Geoghegan in £300,000 expenses deal after HSBC pay rise shelved

BANKING giant HSBC is to pay its chief executive an extra £300,000 a year to cover living costs in Hong Kong following his relocation there, it emerged yesterday.

The boost to Michael Geoghegan's package comes after a proposed increase in his basic salary from 1.1 million to almost 1.5m was shelved amid shareholder opposition.

HSBC's annual report said Geoghegan would be paid the additional sum – almost 30 per cent of his basic pay – annually "in recognition of the relocation to Hong Kong and the associated additional costs of living that will be incurred". It will come on top of housing and other benefits, such as accounting advice, that are commonplace for such a move.

A spokesman said it was not "a pay rise in disguise" and had been earmarked since the plan to move Geoghegan from London to Hong Kong was announced in September. It compensates for the disruption, having family on two continents and recognises Geoghegan's additional role as chairman of HSBC's Asia business, he said.

The cost of living in Hong Kong is 1 per cent lower than it is in London, according to a recent survey by Mercer Consulting. The most generous allowance normally paid to executives relocating from more to less expensive cities is 30,000, it said.

HSBC sought to increase Geoghegan's basic salary by about 36 per cent ahead of this week's results, which showed it missed expectations for 2009 profits after bad debts rose.

It yielded to shareholder protests and backed away from the controversial plan, amid fears of a public backlash about higher pay for bankers.

However, HSBC chairman Stephen Green said the bank would speak to investors about increasing Geoghegan's basic salary this year, as he was underpaid relative to peers. Geoghegan's 1.07m salary compares with Barclays chief executive John Varley's 1.075m salary and the 1.035m collected by Eric Daniels, Lloyds Banking Group's chief executive. Stephen Hester, chief executive of Royal Bank of Scotland, makes 1.2m in salary.

A string of top executives have given up their 2009 bonuses. Geoghegan is donating his bonus of up to 4m to charity. It follows moves by the heads of Barclays and bailed-out Lloyds and RBS – 41 per cent and 84 per cent owned by the taxpayer respectively – to waive their rights to bonuses that would have averaged 2.2m.