HSBC, Europe's largest bank, faces escalating investor concern about its "excessive" remuneration scheme after more corporate governance experts questioned the size of directors' pay packages compared to their performance targets.

Pirc, the corporate governance body, is recommending that shareholders vote against HSBC's remuneration scheme at the bank's Annual General Meeting (AGM) on Friday, May 30, stating: “We consider the combined level of potential awards to be excessive. Average salaries are currently at the top end of the UK sector.”

The bank's maximum pay package is 250 per cent of salary for the annual bonus scheme and 700 per cent of salary for the HSBC Share Plan.

The Share Plan uses earnings per share and total shareholder return over a three-year period as performance measures, which Pirc called “poor targets.” It said: "Although the scheme use two performance measures, they are not utilised concurrently, which we consider to be best practice.”

Last week, the Association of British Insurers (ABI) issued an amber warning on HSBC's pay proposals, which identified areas of potential concern and advised shareholders to carefully consider the scheme.

HSBC has been under attack from Knight Vinke, the activist investor, since last year primarily over its strategy. However, the investor has highlighted concerns about HSBC's pay scheme, in particular the 2005 bonus worth millions to directors in spite of slow profits growth.

Pirc said that it was also opposed to HSBC's proposed amendments to the Share Plan performance conditions, describing them as not sufficiently challenging or “suitably broad to be geared towards outperformance.”

It said HSBC shareholders are not given sufficient information to judge whether targets are challenging or not: "We also note that economic profit is not identified as a key performance indicator.”

A spokesman at HSBC said today that it had been in consultation about the scheme with investors collectively holding 50 per cent of shares in the bank, as well as the ABI and the National Association of Pension Funds and the "majority support the proposals."

He added that the bank had put in place changes to directors' remuneration to ensure that 80 per cent was variable to ensure remumeration is aligned to shareholders' interests.

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