HSBC faces shareholder trial over costs, pay

By Sarah White and Tommy Wilkes

LONDON (Reuters) - HSBC Holdings Plc <HSBA.L> <0005.HK> faces scrutiny from investors over its ambitious plans to cut costs and lift waning profits, as well as a revamped pay format for managers through which it hopes to placate critics.

Newly-instated Chief Executive Stuart Gulliver unveiled a retreat from retail banking in a host of countries earlier this month, aimed at tackling a jump in costs which dragged down first-quarter profits some 14 percent.

Gulliver, who rose to the top job earlier this year after a boardroom tussle in 2010, is targeting up to $3.5 billion in costs savings through the overhaul, which could also involve Europe's largest bank offloading its U.S. credit card arm.

Shareholders will get a chance to grill the 51-year-old at the bank's annual general meeting on Friday.

The bank is also seeking approval for its new remuneration policy, redesigned after stinging investor protests over executive pay last year.

The revamped format includes limiting long-term incentive plan share payouts to six times basic salary, from seven times, and makes it harder for employees to cash in quickly on rewards.

Measures also include making staff hold on to shares until they retire or leave the bank.

But the Association of British Insurers (ABI), whose members own almost 15 percent of investments listed on the London stock market, has issued a so-called "amber top" alert to raise its concerns over HSBC's pay plans.

It did the same over the compensation proposals put forward by British rival Barclays Plc <BARC.L>, although the firm's pay plan was passed after a backlash from about a tenth of investors.

"The report has been amber topped to highlight that the new share plan has a number of features which diverge from normal market practice," Hugh Savill, ABI's director of investment affairs, said of HSBC's plan.

Share advisory group Pirc also slammed elements of the compensation strategy, including provisions for "golden hellos," a recruitment incentive whereby employees are compensated for joining from another firm.

Pirc also questioned the lack of a cap on salaries and recommended shareholders oppose the plan.

(Editing by David Holmes)