HSBC Finance Corp 2007 10K-P6
HSBC Holdings PLC
03 March 2008
PART 6
SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
THREE THREE THREE THREE THREE THREE THREE THREE
MONTHS MONTHS MONTHS MONTHS MONTHS MONTHS MONTHS MONTHS
ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED
DEC. 31, SEPT. 30, JUNE 30, MAR. 31, DEC. 31, SEPT. 30, JUNE 30, MAR. 31,
2007 2007 2007 2007 2006 2006 2006 2006
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(IN MILLIONS)
Finance and other interest
income......................... $ 4,616 $ 4,702 $4,669 $4,696 $4,629 $4,535 $4,311 $4,087
Interest expense:
HSBC affiliates................ 264 247 236 245 320 283 173 153
Non-affiliates................. 1,737 1,785 1,792 1,826 1,736 1,650 1,589 1,470
------- ------- ------ ------ ------ ------ ------ ------
Net interest income.............. 2,615 2,670 2,641 2,625 2,573 2,602 2,549 2,464
Provision for credit losses on
owned receivables.............. 4,222 3,189 1,931 1,684 3,066 1,384 1,248 866
------- ------- ------ ------ ------ ------ ------ ------
Net interest income after
provision for credit losses.... (1,607) (519) 710 941 (493) 1,218 1,301 1,598
------- ------- ------ ------ ------ ------ ------ ------
Other revenues:..................
Securitization related revenue... 12 15 22 21 21 24 51 71
Insurance revenue................ 139 244 193 230 251 280 226 244
Investment income................ 53 34 32 26 175 31 34 34
Derivative income (expense)...... (29) (4) (39) (7) 72 68 (7) 57
Gain (loss) on debt designated at
fair value and related
derivatives.................... 742 519 (130) 144 - - - -
Fee income....................... 553 660 629 573 558 542 429 382
Enhancement services revenue..... 170 167 150 148 133 129 130 123
Taxpayer financial services
income......................... 31 (27) 4 239 - 4 20 234
Gain on receivable sales to HSBC
affiliates..................... 121 94 109 95 139 101 97 85
Servicing and other fees from
HSBC affiliates................ 138 133 132 133 151 121 116 118
Other income..................... (5) (17) (88) 40 (7) 34 79 73
------- ------- ------ ------ ------ ------ ------ ------
Total other revenues............. 1,925 1,818 1,014 1,642 1,493 1,334 1,175 1,421
------- ------- ------ ------ ------ ------ ------ ------
Costs and expenses:
Salaries and fringe benefits..... 563 582 587 610 617 572 562 582
Sales incentives................. 28 54 62 68 86 94 98 80
Occupancy and equipment expense.. 139 77 85 78 77 78 79 83
Other marketing expenses......... 146 162 220 220 268 197 176 173
Other servicing and
administrative expenses........ 514 319 242 262 353 286 224 252
Support services from HSBC
affiliates..................... 308 300 299 285 304 261 270 252
Amortization of acquired
intangibles.................... 64 63 63 63 63 63 63 80
Policyholders' benefits.......... 65 142 90 124 119 123 107 118
Goodwill and other intangible
asset impairment charges....... 4,010 881 - - - - - -
------- ------- ------ ------ ------ ------ ------ ------
Total costs and expenses......... 5,837 2,580 1,648 1,710 1,887 1,674 1,579 1,620
------- ------- ------ ------ ------ ------ ------ ------
Income before income taxes....... (5,519) (1,281) 76 873 (887) 878 897 1,399
Income tax expense (benefit)..... (1,111) (179) 13 332 (323) 327 329 511
------- ------- ------ ------ ------ ------ ------ ------
Net income....................... $(4,408) $(1,102) $ 63 $ 541 $ (564) $ 551 $ 568 $ 888
======= ======= ====== ====== ====== ====== ====== ======
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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
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There were no disagreements on accounting and financial disclosure matters
between HSBC Finance Corporation and its independent accountants during 2007.
ITEM 9A. CONTROLS AND PROCEDURES.
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EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
We maintain a system of internal and disclosure controls and procedures designed
to ensure that information required to be disclosed by HSBC Finance Corporation
in the reports we file or submit under the Securities Exchange Act of 1934, as
amended, (the "Exchange Act"), is recorded, processed, summarized and reported
on a timely basis. Our Board of Directors, operating through its audit
committee, which is composed entirely of independent outside directors, provides
oversight to our financial reporting process.
We conducted an evaluation, with the participation of the Chief Executive
Officer and Chief Financial Officer, of the effectiveness of our disclosure
controls and procedures as of the end of the period covered by this report.
Based upon that evaluation, the Chief Executive Officer and Chief Financial
Officer concluded that our disclosure controls and procedures were effective as
of the end of the period covered by this report so as to alert them in a timely
fashion to material information required to be disclosed in reports we file
under the Exchange Act.
There have been no significant changes in our internal and disclosure controls
or in other factors which could significantly affect internal and disclosure
controls subsequent to the date that we carried out our evaluation.
MANAGEMENT'S ASSESSMENT OF INTERNAL CONTROL OVER FINANCIAL REPORTING
Management is responsible for establishing and maintaining adequate internal
control structure and procedures over financial reporting as defined in Rule
13a-15(f) of the Securities and Exchange Act of 1934, and has completed an
assessment of the effectiveness of HSBC Finance Corporation's internal control
over financial reporting as of December 31, 2007. In making this assessment,
management used the criteria related to internal control over financial
reporting described in "Internal Control - Integrated Framework" established by
the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
Based on the assessment performed, management concluded that as of December 31,
2007, HSBC Finance Corporation's internal control over financial reporting was
effective.
The effectiveness of HSBC Finance Corporation's internal control over financial
reporting as of December 31, 2007 has been audited by HSBC Finance Corporation's
independent registered public accounting firm, KPMG LLP, as stated in their
report appearing on page 122, which expressed an unqualified opinion on the
effectiveness of HSBC Finance Corporation's internal control over financial
reporting as of December 31, 2007.
ITEM 9B. OTHER INFORMATION.
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None.
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.
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DIRECTORS
Set forth below is certain biographical information relating to the members of
HSBC Finance Corporation's Board of Directors. Each director is elected
annually. There are no family relationships among the directors.
NIALL S. K. BOOKER, age 49, joined HSBC Finance Corporation's Board in August
2007. Mr. Booker also serves as Chief Executive Officer of HSBC Finance
Corporation and Chief Operating Officer of HSBC North America Holdings Inc.
since February 2008. From April 2007 to February 2008 he was Chief Operating
Officer of HSBC Finance Corporation and Group Executive of HSBC North America
Holdings Inc. Mr. Booker was Deputy
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Chairman and Chief Executive Officer of HSBC Bank Middle East Limited from May
2006 to May 2007 and has served as Group General Manager to HSBC since January
2004. Mr. Booker joined the HSBC Group in 1981 as an International Manager and
has held several positions within the HSBC organization since. Mr. Booker has
gained extensive international experience and skills by building different
businesses within various positions in the HSBC Group. Over the years, he has
worked in retail banking in Brunei and the UK, syndicated loans and specialized
finance in Hong Kong, banking operations in Abu Dhabi and Trade Finance and
corporate banking in Japan. He led HSBC's business in Thailand after the 1997
financial crises in Asia and in three tenures in the United States. Mr. Booker
worked in Treasury, was responsible for the work out of assets for Concord
Leasing and lastly, was CEO, International Private Banking, Americas. He went to
India in July 2002 as Deputy Chief Executive Officer of The Hongkong and
Shanghai Banking Corporation and took over as Chief Executive Officer and
Country Head for HSBC in India, in November 2002.
Mr. Booker is a member of the Executive Committee.
WILLIAM R. P. DALTON, age 64, joined HSBC Finance Corporation's Board in April
2003. Mr. Dalton retired in May 2004 as an Executive Director of HSBC Holdings
plc, a position he held from April 1998. He also served HSBC as Global Head of
Personal Financial Services from August 2000 to May 2004. From April 1998 to
January 2004 he was Chief Executive of HSBC Bank plc. Mr. Dalton held positions
with various HSBC entities for 25 years.
Mr. Dalton is a member of the Compensation, the Executive and the Audit
Committees.
J. DUDLEY FISHBURN, age 61, joined HSBC Finance Corporation's Board in September
1995. Mr. Fishburn became Chairman of the Board of HFC Bank Ltd. (HSBC Finance
Corporation's primary subsidiary in the United Kingdom) in 1998. He is also on
the Board of HSBC Bank (UK) Ltd. He previously served as the Conservative Member
of Parliament for Kensington in London from 1988 to 1997. Prior to entering
Parliament, Mr. Fishburn was Executive Editor for The Economist Newspaper Ltd.
from 1979 to 1988. He is also a Director of Altria Inc., Henderson Smaller
Companies Investment Trust plc and Beazley Group plc. He is a trustee of the
Foundation for Liver Research, The Peabody Trust and Reading University.
Mr. Fishburn is a member of the Nominating & Governance Committee.
DOUGLAS J. FLINT, age 52, joined HSBC Finance Corporation's Board in February
2007. Mr. Flint serves as Group Finance Director with responsibility for
investor relations, finance and tax at HSBC. He joined HSBC as an Executive
Director in 1995. Mr. Flint chaired the Financial Reporting Council's review of
the Turnbull Guidance on Internal Control, served on the Accounting Standards
Board and the Standards Advisory Council of the International Accounting
Standards Board from 2001 to 2004 and is a former partner of KPMG. He is a non-
executive Director of BP plc since January 2005.
Mr. Flint is the Non-Executive Chairman of the Board and an ex-officio (non-
voting) member of the Audit Committee.
CYRUS F. FREIDHEIM, JR., age 72, joined HSBC Finance Corporation's Board in
September 1992. He currently serves as Chief Executive Officer of Sun-Times
Media Group Inc., and is a member of its Board of Directors since October 2005.
Mr. Freidheim served as Chairman of the Board and Chief Executive Officer of
Chiquita Brands International, Inc. from March 2002 to January 2004 and Chairman
until May 2004. In March 2002, he retired as Vice Chairman of Booz, Allen &
Hamilton, Inc. (a management consulting firm), with which he had been affiliated
since 1966. He is also a Director of both Allegheny Energy, Inc. and Virgin
America Inc. He is a Trustee for The Brookings Institution, Rush University
Medical Center, Chicago Council on Global Affairs and the Chicago Symphony
Orchestra. Mr. Freidheim is a Member of the Advisory Council of the Mendosa
School of Business at the University of Notre Dame, The Economic Club of Chicago
and The Commercial Club of Chicago, Council of Foreign Relations.
Mr. Freidheim is the Lead Director and as such is Chair of the Executive
Committee and an ex-officio (non-voting) member of both the Audit and the
Nominating & Governance Committees. He is also a member of the Compensation
Committee.
ROBERT K. HERDMAN, age 59, joined HSBC Finance Corporation's Board in January
2004. Since March 2005, he has served as a member of the Board of Directors of
HSBC North America Holdings, Inc. Mr. Herdman is also on
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the Board of Directors of Cummins Inc. since February 2008. Since January 2004,
Mr. Herdman has been a Managing Director of Kalorama Partners LLC, a Washington,
D.C. consulting firm. Mr. Herdman was the Chief Accountant of the U.S.
Securities and Exchange Commission ("SEC") from October 2001 to November 2002.
The Chief Accountant serves as the principal advisor to the SEC on accounting
and auditing matters, and is responsible for formulating and administering the
accounting program and policies of the SEC. Prior to joining the SEC, Mr.
Herdman was Ernst & Young's Vice Chairman of Professional Practice for its
Assurance and Advisory Business Services (AABS) practice in the Americas and the
Global Director of AABS Professional Practice for Ernst & Young International.
Mr. Herdman was the senior Ernst & Young partner responsible for the firms'
relationships with the SEC, Financial Accounting Standards Board (FASB) and
American Institute of Certified Public Accountants (AICPA). He served on the
AICPA's SEC Practice Section Executive Committee from 1995 to 2001 and as a
member of the AICPA's Board of Directors from 2000 to 2001.
Mr. Herdman is Chair of the Audit Committee.
LOUIS HERNANDEZ, JR., age 41, joined HSBC Finance Corporation's Board in April
2007. Mr. Hernandez serves as Chief Executive Officer of Open Solutions Inc., a
provider of software and services to financial institutions, since 1999. He also
became Chairman of Open Solutions Inc. in 2000. Previously, he served Rowecom,
Inc., an electronics commerce software provider, as its Chief Financial Officer
from 1997 to 1999 and also as an Executive Vice President from 1998. Mr.
Hernandez held several positions in the Business and Advisory Services Group of
Price Waterhouse LLP from 1990 though 1996. In addition to Open Solutions, he
served on the Board of Mobius Management System, Inc. which was sold during
2007.
Mr. Hernandez is a member of the Audit Committee.
GEORGE A. LORCH, age 66, joined HSBC Finance Corporation's Board in September
1994. He also serves as a member of the Board of Directors of HSBC North America
Holdings Inc. From May 2000 until August 2000, Mr. Lorch served as Chairman,
President and Chief Executive Officer of Armstrong Holdings, Inc. (the parent of
Armstrong World Industries, Inc.). Mr. Lorch served as Chairman of the Board,
Chief Executive Officer and President of Armstrong World Industries, Inc. (a
manufacturer of interior finishes) from 1994 and President and Chief Executive
Officer from 1993 until May 1994. Mr. Lorch is a Director of The Williams
Companies, Inc., Autoliv, Inc. and Pfizer Inc.
Mr. Lorch is Chair of the Compensation Committee and a member of the Nominating
& Governance Committee.
BRENDAN P. MCDONAGH, age 49, joined HSBC Finance Corporation's Board in August
2007. Mr. McDonagh serves as Chief Executive Officer of HSBC North America
Holdings Inc. since February 2008. From February 2007 to February 2008 Mr.
McDonagh served as Chief Executive Officer of HSBC Finance Corporation and Chief
Operating Officer of HSBC North America Holdings Inc.. Mr. McDonagh served as
Chief Operating Officer of HSBC Finance Corporation prior to his appointment as
Chief Executive Officer in February 2007. From September 2006 to February 2007,
Mr. McDonagh held the title of Group Executive of HSBC Finance Corporation. From
October 2004 to December 2006 he served as Chief Operating Officer of HSBC Bank
USA. He is also a Group General Manager of HSBC Holdings plc having been
appointed as such in August 2005. An international manager for the HSBC Group
for more than twenty five years, Mr. McDonagh began his career with HSBC in
1979, completing various assignments throughout the world. In September 2002, he
transferred to the United States to run the retail and commercial banking
operations of HSBC Bank USA. Mr. McDonagh is active in several US and Ireland
organizations including the Chicago Regional Board of the American Ireland Fund
and USA Board of Co-operation Ireland. Mr. McDonagh is Chairman of the Consumer
Bankers Association.
LARREE M. RENDA, age 49, joined HSBC Finance Corporation's Board in September
2001. Ms. Renda has been employed by Safeway Inc. since 1974. She became
Executive Vice President, Chief Strategist and Administrative Officer of Safeway
Inc. in November 2005. Prior to her current position she served as Executive
Vice President for Retail Operations, Human Resources, Public Affairs, Labor and
Government Relations since 1999. Prior to this position, she was a Senior Vice
President from 1994 to 1999, and a Vice President from 1991 to 1994. She is also
a director and Chairwoman of the Board of The Safeway Foundation and serves on
the Board of Directors for Casa Ley, S.A. de C.V. Ms. Renda is a member of the
Retailing Initiative Advisory Board of the Wharton School of Business and serves
as a Trustee on the National Joint Labor Management Committee. Additionally she
serves on
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the Board of Directors for both the California and U.S. Chamber of Commerce and
also serves as a National Vice President of the Muscular Dystrophy Association.
Ms. Renda is Chair of the Nominating & Governance Committee and a member of the
Executive and the Audit Committees.
EXECUTIVE OFFICERS
Information regarding the executive officers of HSBC Finance Corporation as of
March 3, 2008 is presented in the following table.
