HSBC Holdings Regulatory News (HSBA)

Dear Shareholder

I am delighted to present our 2023 Directors' remuneration report on behalf of the members of the Group Remuneration Committee.

I would like to thank Jamie Forese for the counsel he provided to us all as a member of the Group Remuneration Committee. We welcomed Eileen Murray and Ann Godbehere as members. They have already made valuable contributions since their respective appointments in 2023.

2023 was a year of good performance and positive progress for the Group. Our colleagues were critical to delivering those outcomes, remaining committed to serving our customers and clients around the world. Against that backdrop, the Committee's focus in 2023 was on ensuring we deliver an exceptional experience to colleagues. This is crucial to attract, retain and energise the people we need to sustain our performance and grow in markets that are highly competitive.

We also spent considerable time in 2023 thinking about executive Director remuneration, in the context of our strategy, performance and the removal of the 2:1 UK regulatory cap between variable and fixed pay. We have started to consider policy options ahead of the renewal of the Directors' remuneration policy in 2025.

The Committee reflected on feedback from investors following the vote on the implementation of our current policy at the Annual General Meeting ('AGM') in 2023, which received 79.75% of votes cast in favour.

We explained in our statements of 5 May 2023 and 3 November 2023 that our largest shareholder voted against the Board's recommendations on a number of resolutions including the Directors' remuneration report, which impacted the voting results on these resolutions. The Board was pleased that a large majority of shareholders voting at the AGM supported HSBC's approach. I have met with several of our large institutional investors and proxy advisory firms since the AGM, and there remains strong support for our current Directors' remuneration policy.

We will continue to engage with our major shareholders and listen to their views as we develop the Directors' remuneration policy next year.

Performance in 2023

Financial performance

Our financial performance in 2023 reflected the strength of our balance sheet in a higher interest rate environment and the good progress made executing our strategy over the last four years.

We delivered a reported profit before tax of $30.3bn, which was up $13.3bn compared with 2022. This included a favourable year-on-year impact of $2.5bn relating to the sale of our retail banking operations in France and a provisional gain of $1.6bn recognised on the acquisition of Silicon Valley Bank UK Limited ('SVB UK'), which were partly offset by the recognition of a $3.0bn impairment charge relating to the investment in our associate, Bank of Communications Co., Limited ('BoCom').

Reported revenue of $66.1bn grew by 30% or $15.4bn compared with 2022, due to good performance by all three businesses reflecting higher net interest income from interest rate rises.

Reported costs fell by 2% to $32.1bn, primarily due to the non-recurrence of restructuring and other related costs. On our cost target basis, 2023 costs grew by 6% versus our target of approximately 3% compared with 2022.

Our return on average tangible equity ('RoTE') for 2023 was 14.6%, compared with 10.0% in 2022. Excluding strategic transactions and the BoCom impairment, our RoTE was 15.6%.

This performance together with our 50% payout ratio commitment for 2023 (excluding material notable items and related impacts) enables us to approve a full year dividend of $0.61 per share.

Strategic performance

In 2023, there was further good progress in executing our strategy across the four strategic pillars aligned to our purpose, values and ambition. The completion of the sale of our retail banking operations in France on 1 January 2024 was an important milestone in the turnaround of our business. However, the strategic focus has shifted to investing for growth. The acquisition of SVB UK, and subsequent launch of HSBC Innovation Banking, is a good example of this.

We continued to capitalise on our strengths, which are our two home markets of Hong Kong and the UK, as well as our international wholesale, transaction banking and wealth businesses. The digitisation of our services for personal and corporate customers helped to improve our net promoter scores in key markets and businesses. Meanwhile the growth of transaction banking revenue, fee income in Commercial Banking, and net new invested assets in Wealth all underlined our focus on improving our earnings sustainability, which remains a key priority.

Our colleagues are the driving force behind our performance and progress, with our 2023 employee Snapshot survey demonstrating that they are more engaged than ever. Our employee focus index, which gauges how colleagues feel about their day-to-day work, was 76%, which was an increase of four percentage points on 2022. Our employee engagement index is at an all time high of 77%, which was also an increase of three percentage points and meant we matched or exceeded the global financial services benchmark in all eight of our indices.

We also continued to support our customers in challenging economic times, particularly in the UK where we supported our personal and business customers by enhancing our range of digital resources and targeting those most in need.

Rewarding our colleagues

Our goal is to deliver a unique and exceptional experience to colleagues so that we sustain our performance in competitive markets. Our reward principles and commitments centre on rewarding colleagues responsibly, recognising their success and supporting them to grow.

Pay is a critical part of our proposition. We were encouraged by a nine percentage point improvement to 52% in colleagues' perceptions they are paid fairly because of actions we took through 2022. The Committee remains very focused on the need to improve this further. For 2024, we are putting more structure in place to improve transparency and clarity about how we make pay decisions.

Beyond pay we have a strong proposition of benefits, well-being support, flexible working options, and learning and career opportunities to support our colleagues.

In 2023, we saw the maturity of the 2020 three-year Sharesave plan, which had the highest take-up rate and contribution level in recent years. The share price at maturity was more than double the option price, meaning colleagues benefited from our share price growth at a time when they needed it most. Over 90% of colleagues have access to share ownership plans globally with 25% of our global population taking part.

For further details, see 'Our approach to workforce reward' on page 292.

Fixed pay

For the majority of our colleagues, fixed pay is the biggest part of their reward, and many continue to be impacted by the economic environment including inflation and cost of living challenges. Our focus is on ensuring that we provide financial security through fixed pay.

Fixed pay is primarily reviewed through our annual pay cycle. Fixed pay ranges were introduced for over 190,000 colleagues to improve clarity and transparency and simplify decision making for our people managers. Effective in 2024, we have awarded an overall fixed pay increase of 4.4%. The level of increases vary by market, depending on the economic situation and individual roles. The highest increases were made to lower paid colleagues, and then focused on middle management, so that we keep pace with wage inflation.

We have also established Living Wage benchmarks for every market and were certified as a global Living Wage employer by the Fair Wage Network for 2024. This is critical to give us further confidence in meeting our commitments to reward colleagues responsibly.

We continued to take tangible actions to address the most significant inflationary pressures for colleagues. For example, in Argentina and Türkiye, we adjusted fixed pay regularly through the year. In Egypt, we supported our colleagues with a one-off pay adjustment in response to high inflation.

Variable pay

In determining the 2023 variable pay pool, the Committee wanted to recognise our strong financial and strategic performance, and the contribution colleagues have made to that.

The Committee determined an overall variable pay pool of $3,774m, 12% higher than $3,359m in 2022. This was determined based on a review of our performance against financial and non-financial metrics set out in the Group risk framework. The Committee considered the strength of our financial performance in 2023, and the ratio between variable pay and pre-variable pay profit before tax. The Committee considered the impact of margins on interest rates in our results, and lowered the total pool in line with our countercyclical funding approach. We also considered our total compensation position compared with the market, and the broader economic outlook.

