HSBC Bank - Corporate Governance | HSBC
HSBC USA Inc. HSBC BANK USA, N.A. CORPORATE GOVERNANCE STANDARDS
The following standards have been approved by the Boards of Directors and, together with the charters of committees of the Boards of Directors, provide the framework for the corporate governance of HSBC USA Inc. and HSBC Bank USA, N.A. (collectively referred to herein as the "Corporation"). These standards will be reviewed by the Boards periodically in order to ensure the Corporation maintains "best practices" in corporate governance.
Role of the Board and Management
The Corporation's business is conducted by its employees, managers and officers, under the direction of the president and chief executive officer (the "CEO") and the oversight of the Board, to enhance long-term value of the Corporation for HSBC Holdings plc ("HSBC"). The Board has responsibility for governing the affairs of the Corporation, including to:
- provide input and endorse business strategy formulated by management and HSBC;
- provide input and approve the annual operating, funding and capital plans prepared by management;
- monitor the implementation of strategy by management and the Corporation's performance relative to approved operating, funding and capital plans;
- with HSBC's endorsement, appoint the CEO;
- review and advise as to the adequacy of the succession plans for the CEO and senior executive management;
- review and provide input to the shareholder concerning evaluation of the CEO's performance, at least annually;
- review and approve the Corporate Governance Standards and monitor compliance with the standards;
- assess and monitor the major risks facing the Corporation consistent with the Board's responsibilities to the Corporation's ultimate parent, HSBC; and
- monitor the risk management structures designed by management to ensure compliance with HSBC policies, ethical standards and business strategies.
In all actions taken by the Board, the Directors will exercise their business judgment in what they reasonably believe to be in the best interests of the Corporation. In discharging that obligation, Directors may rely on the honesty and integrity of the Corporation's management and its outside advisors and independent auditors. Management is expected to be loyal to the Corporation, implement approved business strategy, appropriately resolve day-today operations issues, keep the Board informed, and maintain and promote high ethical standards while seeking to maximize returns to the Corporation within HSBC's risk tolerance as advised by HSBC.
Composition and Qualification
In accordance with the Bylaws of the Corporation, the size of the Board shall consist of the number of Directors established by the Board. The Chairman and CEO of the Corporation shall also be Directors of the Corporation. A majority of the non-executive Directors should be active or retired senior executives (or the equivalent) of other large companies, educational institutions, governmental agencies, service providers or non-profit organizations.
Each Director will stand for election by the shareholder every year.
The Corporation maintains a mandatory retirement policy whereby retirement is required as of the annual meeting of the shareholder after the date on which a Director attains the mandatory retirement age of 72. Any former employee of HSBC or its subsidiaries who is appointed as a Director of the Corporation may serve in that capacity for up to five years from the date of retirement as an employee, or from the date of appointment as a Director, if later, unless otherwise approved by the HSBC Board of Directors.
Executive Directors will resign from the Board when their employment with HSBC and its subsidiaries ends. With respect to any Director, the Board may defer retirement from the Board if business conditions or other circumstances, in the opinion of the Board, warrant such action.
A non-executive Director is expected to offer to resign from the Board whenever there is (i) a major change in his or her career position or status (unless such change in position or status results from normal retirement), or (ii) a change in his/her status as an "Independent Director." The Chairman, in consultation with the Corporation's CEO and HSBC senior executive management, shall determine whether to present the offer of resignation to the Board for action. If presented, the Board has discretion, after consultation with HSBC management, to either accept or reject such resignation.
Directors shall not be a director, consultant or employee of or to any competitor of the Corporation (i.e., a company that has a business segment offering products or seeking customers that are similar to the products offered or customers served by any business segment of the Corporation). To avoid potential conflicts of interest senior executive officers of the Corporation (i.e., the Chairman, CEO or any direct report to the CEO) may not serve on the board or as a trustee of a company or institution that employs any non-executive Director of HSBC (i.e., reciprocal directorship).
Each Director, while representing the best interests of HSBC and the Corporation, shall:
- promote HSBC's brand values and standards in performing their responsibilities;
- have the ability to spend the necessary time required to function effectively as a Director;
- develop and maintain a sound understanding of the strategies, business and senior executive succession planning of the Corporation;
- carefully study all Board materials and provide active, objective and constructive participation at meetings of the Board and its committees;
- assist in affirmatively representing HSBC to the world;
- be available to advise and consult on key organizational changes and to counsel on corporate issues;
- develop and maintain a good understanding of global economic issues and trends; and
- seek clarification from experts retained by the Corporation (including employees of the Corporation) to better understand legal, financial and business issues affecting the Corporation.
A majority of the Directors will be independent. Annually, the Board shall determine whether each Director can exercise independent judgment from management and shall publish the results of those determinations in the HSBC USA Inc. Form 10-K. The Board shall use the standards set forth in Appendix A hereto, which are based upon the New York Stock Exchange (NYSE) listing standards, as a foundation for its determinations concerning independence.
Annually, all Directors shall be provided with a schedule identifying all regularly scheduled Board and committee meetings for the current and the next succeeding year. There will generally be six regularly scheduled meetings of the Board each year. At the first regularly scheduled meeting of each calendar year, a strategic focus of the Corporation's businesses will be discussed and the Board will review and approve proposed annual operating and capital plans. At least once a year, the Independent Directors shall meet in executive session. Personal attendance of the Directors at Board and committee meetings is expected. The use of current technology to facilitate attendance should be requested by Directors only in extraordinary situations that prevent a Director from attending a meeting in person.
The Secretary and Chairman in consultation with the CEO will establish the agenda for each Board meeting. The Chair of a committee in consultation with the Secretary and senior management will develop the agenda for each committee meeting. Directors are encouraged to suggest to the Chairman, topics for inclusion on future agendas.