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YEAR
NAME AGE APPOINTED PRESENT POSITION
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Niall S. K. Booker 49 2008 Chief Executive Officer
Andrew C. Armishaw 45 2008 Chief Information Officer - North America
James E. C. Binyon 44 2008 Executive Vice President and Chief
Accounting Officer
Patrick J. Burke 46 2008 Senior Executive Vice President and Chief
Operating Officer - Card and Retail Services
Jon N. Couture 42 2007 Senior Executive Vice President - Human
Resources
Patrick A. Cozza 52 2008 Senior Executive Vice President - Insurance
Curt A. Cunningham 44 2008 Executive Vice President - General
Compliance
Thomas M. Detelich 51 2008 President - Consumer & Mortgage Lending
Gary R. Esposito 47 2008 Executive Vice President and Head of
Consumer & Mortgage Lending Distribution
Bruce A. Fletcher 48 2008 Senior Executive Vice President - Chief
Retail Credit Officer
John J. Haines 44 2008 Senior Executive Vice President - Auto
Finance
Susan B. Jewell 52 2008 Executive Vice President and General Counsel
William H. Kesler 56 2008 Executive Vice President and Treasurer
Thomas M. Kimble 59 2008 Executive Vice President - Global Projects
and Operations
Iain J. Mackay 46 2008 Senior Executive Vice President
Mark A. Melas 51 2007 Executive Vice President - Corporate Real
Estate
Walter G. Menezes 62 2008 President - Card & Retail Services and Auto
Finance
Anthony J. Murphy 48 2007 Senior Executive Vice President - Portfolio
Management
Faye M. Polayes 56 2008 Executive Vice President and Head of
Corporate Tax
Patrick D. Schwartz 50 2008 Executive Vice President, Deputy General
Counsel and Corporate Secretary
Beverley A. Sibblies 46 2008 Executive Vice President and Chief Financial
Officer
Lisa M. Sodeika 44 2005 Executive Vice President - Corporate Affairs
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Niall S. K. Booker, Director and Chief Executive Officer of HSBC Finance
Corporation and Chief Operating Officer of HSBC North America Holdings Inc. See
Directors for Mr. Booker's biography.
Andrew C. Armishaw, Chief Information Officer-North America of HSBC Finance
Corporation and of HSBC North America Holdings Inc. since February 2008. From
January 2004 to February 2008 he was Group Executive and Chief Information
Officer of HSBC Finance Corporation and of HSBC North America Holdings Inc. From
January 2001 to December 2003 Mr. Armishaw was Head of Global Resourcing for
HSBC and from 1994 to 1999 was Chief Executive Officer of First Direct (a
subsidiary of HSBC) and Chief Information Officer of First Direct.
James E. C. Binyon, Executive Vice President and Chief Accounting Officer of
HSBC Finance Corporation since February 2008. From February 2006 to February
2008, Mr. Binyon was Vice President and Chief Accounting Officer of HSBC Finance
Corporation. From September 2004 to February 2006 he was Vice President and
197
Controller of HSBC Finance Corporation. From November 2001 to August 2004 he
served as Finance Director of First Direct, and from February 1995 to October
2001 was Senior Area Accounting Manager, and Manager - Balance Sheet Management
for HSBC Hong Kong. Mr. Binyon was Manager-Asset Management & Funding, and
Manager - Treasury Audit Department between 1992 and 1995. Prior to joining
HSBC, Mr. Binyon spent five years at KPMG.
Patrick J. Burke, Senior Executive Vice President and Chief Operating
Officer - Card & Retail Services of HSBC Finance Corporation since February
2008. From December 2007 to February 2008 he was Managing Director - Card and
Retail Services of HSBC Finance Corporation. He was Managing Director - Card
Services from July 2006 to December 2007. He was appointed President and Chief
Executive Officer of HSBC Financial Limited Canada in January 2003 until July
2006. Patrick was appointed Chief Financial Officer with HFC Bank Limited from
2000 until 2003. From the start of his career with HSBC in 1989, Mr. Burke has
served the company in many roles including Deputy Director of Mergers and
Acquisitions and Vice President of Strategy and Development.
Jon N. Couture, Senior Executive Vice President-Human Resources of HSBC Finance
Corporation since December 2007 and Senior Executive Vice President-Human
Resources of HSBC North America Holdings Inc. since February 2008. Mr. Couture
joined HSBC in December 2007 as Executive Vice President and Head of Human
Resources of HSBC North America Holdings Inc. Mr. Couture was formerly with
National City Corporation where he was Executive Vice President, Human Resources
and Corporate Senior Vice President from May 2004 to December 2007. Prior to
that Mr. Couture was with Siemens Business Services, Inc. from 1998 until May
2004 where he held the position of Senior Vice President, Human Resources. Mr.
Couture has been a member of the Board of Directors of Banking Administration
Institute since 2006.
Patrick A. Cozza, Senior Executive Vice President - Insurance of HSBC Finance
Corporation since February 2008. From April 2004 to February 2008 he was Group
Executive of HSBC Finance Corporation. Mr. Cozza became President - Refund
Lending and Insurance Services in 2002 and Managing Director and Chief Executive
Officer - Refund Lending in 2000. He also serves on the board of directors of
Junior Achievement in New Jersey, Cancer Hope Network, Somerset Business
Partnership and American Council of Life Insurers PAC. Mr. Cozza serves as board
member and officer of Household Life Insurance Company, First Central National
Life Insurance Company and HSBC Insurance Company of Delaware, all subsidiaries
of HSBC Finance Corporation.
Curt A. Cunningham, Executive Vice President-General Compliance of HSBC Finance
Corporation since February 2008. From January 2007 to February 2008 Mr.
Cunningham was Chief Compliance Officer of HSBC Finance Corporation. Prior to
that Mr. Cunningham was Assistant Vice President Corporate Compliance
responsible for Compliance oversight for non-bank finance company businesses.
Mr. Cunningham served in a variety of Compliance roles, including Local
Compliance Officer for the Mortgage Services division between September 1997
through February 2003. Mr. Cunningham joined HSBC in 1988 and has held a variety
of management positions in Operations, Training, Learning and Development and
Compliance.
Thomas M. Detelich, President-Consumer & Mortgage Lending of HSBC Finance
Corporation and of HSBC North America Holdings Inc. since February 2008. From
August 2006 to February 2008 he was Group Executive of HSBC Finance Corporation
and of HSBC North America Holdings Inc. He became Group Executive, Consumer
Lending in July 2002. Mr. Detelich also held the positions of Managing Director
at Beneficial Corporation from March 2000 to July 2002 and Managing Director of
Household Finance Corporation from January 1999 to July 2002 and regional
general manager of consumer lending in 1998. Mr. Detelich was formerly with
Transamerica for 21 years, becoming Executive Vice President of Branch
Operations in 1997.
Gary R. Esposito, Executive Vice President and Head of Consumer & Mortgage
Lending Distribution of HSBC Finance Corporation since February 2008. From
September 2005 to February 2008 he was Managing Director - Mortgage Services of
HSBC Finance Corporation. From 2002 to 2005, Mr. Esposito held the positions of
Managing Director - U.S. branch operations for the Consumer Lending business and
was the President, Chief Executive Officer and Chairman for HSBC Canada from
October 2000 to November 2003. He was also National Director, branch and retail
operations from 1998 through 2000. He has been with HSBC Finance Corporation
since 1982.
Bruce A. Fletcher, Senior Executive Vice President-Chief Retail Credit Officer
of HSBC Finance Corporation and of HSBC North America Holdings Inc. since
February 2008. Mr. Fletcher has been a Vice President of HSBC Bank
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Nevada, N.A. since May 2006, and an Executive Vice President, Retail Credit of
HSBC Bank USA, Inc. since April 2005. From April 2005 to February 2008 Mr.
Fletcher was Senior Vice President-Chief Retail Credit Officer of HSBC Finance
Corporation and of HSBC North America Holdings Inc. Prior to that Mr. Fletcher
was Managing Director and Senior Credit Officer of Citigroup, Inc. His
employment with Citigroup began with subsidiary Citibank, N.A. where he was
employed beginning in June 1988.
John J. Haines, Senior Executive Vice President - Auto Finance of HSBC Finance
Corporation since February 2008. From August 2004 to February 2008 he was
Managing Director - Auto Finance of HSBC Finance Corporation. From May 1989 to
August 2004 Mr. Haines worked for General Electric where most recently he was
Senior Vice President - Products and Services for General Electric Fleet
Services and Senior Vice President - North American Operations for General
Electric Fleet Services.
Susan B. Jewell, Executive Vice President and General Counsel of HSBC Finance
Corporation since February 2008. From December 2007 to February 2008 Ms. Jewell
was General Counsel of HSBC Finance Corporation. In this role, she manages the
legal function for the organization, which encompasses HSBC's non-bank financial
operations in the United States and Canada. Ms. Jewell has also been the Vice
President, General Counsel and Secretary of HSBC Bank Nevada, N.A. since March
2004. Ms. Jewell joined HSBC in 1983 and has held a variety of positions
providing or managing legal support of the HSBC businesses.
William H. Kesler, Executive Vice President and Treasurer of HSBC Finance
Corporation since February 2008 and Executive Vice President - Asset and
Liability Management of HSBC North America Holdings Inc. since April 1, 2006.
From April 2006 to February 2008 he was Senior Vice President - Treasurer of
HSBC Finance Corporation. From May 2005 to April 2006 he was Vice President and
Assistant Treasurer for HSBC Finance Corporation. Mr. Kesler joined HSBC Finance
Corporation in 1992 and since that time has held various treasury management
positions. He is a trustee of the Hospice of Northeastern Illinois Foundation
and serves on the Foundation's executive committee.
Thomas M. Kimble, Executive Vice President-Global Projects and Operations of
HSBC Finance Corporation and of HSBC North America Holdings Inc. since February
2008. From February 2007 to February 2008 he was Managing Director-Strategic
Cost Initiative and Global Resourcing of HSBC Finance Corporation and of HSBC
North America Holdings Inc. Prior to his appointment to that position, since
July 2006 Mr. Kimble served as the Managing Director - Global Projects and
Operations for HSBC North America Holdings Inc. and prior to that, Managing
Director of Operations for Household/HSBC Card Services for eight years. Mr.
Kimble has been active in the Salinas Valley Chamber of Commerce and is a past
president of the Chamber. He is also a past president of Shelter Outreach Plus,
a domestic violence shelter.
Iain J. Mackay, Senior Executive Vice President of HSBC Finance Corporation and
Senior Executive Vice President and Chief Financial Officer of HSBC North
America Holdings Inc. since February 2008. From July 2007 to February 2008 he
was Executive Vice President of HSBC Finance Corporation and Executive Vice
President and Chief Financial Officer of HSBC North America Holdings Inc. Prior
to joining HSBC, Mr. Mackay was Vice President and Chief Financial Officer of
General Electric's Healthcare Global Diagnostics Imaging Business since 2004.
Mr. Mackay joined General Electric Company in 1996 where he held various
positions until 2007.
Mark A. Melas, Executive Vice President - Corporate Real Estate of HSBC Finance
Corporation and of HSBC North America Holdings Inc. since 2000. Prior to that,
Mr. Melas held the position of Senior Vice President from April 1995. From 1978
through March 1995 he was employed at New York Telephone as an Area Operations
Manager in Corporate Real Estate.
Walter G. Menezes, President - Card & Retail Services and Auto Finance of HSBC
Finance Corporation and of HSBC North America Holdings Inc. since February 2008.
From April 2004 to February 2008 he was Group Executive of HSBC Finance
Corporation and of HSBC North America Holdings Inc. Mr. Menezes is also a Group
General Manager for HSBC since October 1, 2006 and is responsible for managing
Group Cards. Mr. Menezes held the title of President and Chief Executive Officer
for Auto Finance from 2002 to August 2004 and Managing Director and Chief Credit
Officer of Credit Card Services from 1998 to 2002. He joined HSBC Finance
Corporation in 1996 as National Director Collections - Credit Card Services.
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Anthony J. Murphy, Senior Executive Vice President - Portfolio Management of
HSBC Finance Corporation and of HSBC North America Holdings Inc. since February
2007. Prior to his appointment to this position, Mr. Murphy was President and
Chief Executive Officer of HSBC Securities (USA) Inc. and Chief Operating
Officer of CIBM Americas. He was also Co-Head of Corporate, Investment Banking
and Markets (CIBM Americas) since November 2004. Mr. Murphy has been with the
HSBC Group since 1990. Prior to his appointment as Chief Executive Officer of
HSBC Securities (USA) Inc. in April 2003, Mr. Murphy served as Chief Strategic
Officer of CIBM Americas from 2000. Prior to that assignment, he was Head of
Market Risk Management for HSBC Bank plc and HSBC Investment Bank in London from
1996.
Faye M. Polayes, Executive Vice President and Head of Corporate Tax of HSBC
Finance Corporation and of HSBC North America Holdings Inc. since February 2008.
Ms. Polayes has been Vice President of HSBC Bank Nevada, National Association
since January 2004. From June 2004 to February 2008 Ms. Polayes was Vice
President of HSBC Card Services Inc. From February 2004 to February 2008 Ms.
Polayes was Senior Vice President - Taxes of HSBC Finance Corporation and from
September 2003 to February 2008 was Executive Vice President - Tax of HSBC North
America Holdings Inc. and of HSBC Bank USA, N.A. Prior to that Ms. Polayes was
Executive Vice President and Tax Director of HSBC Bank USA, N.A. from January
2000 to September 2003.
Patrick D. Schwartz, Executive Vice President, Deputy General Counsel and
Corporate Secretary of HSBC Finance Corporation and of HSBC North America
Holdings Inc. since February 2008. From August 2007 to February 2008 Mr.
Schwartz was Vice President, Deputy General Counsel - Corporate and Corporate
Secretary of HSBC Finance Corporation, Senior Vice President and Secretary of
HSBC USA Inc. and Assistant General Counsel - Corporate, Chief Governance
Officer and Corporate Secretary of HSBC North America Holdings Inc. Mr. Schwartz
counsels management and the Board of Directors of HSBC Finance Corporation, HSBC
USA Inc. and HSBC North America Holdings Inc. with respect to corporate
transactions, securities issuance and compliance, and corporate governance
matters. He manages the HSBC-North America legal team that provides legal
support in these areas. Since joining HSBC in 1993, Mr. Schwartz has held
various positions providing or managing legal support of securities law, asset-
backed funding, public financial reporting and corporate governance, as well as
serving as General Counsel to the Mortgage Services operations from 2000 - 2001.
Beverley A. Sibblies, Executive Vice President and Chief Financial Officer of
HSBC Finance Corporation since February 2008 and Executive Vice
President - Finance of HSBC North America Holdings Inc. since October 2005. From
October 2005 to February 2008 she was Senior Vice President - Chief Financial
Officer of HSBC Finance Corporation. Ms. Sibblies joined HSBC Finance
Corporation in November 2004 as the Senior Vice President and Chief Accounting
Officer. Prior to joining HSBC Finance Corporation, she served as Executive Vice
President and Chief Financial Officer for EMC Mortgage from June 2000 to
February 2004. Prior to that, she served as a partner in the financial services
practice of Deloitte & Touche, LLP from July 1997 to June 2000.
Lisa M. Sodeika, Executive Vice President - Corporate Affairs of HSBC Finance
Corporation since July 2005 and of HSBC North America Holdings Inc. since June
2005. Ms. Sodeika directs HSBC North America's public affairs, employee
communications, government relations, consumer affairs, community development
and philanthropic activities. From January 2003 to June 2005 Ms. Sodeika was
Senior Vice President - Corporate Affairs and Vice President - Consumer Affairs.
Since joining HSBC Finance Corporation, Ms. Sodeika has held management
positions in the consumer finance and retail services businesses including
marketing, collections, quality assurance and compliance, underwriting and human
resources. Ms. Sodeika served as member, vice chair, and then chairperson of the
Federal Reserve Board's Consumer Advisory Council from 2005-2007.
CORPORATE GOVERNANCE
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BOARD OF DIRECTORS - COMMITTEES AND CHARTERS
The Board of Directors of HSBC Finance Corporation has four standing committees:
the Audit Committee, the Compensation Committee, the Nominating & Governance
Committee and the Executive Committee. The charters of the above-mentioned
committees, as well as our Corporate Governance Standards, are available on our
website at www.hsbcusa.com or upon written request made to HSBC Finance
Corporation, 26525 N. Riverwoods Boulevard, Mettawa, Illinois 60045, Attention:
Corporate Secretary.
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Audit Committee
The primary purpose of the Audit Committee is to assist the Board of Directors
in fulfilling its oversight responsibilities relating to HSBC Finance
Corporation's system of internal controls over financial reporting and its
accounting, auditing and financial reporting practices. The Audit Committee is
currently comprised of the following independent Directors (as defined by HSBC
Finance Corporation's Corporate Governance Standards which are based upon the
rules of the New York Stock Exchange): Robert K. Herdman (Chair), William R. P.
Dalton, Louis Hernandez, Jr. and Larree M. Renda. In addition, Cyrus F.
Freidheim, Jr., Lead Director, and Douglas J. Flint, Group Finance Director of
HSBC, are non-voting members of the Audit Committee. The Board has determined
that each of these individuals is financially literate. The Board of Directors
has determined that Robert K. Herdman qualifies as an Audit Committee financial
expert.
