities and Exchange Commission on April 3, 2002). |
| | |
| 12 | Computation of Ratio of Earnings to Fixed Charges and Earnings to Combined Fixed Charges and Preferred Stock Dividends. |
| | |
| 14 | Code of Ethics for Senior Financial Officers (incorporated by reference to Exhibit 14 to HUSI’s Annual Report on Form 10-K for the year ended December 31, 2006, filed with the Securities and Exchange Commission on March 5, 2007). |
209
210
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
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HSBC USA Inc. | |
Registrant | |
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/s/ Janet L. Burak | |
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Janet L. Burak | |
Senior Executive Vice President & General Counsel | |
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed on March 3, 2008 by the following persons on behalf of the registrant and in the capacities indicated:
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/s/ Gerard Mattia | | Michael F. Geoghegan* |
| | Chairman of the Board |
Gerard Mattia | | Paul J. Lawrence* |
Senior Executive Vice President and | | Director, President and Chief Executive Officer |
Chief Financial Officer | | Salvatore H. Alfiero* Director |
(Principal Financial Officer) | | Donald K. Boswell* Director |
| | James H. Cleave* Director |
| | Frances D. Fergusson* Director |
/s/ Joseph R. Simpson | | Stewart T. Gulliver * Director |
| | Richard A. Jalkut* Director |
Joseph R. Simpson | | Peter Kimmelman* Director |
Chief Accounting Officer | | Charles G. Meyer, Jr.* Director |
(Principal Accounting Officer) | | James L. Morice* Director |
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| | * /s/ Janet L. Burak |
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| | Janet L. Burak |
| | Attorney-in-fact |
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