The Committee considered in respect of all its remuneration decisions for 2023 the Prudential Regulation Authority's ('PRA') 29 January 2024 Notice relating to HSBC Bank plc's and HSBC UK's compliance with the UK Financial Services Compensation Scheme ('FSCS') and related Depositor Protection rules. The PRA penalty was reflected in the calculation of profitability used to determine the pool. The Committee carefully considered input from the Group Risk Committee ('GRC') and determined that no further discretionary adjustment should be made to the overall variable pay pool. The circumstances leading to the penalty require a more detailed review internally to address potential responsibility of individuals, which will be completed by the Committee in 2024, with any remuneration adjustments applied once it is complete.

Total compensation across all our businesses increased relative to 2022, rewarding our colleagues for their contribution to our performance. The distribution of the pool by business considered relative performance against revenue, reported profit before tax and cost targets. Strong differentiation has meant our highest performers received the largest increases in variable pay compared with the previous year.

Key remuneration decisions for executive Directors

Annual incentive for 2023 performance

The Group's financial and strategic performance is reflected in the executive Directors' annual scorecards. The Committee believes this reflects their individual leadership and contribution to delivery of the Group's performance.

At the start of the year, the Committee set the scorecards to align with our reported financial performance. The Committee considered carefully the impact of strategic transactions and one-offs on the Group's financial performance in 2023, including the favourable year-on-year impact of $4.1bn relating to the sale of our retail banking operations in France and the provisional gain on the acquisition of SVB UK, balanced with the $3.0bn impairment charge relating to the investment in BoCom.

Consistent with the approach in prior years, the Committee judged that it was appropriate to assess financial performance for the purpose of the annual scorecard excluding these items, to ensure that out-turns were not impacted by one-offs. The assessment of RoTE and profit before tax measures therefore excluded strategic transactions and the BoCom impairment.

The Committee also considered the impact of interest rates on performance and noted that macroeconomic fluctuations remain a frequent driver of the Group's business outcomes for our executives to manage. In recent years these factors have not led to discretionary scorecard adjustments for our executive Directors, either positive or negative, which the Committee continues to believe is appropriate.

As part of its deliberations, the Committee reflected on the overall risk management in the year, and in respect of the PRA Notice: the nature of the failings identified; the regulator's finding that the breaches identified were not deliberate or reckless; fines levied; and the tenure and specific responsibilities of the executive Directors in relation to the issues covered.

Taking into account inputs from the GRC and the overall accountability of the Group Chief Executive for the performance and risk management of the Group in 2023, the Committee used its judgement and applied a downward adjustment of 7.50% to Noel Quinn's scorecard outcome.

This results in a final scorecard outcome of 70.24% of the maximum opportunity for Group Chief Executive Noel Quinn (2022: 75.35%) and an annual incentive of £2,018,000, which is 7% lower than £2,164,000 in 2022.

The scorecard for Group Chief Financial Officer Georges Elhedery was 76.75%, resulting in an annual incentive of £1,287,000.

The Committee considered that these final outcomes were a balanced and appropriate reflection of Group and individual performance delivered in 2023, and appropriate in the context of the pay decisions made for the wider workforce.

2021-2023 long-term incentive ('LTI') vesting

Noel Quinn and Ewen Stevenson (the former Group Chief Financial Officer) participated in the 2021-2023 LTI that will vest in March 2024. As disclosed in our 2020 Directors' remuneration report, the Committee considered windfall gains at the time of award and determined no adjustment was appropriate.

The maximum RoTE and relative total shareholder return ('TSR') targets were exceeded. The capital reallocation to Asia measure was not met and the environment and sustainability measures were assessed to be 100% met. Overall, 75.00% of the original award will vest on a pro-rata basis over the next five years. Ewen Stevenson's awards have been pro-rated for time in employment.

As this is the first LTI vesting for Noel Quinn, his single figure of remuneration for 2023 is materially changed. The 2023 single figure of remuneration for Noel Quinn is £10,641,000 (compared with £5,562,000 for 2022). The value of the LTI award reflects the Group's improvement in performance, shareholder returns and share price over 2021 to 2023, and Noel Quinn's leadership in reshaping the Group to deliver more sustainable returns to shareholders.

Noel Quinn's LTI vesting also means that the pay ratio measuring the total pay of the Group Chief Executive against the median pay of our UK employees has increased to 169:1 compared with 95:1 last year. Excluding the LTI vesting in respect of the year, the median ratio remained broadly in line with prior years at 86:1. This is consistent with the pay and progression policies for our UK workforce, considering the diverse mix of employees, the pay mix for various roles and the differences in pay structure compared with executive Directors.

2024-2026 LTI awards

We have reviewed the performance measures for LTI awards considering the next phase of our strategy over 2024 to 2026. We will retain Group RoTE, relative TSR and environment targets, reflecting our strategic commitments, and to measure relative performance compared with peers. The capital reallocation to Asia measure was previously included to retain focus on repositioning the Group's capital base through the transformation of the business. While our operations in Asia continue to be of significant strategic importance to the Group, it was the Committee's view that this measure no longer appropriately incentivises the delivery of sustainable returns achievable across wider markets in which HSBC operates. We are simplifying the 2024-2026 LTI by removing this metric and increasing the weighting of RoTE and relative TSR.

The relative TSR peer group was amended for 2023 to include more Asian peers to better reflect our growth and investment focus. We do not propose to make any changes for 2024 other than the removal of the Credit Suisse Group following its acquisition by UBS Group.

Noel Quinn and Georges Elhedery will each receive a 2024-2026 LTI award of 320% of base salary in respect of their performance for 2023 (Noel Quinn: £4,275,000; Georges Elhedery: £2,496,000). Subject to performance over the next three years, awards will vest over a further five years with a one-year retention period on vesting shares. Further details on our targets can be found on page 286.

Fixed pay for 2024

We have increased the base salary of our executive Directors by 3%, effective from 1 March 2024. The increase is lower than the overall fixed pay increase of 4.4% for our wider workforce.

Remuneration in 2024

The Committee welcomes the change announced by the PRA and the Financial Conduct Authority ('FCA') to remove the existing limits on the ratio between fixed and variable pay.

The announcement, together with the wider considerations on the overall competitiveness of the UK capital markets, provides us an opportunity to consider the competitiveness of our remuneration arrangements for our executive Directors and wider workforce.

At the 2024 AGM, we will seek shareholder approval to provide the Committee with discretion, where regulations allow, to set an appropriate variable to fixed pay ratio considering all relevant factors, including our business activities and associated prudential and conduct risks.

This will improve flexibility in the structure of remuneration to increase the amount of pay that is variable, subject to the delivery of performance. It will also strengthen our ability to recruit and retain people in competitive markets where many of our international competitors do not have similar restrictions.

