HSBC disagrees with group of shareholders over proposed resolution regarding Clawback

Maria Nikolova

A group of shareholders argues Clawback is inequality and past employment practices mean more women are adversely affected than men.

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HSBC Holdings plc (LON:HSBA) today announced that its 2020 Annual General Meeting (AGM) will be held at 11.00am on April 24, 2020 at the Queen Elizabeth Hall, Southbank Centre, Belvedere Road, London, SE1 8XX.

The list of proposed resolutions includes Resolution 18, requisitioned by the Midland Clawback Campaign Shareholder group. This is the single proposed resolution that the HSBC Board advises voting against.

Resolution 18 concerns the so-called “clawback”, also known as State Pension Integration, State Pension Offset, or as State Deduction. This is a process whereby a company pension is reduced when a scheme member reaches State Pension age. Introduced in legislation in 1948 alongside State Pension and National Insurance, it was designed to save money for employers that provided a company pension by reducing scheme funding costs. Midland Bank Ltd introduced this cost saving measure from January 1, 1975.

The cost of a company pension is driven by salary and then pension paid. Clawback is not linked to salary but only State Pension, meaning a senior manager retiring on £100,000 a year suffers the same clawback, as a junior staff member with the same service record retiring on £12,000 a year.

According to he Midland Clawback Campaign Shareholder group, the Clawback is an inequality and past employment practices mean more women are adversely affected than men.

The clawback calculation is the same for all but has a worse effect on those who have earned a lower wage, mainly women and consequently puts them at a disadvantage, the campaigners argue. It seems clear, according to them, that an inequality exists and indirect discrimination.

About 52,000 of HSBC’s past and present UK staff are affected by Clawback. A group of about 10,000 of these has come together via social media and word of mouth to challenge the alleged unfairness of clawback and the lack of clear explanation given by the bank to new staff in the 1970s and 1980s and the use of misleading terminology, the campaigners explain.

HSBC’s directors consider that Resolution 18 is not in the best interests of the company and its shareholders as a whole.

HSBC’s review of the State Deduction feature has demonstrated that it is an accepted aspect of UK pensions practice that is recognised by legislation and continues to be maintained by a significant number of schemes today. When introduced, it formed part of a generous, non-contributory pension.

The feature was communicated clearly to members and applied as intended and in accordance with the Trust Deed and Rules, the bank explains.

HSBC’s directors stress that the State Deduction feature does not constitute indirect discrimination because it applies to and affects all members equally irrespective of gender or other protected characteristics.

Further, removal of the State Deduction feature would come at a considerable, but difficult to quantify, cost to the organisation. The Scheme’s external actuary has estimated the removal of the State Deduction for future payments would come at a cost of approximately £450 million.

Finally, HSBC has been advised that no schemes with a similar feature to the State Deduction have removed this retrospectively due to it being considered unfair or inappropriate.

HSBC notes that removal of the State Deduction completely or by degrees could be unfair and discriminatory to other Post 1974 Section members who would not receive an equivalent enhancement.

The Board recommends voting against Resolution 18 at the AGM.

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