Compensation Committee
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 of HSBC Finance Corporation and the officers that are
direct reports to the Chief Executive Officer and such other officers as may be
designated by the Board of Directors. The Compensation Committee is currently
comprised of the following directors: George A. Lorch (Chair), William R. P.
Dalton and Cyrus F. Freidheim, Jr. All members of the Compensation Committee are
independent directors under HSBC Finance Corporation's Corporate Governance
Standards.
The Charter of the Compensation Committee lists the primary responsibilities,
powers and authorities of the Compensation Committee. The listed items include
(i) review and approve corporate goals and performance objectives relevant to
the compensation of the Chief Executive Officer and executive officers, evaluate
the performance of the Chief Executive Officer and executive officers in light
of those goals and objectives, and review its findings with the Board of
Directors in executive session, (ii) submit recommendations concerning base
salary, performance-based cash and long term equity-based incentive awards for
the Chief Executive Officer and executive officers to the Remuneration Committee
of HSBC ("REMCO") for approval, (iii) recommend to REMCO equity incentives under
HSBC plans to all employees, except those awards that the Chief Executive
Officer may determine based upon a delegation of authority by REMCO, (iv) review
and approve benefits and perquisites of the Chief Executive Officer and
executive officers to the extent such benefits are not available to all
employees, (v) recommend to the Board of Directors and REMCO the creation or
amendment of any welfare, or tax qualified employee benefit plan or program of
HSBC Finance Corporation, or any long-term executive compensation plan or
program of HSBC Finance Corporation whose participants include the Chief
Executive Officer or executive officers, (vi) review and recommend to REMCO any
employment and severance contracts for the Chief Executive Officer and executive
officers, as well as any severance payouts to such officers, (vii) review and
consider "best practices" of peer companies with respect to compensation
philosophies, policies and practices, (viii) review management's Compensation
Discussion and Analysis ("CD&A") to be included in HSBC Finance Corporation's
Annual Report on Form 10-K, discuss the CD&A's content with management, prepare
the Compensation Committee Report concerning the CD&A and recommend to the Board
of Directors that the CD&A be included in the annual report on Form 10-K and
(ix) engage in an annual self assessment with the goal for continuing
improvement, and to review and assess the adequacy of this charter at least
annually and recommend any proposed changes to the Board of Directors for
approval. The Compensation Committee may in its discretion retain and discharge
consultants to assist the Compensation Committee in evaluating director, Chief
Executive Officer or executive officer compensation and to determine the
appropriate terms of engagement and the fees to be paid to such consultants.
In establishing executive compensation packages for 2007, in December 2006 the
Compensation Committee provided advisory recommendations to HSBC's Group General
Manager for submission to the HSBC CEO with respect to 2007 compensation for the
Chief Executive Officer and certain other executive officers. The package
included advisory recommendations for 2007 base salary, long-term incentive
share awards and cash awards relating to 2006 performance. Final determination
of compensation, including performance-based cash awards relating to 2007
performance, was proposed by the HSBC CEO and endorsed by REMCO. The Chief
Executive Officer is given full authority, which may be delegated, to establish
the compensation and salary ranges for all other employees of HSBC Finance
Corporation and its subsidiaries whose salaries are not subject to review by the
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Compensation Committee and approval by REMCO. For more information about the
compensation policy of HSBC Finance Corporation please see Item 11. Executive
Compensation - Compensation Discussion and Analysis.
Nominating & Governance Committee
The primary purpose of the Nominating & Governance Committee is to assist the
Board of Directors of HSBC Finance Corporation in discharging its
responsibilities related to identifying and nominating members of the Board of
Directors to the Board, recommending the composition of each committee of the
Board of Directors and the Chair of each committee, establishing and reviewing
HSBC Finance Corporation's corporate governance and making recommendations to
the Board of Directors regarding compensation for service of the non-executive
Board members. The Nominating & Governance Committee ensures that HSBC Finance
Corporation maintains "best practices" with respect to corporate governance in
order to ensure effective representation of its stakeholders.
The Nominating & Governance Committee is currently comprised of the following
directors: Larree M. Renda (Chair), J. Dudley Fishburn, Cyrus F. Freidheim, Jr.
(ex-officio member) and George A. Lorch. With the exception of Mr. Fishburn, all
members of the Nominating & Governance Committee are independent directors under
HSBC Finance Corporation's Corporate Governance Standards.
Executive Committee
The Executive Committee may exercise the powers and authority of the Board of
Directors in the management of the business and affairs of the corporation
during the intervals between meetings of the Board of Directors. Cyrus F.
Freidheim, Jr. (Chair), Niall S. K. Booker, William R. P. Dalton and Larree M.
Renda are members of the Executive Committee.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act, as amended, requires certain of our
Directors, executive officers and any persons who own more than ten percent of a
registered class of our equity securities to report their initial ownership and
any subsequent change to the SEC and the New York Stock Exchange ("NYSE"). With
respect to the 6.36% Series B Preferred Stock of HSBC Finance Corporation, we
reviewed copies of all reports furnished to us and obtained written
representations from our Directors and executive officers that no other reports
were required. Based solely on a review of copies of such forms furnished to us
and written representations from the applicable Directors and executive
officers, all required reports of changes in beneficial ownership were filed on
a timely basis for the 2007 fiscal year.
CODE OF ETHICS
HSBC Finance Corporation's Board of Directors has adopted a Code of Ethics for
Senior Financial Officers. That Code of Ethics is incorporated by reference in
Exhibit 14 to this Annual Report on Form 10-K. HSBC Finance Corporation also has
a general code of ethics applicable to all employees that is referred to as its
Statement of Business Principles and Code of Ethics. That document is available
on our website at www.hsbcusa.com or upon written request made to HSBC Finance
Corporation, 26525 N. Riverwoods Boulevard, Mettawa, Illinois 60045, Attention:
Corporate Secretary.
ITEM 11. EXECUTIVE COMPENSATION.
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COMPENSATION DISCUSSION AND ANALYSIS
The following compensation discussion and analysis (the "2007 CD&A") summarizes
the principles, objectives and factors considered in evaluating and determining
the compensation of HSBC Finance Corporation's executive officers in 2007.
Specific compensation information relating to our 2007 Chief Executive and Chief
Financial Officers, our former Chief Executive Officer who left HSBC in February
2007 and our next three most highly compensated executives is contained in this
portion of the Form 10-K.
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OVERSIGHT OF COMPENSATION DECISIONS
Role of HSBC Holdings plc's Remuneration Committee and HSBC CEO
HSBC Finance Corporation is a wholly owned subsidiary of HSBC Holdings plc
("HSBC"). The Board of Directors of HSBC has the authority to delegate any of
its powers, authorities and judgments to any committee consisting of one or more
directors, and has established a Remuneration Committee ("REMCO") for the
purpose of setting the remuneration policy for HSBC and remuneration of the more
senior executives whose appointment requires HSBC Board of Directors approval.
Compensation packages (including base salary, incentive awards and any long-term
incentive awards) for certain senior executives whose appointment requires HSBC
Board of Directors approval, are initially determined by Mr. Michael F.
Geoghegan, the HSBC Group Chief Executive (the "HSBC CEO"). The HSBC CEO then
forwards his determinations to REMCO which reviews the determinations to ensure
they are in line with the remuneration policy for HSBC and if they are, it
endorses those determinations.
In November 2006, REMCO delegated its authority for endorsement of base salaries
and annual cash incentive awards relating to certain classes of executives to
the HSBC CEO. However, REMCO retained exclusive authority to endorse base
salaries and annual cash incentive award recommendations for the more senior
executives within HSBC and its subsidiaries. REMCO also has exclusive authority
with respect to all long-term incentive plans involving interests in HSBC
ordinary shares. As a result, REMCO had final authority over the compensation
recommendations made by the HSBC CEO in respect of Messrs. McDonagh, Mehta,
Detelich, Menezes and Booker in 2007.
The members of REMCO in 2007 were Sir Mark Moody-Stuart (Chairman), William K.
L. Fung (until May 2007), Sharon Hintze (until May 2007), Gwyn Morgan (as of May
2007) and J.D. Coombe, all of whom were or are non-executive directors of HSBC.
REMCO has retained the services of Mercer Limited as advisers on matters of
corporate governance, and Towers Perrin, a human resource consulting firm, to
provide independent advice on global executive compensation issues.
Role of HSBC Finance Corporation's Compensation Committee and Human Resources
Executives
The Compensation Committee of the Board of Directors of HSBC Finance Corporation
(the "Compensation Committee") generally seeks to ensure that our compensation
policies and practices support the objectives of HSBC Finance Corporation's
compensation program, which are based upon the compensation strategy established
by REMCO. As described below, in establishing executive compensation packages
for 2007, other than for Ms. Sibblies whose compensation is proposed by the
Chief Financial Officer of HSBC North America Holdings Inc. and approved by the
Chief Executive Officer of HSBC Finance Corporation, the Compensation Committee
provided advisory recommendations to HSBC's Group General Manager of Human
Resources for submission to the HSBC CEO, the HSBC CEO further recommended final
remuneration under each element of compensation to REMCO, including base salary
and cash incentive awards, and REMCO endorsed the awards. Additional information
with regard to the Compensation Committee, including a description of its
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.
For purposes of proposing 2007 executive compensation packages to the HSBC CEO,
the Compensation Committee retained the services of Strategic Apex Group, an
executive compensation consulting firm, in December 2006, to provide comparator
data and to assist in the development of competitive compensation packages for
our executives. In addition, our Human Resources executives worked with the
Compensation Committee to prepare a comprehensive annual compensation package
for our Chief Executive Officer and each executive officer that reported to him
in 2007.
2007 Executive Officer Compensation Decision Process
With respect to the executive officers reported in this 2007 CD&A, in December
2006, Mr. Mehta, the Chief Executive Officer of HSBC Finance Corporation at that
time, made proposals to the Compensation Committee regarding 2007 base salary,
long-term incentive share awards and cash awards relating to 2006 performance
for each of his direct reports. Mr. Mehta's recommendations concerning his
direct reports, the Compensation
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Committee's recommendation with respect to Mr. Mehta's salary, and its
endorsement of Mr. Mehta's compensation recommendations as to his direct
reports, were forwarded to HSBC's Group General Manager of Human Resources for
submission to the HSBC CEO. Comparator and market data provided by Strategic
Apex Group was referenced by the Compensation Committee to evaluate the
competitiveness of proposed executive compensation. The HSBC CEO reviewed the
2007 compensation recommendations provided by the Compensation Committee,
including incentive awards relating to 2006 performance, and forwarded the
recommendations to REMCO for endorsement. The HSBC CEO was provided with
comparator information from Towers Perrin based on the following peer group:
American Express Company, Bank of America Corporation, Barclays, BNP Paribas,
Capital One Financial, Citigroup, Inc. Countrywide Financial Corporation,
FifthThird Bancorp, Deutsche Bank, National City Corporation, Royal Bank of
Scotland, JP Morgan Chase, Santander, UBS, Royal Bank of Canada, US Bancorp,
Wachovia Corporation, and Wells Fargo &Company (collectively, the "Comparator
Group"). Comparator and market data was referenced by the HSBC CEO to evaluate
the competitiveness of proposed executive compensation. REMCO reviewed and
endorsed these final recommendations.
In July 2007, Mr. McDonagh proposed the performance objectives relating to the
performance-based cash awards made to executive officers participating in the
Management Incentive Program and submitted these goals to the HSBC CEO. As the
performance-based cash awards were dependent upon satisfaction of objectives
that could not be evaluated until the end of the performance measurement year
(i.e., 2007), the final determination of this component of compensation was not
made until the HSBC CEO received reports from management concerning satisfaction
of corporate, business unit and individual objectives in January 2008. REMCO
reviewed and endorsed the HSBC CEO's recommendations.
OBJECTIVES OF HSBC FINANCE CORPORATION'S COMPENSATION PROGRAM
Our compensation program is designed to support the successful recruitment,
development and retention of high performing executive talent and to provide
incentive to those executives to achieve HSBC Finance Corporation's short-term
business objectives and to optimize its long-term financial returns. We focus on
total compensation rather than individual elements of pay. Our compensation
program is designed to be competitive with the benchmark financial institutions
included in the Comparator Group which is comprised of U.S.-based organizations
that compete with us for business, customers and executive talent. While most of
these organizations are publicly-held companies, our operations are of
comparable scale and complexity. Accordingly, our compensation program is
designed to provide the flexibility to offer compensation that is competitive
with the Comparator Group so that we may attract and retain the highest
performing executives.
The philosophy underlying our executive compensation program which is designed
to promote the compensation strategy of our parent, HSBC, is discussed below.
Across businesses, individual compensation recommendations reflect HSBC's strong
stance with respect to diversity and equal opportunity for all employees within
the context of meritocracy and performance.
Link to Company Performance
We seek to offer competitive base salaries with a significant portion of
variable compensation components determined by measuring performance of the
executive, his or her respective business unit, HSBC Finance Corporation and
HSBC. The performance-based cash compensation plans, which are more fully
described under Elements of Compensation - Annual Performance-Based Awards,
emphasize revenue and expense growth, profits and other key performance
measures. Other considerations taken into account in setting compensation
policies and making compensation decisions include demonstrated leadership,
future potential, adherence to HSBC's ethical standards and the ability to
leverage capabilities across businesses. Corporate, business unit and/or
individual goals are established at the beginning of each year.
Compensation plans motivate our executives to improve the overall performance
and profitability of HSBC as well as the specific region, unit, or function to
which they are assigned. Each executive's individual performance and
contribution is considered in making salary adjustments and determining the
amount of annual performance bonus paid and the value of HSBC equity-based
awards granted each year.
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In 2005, HSBC began to award long-term incentive share awards called "Restricted
Shares" which vest on a specified date if the executive remains employed through
that date, and "Performance Shares" which require continued employment and
satisfaction of corporate performance conditions designed to reinforce a long-
term focus on HSBC's business strategy and delivering value to its shareholders.
Performance Share awards may be granted to the most senior executives whose
business units have the ability to have a direct impact on HSBC's consolidated
results. Restricted Share awards may be granted to other high performing
executives.
Competitive Compensation Levels and Marketplace Research
We endeavor to maintain a compensation program that is competitive. We operate
in a highly competitive business environment, in which our Comparator Group and
other financial services companies continuously look to gain market share and
competitive advantage by hiring top executive talent. On an annual basis, and as
needed when recruiting, we compare the compensation for our executive officers
to that of executives with similar responsibilities for companies of similar
industry, size and complexity.
We research the types of compensation programs provided by other companies,
compensation levels for executives, details of certain compensation programs,
marketplace compensation trends, marketplace practices regarding compensation
mix, stock vesting terms, equity ownership levels, the amount of compensation
that is derived from equity incentives and the benefits provided to executives.
We also research different aspects of performance, including the relationship
between performance and compensation, a comparison of HSBC Finance Corporation's
historical performance to our Comparator Group, and types of performance
measures that are used by other companies for their annual and long-term
incentive programs. Research data is gathered from several different sources,
including general surveys of the marketplace and through retained compensation
consultants including Towers Perrin and Strategic Apex Group.
Our 2007 compensation program generally provided executives with the opportunity
to earn a base salary that was targeted near the median of the market. We
believe this represented a competitive base salary for meeting general business
objectives. Total compensation, which includes incentive awards, was also
targeted to be in the 50th percentile if we, HSBC and the executive met
established performance goals, with the possibility of reaching the 75th
percentile if we, HSBC and the executive exceeded established performance goals.
This provided greater incentive to achieve higher performance standards and the
specific compensation strategy established by REMCO. The level of compensation
paid to an executive from year to year will differ based on performance. This
year-to-year difference stems mainly from HSBC Finance Corporation's and/or an
individual business unit's performance results and, for individuals eligible for
performance-based equity awards, awards may vary based upon HSBC's performance
results. Compensation levels will also increase or decrease based on the
executive's individual performance and level of responsibility.
Repricing of Stock Options and Timing of Option Grants
The exercise price of stock options under historical Household International,
Inc. option plans was based upon the stock price on the date the option grant
was approved. For HSBC discretionary option plans, the exercise price of awards
made in 2003 and 2004 was the higher of the average market value for HSBC
ordinary shares on the five business days preceding the grant date or the market
value on the date of the grant.
HSBC also offers employees a plan in which options to acquire HSBC ordinary
shares are awarded when an employee commits to contribute up to 250 GBP (or the
equivalent) each month for one, three or five years. At the end of the term, the
accumulated amount, plus interest, may be used to purchase shares under the
option, if the employee chooses to do so. The exercise price for such options is
the average market value of HSBC ordinary shares on the five business days
preceding the date of the invitation to participate, less a 15 to 20 percent
discount (depending on the term).