We remain very supportive of the use of deferral mechanisms and the requirements to deliver a substantial portion of variable remuneration in shares to ensure alignment between shareholders, good risk management and individual reward.

For our executive Directors, we have started early engagement with institutional shareholders and proxy advisory bodies ahead of the renewal of our Directors' remuneration policy in 2025. Over several years, the Committee has expressed concerns around the competitiveness of the executive Director remuneration opportunity and indicated that our preference would be to operate a policy with a higher proportion of the package based on variable pay linked to performance. The Committee continues to believe in a more performance-based structure, and we will seek shareholder approval for a new Directors' remuneration policy at the 2025 AGM in line with the normal three-year cycle after engaging with shareholders through 2024.

Conclusion

On behalf of the Committee, I would like to thank our shareholders for the time taken to engage with us during the year. We welcome the feedback on our approach to remuneration and I look forward to engaging with you further in the year ahead as we continue our review of the Directors' remuneration policy, in advance of the 2025 AGM.

As Chair of the Committee, I hope you will support the 2023 Directors' remuneration report and the resolution to remove the 2:1 cap on variable pay for our Material Risk Takers at this year's AGM.

Dame Carolyn Fairbairn

Chair

Group Remuneration Committee

21 February 2024

Executive remuneration at a glance

This section sets out an overview of our performance, 2023 remuneration outcomes for executive Directors and a summary of the policy approved by shareholders at our 2022 AGM, including how we will implement the policy in 2024. 

Our performance

1 The 2022 employee engagement index score has been recalculated to reflect a change in the composition of questions in the 2023 index to ensure comparisons remain valid. In 2022 the employee engagement index was reported as 73%.

2 The percentage of women in senior leadership roles excluded the Canada business held for sale.

Remuneration outcomes for executive Directors

Summary remuneration outcomes for 2023 are set out below. Further details are set out in our annual report on Directors' remuneration on pages 284 to 286.

Georges Elhedery did not participate in the

2021-2023 long-term incentive

Remuneration policy summary - executive Directors

Our Directors' remuneration policy was approved at the AGM on 29 April 2022. The full policy can be found on pages 257 to 265 of our Annual Report and Accounts 2021 and in the Directors' Remuneration Policy Supplement, which is available under Group results and reporting in the 'Investors' section of www.hsbc.com. 

Annual report on Directors' remuneration

This section sets out how our approved Directors' remuneration policy was implemented during 2023.

Determining executive Directors' incentive outcomes

(Audited) 

For any annual incentive award to be made, each executive Director must achieve a minimum standard of conduct and values-aligned behaviour. Both executive Directors met this requirement for 2023.

The award is determined by applying the outcome of their annual scorecard to the maximum opportunity, set at 215% of base salary.

The financial measures, weightings and targets were set at the start of the financial year to align with our reported financial performance and before significant changes in the interest rate environment. They considered the 2023 financial plan, data from 2022, external commitments, scenario testing of upside and downside risks in the plan, and analyst consensus where relevant.

The Committee considered carefully the wider context in which performance was delivered and the impact of strategic transactions and one-offs on the Group's financial performance in 2023, including the favourable year-on-year impact of $4.1bn relating to the sale of our retail banking operations in France and the provisional gain on the acquisition of SVB UK, balanced with the $3.0bn impairment charge relating to the investment in BoCom.

Consistent with the approach in prior years, the Committee judged that it was appropriate to assess financial performance for the purpose of the annual scorecard excluding these items, to ensure that out-turns were not impacted by one-offs. The assessment of RoTE and profit before tax measures therefore excluded strategic transactions and the BoCom impairment.

The Committee also considered the impact of interest rates on performance and noted that macroeconomic fluctuations remain a frequent driver of the Group's business outcomes for our executives to manage. In recent years these factors have not led to discretionary scorecard adjustments for our executive Directors, either positive or negative, which the Committee continues to believe is appropriate.

Performance was above the maximum targets for Group profit before tax, Group RoTE and Asia RoTE. On our cost target basis, growth was 6% versus our target of approximately 3% compared with 2022 and below the performance range.

For strategic measures, diversity representation targets were set based on a trajectory to meet our external commitments. Other

measures were set based on maintaining or improving when compared with 2022 performance and/or market benchmarks.

The Inclusion index in our employee Snapshot survey exceeded target, and was significantly above the financial services benchmark.

We met or exceeded our senior leadership diversity representation targets. Our customer net promoter score ('NPS') performance was largely positive relative to our competitors in most areas of our business.

The Committee considered that the scorecard outcome for personal measures for both Noel Quinn and Georges Elhedery was appropriate against the targets set at the start of the year.

Overall, this resulted in a formulaic scorecard outcome of 75.93% of the maximum for Noel Quinn and 76.75% for Georges Elhedery.

The Committee discussed at length whether the risk and compliance modifier should be applied for 2023 for the Group's performance against key risk metrics, including the historical failings identified by the PRA in its Notice of 29 January 2024.

As part of its deliberations, the Committee reflected on the overall risk management in the year, and in respect of the PRA Notice: the nature of the failings identified; the regulator's finding that the breaches identified were not deliberate or reckless; fines levied; and the tenure and specific responsibilities of the executive Directors in relation to the issues covered.

Taking into account inputs from the Group Risk Committee and Noel Quinn's overall accountability for the performance and risk management of the Group in 2023, the Committee used its judgement and applied a downward adjustment of 7.50% to his scorecard outcome.

This results in a final outcome of 70.24% of the maximum opportunity for Noel Quinn (2022: 75.35%) and an annual incentive of £2,018,000, which is 7% lower than £2,164,000 in 2022.

No risk and compliance modifier was applied for Georges Elhedery who was appointed as Group Chief Financial Officer on 1 January 2023, after all underlying issues identified by the PRA had been fully remediated. Georges Elhedery's scorecard outcome of 76.75% results in an annual incentive of £1,287,000.

Annual incentive scorecard assessment

(Audited)

1 Assessed excluding strategic transactions and BoCom impairment.

2 The CET1 capital ratio underpin was met.

Single figure of remuneration

(Audited)

The following table shows the single figure of remuneration of each executive Director for 2023, together with comparative figures. This is the first vesting LTI for Noel Quinn since his appointment as Group Chief Executive in 2020 and so materially changes the composition of his single figure of remuneration for 2023.

1 Georges Elhedery was appointed Group Chief Financial Officer from 1 January 2023.

2 Taxable benefits include the provision of medical insurance, car benefit, accommodation and tax return assistance (including any associated tax due, where applicable). Non-taxable benefits include the provision of life assurance and other insurance cover.

3 Annual incentive awards to the executive Directors are awarded 50% in cash and 50% in shares. The shares portion of the award vests immediately at grant and is subject to a retention period of one year and clawback provisions.

