HSBC board backs down on chief executive Michael Geoghegan's pay hike

THE board of HSBC is thought to have backed down on a proposed 36 per cent pay hike for chief executive Michael Geoghegan, which would have boosted his basic salary to some £1.4m.

However, it remains uncertain what HSBC intends to do on the thorny issue of annual bonuses. For Geoghegan, this could mean an additional award of up to 4.4m, equal to 400 per cent of his current basic salary of 1.1m.

HSBC is the largest of the UK's "big four" banks, and will be the last to post results when it announces year-end figures tomorrow.

In recent weeks, top bosses at Barclays, Royal Bank of Scotland and Lloyds Banking Group have all waived bonus entitlements amid continuing concerns about excessive pay in a sector that owes its survival to taxpayer bail-outs.

HSBC has weathered the economic downturn well when compared to many of its rivals. It avoided taking any direct state support, but critics note that it has still benefited from the general stabilisation of the financial system.

The group – which operates in 86 countries spanning Europe, Asia, the Americas, the Middle East and Africa – is expected to report an increase in underlying pre-tax profits for 2009.

Analysts' predictions range from 7.8bn to 11.3bn, with the higher end putting HSBC close behind the 11.6bn reported by Barclays.

Investment banking staff are reportedly in line to share 1.5bn in bonuses set aside for 2009. Like its rivals, HSBC is trying to successfully navigate the thin line between retaining top talent and assuaging public anger.

The group's executive directors decided to forego their bonuses last year, while salaries have been frozen for the past three years.

The proposed salary rise that has now apparently been postponed would have benefited executives other than Geoghegan, including finance director Douglas Flint, whose basic pay would have jumped from 700,000 to 900,000.

Reporting its third quarter results in November, HSBC signalled that the worst of its bad debt impairments might be coming to an end.

The group has suffered from a lending binge during the housing market boom, and investors will be keen for assurances on this front.