We do not, and our parent, HSBC, does not reprice stock option grants. In
addition, neither HSBC Finance Corporation nor HSBC has ever engaged in the
practice known as "back-dating" of stock option grants, nor have we attempted to
time the granting of historical stock options in order to gain a lower exercise
price.
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Dilution from Equity-Based Compensation
While dilution is not a primary factor in determining award amounts, there are
limits to the number of shares that can be issued under HSBC's equity-based
compensation programs. These limits were established by vote of HSBC
shareholders in 2005.
Perquisites
It is our philosophy to provide few perquisites to executives. The perquisites
we provide are intended to help executives be more productive and efficient or
to protect HSBC Finance Corporation and its executives from certain business
risks and potential threats. Our review of competitive market data indicates
that the perquisites provided to executives are reasonable and within market
practice. See the Summary Compensation Table below for further information on
perquisites awarded to our executives.
Retirement Benefits
HSBC North America Holdings Inc. offers a pension retirement plan in which HSBC
Finance Corporation executives may participate that provides a benefit equal to
that provided to all eligible employees of HSBC Finance Corporation with like
dates of hire. However, both qualified and non-qualified defined benefit plans
are maintained so that this level of pension benefit can be continued without
regard to certain Internal Revenue Service limits. Executives and certain other
highly compensated employees can elect to participate in a nonqualified deferred
compensation plan, where such employees can elect to defer the receipt of earned
compensation to a future date. We also maintain a qualified 401(k) plan with
company matching contributions. Another nonqualified deferred compensation plan
provides executives and certain other highly compensated employees with a
benefit measured by the company matching contribution that could not be
allocated to the 401(k) plan because of certain Internal Revenue Service limits.
We do not pay any above-market or preferential interest in connection with
deferred amounts. As international managers, Mr. McDonagh and Mr. Booker are
accruing pension benefits under a foreign-based defined benefit plan that
includes member contributions. Additional information concerning this plan is
contained below in this 2007 CD&A in the table entitled Pension Benefits.
Employment Contracts and Severance Protection
There are no employment agreements between our executive officers and HSBC
Finance Corporation. However, Mr. Menezes has entered into an agreement that
only provides additional severance benefits upon a change of control of HSBC
Finance Corporation. The terms of Mr. Menezes' agreement is contained in the
description of his compensation under the heading Compensation of Officers
Reported in the Summary Compensation Table.
Accounting Considerations
We adopted the fair value method of accounting under Statement of Financial
Accounting Standards No. 123 (revised 2004), "Share Based Payment" ("SFAS
123(R)") effective January 1, 2006. SFAS 123(R) applies to all equity
instruments granted to employees beginning January 1, 2006 and does not apply to
awards granted in prior periods before the effective date, except to the extent
that prior periods' awards are modified, repurchased or cancelled after the
required effective date. Prior to 2006, we adopted the fair value method of
accounting prospectively in 2002 for all new equity instruments granted to
employees as provided under Statement of Financial Accounting Standards No. 148,
"Accounting for Stock-Based Compensation - Transition and Disclosure (an
amendment of FASB Statement No. 123)." The Board of Directors believes that this
treatment reflects greater accuracy and transparency of the cost of these
incentives and promotes better corporate governance.
Tax Considerations
Limitations on the deductibility of compensation paid to executive officers
under Section 162(m) of the Internal Revenue Code are not applicable to HSBC
Finance Corporation, as it is not a public corporation as defined by Section
162(m). As such, all compensation to our executive officers is deductible for
federal income tax purposes, unless there are excess golden parachute payments
under Section 4999 of the Internal Revenue Code following a change in control.
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ELEMENTS OF COMPENSATION
The primary elements of executive compensation are base salary, annual non-
equity performance-based awards, and long-term equity-based incentives. In
limited circumstances, discretionary bonuses may also be awarded. While the base
salary is generally fixed and not subject to fluctuation, the size of the cash
incentive and amount of equity compensation an individual receives is
discretionary. HSBC conducts an internal comparison of its executives globally,
and then compares business performance relative to the market. In addition,
executives are eligible to receive company funded retirement benefits that are
offered to employees at all levels who meet the eligibility requirements.
Perquisites are not a significant component of compensation. As discussed above
in the section entitled Oversight of Compensation Decisions, in establishing
executive compensation packages for 2007, other than for Ms. Sibblies whose
compensation is proposed by the Chief Financial Officer of HSBC North America
Holdings Inc. and approved by the Chief Executive Officer of HSBC Finance
Corporation, the Compensation Committee provided advisory recommendations to
HSBC's Group General Manager of Human Resources for submission to the HSBC CEO,
the HSBC CEO further recommended final remuneration under each element of
compensation to REMCO and REMCO endorsed the awards. The HSBC CEO based his
decision on what he considered was an appropriate balance between performance-
based compensation and other forms of compensation, the level of responsibility
and individual contribution of the executive and competitive practice in the
marketplace for executives from companies of similar industry, size, and
complexity as HSBC Finance Corporation.
HSBC's philosophy is to focus on total compensation versus the individual
elements of pay. HSBC has adopted a market-driven orientation that strives to
leverage variable pay to motivate outstanding business results. We have
implemented a process that aids in determining final total individual pay based
on an evaluation of business performance against goals, individual performance
against goals, and a comparison against the marketplace. Individual total
compensation for each of our executives is targeted at the 50th percentile, and
adjusted upward or downward based on performance.
Base Salary
Base salary is reviewed annually and increases, if any, are based on individual
performance and market position. When establishing base salaries for executives,
consideration is given to compensation paid for similar positions at companies
included in compensation surveys and our Comparator Group, targeting the 50th
percentile, which, when combined with significant performance-based compensation
opportunities, enables HSBC Finance Corporation to attract and retain high
performing executives. In addition, other factors such as individual and
corporate performance, potential for future advancement, specific job
responsibilities, length of time in current position, individual pay history,
and comparison to comparable internal positions (internal equity) influences the
final base salary recommendations for individual executives.
Annual Performance-Based Awards
Annual non-equity performance-based awards are paid in cash upon satisfaction of
individual, business unit, corporate financial and operational goals. Superior
performance is encouraged by placing a significant part of the executive's total
compensation at risk. In the event certain quantitative or qualitative
performance goals are not met, annual non-equity performance awards may be less
than the maximum permitted. Performance goals are set based on prior year's
performance, expectations for the upcoming year, our annual business plan,
HSBC's business strategies, and objectives related to building value for HSBC
shareholders. This is consistent with our strategy of targeting individual total
compensation for each of our executives at the 50th percentile, and adjusting it
upward or downward based on the factors mentioned above.
In support of our pay-for performance philosophy, we have an annual non-equity
performance-based award program entitled the Management Incentive Program. The
Management Incentive Program is an annual cash incentive plan that uses
quantitative and qualitative goals to motivate employees who have a significant
role in the corporation. The quantitative objectives may include meeting revenue
and/or receivable targeted growth, a targeted loss reserve ratio, a targeted
equity to managed assets ratio, a targeted earnings per share, reduction in
expenses and charge-offs by specified percentages, specified net income and
operating efficiency ratios for HSBC Finance Corporation and/or the executive's
respective business unit, and an increase in the number of our products used by
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each customer. Qualitative objectives may include key strategic business
initiatives or projects for the executive's respective business unit. The
qualitative objective goals may also include cross-business initiatives that
create revenue, leverage talent across businesses and share and support
execution of "best practices" and/or adopt another business' "best practice."
Award opportunity and payouts have historically been determined as a percentage
of base salary and are based on comparison to other internal comparable
positions (internal equity) and external market practices. Cash incentive awards
under the Management Incentive Program are paid in February of the year
following the measurement year.
The specific objectives for Ms. Sibblies and Messrs. Detelich and Menezes are
described below in the discussions of their compensation awards.
Long-term Incentives
Long-term incentive compensation is awarded through grants of HSBC equity
instruments. The purpose of equity-based incentives is to help HSBC attract and
retain outstanding employees and to promote the growth and success of HSBC
Finance Corporation's business over a period of time by aligning the financial
interests of these employees with those of HSBC's shareholders.
Historically, equity incentives were awarded through stock options and
restricted share grants. All stock options granted prior to November 2002 vested
in full upon the merger of HSBC Finance Corporation and HSBC, and options
granted in November 2002 have subsequently vested in full. From the time of the
merger in March 2003 to 2005, options on HSBC ordinary shares were granted to
certain executives and restricted shares to others. Awarded options have an
exercise price equal to the greater of the average market value of HSBC ordinary
shares on the five business days prior to the grant of the option and the market
value of HSBC ordinary shares on the grant date. Options without a performance
condition typically vest in three, four or five equal installments subject to
continued employment, and expire ten years from the grant date. However, certain
options awarded to key executives had a "total shareholder return" performance
vesting condition and only vest if and when the condition is satisfied. No stock
options were granted to executive officers in 2005, 2006 or 2007 as HSBC shifted
to Restricted Share and Performance Share grants for equity based compensation.
Awarding restricted shares is another form of long-term incentive compensation
utilized to compensate and provide an incentive to our employees. When
restricted shares are granted to an executive officer, the underlying shares are
held in a trust for the benefit of the employee and are released only after the
defined vesting conditions are met at the end of the holding period. While in
such trust, dividend equivalents are paid on all underlying shares of restricted
stock at the same rate paid to ordinary shareholders. The dividend equivalents
are paid in the form of additional shares for awards made after 2004 and in cash
paid to the executive for all prior awards.
There are two types of long-term incentive share awards used by HSBC: (i) those
with a time vesting condition awarded to recognize significant contribution to
HSBC Finance Corporation ("Restricted Shares") and (ii) those with time and
corporate performance-based vesting conditions ("Performance Shares").
Restricted Shares are awarded to key executives as part of the annual pay review
process in recognition of past performance and to further motivate and retain
executives. Restricted Share awards comprise a number of shares to which the
employee will become entitled, normally after three years, subject to the
individual remaining in employment. The level of 2007 grants to most HSBC Group
General Managers and other senior executives reflect the fact that these awards
do not carry the uncertainty of performance conditions for future vesting. The
amount granted is based on general guidelines endorsed by REMCO addressing
individual performance, goal achievement and potential for growth as part of an
individual executive's total compensation package. In March 2007, certain HSBC
Finance Corporation executives received Restricted Share awards for 2006
performance. In January 2008, certain HSBC Finance Corporation executives were
awarded Restricted Shares for 2007 performance. No Performance Shares were
awarded to executive officers for 2007 performance.
Performance Shares which were awarded in 2005 and 2006 to key executives, were
awarded based on achievement of defined levels of future performance of HSBC.
Performance Shares were divided into two equal parts subject to distinct
performance conditions measured over a three year period. A total shareholder
return award, which accounts for 50 percent of each Performance Share award,
will vest in whole or in part (based on a sliding scale of 0 percent to 100
percent) depending upon how the growth in HSBC's share value, plus declared
dividends, compares
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to the average shareholder return of a defined competitor group 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, Societe Generale, Standard Chartered PLC, UBS AG, Unicredito Italiano, US
Bancorp, Wachovia Corporation, Wells Fargo & Company and Westpac Banking
Corporation.
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.
COMPENSATION OF OFFICERS REPORTED IN THE SUMMARY COMPENSATION TABLE
Below is a summary of the factors that affected the compensation earned in 2007
by the executive officers listed in the Summary Compensation Table. In
determining the compensation of each of our executives, management, the
Compensation Committee and the HSBC CEO evaluated competitive levels of
compensation for executives managing operations or functions of similar size and
complexity and the importance of retaining executives with the required
strategic, leadership and financial skills to ensure our continued growth and
success and their potential for assumption of additional responsibilities. The
HSBC CEO then forwarded his recommendations to REMCO and REMCO endorsed the
final awards.
Compensation of Brendan P. McDonagh
Mr. McDonagh served as Chief Executive Officer of HSBC Finance Corporation and
as Chief Operating Officer of HSBC North America Holdings Inc. until his
appointment as Chief Executive Officer of HSBC North America Holdings Inc. in
February 2008. Prior to his appointment as Chief Executive Officer of HSBC
Finance Corporation, Mr. McDonagh served as Chief Operating Officer of HSBC
Finance Corporation. From September 2006 to February 2007, Mr. McDonagh served
as Group Executive of HSBC Finance Corporation and of HSBC North America
Holdings Inc.
Mr. McDonagh participates in general benefits available to executives of HSBC
Finance Corporation 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, cash
incentive awards, 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. McDonagh's total compensation, the HSBC
CEO considered his individual performance, the performance of HSBC Finance
Corporation measured against its annual operating plan and Mr. McDonagh's
leadership of HSBC Finance Corporation through a very difficult U.S. business
environment. For 2007, Mr. McDonagh's goals included implementing the annual
operating plan of HSBC Finance Corporation, improving collaboration across the
HSBC North America business entities, achieving a targeted net income goal,
executing cost containment initiatives to achieve profit before tax target,
managing reputational risk and developing talent and creating strong talent
pools and succession plans. Mr. McDonagh's cash compensation for 2007 was
determined by REMCO on the recommendation of the HSBC CEO who consulted with
HSBC Human Resources executives.
Mr. McDonagh's base salary for 2007 was $643,287. In determining Mr. McDonagh's
base salary, the HSBC CEO reviewed the salary levels of Mr. McDonagh's internal
peers on a global basis and found Mr. McDonagh's salary to
209
be slightly below the 50th percentile among internal peers of equivalent
experience level. As a result, a recommendation was made to REMCO and REMCO
endorsed a base salary increase of three percent to $643,287. No salary
adjustment was made on Mr. McDonagh's appointment as Chief Executive Officer of
HSBC Finance Corporation. This approach is in line with the HSBC reward strategy
where the focus is on using variable compensation to reward performance with
base salary being positioned around the 50th percentile of the market rate.
In March 2007, the HSBC CEO proposed and REMCO endorsed an award to Mr. McDonagh
of Restricted Shares with a grant date value of $630,240. The award was made in
recognition of Mr. McDonagh's 2006 performance. In January 2008, the HSBC CEO
proposed and REMCO endorsed an award to Mr. McDonagh of Restricted Shares with a
grant date value of $1,701,288. The January 2008 discretionary equity award,
which is to be awarded in March 2008 in recognition of Mr. McDonagh's 2007
performance, reflects the HSBC CEO's view of the value of Mr. McDonagh's long-
term contribution to and leadership within HSBC, including HSBC Finance
Corporation and HSBC North America Holdings Inc., and HSBC's desire to retain
Mr. McDonagh and to motivate and reward his outstanding performance. The 2008
Restricted Share award is also consistent with maintaining Mr. McDonagh'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 cash
bonus award to Mr. McDonagh of $1,701,288. The HSBC CEO proposed the award in
recognition of Mr. McDonagh's performance in his role as Chief Executive Officer
of HSBC Finance Corporation in 2007. In considering Mr. McDonagh's bonus award,
the HSBC CEO considered Mr. McDonagh's personal contribution to the achievement
of the business objectives of HSBC Finance Corporation as set out in the annual
operating plan of HSBC Finance Corporation and his personal leadership of HSBC
Finance Corporation through a very difficult business environment. The
discretionary cash bonus award was considered as part of the overall assessment
of Mr. McDonagh's total compensation which was based on his 2007 performance and
benchmarked against HSBC Finance Corporation's Comparator Group.
In conformance with HSBC's total compensation philosophy, Mr. McDonagh 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 HSBC Finance Corporation. 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 Siddharth N. Mehta
On February 15, 2007, Mr. Mehta resigned as the Chief Executive Officer of HSBC
Finance Corporation. Until that time, he participated in the same programs and
generally received compensation based on the same factors as the other executive
officers. However, Mr. Mehta's overall compensation level reflected his greater
degree of policy-and decision-making authority, his higher level of
responsibility with respect to the strategic direction of HSBC Finance
Corporation and his ultimate responsibility for our financial and operational
results.
Mr. Mehta had an employment agreement pursuant to which Mr. Mehta was to serve
as Chairman and Chief Executive Officer of HSBC Finance Corporation and also
Chief Executive Officer of HSBC North America Holdings Inc. until March 28,
2008. However, upon Mr. Mehta's resignation, the employment agreement was
terminated and replaced with a separation agreement entered into on February 15,
2007 between Mr. Mehta and HSBC Finance Corporation.