4 Deferred cash awards granted in prior years include a right to receive notional returns for the period between the grant and vesting date. This is determined by reference to a rate of return specified at the time of grant and paid annually, with the amount disclosed on a paid basis.

5 An LTI award over 1,118,554 shares was made in February 2021 (in respect of 2020) at a share price of £4.262 for which the performance period ended on 31 December 2023. The value has been computed based on a share price of £6.192, the average share price during the three-month period to 31 December 2023. The value attributable to share price appreciation is £1,619,106. See the following section for details of the assessment outcomes, which resulted in 75.00% vesting due to performance.

Benefits

The values of the significant benefits in the single figure table are set out in the following table. The insurance benefit for Noel Quinn has increased year on year because of the increase in premium at annual renewal. The car benefits for Georges Elhedery are not included in the table below as they were not deemed significant.

Long-term incentive ('LTI') awards

(Audited)

LTI awards over 2021 to 2023 performance period

The 2021-2023 LTI award was granted to Noel Quinn and Ewen Stevenson in February 2021. Georges Elhedery was in a different role at the time and did not receive the 2021-2023 LTI award.

The scorecard delivered an outcome of 75.00%, reflecting a significant improvement in shareholder returns across the performance period.

In line with the terms of his departure, Ewen Stevenson is a good leaver and his award has been pro-rated for time in employment. Based on the performance outcome, 838,915 shares will vest for Noel Quinn and 371,697 shares will vest for Ewen Stevenson. The awards will vest in five equal annual instalments commencing in March 2024.

The Committee is mindful of executives not experiencing 'windfall gains' through the granting of LTI awards when a share price is particularly low. We introduced an upfront windfall gains check for the 2021-2023 LTI award such that if the LTI grant share price experienced a greater than 30% decline since the previous grant, then a downward adjustment would be made. The Committee determined that there were no windfall gains to consider for this award given the share price at grant (£4.26) was 24% below the share price at the previous LTI grant (£5.62).

The 2021-2023 LTI award is subject to a risk and compliance modifier. The Committee received input from the GRC who assessed that the performance targets were delivered with appropriate risk management. On this basis, the Committee considered that no adjustment for risk should be made to the 2021-2023 LTI award. The CET1 capital ratio underpin for the 2021-2023 LTI award was also met.

1 Awards vest on a straight-line basis for performance between the minimum, target and maximum levels of performance set out in this table.

2 Assessed based on RoTE in the 2023 financial year. The CET1 capital ratio underpin was met.

3 Assessed based on share of Group tangible equity (on a constant currency basis and excluding associates) allocated to Asia by 31 December 2023, which was not met.

4 Carbon reduction assessed on percentage reduction in total energy and travel emissions achieved by 31 December 2023 using 2019 as the baseline. Sustainable finance and investment assessed on cumulative financing provided over the performance period.

5 The peer group was: Bank of America, Barclays, BNP Paribas, Citigroup, DBS Group Holdings, Deutsche Bank, J.P. Morgan Chase & Co., Lloyds Banking Group, Morgan Stanley, Standard Chartered and UBS Group. Credit Suisse Group was removed from the peer group following its acquisition by UBS Group in June 2023.

LTI awards over 2024 to 2026 performance period

After taking into account performance for 2023, the Committee decided to grant Noel Quinn an LTI award of £4,275,000 and Georges Elhedery an LTI award of £2,496,000 (both 320% of base salary).

The awards will have a three-year performance period starting on 1 January 2024.

The Committee has reviewed the performance measures considering feedback from shareholders and the next phase of our strategy. We are simplifying and improving the focus on shareholder returns by assessing performance on three measures, including RoTE and relative TSR which are equally-weighted financial measures, and a third measure linked to our climate ambitions.

The capital reallocation to Asia measure was previously included to retain focus on repositioning the Group's capital base through the transformation of the business. While our operations in Asia continue to be of significant strategic importance to the Group, it was the Committee's view that this measure no longer appropriately incentivised the delivery of sustainable returns achievable across wider markets in which HSBC operates.

Targets have been set to balance stretch and achievability so that awards act as an effective incentive for management, and incentivise outperformance, aligned to our external strategic commitments.

- The minimum threshold for the RoTE measure is aligned to our external commitment of mid-teens RoTE over the medium term.

- The relative TSR peer group was amended for 2023 to include more Asian peers to better reflect our growth and investment focus. No changes have been made for 2024 other than the removal of the Credit Suisse Group following its acquisition by UBS Group.

- Our emissions reduction targets have been set based on meeting our commitments to procure 90% renewable energy by 2025 and halve energy consumption and travel emissions by 2030.

- Our sustainable finance and investments measure is based on our ambition announced in 2020 to provide $750bn to $1tn of financing and investment by 2030. Although the target range is lower than for the 2023-2025 LTI awards, we are on track to meet our 2030 ambition, with changing market conditions slightly impacting our year-on-year trajectory.

The LTI is subject to a risk and compliance modifier, which gives the Committee the discretion to ensure performance targets are delivered with appropriate risk management.

The RoTE measure is subject to a CET1 capital ratio underpin. If the CET1 capital ratio at the end of the performance period is below the CET1 risk tolerance level set in the risk appetite statement, then the assessment for this measure will be reduced to nil.

The number of shares to be awarded will be adjusted to reflect the expected dividend yield of the shares over the vesting period, as awards are not entitled to dividend equivalents in accordance with regulatory requirements.

To the extent performance conditions are satisfied at the end of the three-year performance period, the awards will vest in five equal annual instalments commencing from around the third anniversary of the grant date. On vesting, shares equivalent to the net number of shares that have vested (after those sold to cover any income tax and social security payable) will be held for a retention period of up to one year, or such period as required by regulators.

1 Awards will vest on a straight-line basis for performance between the minimum, target and maximum levels of performance set in this table.

2 To be assessed based on RoTE at the end of the performance period, subject to the CET1 capital ratio underpin.

3 Carbon reduction will be measured based on percentage reduction in total energy and travel emissions achieved by 31 December 2026 using 2019 as the baseline. The sustainable finance and investment metric will assess the cumulative amount provided and facilitated over the period ending 31 December 2026.

4 The peer group for the 2023 award is: Bank of China (Hong Kong), Barclays, BNP Paribas, China Merchants Bank, Citigroup, DBS Group Holdings, J.P. Morgan Chase & Co., Lloyds Banking Group, OCBC Bank, Standard Chartered and UBS Group.

Annual incentive measures for 2024

The 2024 annual incentive scorecard measures for our executive Directors have been set to incentivise the delivery of the next phase of our strategy.

We have reduced the number of financial measures, reflecting feedback from shareholders to simplify our approach and ensure focus on our key strategic commitments. The weighting of Group RoTE has increased to 25% (from 15% in 2023). The overall weighting of financial measures remains at 60%.