At every regularly scheduled Board meeting, the CEO or his/her designee shall advise the Board of the operating performance of the Corporation, focusing on important trends, achievements, plans and developments, and how those matters may affect the annual operating plan approved by the Board. Also, at every regularly scheduled Board meeting, the CEO, Chief Financial Officer or Chief Accounting Officer of the Corporation or of HSBC North America Holdings Inc. shall present the latest available financial results with respect to the Corporation, focusing on significant variances from the annual operating and capital plans approved by the Board and from prior year/quarter results. Interim meetings will be scheduled to discuss the business as required. At each Board meeting, the Directors will be provided the opportunity to question, respond to and advise management on all matters presented as well as other topics of relevance to the Corporation.
Information with respect to any Board or committee meeting should be sent to Directors at least five (5) days in advance of the meeting, if possible. Materials relating to any matter in which a Director has a personal interest will be withheld from that Director. Financial statements included in this information should be condensed with commentary focused on important issues, trends or variances, noting the perceived reasons therefor and the opportunities or risks, if any, that may result.
Minutes of all Board and committee meetings shall be sent to all Directors unless it is legally required that such minutes be kept confidential or such minutes relate to a matter in which a Director has a personal interest.
The committee structure of the Board shall be reviewed annually. The Board will have Audit, Risk, Compliance and Fiduciary Committees. The Board may also appoint other ad hoc committees for limited purposes and duration as it deems appropriate. The Secretary and the Chairman, in consultation with the CEO, shall make recommendations to the Board regarding membership on the committees. The Board will appoint and remove all committee members and the Chair of each committee.
Each standing committee of the Board shall adopt and approve a charter. Each such charter, and any amendments thereto, must be approved by the Board. At least annually, each committee will review the appropriateness of its charter and evaluate and report on its performance to the Board.
The Chair of each committee, in consultation with committee members and senior management of the Corporation will determine the frequency and length of the meetings of the committee.
A quorum and the vote required at any committee meeting shall be determined in the same manner as a quorum for a meeting of the Board as set forth in the Bylaws of the Corporation.
Director compensation will be in the form of cash compensation. The amount of compensation to be paid to Directors will be determined by the Board in consultation with HSBC senior executive management and shall be approved by the Remuneration Committee of the Board of Directors of HSBC.
Access to Senior Management and Independent Advisors
Directors shall have free and full access to senior management and other employees of the Corporation. The CEO or Secretary may assist in arranging any contacts or meetings at a Director's request.
The Board and its committees shall have the right at any time to retain independent outside financial, legal or other advisors and any expenses related thereto will be the responsibility of the Corporation.
Director Orientation and Continuing Education
The Corporation shall provide an orientation program for new non-executive Directors and a continuing education program for all members of the Board. These programs shall include presentations by senior management on the responsibilities of the Directors under United Kingdom and local law, the Corporation's governance structure and strategic plans, its significant financial, accounting and risk management issues, its compliance programs, Statement of Business Principles and Code of Ethics, management structure, executive officers and internal and independent auditors. The orientation program may also include visits to certain of the Corporation's significant facilities, to the extent practical. All Directors are invited to participate in the orientation and continuing education programs.
Annually, the Board shall discuss the effectiveness of the Board and its various committees. The Chairman, in consultation with the Secretary and the CEO shall determine the process to be followed in connection with this evaluation.
INDEPENDENT DIRECTOR STANDARDS
The Board shall consider all relevant facts and circumstances in assessing the independence of Directors. As a foundation for such determinations, the Board has established the following guidelines. An Independent Director is a Director who:
- has no personal loans from the Corporation, other than mortgage loans, credit cards and charge cards made in the ordinary course of business on substantially the same terms as those prevailing at the time for comparable transactions with nonaffiliated persons;
- has not been retained by the Corporation or any of its affiliates in the capacity of an employee or nonemployee executive officer within the last three years and is not currently receiving any compensation from the Corporation or any of its affiliates (other than for service on the Board of Directors of one or more HSBC subsidiaries, deferred compensation for prior service or benefits under a tax-qualified retirement plan);
- has not received more than $120,000 in direct compensation from the Corporation or any of its affiliates in any year, other than for board service, benefits under a tax-qualified retirement plan or deferred compensation for prior service, within the last three years;
- (i) is not a current partner of a firm that is an internal or external auditor of the Corporation (including KPMG);
- (ii) does not have an immediate family member who is a current partner of such a firm;
- (iii) does not have an immediate family member who is a current employee of such a firm and personally works on the Corporation's audit; or
- (iv) within the last three years, has not been and has not had an immediate family member who has been a partner or employee of such a firm and personally worked on the Corporation's audit within such time.
- has not been an employee, partner or executive officer of any significant vendor or customer of the Corporation or any of its subsidiaries, or a pension, profit sharing or employee benefit plan sponsored by the Corporation that makes payments to, or receives payments from the Corporation in an amount that in any fiscal year exceeded the greater of $1 million, or 2% of such entity's consolidated gross revenues within the last three years;
- has not been an executive officer, director or trustee of a charitable organization in which the Corporation or any of its subsidiaries made contributions in any fiscal year that exceeded the greater of $1 million, or 2% of the charitable organization's consolidated gross revenues;
- has no interest in any significant transactions or business relationships with the Corporation or its subsidiaries that are required to be disclosed by the rules and regulations of the Securities and Exchange Commission;
- does not represent a significant shareholder;
- does not hold cross-directorships or have significant links with other directors through involvement with other companies or entities; and
- is not a member of the immediate family of any person described above. Immediate family members are the Director's spouse, parents, children, siblings, mothers and fathers-in-law, sons and daughters-in-law, brothers and sistersin-law and anyone (other than domestic employees) who share the Director's home.
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