Pursuant to the separation agreement, Mr. Mehta received $115,385, representing
all base salary earned but unpaid as of February 15, 2007, and $71,795 in
respect of vacation earned but not taken prior to his departure. In addition,
Mr. Mehta was entitled to receive $2,271,372 on the first day of September 2007,
reflecting, in substantial part, a bonus pursuant to the 2006 executive bonus
pool to which he was entitled in accordance with the terms of his employment
agreement but did not receive. In addition, Mr. Mehta continues to receive his
base salary, at a rate of $1,000,000 per annum through March 28, 2008. On
January 2, 2008 he received payments for guaranteed bonuses
210
in the amounts of $1,875,000 for the period January 1, 2007 through December 31,
2007 and $468,750 for the period January 1, 2008 through March 28, 2008. Mr.
Mehta is also to receive interest on all payments to which he 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.
Pursuant to the separation agreement, Mr. Mehta 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
Mr. Mehta becomes eligible to participate in similar plans or policies of
another employer and March 28, 2008. Due to his subsequent employment, such
benefits terminated on November 1, 2007. All options to purchase shares granted
to Mr. Mehta 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.
Mr. Mehta's separation agreement included a non-competition provision for the
three-month period following his termination. In addition, the agreement
contained a non-solicitation provision that stated that, subject to some
exceptions, during the one-year period starting February 15, 2007, Mr. Mehta
would not directly or indirectly induce any employee of HSBC Finance Corporation
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 HSBC
Finance Corporation or an affiliate.
Compensation of Beverley A. Sibblies
The Chief Financial Officer of HSBC Finance Corporation, Ms. Beverley A.
Sibblies, participates in general benefits available to officers of the
corporation and the Management Incentive Program. Her base salary for 2007 was
determined in December 2006 by Mr. Mehta, the former Chief Executive Officer,
upon recommendation of the Chief Financial Officer of HSBC North America
Holdings Inc. in consultation with Human Resources executives. Management
Incentive Plan awards earned by Ms. Sibblies in 2007 and paid in February 2008
and Restricted Share awards were recommended by the Chief Financial Officer of
HSBC North America Holdings Inc. and approved by Mr. McDonagh.
Ms. Sibblies' 2007 compensation was determined as a total compensation package
which included base salary, a cash incentive award, stock awards and
perquisites. In determining her 2007 compensation, the Chief Financial Officer
of HSBC North America Holdings Inc. reviewed Ms. Sibblies' performance
objectives, including corporate, individual and departmental goals further
described below. In addition, he reviewed Ms. Sibblies' performance against the
performance objectives, her expertise and contribution to the organization. The
package was compared against the Comparator Group data as well as internal
peers.
Ms. Sibblies' base salary in 2007 was $400,000 of which $396,154 was received in
2007. This was a $25,000 increase from her 2006 base salary. To determine Ms.
Sibblies' base salary, Human Resources executives reviewed competitive
compensation levels and found Ms. Sibblies' then current base salary level to be
below the 50th percentile among similarly-placed executives reported in salary
survey data as well as internal peers on a global basis. The Compensation
Committee recommended the $25,000 increase and the HSBC CEO approved the
Compensation Committee's proposal.
In March 2007, Ms. Sibblies was granted Restricted Shares (formerly referred to
as Achievement Shares), with a grant date value of $550,000. The grant was made
in recognition of Ms. Sibblies' 2006 performance. In January 2008, Ms. Sibblies
was awarded Restricted Shares with a grant date value of $300,000. The awards
are each subject to a three-year vesting schedule. The January 2008
discretionary equity award, which is to be awarded in March 2008, reflects
management's recognition of the value of Ms. Sibblies' contribution to and
leadership of HSBC Finance Corporation, HSBC's desire to retain Ms. Sibblies and
to motivate and reward outstanding performance. This award is also consistent
with maintaining Ms. Sibblies' compensation level at a competitive market pay
level.
Ms. Sibblies' cash incentive compensation under the Management Incentive Program
of $304,000 earned in 2007 and paid in February 2008 was determined based upon
satisfaction of quantitative and qualitative objectives that provide for a
target cash award equal to 150 percent of her base salary, with a maximum of two
times that amount. Ms. Sibblies' cash incentive compensation required
satisfaction of objectives that included the following:
211
(i) individual objectives such as facilitating collaboration among the chief
financial officers for HSBC Finance Corporation and its subsidiaries, developing
talent management and succession planning for all critical finance functions
within HSBC Finance Corporation, establishing a process that ensures our
accounting policies are consistent and properly applied, enhancing the planning
and forecasting functions within the corporate finance department, developing
and supporting a strategy to mitigate control gaps, working with the treasury
department to allocate transaction costs, continuing to provide leadership and
guidance with respect to Sarbanes-Oxley reporting and disclosure controls and
supporting HSBC with the implementation of a Basel Committee on Banking
Supervision framework, (ii) common goal objectives such as achieving a targeted
net income goal, improving employee engagement, meeting internal audit and
operational risk goals and (iii) business unit goals such as increasing
diversity, maintaining collaboration among HSBC North America management,
meeting expense controls, establishing a process that ensures that HSBC's
accounting policies are consistently applied, leading process improvement
programs, overseeing development of an economic capital model and providing
support to the Chief Executive Officer.
The Chief Financial Officer of HSBC North America Holdings Inc., in consultation
with Human Resources executives, assessed Ms. Sibblies' and HSBC Finance
Corporation's performance against the above-mentioned objectives and found that
there was complete or substantial satisfaction of the majority of the goals. It
was deemed that Ms. Sibblies' most significant accomplishments in 2007 included
establishing a process to ensure HSBC Group accounting policies were applied,
preparing and submitting an annual operating plan in accordance with significant
revised HSBC requirements, and establishing process improvement programs that
positively impact the timeliness and accuracy of the month-end closing process.
Ms. Sibblies was therefore awarded cash incentive compensation equal to seventy-
six percent of her base salary, or $304,000, which was paid to her in February
2008.
Other compensation paid to Ms. Sibblies, including perquisites such as an
executive physical examination, is consistent with perquisites paid to
similarly-placed executive officers within and outside of HSBC.
Compensation of Mr. Thomas M. Detelich
Mr. Detelich's 2007 compensation was determined as a total compensation package
which included base salary, a cash incentive award, stock awards and
perquisites. In recommending Mr. Detelich's 2007 compensation to REMCO, the HSBC
CEO reviewed Mr. Detelich's performance objectives, including corporate,
individual and departmental goals further described below. In addition, he
reviewed Mr. Detelich's performance against the performance objectives, his
expertise and contribution to the organization. The package was compared against
the Comparator Group data as well as internal peers.
In 2007, Mr. Detelich's base salary remained the same as 2006, at $650,000. In
December 2006, the Compensation Committee reviewed competitive compensation
levels and found Mr. Detelich's then current base salary level was above the
50th percentile among similarly-placed executives reported in salary survey data
as well as internal peers on a global basis. In keeping with the goal of
maintaining executive base salaries in the 50th percentile, it did not recommend
an increase to his salary. The HSBC CEO recommended and REMCO endorsed the
Compensation Committee's assessment.
In March 2007, the HSBC CEO proposed and REMCO endorsed an award to Mr. Detelich
of Restricted Shares with a grant date value of $440,000. The award was made in
recognition of Mr. Detelich's 2006 performance. The award is subject to a three-
year vesting schedule.
Mr. Detelich's cash incentive compensation under the Management Incentive
Program of $520,000 earned in 2007 and paid in February 2008 was determined
based upon satisfaction of certain quantitative and qualitative objectives that
provide for a target cash award equal to 150 percent of his base salary, with a
maximum of two times that amount. Mr. Detelich's cash incentive compensation
required satisfaction of objectives that included: (i) individual objectives
such as improving collaboration across the HSBC North America business entities,
developing talent and creating strong talent pools and succession plans,
ensuring Consumer and Mortgage Lending is focused on customer values, executing
marketing, cost containment, credit quality and compliance initiatives to
achieve profit before tax target and managing reputational risk, (ii) common
goal objectives such as achieving a targeted net income goal, improving employee
engagement, meeting internal audit and operational risk goals and (iii) business
unit goals such as supporting HSBC North America's diversity goals, achieving
the overall senior management
212
committee goals, achieving expense budgets, achieving profits before tax
targets, achieving delinquency and charge-off targets.
The HSBC CEO assessed Mr. Detelich's, the Consumer Lending and Mortgage Services
businesses' and HSBC Finance Corporation's performance against the above-
mentioned objectives and found that Mr. Detelich did not attain the majority of
the goals. However, Mr. Detelich's accomplishments in 2007 included proven
leadership skills through a very difficult business environment resulting in a
high score on an employee engagement study of the Consumer Lending and Mortgage
Services businesses, exceeding the plan for charge-off and expense reduction and
leading his business unit through the closure of the Mortgage Services and
Decision One businesses and the significant restructuring within HSBC.
Therefore, despite not meeting all of his goals, the HSBC CEO recommended and
REMCO endorsed a cash incentive award equal to eighty percent of his base
salary, or $520,000, which was paid to him in February 2008.
Other compensation paid to Mr. Detelich, including perquisites such as an
executive physical examination, is consistent with perquisites paid to
similarly-placed executive officers within and outside of HSBC.
Compensation of Mr. Walter G. Menezes
Mr. Menezes' 2007 compensation was determined as a total compensation package
which included base salary, a cash incentive award, stock awards and
perquisites. In recommending Mr. Menezes' 2007 compensation to REMCO, the HSBC
CEO reviewed Mr. Menezes' performance objectives, including corporate,
individual and departmental goals further described below. In addition, he
reviewed Mr. Menezes' performance against the performance objectives, his
expertise and contribution to the organization. The package was compared against
the Comparator Group data as well as internal peers.
In 2007, Mr. Menezes' base salary remained the same as 2006, at $650,000. In
December 2006, the Compensation Committee reviewed competitive compensation
levels and found Mr. Menezes' then current base salary level was above the 50th
percentile among similarly-placed executives reported in salary survey data as
well as internal peers on a global basis. In keeping with the goal of
maintaining executive base salaries in the 50th percentile, it did not recommend
an increase to his salary. The Compensation Committee also considered that Mr.
Menezes' base salary was equal to Mr. Detelich's who the Compensation Committee
deemed to have comparable responsibilities. The HSBC CEO recommended and REMCO
endorsed the Compensation Committee's assessment.
In March 2007, the HSBC CEO proposed and REMCO endorsed an award to Mr. Menezes
of Restricted Shares with a grant date value of $440,000. The award was made in
recognition of Mr. Menezes' 2006 performance. In January 2008, the HSBC CEO
proposed and REMCO endorsed an award to Mr. Menezes of Restricted Shares with a
grant date value of $900,000. The January 2008 discretionary equity award, which
is to be awarded in March 2008 in recognition of Mr. Menezes' 2007 performance,
reflects the HSBC CEO's view of the value of Mr. Menezes' expected long-term
contribution to and leadership of HSBC North America, and HSBC's desire to
retain Mr. Menezes and to motivate and reward exceptional performance. This
award is also consistent with maintaining Mr. Menezes' 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.
Mr. Menezes' cash incentive compensation under the Management Incentive Program
of $940,000 earned in 2007 and paid in February 2008 was determined based upon
satisfaction of certain quantitative and qualitative objectives that provide for
a target cash award equal to 150 percent of his base salary, with a maximum of
two times that amount. Mr. Menezes' cash incentive compensation required
satisfaction of objectives that included: (i) individual objectives such as
promoting cross-selling opportunities between Card Services and Retail Services
units, developing talent and creating strong talent pools and succession plans,
ensuring delivery of extraordinary customer care, increasing revenue, managing
expenses and mitigating losses, supporting HSBC's global reach with focus on
distribution of profitable credit card products across certain regions and
managing reputational risk, (ii) common goal objectives such as achieving a
targeted net income goal, improving employee engagement, meeting internal audit
and operational risk goals and (iii) business unit goals such as supporting HSBC
North America's diversity goals, achieving the overall senior management
committee goals, achieving expense budgets, achieving profits before tax
targets, achieving delinquency and charge-off targets.
213
The HSBC CEO assessed Mr. Menezes', the Credit Card Services, Retail Services
and Auto Finance businesses and HSBC Finance Corporation's performance against
the above-mentioned objectives and found that Mr. Menezes attained approximately
half of the goals. In addition, Mr. Menezes' accomplishments in 2007 included
developing the global card strategy and starting its implementation, reduction
of future exposure on deterioration of credit quality attributable to the U.S.
economic environment and solid results for the U.S. domestic card business.
Therefore, the HSBC CEO recommended and REMCO endorsed a cash incentive award
equal to one hundred forty-four percent of his base salary, or $940,000, which
was paid to him in February 2008.
Other compensation paid to Mr. Menezes, including perquisites such as an
executive physical examination, is consistent with perquisites paid to
similarly-placed executive officers within and outside of HSBC.
Mr. Menezes, has an employment protection agreement pursuant to which if, during
the 18 month period following a change in control of HSBC Finance Corporation,
Mr. Menezes' employment is terminated due to a "qualifying termination" (which
includes a termination other than for "cause" or disability, or resignation by
Mr. Menezes for "good reason"), he will be entitled to receive a cash payment
consisting of:
- A pro rata annual bonus through the date of termination, based on the
highest of the annual bonuses payable during the three years preceding
the year in which the termination occurs;
- A payment equal to 1.5 times the sum of the applicable base salary and
highest annual bonus; and
- A payment equal to the value of 18 months of additional employer
contributions under HSBC North America's tax-qualified and supplemental
defined contribution plans.
In addition, upon a qualifying termination following a change in control, Mr.
Menezes will be entitled to continued welfare benefit coverage for 18 months
after the date of termination, 18 months of additional age and service credit
under HSBC North America's tax-qualified and supplemental defined benefit
retirement plans, and outplacement services. If any amounts or benefits received
under the employment protection agreement or otherwise are subject to the excise
tax imposed under section 4999 of the Internal Revenue Code, an additional
payment will be made to restore Mr. Menezes to the after-tax position in which
he would have been if the excise tax had not been imposed. However, if a small
reduction in the amount payable would render the excise tax inapplicable, then
this reduction will be made instead.
Compensation of Niall S. K. Booker
Mr. Booker served as Chief Operating Officer of HSBC Finance Corporation until
his appointment as Chief Executive Officer of HSBC Finance Corporation in
February 2008. Mr. Booker participates in general benefits available to
executives of HSBC Finance Corporation 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, cash incentive awards, 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. Booker's total
compensation, the HSBC CEO considered his individual performance and the
performance of HSBC Finance Corporation measured against its annual operating
plan. For 2007, Mr. Booker's goals included supporting the implementation of the
annual operating plan of HSBC Finance Corporation, improving collaboration
across the HSBC North America business entities, meeting internal audit, credit
and operational risk goals, enhancing the planning and forecasting functions at
HSBC Finance Corporation, executing cost containment initiatives to achieve
profit before tax target, managing reputational risk and developing talent and
creating strong talent pools and succession plans. Mr. Booker's cash
compensation for 2007 was determined by REMCO on the recommendation of the HSBC
CEO who consulted with HSBC Human Resources executives.
Mr. Booker's base salary for 2007 was $561,080, of which $374,053 was earned
from April 30, 2007, the effective date of his appointment as Chief Operating
Officer of HSBC Finance Corporation. In determining Mr. Booker's base salary,
the HSBC CEO reviewed competitive compensation levels and found Mr. Booker's
current compensation level was above the 50th percentile among similarly-placed
executives at HSBC Finance Corporation's Comparator Group as well as internal
peers on a global basis. On appointment as Chief Operating Officer of HSBC
Finance Corporation, Mr. Booker's base salary remained unchanged. This approach
is in line with the HSBC reward strategy where the focus is on using variable
compensation to reward performance with base salary being positioned around the
50th percentile of the market rate.
214
In January 2008, the HSBC CEO proposed and REMCO endorsed an award to Mr. Booker
of Restricted Shares with a grant date value of $1,209,666. The January 2008
discretionary equity award, which is to be awarded in March 2008 in recognition
of Mr. Booker's 2007 performance, reflects the HSBC CEO's view of the value of
Mr. Booker's long-term contribution to and leadership within HSBC, including
HSBC Finance Corporation and HSBC North America Holdings Inc., and HSBC's desire
to retain Mr. Booker and to motivate and reward his outstanding performance. The
2008 Restricted Share award is also consistent with maintaining Mr. Booker's
total compensation at a competitive market pay level in respect of his
performance and long term value to the HSBC Group. The award is subject to a
three-year vesting schedule.