Financial measures will be assessed on a reported basis excluding notable items so that the outcome reflects performance excluding the impact of one-off and items not controlled by management.

Our first net zero transition plan was launched in January 2024 setting out our approach to net zero and the actions we are taking. To support our ambition, a sustainability measure has been added to the annual scorecard, which will be assessed based on the execution of our sustainability commitments against Board approved plans.

Personal measures have been set to ensure meaningful weighting for the most critical objectives for each executive Director.

The Committee will continue to retain discretion to adjust the formulaic outcomes of scorecards, taking into account factors such as Group profits, wider business performance and stakeholder experience, to ensure executive reward is aligned with underlying Group performance and the broader stakeholder experience.

The weightings and performance measures for the 2024 annual incentive scorecard for executive Directors are in the adjacent table.

The targets have been set to reflect the Group's 2024 plan, while considering macroeconomic uncertainty, including the interest rate environment and inflation. The performance targets are commercially sensitive and it would be detrimental to the Group's interests to disclose them at the start of the financial year. Subject to commercial sensitivity, we will disclose the targets in the 2024 Directors' remuneration report.

Our approach to workforce reward

Our goal is to deliver a unique and exceptional experience to energise colleagues to perform at their best. This is critical to strengthening our ability to attract, retain and motivate the people we need, in competitive markets where employee expectations continue to evolve.

Our approach is centred on our purpose and values, and our reward principles and commitments are:

- We will reward our colleagues responsibly through fixed pay security and protection through core benefits, a competitive total compensation opportunity, pay equity, and a more inclusive and sustainable benefits proposition over time.

- We will recognise colleagues' success through our performance culture and routines, including feedback and recognition, pay for performance, and all employee share ownership opportunities.

- We will support our colleagues to grow through our proposition beyond pay, with a focus on future skills and development, support for well-being, and flexibility.

Pay is an important part of our overall proposition. Our focus is improving transparency and clarity for colleagues so they understand better how we make pay decisions.

For 2024, we will introduce a new variable pay structure for over 150,000 junior and middle management colleagues, providing more clarity around the variable pay levels for on-target performance, while retaining flexibility to differentiate outcomes for performance.

We have been certified by the Fair Wage Network as a global Living Wage employer for 2024. This is an important commitment to give colleagues confidence that our fixed pay levels are sufficient to provide financial security.

The section below highlights some of our achievements in 2023.

We will reward you responsibly

We will recognise your success

We will support you to grow

Remuneration structure for employees

We set out below the key features of our remuneration framework, which applies on a Group-wide basis, subject to compliance with local laws:

Committee governance

The Group Chief Executive, the Group Chief Risk and Compliance Officer, the Group Company Secretary and Chief Governance Officer, the Group Chief Human Resources Officer, and the Group Head of Performance, Reward and Employee Relations routinely and selectively attend Committee meetings. As detailed below, the Chair of the Group Remuneration Committee held regular meetings with management, and Committee advisers to discuss specific issues as they arose during the year outside the formal Committee process.

The Committee Secretary regularly met with the Chair to ensure the Committee fulfilled its governance responsibilities, to consider input

from stakeholders when finalising meeting agendas and track progress on actions and Committee priorities. The Committee Secretary will continue to support the Chair in ensuring that the Committee has fulfilled its governance responsibilities.

A copy of the Committee's terms of reference can be found on our website at www.hsbc.com/who-we-are/leadership-and-governance/board-committees.

Advisers

The Committee received input and advice from different advisers on specific topics during 2023. Deloitte provided independent advice to the Committee. Deloitte also provided tax compliance and other advisory services to the Group in 2023. Deloitte is a founding member of the Remuneration Consultants Group and voluntarily operates under the code of conduct in relation to executive remuneration consulting in the UK.

The Committee also received advice from Willis Towers Watson on market data and remuneration trends. Willis Towers Watson also provides actuarial support to Global Finance, benchmarking data for the wider workforce and services related to benefits administration for our Group employees. The Committee was satisfied the advice provided by Deloitte and Willis Towers Watson was objective and independent in 2023.

For 2023, total fees of £292,800 and £51,492 were incurred in relation to remuneration advice provided by Deloitte and Willis Towers Watson, respectively. This was based on pre-agreed fees and a time-and-materials basis.

Attendees and interaction with other Board committees

During the year, Noel Quinn as the Group Chief Executive provided regular briefings to the Committee. In addition, the Committee engaged with, and received updates from, the following:

- Mark Tucker, Group Chairman;

- Elaine Arden, Group Chief Human Resources Officer;

- Georges Elhedery, Group Chief Financial Officer;

- Jenny Craik, Group Head of Performance, Reward and Employee Relations;

- Pam Kaur, Group Chief Risk and Compliance Officer;

- Bob Hoyt, Group Chief Legal Officer; and

- Aileen Taylor, Group Company Secretary and Chief Governance Officer.

The Committee also received feedback and input from the Group Risk Committee and Group Audit Committee on risk, conduct and compliance-related matters relevant to remuneration.

No Director is present at Committee meetings when their own remuneration is discussed.

In addition to the meetings above, the Chair took the opportunity to meet with the Chair of the Group Risk Committee and Group Audit Committee to consider the Group's risk and reward alignment framework, which is designed to promote sound and effective risk management in meeting PRA and FCA remuneration rules and expectations.

Committee effectiveness

In 2023, the annual review of the effectiveness of the Board committees, including the Group Remuneration Committee, was conducted externally by Ffion Hague, Independent Board Evaluation. The review determined that the Committee continued to operate effectively.

Areas for enhancement were identified, including continued focus on the relationship between the Group and its subsidiary entities, building on the efforts taken under the direction of the Committee Chair, which will be kept under review in 2024.

The outcomes of the evaluation have been reported to the Board, and the Committee will track the progress in implementing recommendations during 2024.

As highlighted in the Board effectiveness review disclosure on page 261, the Board considered that further improvement is required to ensure reporting is succinct and supported by relevant key performance indicators. Further details of the annual review of the Board effectiveness review can be found on pages 260 to 261.

Additional remuneration disclosures

This section provides further information and disclosure in relation to executive Director and wider workforce remuneration as required under the Directors' Remuneration Report Regulations, the UK Corporate Governance Code, Hong Kong Ordinances, Hong Kong Listing Rules and the Pillar 3 remuneration disclosures.

For the purpose of the Pillar 3 remuneration disclosures, executive Directors and non-executive Directors are considered to be members of the management body. Members of the Group Executive Committee other than the executive Directors are considered as senior management.

Policy alignment with UK Corporate Governance Code

The table below details how the Group Remuneration Committee addresses the principles set out in the UK Corporate Governance Code in respect of the Directors' remuneration policy:

Link between risk, performance and reward

Our remuneration practices promote sound and effective risk management to support our business objectives and the delivery of our strategy.

We set out below the key features of our framework, which enable us to align between risk, performance and reward, subject to compliance with local laws and regulations:

Summary of shareholder return and Group Chief Executive remuneration

The graph shows HSBC TSR performance (based on the daily spot Return Index in sterling) against the FTSE 100 Total Return Index for the 10-year period ended 31 December 2023.

The FTSE 100 Total Return Index has been chosen as a recognised broad equity market index of which HSBC Holdings is a member.

The single figure remuneration for the Group Chief Executive over the past 10 years, together with the outcomes of the respective annual incentive and LTI awards, are presented in the following table.

1 The 2012 annual incentive figure for Stuart Gulliver included 60% of the annual incentive disclosed in the 2012 Directors' remuneration report, which was deferred for five years and subject to service conditions and satisfactory completion of the five-year deferred prosecution agreement with the US Department of Justice, entered into in December 2012 ('AML DPA') as determined by the Committee. The AML DPA performance condition was met and the award vested in 2018. The value of the award at vesting was in the 2018 single figure of remuneration and included as long-term incentive for 2018.

2 Long-term incentive awards are included in the single figure of remuneration for the year in which the performance period is deemed to be substantially completed. For Group Performance Share Plan ('GPSP') awards, this is the end of the financial year preceding the date of grant. GPSP awards shown in 2014 to 2015 are therefore related to awards granted in 2015 to 2016.

3 The GPSP was replaced by the LTI in 2016 and the value for GPSP is nil for 2016 as no GPSP award was made. LTI awards have a three-year performance period and the first LTI award was made in February 2017. The value of the LTI awards expected to vest will be included in the total single figure of remuneration of the year in which the performance period ends. Noel Quinn received the 2021-2023 LTI award that had a performance period which ended on 31 December 2023. This was the first LTI award granted to him as Group Chief Executive.

Voting results from Annual General Meeting

As set out in the Committee Chair's letter, the Committee reflected on feedback from investors following the vote on the implementation of our current policy at last year's AGM. We explained in our statements of 5 May 2023 and 3 November 2023 that our largest shareholder voted against the Board's recommendations on a number of resolutions including the Directors' remuneration report, which impacted the results of these resolutions.

The Board was pleased that a large majority of shareholders voting at the AGM supported HSBC's strategy. The Committee Chair has met with several of our large institutional investors and proxy advisory firms since the AGM, and there remains strong support for the current remuneration policy.

Pay ratio

The following table shows the ratio between the total pay of the Group Chief Executive and the lower quartile, median and upper quartile pay of our UK employees.

Total pay and benefits for the Group Chief Executive is the single figure of remuneration for Noel Quinn. The increase in median ratio is primarily driven by the vesting of the 2021-2023 long-term incentive ('LTI'), which is the first he has received as Group Chief Executive. Excluding the LTI vesting in respect of the year, the ratio remained broadly in line with prior years at 86:1 at median.

The total pay and benefits for the median employee for 2023 was £63,000, an 8.1% increase compared with 2022.

Our UK workforce comprises a diverse mix of colleagues across different businesses and levels of seniority, from junior cashiers in our retail branches to senior executives managing our global business units. We aim to deliver market-competitive pay for each role, taking into consideration the skills and experience required for the business.

Pay structure varies across roles in order to deliver an appropriate mix of fixed and variable pay. Junior colleagues have a greater portion of their pay delivered in a fixed component, which does not vary with performance and allows them to predictably meet their day-to-day needs. Our senior management, including executive Directors, generally have a higher portion of their total remuneration opportunity structured as variable pay and linked to the performance of the Group, given their role and ability to influence the strategy and performance of the Group. Executive Directors also have a higher proportion of their variable pay delivered in shares, which vest over a period of seven years with a post-vesting retention period of one year. During this deferral and retention period, the awards are linked to the share price so the value of award realised by them after the vesting and retention period will be aligned to the performance of the Group.

We are satisfied that the median pay ratio is consistent with the pay and progression policies for our UK workforce, taking into account the diverse mix of our UK employees, the pay mix applicable to each role and our objective of delivering market competitive pay for each role subject to Group, business and individual performance.

Our ratios have been calculated using the option 'A' methodology prescribed under the UK Companies (Miscellaneous Reporting) Regulations 2018. Under this option, the ratios are calculated using full-time equivalent pay and benefits of all employees providing services in the UK at 31 December 2023. We believe this approach provides accurate information and representation of the ratios. The

ratio has been computed taking into account the pay and benefits of nearly 33,000 UK employees, other than the Group Chief Executive. We calculated our pay quartiles and benefits information for our UK employees using:

- full-time equivalent annualised fixed pay, which includes base salary and allowances, at 31 December 2023;

- variable pay awards for 2023;

- return on deferred cash awards granted in prior years. The deferred cash portion of the annual incentive granted in prior years includes a right to receive notional returns for the period between the grant date and vesting date, which is determined by reference to a rate of return specified at the time of grant. A payment of notional return is made annually and the amount is disclosed on a paid basis in the year in which the payment is made;

- gains realised from exercising awards from taxable employee share plans; and

- full-time equivalent value of taxable benefits and pension contributions.

Full-time equivalent fixed pay and benefits for each employee have been calculated by using each employee's data as at 31 December 2023. Where an employee works part-time, fixed pay and benefits are grossed up, where appropriate, to full-time equivalent. One-off benefits have not been included in calculating the ratios as these are not permanent in nature and in some cases, depending on individual circumstances, may not truly reflect a benefit to the employee.

The reported ratios may not be comparable to our international and listed peers on the FTSE 100, given differences in business mix and size; employment and compensation practices; methodologies for computing pay ratios; and assumptions used by companies.

Relative importance of spend on pay

The following chart shows the change in:

- total employee pay between 2022 and 2023; and

- dividends and share buy-backs in respect of 2022 and 2023.

In 2023, total spend on pay was slightly higher than in 2022. The total return to shareholders increased by 156% compared with 2022, reflecting a higher dividend and $7bn of capital return to shareholders through share buy-backs, which included the up to $3bn buy-back announced at our third quarter of 2023 results. In addition, the Group has announced the intention to initiate a further up to $2bn buy-back. Dividends include an approximation of the amount payable in April 2024 in relation to the fourth interim dividend of $0.31 per ordinary share.

 Relative importance of spend on pay

1 In our Annual Report and Accounts 2022, we disclosed that the total return to shareholders was $9,144m, of which $8,144m related to dividends in 2022. This was an error and has been corrected in the chart above.

Comparison of Directors' and employees' pay

The following table compares the changes in each Director's base salary, taxable benefits and annual incentive between 2020 and 2023 with the percentage change in each of those elements of pay for UK-based employees of HSBC Group Management Services Limited, the employing entity of the executive Directors.