In January 2008, the HSBC CEO proposed and REMCO endorsed a discretionary cash
bonus award to Mr. Booker of $1,209,666. The HSBC CEO proposed the award in
recognition of Mr. Booker's performance in his role as Chief Operating Officer
of HSBC Finance Corporation in 2007. In considering Mr. Booker's bonus award,
the HSBC CEO considered Mr. Booker's personal contribution to the achievement of
the business objectives of HSBC Finance Corporation as set out in the annual
operating plan of HSBC Finance Corporation and his personal leadership skills
through a very difficult business environment. The discretionary cash bonus
award was considered as part of the overall assessment Mr. Booker's total
compensation which was based on his 2007 performance and benchmarked against
HSBC Finance Corporation's Comparator Group.
In conformance with HSBC's total compensation philosophy, Mr. Booker also
received perquisites relating to housing, education and tax equalization, that
was significant when compared to other compensation received by other executive
officers within HSBC Finance Corporation. 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 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 of HSBC Finance Corporation and the officers that are
direct reports to the Chief Executive Officer and such other officers as may be
designated by the Board of Directors. The Compensation Committee is comprised of
the following directors: George A. Lorch (Chair), William R. P. Dalton and Cyrus
F. Freidheim, Jr. All members of the Compensation Committee are independent
directors under HSBC Finance Corporation's Corporate Governance Standards.
Additional information with regard to the Compensation Committee is contained in
the section of this Form 10-K entitled Item 10. Directors, Executive Officers
and Corporate Governance - Corporate Governance.
215
COMPENSATION COMMITTEE REPORT
The Compensation Committee has reviewed and discussed the Compensation
Discussion and Analysis ("2007 CD&A") with management. Based on such review and
discussion, the Compensation Committee has recommended to the Board of Directors
that the 2007 CD&A be included in this Annual Report on Form 10-K.
Compensation Committee
George A. Lorch (Chair)
William R.P. Dalton
Cyrus F. Freidheim, Jr.
216
EXECUTIVE COMPENSATION
The following tables and narrative text discuss the compensation awarded to,
earned by or paid to (i) Mr. Brendan P. McDonagh, who served as our Chief
Executive Officer from February 2007 through February 21, 2008, (ii) Mr.
Siddharth N. Mehta, who served as Chief Executive Officer until February 2007,
(iii) Ms. Beverley A. Sibblies, who served as our Chief Financial Officer during
2007 and (iv) our three other most highly compensated executive officers who
served as executive officers, all as of December 31, 2007.
SUMMARY COMPENSATION TABLE
CHANGE IN
PENSION VALUE
AND
NON-EQUITY NONQUALIFIED
INCENTIVE DEFERRED
STOCK OPTION PLAN COMPENSATION ALL OTHER
NAME AND SALARY BONUS AWARDS AWARDS COMPENSATION EARNINGS COMPENSATION
TOTAL
PRINCIPAL POSITION YEAR ($) ($)(2) ($)(3) ($)(4) ($)(5) ($)(6) ($)(7)
($)
------------------------------------------------------------------------------------------------------------------------
----------
BRENDAN P. 2007 $643,287 $1,701,288 $ 938,756 $ - $ - $ 479,374 $ 924,943
$4,687,648
MCDONAGH(1)..........
Chief Executive Officer 2006 $676,553 $ - $ 272,515 $ - $710,444 $ 488,925 $ 635,401
$2,783,838
SIDDHARTH N. MEHTA(1).. 2007 $115,385 $ - $ - $ - $ - $ 191,774 $5,846,248
$6,153,407
Former Chairman & Chief 2006 $984,615 $ - $3,684,906 $1,575,292 $ - $ 351,288 $ 290,962
$6,887,063
Executive Officer
BEVERLEY A. SIBBLIES... 2007 $396,154 $ - $ 498,259 $ - $304,000 $ 20,376 $ 60,493
$1,279,282
Executive Vice 2006 $375,000 $ - $ 216,824 $ - $543,750 $ 17,269 $ 54,303
$1,207,146
President and Chief
Financial Officer
THOMAS M. DETELICH..... 2007 $650,000 $ - $2,775,965 $ 247,265 $520,000 $ 321,566 $ 174,906
$4,689,702
President - Consumer & 2006 $650,000 $2,000,000 $2,069,519 $ 787,646 $ - $1,158,293 $ 162,774
$6,828,232
Mortgage Lending
WALTER G. MENEZES(9)... 2007 $650,000 $ - $1,965,709 $ 204,326 $940,000 $ 994,560 $ 162,386
$4,916,981
President - Card & 2006 $642,308 $2,000,000 $1,476,173 $ 394,302 $ - $1,311,749 $ 151,568
$5,976,100
Retail Services and
Auto Finance
NIALL S. BOOKER(8)..... 2007 $374,053 $1,209,666 $ 869,941 $ - $ - $ 579,077 $ 346,700
$3,379,437
Chief Operating Officer
--------
(1) Brendan P. McDonagh was appointed Chief Executive Officer as of February
26, 2007. Mr. McDonagh's compensation is tied to an international reserve
asset denominated in Special Drawing Rights (SDRs). Because the value of
the U.S. dollar increased against the SDR in 2007, due to the exchange,
it appears as though his salary was reduced when he actually received an
increase of three percent. Mr McDonagh succeeded Siddharth N. Mehta who
resigned as of February 15, 2007. The salary amount shown for Mr. Mehta
is the prorated portion of his annual base salary of $1,000,000.
(2) The amounts disclosed for Messrs. McDonagh and Booker represent the
discretionary incentive bonuses relating to 2007 performance paid in
February 2008. The amounts disclosed for Messrs. Detelich and Menezes
represent the discretionary incentive bonus relating to 2006 performance
paid in February 2007.
(3) The values reflected in the table above are the amounts of compensation
expense amortized in 2007 for accounting purposes under FAS 123R for
outstanding restricted stock grants made in the years 2003, 2004, 2005,
2006 and 2007. A portion of the expense reflected for Messrs. McDonagh,
Detelich and Menezes 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% of the award is subject to a total shareholder return measure ("TSR")
against a comparator group. HSBC Finance Corporation's comparator group
is comprised of U.S.-based organizations that compete with us for
business, customers, and executive talent. The Performance Share
comparator group includes: ABN AMRO Holding N.V., Banco Santander Central
Hispano S.A., Banco Bilbao Vizcaya Argentina, S.A., Bank of America
Corporation, The Bank of New York Mellon Corporation, 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, Societe Generale, Standard
Chartered PLC, UBS AG, Unicredito Italiano, US Bancorp, Wachovia
Corporation, Wells Fargo & Company and Westpac Banking Corporation.
Depending on HSBC's ranking against the comparator group at the end of
the performance period, the TSR portion of the grant may vest on a
sliding scale from 100% to 0%. The remaining 50% 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%, the EPS
portion will be forfeited and if it is 52% 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% due to the
probability of a 0% vest on the TSR portion and a 100% vest on the EPS
portion for both years 2005 and 2006. HSBC Finance Corporation records
expense over the three year period based on the fair value which is 100%
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
217
Table and will be released as long as the named executive officer is
still in the employ of HSBC Finance Corporation at the time of vesting.
HSBC Finance Corporation records expense based on the fair value over the
vesting period which is 100% 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.
(4) HSBC and HSBC Finance Corporation's current philosophy is to reward
executive officers with restricted shares, called "Restricted Shares" or
"Performance Shares." HSBC last issued stock options to HSBC Finance
Corporation's named executive officers in 2004. The amounts reflected
above are the amounts of compensation expense amortized in 2007 for
accounting purposes under FAS 123R for outstanding stock option grants
made in 2003. The methodology of the valuation of these options was based
on a Black-Scholes model. The stock option grant made to certain named
executive officers in 2004 is performance-based with 100% of the
condition tested on Total Shareholder Return. The performance condition
was not met in 2007, and will be subject to a re-test in 2008, and again
in 2009, and must be satisfied in order for the options to vest.
(5) The amounts disclosed represent the incentive bonuses earned in 2007 but
paid in February 2008 under the Management Incentive Program.
(6) The HSBC-North America (U.S.) Retirement Income Plan ("RIP"), the
Household Supplemental Retirement Income Plan ("SRIP"), the HSBC
International Staff Retirement Benefit Scheme (Jersey) ("ISRBS"), the
NonQualified Deferred Compensation Plan and the Supplemental Tax
Reduction Investment Plan are described under Savings and Pension Plans
on page 223. Increase in retirement plan values for each participant are:
Mr. Mehta - $18,634 (RIP), $202,721 (SRIP); Ms. Sibblies - $5,088 (RIP),
$15,085 (SRIP); Mr. Detelich - $20,123 (RIP), $78,546 (SRIP); Mr.
Menezes - $68,992 (RIP), $822,536 (SRIP); and Mr. McDonagh $479,374 and
Mr. Booker $579,077 (both in ISRBS, net of mandatory 2007 contribution).
Changes in values under the deferred compensation plans for each
participant are: Mr. Mehta $(29,581); Ms. Sibblies $203; Mr. Detelich
$222,897, and Mr. Menezes $103,032.
(7) Components of All Other Compensation are disclosed in the aggregate. All
Other Compensation includes such items as financial planning services,
physical exams, club initiation fees, expatriate benefits and car
allowances. The following itemizes benefits that individually or in the
aggregate for each executive officer exceeds $10,000: Club initiation
fees and dues for Messrs. McDonagh $15,112 and Booker $8,766; physical
exams for each named executive officer as follows: Mr. McDonagh $709; Ms.
Sibblies $3,795; Mr. Detelich $12,276; Mr. Menezes $1,766; and Mr. Booker
$584; car allowances for Messrs. McDonagh $15,808, Mehta $11,000, and
Booker $7,845; personal use of aircraft by Mr. McDonagh $1,678; executive
umbrella liability insurance coverage in the amount of $10 million for
Mr. Mehta at a cost of $1,750, and Messrs. Detelich and Menezes each at
cost of $583; children's educational allowances for Mr. McDonagh $33,492,
and Mr. Booker $48,198; housing and furniture allowances for Mr. McDonagh
$172,310 and Mr. Booker $146,261; loan subsidy for Mr. McDonagh of
$30,179 as additional income; medical expenses for Mr. McDonagh $7,225;
relocation expense for Mr. Booker $16,644; international travel plan
costs of $56,105 for Mr. McDonagh; and expatriate benefits for Mr.
McDonagh were $592,325 and for Mr. Booker were $118,403.
The total in the All Other Compensation column also includes HSBC Finance
Corporation's contribution for the named executive officers'
participation in the HSBC-North America (U.S.) Tax Reduction Investment
Plan ("TRIP") and the Supplemental Household International Tax Reduction
Investment Plan ("STRIP") in 2007 as follows: Mr. Mehta, $11,966; Mr.
Detelich, $158,547; Mr. Menezes, $160,037 and Ms. Sibblies, $56,698. In
addition, under the terms of his severance agreement, Mr. Mehta received
the balance of his salary for 2007 in the amount of $884,615, pay for
vacation earned but not taken in the amount of $71,795, $2,271,372
reflecting in part a bonus pursuant to the 2006 executive bonus pool to
which he was entitled in accordance with the terms of his employment
agreement but did not receive, $250,000 covering salary to be received in
2008 along with a prorated 2008 bonus of $468,750.
TRIP and STRIP are described under Savings and Pension Plans - Deferred
Compensation Plans on page 223.
(8) Niall S. Booker joined HSBC Finance Corporation and was appointed Chief
Operating Officer as of April 30, 2007. His base salary reflects amounts
earned by Mr. Booker after that date but his cash bonus and stock awards
reflect the awards for the entire year as they were primarily based on
his performance with HSBC Finance Corporation.
(9) In February 2006, Mr. Menezes' base salary was increased to $650,000. The
amount shown for 2006 is what Mr. Menezes actually received during 2006.
218
GRANTS OF PLAN-BASED AWARDS TABLE
ALL OTHER
ESTIMATED FUTURE PAYOUTS ESTIMATED FUTURE PAYOUTS STOCK AWARDS:
UNDER NON-EQUITY UNDER EQUITY NUMBER OF
INCENTIVE PLAN AWARDS(1) INCENTIVE PLAN AWARDS(2) SHARES OF
--------------------------------- ---------------------------- STOCK OR
THRESHOLD TARGET MAXIMUM THRESHOLD TARGET MAXIMUM UNITS
NAME GRANT DATE ($) ($) ($) (#)(4) (#) (#) (#)
----------------------------------------------------------------------------------------------------------------------
BRENDAN P. MCDONAGH.... 03/30/07 N/A N/A N/A N/A N/A N/A 36,054
Chief Executive Officer
SIDDHARTH N. MEHTA..... N/A N/A N/A N/A N/A N/A N/A N/A
Former Chairman & Chief
Executive Officer
BEVERLEY A. SIBBLIES... 03/30/07 $ - $300,000 $ 600,000 N/A N/A N/A 31,464
Executive Vice
President and Chief
Financial Officer
THOMAS M. DETELICH..... 03/30/07 $ - $975,000 $1,950,000 N/A N/A N/A 25,171
President - Consumer &
Mortgage Lending
WALTER G. MENEZES...... 03/30/07 $ - $975,000 $1,950,000 N/A N/A N/A 25,171
President - Card &
Retail Services and
Auto Finance
NIALL S. BOOKER........ N/A N/A N/A N/A N/A N/A N/A N/A
Chief Operating Officer
ALL OTHER
OPTION AWARDS: GRANT DATE
NUMBER OF FAIR VALUE
SECURITIES OF STOCK
UNDERLYING AND OPTION
OPTIONS AWARDS
NAME (#) ($)(3)(4)
----------------------------------------------------
BRENDAN P. MCDONAGH.... N/A $630,240
Chief Executive Officer
SIDDHARTH N. MEHTA..... N/A N/A
Former Chairman & Chief
Executive Officer
BEVERLEY A. SIBBLIES... N/A $550,000
Executive Vice
President and Chief
Financial Officer
THOMAS M. DETELICH..... N/A $440,000
President - Consumer &
Mortgage Lending
WALTER G. MENEZES...... N/A $440,000
President - Card &
Retail Services and
Auto Finance
NIALL S. BOOKER........ N/A N/A
Chief Operating Officer
--------
(1) 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 which 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 the
market data for the position the executive officer holds and will not
change unless the executive officer changes into a position which has a
different target and maximum payout. Typically the maximum payout is a 1x
or 2x multiplier of target. Actual 2007 awards are reported in the
Summary Compensation Table on page 217.
(2) As discussed in the 2007 CD&A, no Performance Shares were awarded in
2007.
(3) The total grant date fair value reflected for Messrs. McDonagh, Detelich
and Menezes and Ms. Sibblies is based on 100% of the fair market value of
the underlying HSBC ordinary shares on March 30, 2007 (the date of grant)
of GBP 8.25 and converted into U.S. dollars using the GBP exchange rate
as of the time of funding the grant (1.96254). These amounts reflect the
awards of Restricted Shares which consist of shares of restricted stock
that vest in full at the end of a three year period from the date of
grant. The award amount of Restricted Shares is based on the executive
officer's position within the organization, base salary, performance
rating and scope for growth. At the executive level, officers eligible to
receive Restricted Shares are eligible for awards ranging from 50% up to
300% of base salary.
(4) In January 2008, Restricted Shares were approved to be awarded to Messrs.
McDonagh, Menezes and Booker and to Ms. Sibblies. The awards are expected
to be made in March 2008.