There were no changes to the fees or benefits of the non-executive Directors between 2020 and 2023. The year-on-year percentage change in fees noted in the table below is primarily driven by any pro-rated fees received by the non-executive Director for 2020, 2021, 2022 and 2023 based on time served by them on the Board and the relevant Board committees and any additional responsibilities taken on by the non-executive Director during each year. The value of benefits received by the non-executive Directors reflect the taxable expense reimbursements claimed, and the associated gross-up tax, in relation to attending the Board meetings in each year. Page 307 provides the underlying single figure of remuneration for non-executive Directors used to calculate the figures above.

Non-executive Directors who joined after 1 January 2023 are not included, which includes Ann Godbehere, Kalpana Morparia, Brendan Nelson and Swee Lian Teo.

1 Noel Quinn succeeded John Flint as interim Group Chief Executive with effect from 5 August 2019 and was appointed permanently into the role on 17 March 2020. The annual percentage change in 2020 for Noel Quinn is based on remuneration reported in his 2019 single figure of remuneration (for the period 5 August 2019 to 31 December 2019) and his 2020 single figure of remuneration (for the period 1 January 2020 to 31 December 2020). Based on his annualised 2019 compensation as an executive Director, his percentage change in salary, benefits and annual incentive was 2.1%, 85.2% and -50.9%, respectively for 2020.

2 Noel Quinn voluntarily waived the cash portion of his 2020 annual incentive. The year-on-year percentage change between 2020 and 2021 would be -1% without this cash waiver.

3 Georges Elhedery succeeded Ewen Stevenson as Group Chief Financial Officer with effect from 1 January 2023. Year-on-year comparison for Georges Elhedery will be available from 2024 onwards.

4 Geraldine Buckingham joined the Board on 1 May 2022.

5 Rachel Duan and Eileen Murray were appointed members of the Group Audit Committee on 1 June 2022.

6 Rachel Duan and Dame Carolyn Fairbairn did not receive taxable benefits in 2023, resulting in a 100% reduction in benefits from the prior year.

7 Dame Carolyn Fairbairn was appointed as Chair of the Group Remuneration Committee effective 29 April 2022.

8 James Forese was appointed as non-executive Chair of HSBC North America Holdings, Inc in 2021. Fees for 2021 included fees in relation to this role.

9 Steven Guggenheimer joined the Board on 1 May 2020 and therefore received fees for only part of 2020.

10 José Antonio Meade Kuribreña and Jackson Tai did not receive taxable benefits in 2021, resulting in a 100% reduction in benefits from the prior year.

11 Jackson Tai retired from the Board on 5 May 2023.

12 Employee group consists of individuals employed by HSBC Group Management Services Ltd, the employing entity of the executive Directors, as no individuals are employed directly by HSBC Holdings.

Scheme interests awarded during 2023

(Audited)

The table below sets out the scheme interests granted to executive Directors during 2023 in respect of the 2022 performance year, as disclosed in the 2022 Directors' remuneration report. No non-executive Directors received scheme interests during the financial year. The below table includes details of immediate shares and fixed pay allowances in compliance with Chapter 17 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited.

1 In accordance with the remuneration policy approved by shareholders at the 2022 AGM, the LTI award was determined at 320% of base salary for Noel Quinn and 160% of base salary for Georges Elhedery. The number of shares to be granted was determined by taking HSBC's closing share price of £6.357 taken on 24 February 2023, and applying a discount based on HSBC's expected dividend yield of 5% per annum for the vesting period (£4.963). LTI awards are conditional share awards subject to a three-year forward-looking performance period and vest in five equal annual instalments, between the third and seventh anniversary of the award date, subject to performance achieved. Awards are subject to malus and clawback for a maximum period of 10 years from the date of the award and are not eligible for dividend equivalents.

2 Immediate share awards are granted based on the previous years' performance as part of the annual incentive and are not subject to forward-looking performance conditions. On vesting, awards will be subject to a one-year retention period. The face value of the immediate share awards have been computed using HSBC's closing share price of £6.357 taken on 24 February 2023. Awards are subject to clawback for a maximum period of 10 years from the date of the award.

3 Fixed pay allowance awards are granted in instalments in accordance with the remuneration policy approved by shareholders at the 2022 AGM, and are not subject to forward-looking performance conditions. Individual tax liabilities were satisfied in cash, therefore the face value awarded represents the net of tax value of the shares and the number of shares awarded reflects the net of tax number of shares. The fixed pay allowance awards have been computed using HSBC's closing share price of £5.997 taken on 12 May 2023, £5.839 taken on 18 August 2023 and £6.093 taken on 6 November 2023. These awards vest immediately and are subject to a retention period and released annually on pro-rata basis over five years, starting in March 2024.

1 Awards will vest on a straight-line basis for performance between the minimum, target and maximum levels of performance set in this table.

2 To be assessed based on RoTE at the end of the performance period.

3 To be assessed based on share of Group tangible equity (on a constant currency basis and excluding associates) allocated to Asia by 31 December 2025.

4 Carbon reduction will be measured based on percentage reduction in total energy and travel emissions achieved by 31 December 2025 using 2019 as the baseline. The sustainable finance and investment metric will assess the cumulative amount provided and facilitated over the period ending 31 December 2025.

5 The peer group for the 2022 award is: Bank of China (Hong Kong), Barclays, BNP Paribas, China Merchants Bank, Citigroup, DBS Group Holdings, J.P. Morgan Chase & Co., Lloyds Banking Group, OCBC Bank, Standard Chartered and UBS Group.

Executive Directors' interests in shares

(Audited)

The shareholdings of executive Directors in 2023, including the shareholdings of their connected persons, at 31 December 2023 (or the date they stepped down from the Board, if earlier) are set out below. The following table shows the comparison of shareholdings with the company shareholding guidelines. There have been no changes in the shareholdings of the executive Directors from 31 December 2023 to the date of this report.

Individuals have five years from their appointment date to build up the recommended levels of shareholding. In line with investor guidance, for executive Directors, unvested shares that are not subject to forward-looking performance conditions (on a net of tax basis) can count towards their shareholding requirement under the shareholder-approved policy.

The Committee reviews compliance with the shareholding requirement, taking into account shareholder expectations and guidelines. The Committee also has full discretion in determining any penalties for non-compliance.

With regard to post-employment shareholding arrangements, we believe that our remuneration structure achieves the objective of ensuring there is ongoing alignment of executive Directors' interests with shareholder experience post-cessation of their employment due to the following features of the policy:

- Shares delivered to executive Directors as part of the fixed pay allowance have a five-year retention period, which continues to apply following a departure of an executive Director.

- Shares delivered as part of an annual incentive award are subject to a one-year retention period, which continues to apply following a departure of an executive Director.

- LTI awards have a seven-year vesting period with a one-year post-vesting retention period, which is not accelerated on departure.