219
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END TABLE
OPTION AWARDS
--------------------------------------------------------------------------------------------
EQUITY
INCENTIVE
PLAN AWARDS: STOCK AWARDS
NUMBER OF NUMBER OF NUMBER OF -------------------------
------
SECURITIES SECURITIES SECURITIES NUMBER OF MARKET
VALUE
UNDERLYING UNDERLYING UNDERLYING OPTION SHARES OR OF
SHARES OR
UNEXERCISED UNEXERCISED UNEXERCISED EXERCISE OPTION UNITS OF STOCK UNITS OF
STOCK
OPTIONS (#) OPTIONS (#) UNEARNED PRICE EXPIRATION THAT HAVE NOT THAT
HAVE NOT
NAME EXERCISABLE UNEXERCISABLE OPTIONS (#) ($)/(GBP) DATE VESTED (#) VESTED
($)(1)
------------------------------------------------------------------------------------------------------------------------
------
BRENDAN P. MCDONAGH... 18,900(2) GBP6.3754 03/29/09 $
Chief Executive
Officer 9,000(2) GBP6.2767 03/16/08
36,054(3) $
602,383
------------------------------------------------------------------------------------------------------------------------
------
SIDDHARTH N. MEHTA.... 535,000(2) $21.37 11/12/11
Former Chairman & 408,000(2) GBP9.1350 11/03/13
Chief Executive
Officer 204,000(7) GBP8.2930 04/30/14
------------------------------------------------------------------------------------------------------------------------
------
BEVERLEY A. SIBBLIES.. 31,464(3) $
525,694
Executive Vice
President and 29,513(8) $
493,097
Chief Financial
Officer 19,957(9) $
333,438
------------------------------------------------------------------------------------------------------------------------
------
THOMAS M. DETELICH.... 60,188(2) $16.96 11/08/09
President - Consumer & 66,875(2) $18.40 11/13/10
Mortgage Lending 93,625(2) $21.37 11/12/11
267,500(2) $10.66 11/20/12
204,000(2) GBP9.1350 11/03/13
102,000(7) GBP8.2830 04/30/14
25,171(3) $
420,552
70,711(10)
$1,181,425
151,240(11)
$2,526,888
------------------------------------------------------------------------------------------------------------------------
------
WALTER G. MENEZES..... 48,150(2) $13.71 11/09/08
President - Card &
Retail 66,875(2) $16.96 11/08/09
Services and Auto
Finance 74,900(2) $18.40 11/13/10
107,000(2) $21.37 11/12/11
107,000(2) $10.66 11/20/12
150,000(2) GBP9.1350 11/03/13
150,000(7) GBP8.2830 04/30/14
25,171(3) $
420,552
22,292(10) $
372,450
151,240(11)
$2,526,888
------------------------------------------------------------------------------------------------------------------------
------
NIALL S. BOOKER....... 19,759(3) $
330,129
Chief Operating
Officer
------------------------------------------------------------------------------------------------------------------------
------
STOCK AWARDS
-----------------------------------
EQUITY INCENTIVE EQUITY INCENTIVE
PLAN AWARDS: PLAN AWARDS:
NUMBER OF MARKET OR
UNEARNED PAYOUT VALUE
SHARES, UNITS OF UNEARNED
OR OTHER SHARES, UNITS OR
OPTION AWARDS RIGHTS THAT OTHER RIGHTS
---------------------- HAVE NOT THAT HAVE NOT
NAME VESTED (#) VESTED ($)(1)
------------------------------------------------------------
BRENDAN P. MCDONAGH... $
Chief Executive
Officer
14,612(4) $ 244,134
23,734(5) $ 396,543
35,319(6) $ 590,103
------------------------------------------------------------
SIDDHARTH N. MEHTA....
Former Chairman &
Chief Executive
Officer
------------------------------------------------------------
BEVERLEY A. SIBBLIES..
Executive Vice
President and
Chief Financial
Officer
------------------------------------------------------------
THOMAS M. DETELICH....
President - Consumer &
Mortgage Lending
95,040(5) $1,587,909
100,848(6) $1,684,948
------------------------------------------------------------
WALTER G. MENEZES.....
President - Card &
Retail
Services and Auto
Finance
95,040(5) $1,587,909
100,848(6) $1,684,948
------------------------------------------------------------
NIALL S. BOOKER.......
Chief Operating
Officer 13,765(4) $ 229,983
40,791(12) $ 681,528
40,365(13) $ 674,410
------------------------------------------------------------
(1) 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. dollars share price of $16.7078 per share.
(2) Reflects fully vested options.
(3) These awards will vest in full on March 30, 2010.
(4) This award will vest in full on April 2, 2008 if the performance
conditions are met.
(5) These awards vest in part or in full on March 31, 2008 if performance
conditions are met.
(6) These awards vest in part or in full on March 31, 2009 if performance
conditions are met.
(7) These awards will vest in full subject to satisfaction of performance
conditions on the fourth and fifth anniversaries of the date of grant,
April 30, 2004. If the performance conditions are not met on the fifth
anniversary of the date of grant, the options will be forfeited.
(8) This award will vest in full on March 31, 2009.
(9) One-third of this award vested on November 30, 2007. The next one-third
will vest on November 30, 2008, and the final third will vest on
November 30, 2009.
(10) Twenty percent of this award vested on each of March 31, 2004, March 31,
2005, March 31, 2006 and March 30, 2007. The final twenty percent will
vest March 31, 2008.
(11) Twenty percent of this award vested on May 26, 2006 and on May 25, 2007.
Twenty percent of this award will vest on each of May 26, 2008, May 26,
2009, and May 26, 2010.
(12) This award will vest in full on May 27, 2008 if performance conditions
are met.
(13) This award will vest in full on March 6, 2009 if performance conditions
are met.
220
OPTION EXERCISES AND STOCK VESTED TABLE
OPTION AWARDS STOCK AWARDS
------------------------------- -------------------------------
NUMBER OF VALUE NUMBER OF VALUE
SHARES ACQUIRED REALIZED SHARES ACQUIRED REALIZED
ON EXERCISE ON EXERCISE ON VESTING ON VESTING
NAME (#) ($)(1) (#)(2) ($)(1)(2)
----------------------------------------------------------------------------------------------------------
BRENDAN P. MCDONAGH.................. - $ - 14,216(3) $ 261,924
Chief Executive Officer
SIDDHARTH N. MEHTA................... 2,428,900(4) $7,823,587 644,162(5) $11,177,548
Former Chairman &
Chief Executive Officer
BEVERLEY A. SIBBLIES................. - $ - 11,308(6) $ 189,203
Executive Vice President and
Chief Financial Officer
THOMAS M. DETELICH................... 53,500(7) $ 295,930 141,980(8) $ 2,540,050
President - Consumer &
Mortgage Lending
WALTER G. MENEZES.................... - $ - 78,923(9) $ 1,425,523
President - Card & Retail
Services and Auto Finance
NIALL S. BOOKER...................... - $ - 14,216(3) $ 261,924
Chief Operating Officer
--------
(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 vesting period.
(3) Includes the release of 11,392 shares granted on April 15, 2002, together
with additional shares accumulated over the vesting period as reinvested
dividends.
(4) Includes the exercise of 802,500 shares granted June 15, 1998, 358,450
shares granted November 9, 1998, 331,700 shares granted November 8, 1999,
401,250 shares granted November 13, 2000 and 535,000 shares granted November
20, 2002.
(5) Includes the release of 215,825 shares granted April 15, 2003 and 428,337
shares granted May 26, 2005.
(6) Includes the release of 9,879 shares granted December 7, 2004. Remaining
shares are release of additional awards accumulated over the vesting period.
(7) Represents the exercise of shares granted November 9, 1998.
(8) Includes the release of 70,710 shares granted April 15, 2003 and 50,413
shares granted May 26, 2005. Remaining shares are release of additional
awards accumulated over the vesting period.
(9) Includes the release of 22,292 shares granted February 14, 2003 and 50,413
shares granted May 26, 2005. Remaining shares are release of additional
awards accumulated over the vesting period.
221
PENSION BENEFITS
NUMBER OF PRESENT VALUE OF PAYMENTS
YEARS ACCUMULATED DURING LAST
CREDITED BENEFIT FISCAL YEAR
NAME PLAN NAME SERVICE ($) ($)
----------------------------------------------------------------------------------------------------------
BRENDAN P. MCDONAGH............... ISRBS 27.0 $3,138,240(1) $-
Chief Executive Officer
SIDDHARTH N. MEHTA................ RIP-Household New 9.5 $ 151,796 $-
Former Chairman & SRIP-Household New 9.5 $1,931,899
Chief Executive Officer
BEVERLEY A. SIBBLIES.............. RIP-Account Based 3.2 $ 17,541 $-
Executive Vice President and SRIP-Account Based 3.2 $ 31,337
Chief Financial Officer
THOMAS M. DETELICH................ RIP-Household New 31.4 $ 421,331 $-
President - Consumer & SRIP-Household New 31.4 $3,791,670
Mortgage Lending
WALTER G. MENEZES................. RIP-Household New 11.2 $ 432,470 $-
President - Card & Retail SRIP-Household New 11.2 $3,542,614(2)
Services and Auto Finance
NIALL S. BOOKER................... ISRBS 25.9 $2,923,163(3) $-
Chief Operating Officer
--------
(1) Value of age 53 benefit. Participant is also eligible for an immediate early
retirement benefit at a value of $3,764,246.
Plans described under Savings and Pension Plans on page 223.
(2) Value of age 65 benefit. Participant is also eligible for an immediate early
retirement benefit at a value of $484,452 (RIP) and $3,983,921 (SRIP). Plans
are described under Saving and Pension Plans on page 223.
(3) Value of age 53 benefit. Participant is also eligible for an immediate early
retirement benefit at a value of $3,530,447. Plans are described under
Savings and Pension Plans on page 223.
222
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.
Supplemental Retirement Income Plan (SRIP)
The Household 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. 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 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.
Formulas for Calculating Benefits
HOUSEHOLD OLD FORMULA: Applies to executives who were hired prior to January 1,
1990 by Household International, Inc. The benefit at age 65 is determined under
whichever formula, A or B below, provides the higher amount.
A. The normal retirement benefit at age 65 is the sum of (i) 51% of average
salary that does not exceed the integration amount and (ii) 57% 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% and 57%) 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.
B. The normal retirement benefit at age 65 is determined under (a) below,
limited to a maximum amount determined in (b):
a. 55% 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% is reduced for retirement
prior to age 65.
b. The amount determined in (a) is reduced as needed so that when
added to 50% of the primary Social Security benefit, the total
does not exceed 65% 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% 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, Inc. The normal
retirement benefit at age 65 is the sum of (i) 51% of average salary that does
not exceed the integration amount and (ii) 57% 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
223
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% and 57%)
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% and 57%) are reduced.
ACCOUNT BASED FORMULA: Applies to executives who were hired by Household
International Inc. after December 31, 1999. It also applies to executives who
were hired by HSBC Bank USA, National Association 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 2% 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 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% 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).
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 benefit payable at assumed retirement
using interest and mortality assumptions consistent with those used for
financial reporting purposes under SFAS 87 with respect to HSBC Finance
Corporation'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.
Deferred Compensation Plans
TAX REDUCTION INVESTMENT PLAN HSBC North America 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% (15% 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. Employees who will be age 50 or older on or
before December 31 of the plan year may also elect to contribute an additional
$5,000 in catch-up contributions.
If the employee has been employed for at least one year, HSBC Finance
Corporation contributes 3% of compensation each payroll period on behalf of each
participant who contributes 1% and matches any additional participant
contributions up to 4% of compensation. However, matching contributions will not
exceed 6% of a participant's compensation if the participant contributes 4% 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
224
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 HSBC North America also maintains the
Supplemental Household International Tax Reduction Investment Plan ("STRIP")
which is an unfunded plan for eligible employees of HSBC Finance Corporation and
its participating subsidiaries 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 HSBC North America Holdings Inc.
maintains a Non-Qualified Deferred Compensation Plan for the highly compensated
employees in the organization, including executives of HSBC Finance Corporation.
The named executive officers are eligible to contribute up to 80% 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.
The deemed investment choices are reviewed on a periodic basis by the Investment
Committee for the Plan which consists of members chosen by the Board or
Directors or Chief Executive Officer of HSBC North America Holdings Inc. and are
chosen based on a conservative mix of funds. 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 HSBC Finance Corporation. 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.
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 .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.
225
NONQUALIFIED DEFINED CONTRIBUTION
AND OTHER NONQUALIFIED DEFERRED COMPENSATION PLANS
SUPPLEMENTAL
NONQUALIFIED TAX
DEFERRED REDUCTION
COMPENSATION INVESTMENT
PLAN(1) PLAN(2)
EXECUTIVE REGISTRANT AGGREGATE AGGREGATE AGGREGATE
CONTRIBUTIONS CONTRIBUTIONS EARNINGS WITHDRAWALS/ BALANCE AT
NAME IN 2007 ($) IN 2007 ($) IN 2007 ($) DISTRIBUTIONS ($) 12/31/2007 ($)
-----------------------------------------------------------------------------------------------------------------
BRENDAN P. MCDONAGH(4)......... N/A N/A N/A N/A N/A
Chief Executive Officer
SIDDHARTH N. MEHTA............. $ - $ 1,812 $(29,581) $ - $2,371,877
Former Chairman &
Chief Executive Officer
BEVERLEY A. SIBBLIES........... $19,856 $ 43,198 $ 203 $ - $ 110,129
Executive Vice President and
Chief Financial Officer
THOMAS M. DETELICH............. $ - $145,047 $222,897 $193,424(3) $3,301,746
President - Consumer &
Mortgage Lending
WALTER G. MENEZES.............. $ - $146,537 $103,032 $ - $2,011,364
President - Card & Retail
Services and Auto Finance
NIALL S. BOOKER(4)............. N/A N/A N/A N/A N/A
Chief Operating Officer
--------
(1) The NonQualified Deferred Compensation Plan is described under Savings and
Pension Plans on page 223.
(2) The Supplemental Tax Reduction Investment Plan (STRIP) is described under
Savings and Pension Plans on page 223. 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.
(3) Amount represents a scheduled in-service withdrawal from the HSBC Non-
Qualified Deferred Compensation Plan.
(4) Messrs. McDonagh and Booker are not eligible to participate in the
NonQualified Deferred Compensation Plan and STRIP.
226
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE-IN-CONTROL
BRENDAN P. MCDONAGH
EXECUTIVE BENEFITS AND INVOLUNTARY VOLUNTARY FOR
PAYMENTS UPON VOLUNTARY NORMAL NOT FOR CAUSE FOR CAUSE GOOD REASON
TERMINATION TERMINATION DISABILITY RETIREMENT TERMINATION TERMINATION TERMINATION
DEATH
------------------------------------------------------------------------------------------------------------------------
----
CASH COMPENSATION
Base Salary........... - - - - - -
-
Short Term Incentive.. - - - $1,701,288(1) - -
-
LONG TERM INCENTIVE
Performance Shares.... - $1,078,856(2) $1,078,856(2) $1,078,856(2) - $1,078,856(2)
$1,392,516(4)
Restricted Stock:
Unvested and
Accelerated......... - $ 153,453(3) $ 153,453(3) $ 153,453(3) - $ 153,453(3) $
613,811(4)
EXECUTIVE BENEFITS AND CHANGE IN
PAYMENTS UPON CONTROL
TERMINATION TERMINATION
------------------------------------
CASH COMPENSATION
Base Salary........... -
Short Term Incentive.. -
LONG TERM INCENTIVE
Performance Shares.... $1,078,856(2)
Restricted Stock:
Unvested and
Accelerated......... $ 153,453(3)
--------
(1) Assumes a termination date of December 31, 2007, and represents the 2007
cash incentive awarded but not paid until 2008.
(2) Assumes performance conditions have been met. Value based on prorated number
of shares at an assumed retirement date of December 31, 2007, and calculated
using the closing price of HSBC ordinary shares and exchange rate on that
date.
(3) 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.
(4) This amount represents a full vesting of the outstanding restricted 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.
BEVERLEY A. SIBBLIES
EXECUTIVE BENEFITS AND INVOLUNTARY VOLUNTARY FOR
PAYMENTS UPON VOLUNTARY NORMAL NOT FOR CAUSE FOR CAUSE GOOD REASON
TERMINATION TERMINATION DISABILITY RETIREMENT TERMINATION TERMINATION TERMINATION
DEATH
------------------------------------------------------------------------------------------------------------------------
-----
CASH COMPENSATION
Base Salary............ - - - $200,000(1) - -
-
Short Term Incentive... - - - $600,000(1) - -
-
LONG TERM INCENTIVE
Restricted Stock:
Unvested and
Accelerated.......... - $460,367(2) $460,367(2) $460,367(2) - $460,367(2)
$1,444,920(3)
EXECUTIVE BENEFITS AND CHANGE IN
PAYMENTS UPON CONTROL
TERMINATION TERMINATION
-------------------------------------
CASH COMPENSATION
Base Salary............ -
Short Term Incentive... -
LONG TERM INCENTIVE
Restricted Stock:
Unvested and
Accelerated.......... $460,367(2)
--------
(1) Under the terms of the HSBC Severance Policy, Ms. Sibblies would receive 26
weeks of her current salary upon separation from HSBC and a pro-rata amount
of her earned bonus. The figures above represent the bonus payment at
maximum assuming a termination date of December 31, 2007.
(2) 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.
(3) This amount represents a full vesting of the outstanding restricted 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.
THOMAS M. DETELICH
EXECUTIVE BENEFITS AND INVOLUNTARY VOLUNTARY FOR
PAYMENTS UPON VOLUNTARY NORMAL NOT FOR CAUSE FOR CAUSE GOOD REASON
TERMINATION TERMINATION DISABILITY RETIREMENT TERMINATION TERMINATION TERMINATION
DEATH
------------------------------------------------------------------------------------------------------------------------
----
CASH COMPENSATION
Base Salary........... - - - $ 650,000(1) - -
-
Short Term Incentive.. - - - $1,950,000(1) - -
-
LONG TERM INCENTIVE
Performance Shares.... - $2,647,832(2) $2,647,832(2) $2,647,832(2) - $2,647,832(2)
$3,601,663(3)
Stock Options:
Unvested and
Accelerated......... - $ 27,729(4) $ 27,729(4) $ 27,729(4) - $ 27,729(4) $
27,729(4)
Restricted Stock:
Unvested and
Accelerated......... - $3,886,336(5) $3,886,336(5) $3,886,336(5) - $3,886,336(5)
$4,595,793(6)
EXECUTIVE BENEFITS AND CHANGE IN
PAYMENTS UPON CONTROL
TERMINATION TERMINATION
------------------------------------
CASH COMPENSATION
Base Salary........... -
Short Term Incentive.. -
LONG TERM INCENTIVE
Performance Shares.... $2,647,832(2)
Stock Options:
Unvested and
Accelerated......... $ 27,729(4)
Restricted Stock:
Unvested and
Accelerated......... $3,886,336(5)
--------
(1) Under the terms of the HSBC Severance Policy, Mr. Detelich would receive 52
weeks of his current salary upon separation from the company and a pro-rata
amount of his earned bonus. The figures represent the bonus payment at
maximum assuming a termination date of December 31, 2007.
(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.
227
(3) Assumes performance conditions have been met. This amount represents a full
vesting of the outstanding restricted 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.
(4) Assumes performance conditions have been met. This amount represents
accelerated vesting of 100% of the outstanding, unvested stock options, the
value of which has been calculated based on the spread between the strike
price and the fair market value of HSBC ordinary shares on December 31,
2007.
(5) 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.
(6) This amount represents a full vesting of the outstanding restricted 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.
WALTER G. MENEZES
EXECUTIVE BENEFITS AND EARLY INVOLUNTARY VOLUNTARY
PAYMENTS UPON VOLUNTARY RETIREMENT/ NORMAL NOT FOR CAUSE FOR CAUSE GOOD REASON
TERMINATION TERMINATION DISABILITY RETIREMENT TERMINATION TERMINATION TERMINATION
DEATH
------------------------------------------------------------------------------------------------------------------------
---
CASH COMPENSATION
Base Salary........... - - - $ 450,000(1) - -
-
Short Term Incentive.. - - - $1,950,000(1) - -
-
LONG TERM INCENTIVE
Performance Shares.... - $2,647,832(2) $2,647,832(2) $2,647,832(2) - $2,647,832(2)
$3,601,663(3)
Stock Options:
Unvested and
Accelerated......... - $ 27,729(4) $ 27,729(4) $ 27,729(4) - $ 27,729(4) $
27,729(4)
Restricted Stock:
Unvested and
Accelerated......... - $3,886,336(5) $3,886,336(5) $3,886,336(5) - $3,886,336(5)
$4,595,793(6)
BENEFITS AND PERKS
Incremental Retirement
Benefit............. - - - - - -
-
Healthcare............ - - - - - -
-
Life Insurance........ - - - - - -
-
EXECUTIVE BENEFITS AND CHANGE IN
PAYMENTS UPON CONTROL
TERMINATION TERMINATION
------------------------------------
CASH COMPENSATION
Base Salary........... $ 975,000(1)
Short Term Incentive.. $3,000,000(1)
LONG TERM INCENTIVE
Performance Shares.... $2,647,832(2)
Stock Options:
Unvested and
Accelerated......... $ 27,729(4)
Restricted Stock:
Unvested and
Accelerated......... $3,886,336(5)
BENEFITS AND PERKS
Incremental Retirement
Benefit............. $ 893,660(7)
Healthcare............ $ 21,479(8)
Life Insurance........ $ 105,120(9)
--------
(1) See the description of Mr. Menezes' Employment Protection Agreement on page
214. Under the terms of the HSBC Severance Policy, Mr. Menezes would receive
36 weeks of his current salary upon separation from the company and a pro-
rata amount of his earned bonus. The figures represent the bonus payment at
maximum assuming a termination date of December 31, 2007.
(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.
(3) Assumes performance conditions have been met. This amount represents a full
vesting of the outstanding restricted 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.
(4) Assuming performance conditions are met, represents accelerated vesting of
100% of the outstanding, unvested stock options, the value of which has been
calculated based on the spread between the strike price and the fair market
value of HSBC ordinary shares on December 31, 2007.
(5) 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.
(6) This amount represents a full vesting of the outstanding restricted 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.
(7) Mr. Menezes has an employment agreement providing an additional 18 months of
service and pay toward his retirement benefit. He would be entitled to an
additional $6,137 per month if a termination due to a change in control
occurred on December 31, 2007. The present value of this benefit was
determined by HSBC Finance Corporation's actuaries to be $893,660.
(8) Mr. Menezes has an employment agreement providing an additional 18 months of
healthcare coverage for himself and his family with a total value of $16,179
if a termination due to a change in control occurred on December 31, 2007.
The value of this healthcare is calculated based on the medical plan's COBRA
rates. In addition, Mr. Menezes' agreement provides for annual physicals at
the company's expense throughout the 18 month period. The value of two
physicals is $5,300. This value is based on a rate negotiated through HSBC
Finance Corporation's executive physical program.
(9) Mr. Menezes' employment agreement provides for $2 million of life insurance
coverage for himself for 18 months, if a termination due to a change in
control occurred on December 31, 2007, with a total value of $105,120. This
value is based on the cost to convert the company-provided group life
insurance to an individual policy for 18 months.
228
NIALL S. BOOKER
EXECUTIVE BENEFITS AND EARLY INVOLUNTARY VOLUNTARY FOR
PAYMENTS UPON VOLUNTARY RETIREMENT/ NORMAL NOT FOR CAUSE FOR CAUSE GOOD REASON
TERMINATION TERMINATION DISABILITY RETIREMENT TERMINATION TERMINATION TERMINATION
DEATH
------------------------------------------------------------------------------------------------------------------------
-----
CASH COMPENSATION
Base Salary........... - - - - - -
-
Short Term Incentive.. - - - $1,209,666 - -
-
LONG TERM INCENTIVE
Performance Shares.... - $1,394,235(2) $1,394,235(2) $1,394,235(2) - $1,394,235(2)
$1,788,402(3)
Stock Options:
Unvested and
Accelerated......... - - - - - -
-
Restricted Stock:
Unvested and
Accelerated......... - $ 84,099(4) $ 84,099(4) $ 84,099(4) - $ 84,099(4)
$336,395(5)
EXECUTIVE BENEFITS AND CHANGE IN
PAYMENTS UPON CONTROL
TERMINATION TERMINATION
------------------------------------
CASH COMPENSATION
Base Salary........... -
Short Term Incentive.. -
LONG TERM INCENTIVE
Performance Shares.... $1,394,235(2)
Stock Options:
Unvested and
Accelerated......... -
Restricted Stock:
Unvested and
Accelerated......... $ 84,099(4)
--------
(1) Assumes a termination date of December 1, 2007, and represents the 2007 cash
incentive awarded but not paid until 2008.
(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.
(3) Assumes performance conditions have been met. This amount represents a full
vesting of the outstanding restricted 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.
(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.
(5) This amount represents a full vesting of the outstanding restricted 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.
229
DIRECTOR COMPENSATION
The following table and narrative text discusses the compensation awarded to,
earned by or paid to our Directors in 2007.
DIRECTOR COMPENSATION
CHANGE IN
PENSION VALUE
AND NONQUALIFIED
FEES EARNED STOCK OPTION DEFERRED ALL OTHER
OR PAID IN AWARDS AWARDS COMPENSATION COMPENSATION TOTAL
NAME CASH(1) ($)(2) ($)(3) EARNINGS ($)(4) ($)
--------------------------------------------------------------------------------------------------------
Niall S.K. Booker(5)........ - - - - $ - $ -
William R. P. Dalton........ $178,750 - - - $1,750 $180,500
J. Dudley Fishburn.......... $170,000 - - (2,276) $ - $167,724
Douglas J. Flint............ - - - $ - $ -
Cyrus F. Freidheim, Jr...... $270,689 - - (8,576) $1,750 $263,863
Robert K. Herdman........... $195,000 - - $ - $195,000
Louis Hernandez, Jr. ....... $127,444 - - - $1,750 $129,194
George A. Lorch............. $185,000 - - (16,988) $1,750 $169,762
Brendan P. McDonagh(5)...... - - - - $ - $ -
Larree M. Renda............. $200,000 - - (69) $1,750 $201,681
--------
(1) In 2007, the non-management Directors of HSBC Finance Corporation received
an annual cash retainer of $170,000 (with the exception of Mr. Freidheim,
who as Chair of the Executive Committee receives a retainer of $182,000).
HSBC Finance Corporation pays additional compensation to committee chairs
and audit committee members. In addition to the Board retainer, Mr. Dalton
received an additional $11,250 for his membership in the Audit Committee
since April 2007, Mr. Freidheim received an additional $50,000 as the Lead
Director and Chair of the Executive Committee, Mr. Herdman received an
additional $25,000 as Chair of the Audit Committee, Mr. Hernandez received
and additional $11,250 for his membership in the Audit Committee since April
2007, Mr. Lorch received an additional $15,000 as Chair of the Compensation
Committee, Ms. Renda received an additional $15,000 as Chair of the
Nominating & Governance Committee, and an additional $15,000 for her
membership on the Audit Committee. HSBC Finance Corporation does not pay
meeting attendance fees to its Directors. Directors who are employees of
HSBC Finance Corporation or any of its affiliates do not receive additional
compensation related to their Board service. In February 2006, the Board
reviewed its directors' compensation scheme relative to other same sized
financial and professional service organizations and determined to make no
changes to the current compensation structure.
Directors have the ability to defer up to 100% of their annual retainers
and/or fees into the HSBC-North America Directors Non-Qualified Deferred
Compensation Plan. Under this plan, pre-tax dollars may be deferred with the
choice of receiving payouts while still serving HSBC Finance Corporation
according to a schedule established by the Director at the time of deferral
or a distribution after leaving the Board in either lump sum, quarterly or
annual installments.
(2) HSBC Finance Corporation does not grant stock awards to its non-management
directors nor do any portion of employee directors stock awards reflect
services related to the Board. Prior to the merger with HSBC, non-management
Directors could elect to receive all or a portion of their cash compensation
in shares of common stock of Household International, Inc., defer it under
the Deferred Fee Plan for Directors or purchase options to acquire common
stock (as reflected in Footnote 3 below). Under the Deferred Fee Plan,
Directors were permitted to invest their deferred compensation in either
units of phantom shares of the common stock of HSBC Finance Corporation
(then called Household International, Inc.), with dividends credited toward
additional stock units, or cash, with interest credited at a market rate set
under the plan. Prior to 1995, HSBC Finance Corporation offered a Directors'
Retirement Income Plan where the present value of each Director's accrued
benefit was deposited into the Deferred Phantom Stock Plan for Directors.
Under the Deferred Phantom Stock Plan, Directors with less than ten years of
service received 750 phantom shares of common stock of Household
International, Inc. annually during the first ten years of service as a
Director. In January 1997, the Board eliminated this and all future Director
retirement benefits. All payouts to Directors earned under the Deferred
Phantom Stock Plan will be made only when a Director leaves the Board due to
death, retirement or resignation and will be paid in HSBC ordinary shares
either in a lump sum or in installments as selected by the Director.
Following the acquisition, all rights to receive common stock of Household
International, Inc. under both plans described above were converted into
rights to receive HSBC ordinary shares. In May 2004, when the plans were
rolled into a non-qualified deferred compensation plan for Directors, those
rights were revised into rights to receive American Depository Shares in
HSBC ordinary shares, each of which represents five ordinary shares. No new
shares may be issued under the plans. As of December 31, 2007, 17,911
American Depository Shares were held in the deferred compensation plan
account for Directors. Specifically, Messrs. Fishburn, Freidheim Jr. and
Lorch held 810, 3,459 and 6,038 American Depository Shares, respectively,
and Ms. Renda held 26 American Depository Shares.
230
(3) HSBC Finance Corporation does not grant stock option awards to its non-
management directors. As referenced in Footnote 2 above, as of December 31,
2007, 417,426 Stock Options were outstanding which were granted pursuant to
the historical Directors Deferred Fee Plan. Specifically, Messrs. Fishburn,
Freidheim and Lorch held options to purchase 90,950, 111,138 and 105,663
HSBC ordinary shares respectively, and Ms. Renda held options to purchase
40,125 HSBC ordinary shares.
(4) Components of All Other Compensation are disclosed in the aggregate. We
provide each Director with $250,000 of accidental death and dismemberment
insurance and a $10,000,000 personal excess liability insurance policy for
which the company paid premium is $1,750 per annum for each participating
director. Under HSBC Finance Corporation's Matching Gift Program, for all
directors who were members of the Board in 2006 and continue to be on the
Board, we match 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, other than Mr. Hernandez who joined the Board in 2007,
may ask us to contribute up to $10,000 annually to charities of the
Director's choice which qualify under our philanthropic program.
(5) Employee Directors do not derive any compensation from their Board service.
231
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS.
--------------------------------------------------------------------------------
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
HSBC Finance Corporation's common stock is 100% owned by HSBC Investments (North
America) Inc. ("HINO"). HINO 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 ordinary shares and Series B Preferred
Stock of HSBC Finance Corporation held by each director and the executive
officers named in the Summary Compensation Table on page 217, 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 1% of
the ordinary shares of HSBC and the Series B Preferred Stock of HSBC Finance
Corporation.
NUMBER OF HSBC SHARES HSBC
SHARES THAT MAY BE RESTRICTED
SERIES B
BENEFICIALLY ACQUIRED WITHIN SHARES NUMBER OF TOTAL
PREFERRED OF
OWNED OF 60 DAYS BY RELEASED ORDINARY HSBC
HSBC
HSBC EXERCISE OF WITHIN SHARE ORDINARY
FINANCE
HOLDINGS PLC(1)(2) OPTIONS(4) 60 DAYS(5) EQUIVALENTS(6) SHARES
CORPORATION
------------------------------------------------------------------------------------------------------------------------
------
DIRECTORS
Niall S.K. Booker........ 40,929 -- 16,860 -- 57,789
-
William R. P. Dalton..... 61,104 -- -- -- 61,104
-
J. Dudley Fishburn....... 15,678 90,950 -- 810 107,438
-
Douglas J. Flint......... 113,943 -- -- -- 113,943
-
Cyrus F. Freidheim, Jr... -- 111,138 -- 3,459 114,597
-
Robert K. Herdman........ 690 -- -- -- 690
-
Louis Hernandez, Jr. .... -- -- -- -- --
-
George A. Lorch.......... 13,605 105,663 -- 6,038 125,306
-
Brendan P. McDonagh...... 78,139 27,900 17,898 -- 123,937
-
Larree M. Renda.......... 1,650 40,125 -- 26 41,801
50(3)
NAMED EXECUTIVE OFFICERS
Siddharth N. Mehta....... -- 943,000 -- 10,678 953,678
-
Beverley A. Sibblies..... 7,978 -- -- -- 7,978
-
Thomas M. Detelich....... -- 692,188 82,194 81 774,463
-
Walter G. Menezes........ 128,108 553,925 22,292 -- 704,325
-
ALL DIRECTORS AND
EXECUTIVE OFFICERS AS A
GROUP.................. 762,229 3,538,902 376,378 22,982 4,700,491
50
--------
(1) Directors and executive officers have sole voting and investment power over
the shares listed above, except that the number of ordinary shares held by
spouses, children and charitable or family foundations in which voting and
investment power is shared (or presumed to be shared) is as follows: Mr.
Dalton, 49,149; Mr. Lorch, 13,605; Mr. Flint, 29,610 and Mr. Booker, 30,000;
and Directors and executive officers as a group, 123,864.
(2) Some of the shares included in the table above were held in American
Depository Shares, each of which represents five HSBC ordinary shares.
(3) Represents 2000 Depositary Shares, each representing one-fortieth of a share
of 6.36% Non-Cumulative Preferred Stock, Series B.
(4) Represents the number of ordinary shares that may be acquired by HSBC
Finance Corporation's Directors and executive officers through April 1, 2008
pursuant to the exercise of stock options.
(5) Represents the number of ordinary shares that may be acquired by HSBC
Finance Corporation's Directors and executive officers through April 1, 2008
pursuant to the satisfaction of certain conditions.
(6) Represents the number of ordinary share equivalents owned by executive
officers under the HSBC-North America (U.S.) Tax Reduction Investment Plan
(TRIP) and the HSBC North America Employee Non-Qualified Deferred
Compensation Plan and by Directors under the
232
HSBC North America Directors Non-Qualified Deferred Compensation Plan. Some
of the shares included in the table above were held in American Depository
Shares, each of which represents five HSBC ordinary shares.
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