The weighted average holding period of an LTI award within HSBC is therefore six years, in excess of the five-year holding period typically implemented by FTSE-listed companies.

HSBC operates a policy under which individuals are not permitted to enter into any personal hedging strategies in relation to HSBC shares subject to a vesting and/or retention period.

1 The gross number of shares is disclosed. A portion will be sold at vesting to cover any income tax and social security that falls due at the time of vesting.

2 The value of the shareholding is calculated using an average of the daily closing share prices in the three months to 31 December 2023 (£6.192), and does not include any unvested interests.

3 At 31 December 2023, Noel Quinn and Georges Elhedery did not hold any options under the HSBC Holdings Savings-Related Share Option Plan (UK).

4 LTI awards granted in February 2022 and 2023 are subject to the performance conditions as set out in the preceding sections.

5 Executive Directors are expected to meet their shareholding guidelines within five years of the date of their appointment. Noel Quinn and Georges Elhedery were appointed on 5 August 2019 and 1 January 2023, respectively.

Service contracts

The service contracts of executive Directors do not have a fixed term. The notice periods of executive Directors are set at the discretion of the Committee, taking into account market practice, governance considerations, and the skills and experience of the particular candidate at that time.

Service agreements for each executive Director are available for inspection at HSBC Holdings' registered office. Consistent with the best interests of the Group, the Committee will seek to minimise termination payments. Directors may be eligible for a payment in relation to statutory rights.

Total pension entitlements

(Audited)

No employees who served as executive Directors during the year have a right to amounts under any HSBC final salary pension scheme for their services as executive Directors or are entitled to additional benefits in the event of early retirement. There is no retirement age set for Directors, but the normal retirement age for colleagues is 65.

Payments to past Directors

(Audited)

HSBC has received a formal request from the former employer of Ewen Stevenson to reduce the buy-out award granted to him in 2019 by £82,980, which will be offset against the next available vesting for this award. The reduction will be made in line with PRA regulations, acting on the decision made by Ewen Stevenson's former employer. We understand the reduction was part of a collective adjustment and there are no concerns over Ewen Stevenson's conduct or the discharge of his individual accountabilities.

Payments Ewen Stevenson received after he stepped down as an executive Director are set out in the following section.

In line with the terms of his departure disclosed in our Annual Report and Accounts 2022, Ewen Stevenson was granted good leaver status and is therefore eligible to receive vesting of the 2021-2023 LTI award, which was pro-rated for time in employment. Ewen's good leaver status is conditional upon satisfaction of non-compete provisions under which he cannot undertake a role with a defined list of competitor financial services firms for 12 months after his employment ceases with HSBC. Details of the 2021-2023 LTI outcome are outlined on page 289.

No other payments were made to, or in respect of, former Directors in the year in excess of the minimum threshold of £50,000 set for this purpose.

Payments for loss of office

(Audited)

Departure terms for Ewen Stevenson

Ewen Stevenson left the Group on 30 April 2023.

In accordance with the approved Directors' remuneration policy and contractual terms agreed for the period between 1 January 2023 and 25 October 2023, Ewen received payments totalling £703,519 in lieu of his base salary and pension allowance. Ewen also received his

fixed pay allowance in respect of the same period, which totalled £885,836 and was awarded in immediately vested shares, which are subject to a retention period. In accordance with the approved Directors' remuneration policy, Ewen received cash in lieu of unused holiday totalling £73,621 on expiry of his notice period.

External appointments

During 2023, executive Directors did not receive any fees from external appointments.

Directors' emoluments

The details of compensation paid to executive and non-executive Directors for the year ended 31 December 2023 are set out below:

1 Fees and benefits in kind for 2022 reflects the population as per the single figure table for non-executive Directors, which excludes individuals who have stepped down from the Board during 2022.

2 Includes the value of the deferred and LTI awards at grant.

2

The aggregate amount of Directors' emoluments (including both executive Directors and non-executive Directors) for the year ended 31 December 2023 was $25,391,977. As per our policy, benefits in kind may include, but are not limited to, the provision of medical insurance, income protection insurance, health assessment, life assurance, club membership, tax assistance, car benefit, travel assistance, provision of company owned-accommodation and relocation costs (including any tax due, where applicable).

Total benefits in kind of £25,304 ($31,450) were provided to Ewen Stevenson until he left the Group. This included income protection benefits valued at £16,414 ($20,401), life assurance benefits of £935 ($1,162) and other non-taxable expenses of £7,955 ($9,887).

Post-employment medical insurance benefits were provided to former Directors, including Douglas Flint valued at £6,721 ($8,354), Stuart Gulliver valued at £6,721 ($8,354), John Flint valued at £9,706 ($12,064), Marc Moses valued at £15,886 ($19,745) and Ewen Stevenson valued at £377 ($469). Tax return support was also provided to John Flint valued at £5,441 ($6,763), Marc Moses valued at £2,500 ($3,107) and Ewen Stevenson valued at £1,320 ($1,641).

The total aggregate value of benefits provided to former executive Directors was £73,976 ($91,945). The aggregate value of Director retirement benefits for current Directors is nil. Amounts are converted into US dollars based on the average exchange rates for the year.

There were payments under retirement benefit arrangements with three former Directors of £1,381,674. The provision at 31 December 2023 in respect of unfunded pension obligations to two former Directors amounted to £340,208. This relates to unfunded unapproved retirement benefits schemes.

Emoluments of senior management and five highest paid employees

The following tables set out the emoluments paid to senior management, which in this case comprises executive Directors and members of the Group Executive Committee, for the year ended 31 December 2023, or for the period of appointment in 2023 as a Director or member of the Group Executive Committee. Details of the remuneration paid and share awards granted to the five highest paid employees, comprising one executive Director and four Group Executives for the year ended 31 December 2023, are also presented.

1 The weighted average closing price of the shares immediately before the dates on which the awards were vested was £5.9681.

2 The closing price on the day before the grant date was £6.3570. The fair values of the awards were calculated according to the IFRS 2 accounting standard. The fair values, which vary based on the length of the vesting period, range between £2.8390 and £6.3180. These awards include LTI awards and other awards which are subject to satisfaction of performance conditions. LTI awards are subject to a combination of financial and non-financial metrics that are detailed in the Directors' remuneration report in the Annual Report and Accounts.

3 The closing price on the day before the grant date was £5.9970. The fair values of the awards were calculated according to the IFRS 2 accounting standard. The fair value of the award was £6.1100.

4 The closing price on the day before the grant date was £5.8390. The fair values of the awards were calculated according to the IFRS 2 accounting standard. The fair value of the award was £5.8330.

5 The closing price on the day before the grant date was £6.093. The fair values of the awards were calculated according to the IFRS 2 accounting standard. The fair value of the award was £6.0830.

6 Relates to the allocation of dividend equivalent shares in relation to eligible awards.

1 Includes the value of deferred share awards at grant.