HSBC bosses fought off a shareholder revolt over executive pay yesterday as almost one in five shareholders failed to approve the bank's remuneration scheme at its annual general meeting in London.

The scheme, which could deliver £120 million over three years to HSBC's top six executives, was approved by 81.34 per cent of shareholders. The vote came at the end of a three-hour meeting during which many small shareholders expressed their displeasure at the pay package. Among the 8 per cent of shareholders to abstain was Knight Vinke, the activist investor that holds less than 1 per cent of the bank's stock.

One investor, who was applauded by other shareholders at the meeting, suggested that HSBC bosses follow the example of Willie Walsh, the chief executive of British Airways, who gave up his bonus this year after the chaotic opening of Heathrow's Terminal 5. Another suggested that executives give half their bonuses to charity.

Much of the controversy centred on HSBC's dealings in the US, particularly its purchase of Household Finance Corporation (HFC).

The world's largest bank has written down $15.6 billion (£7.9 billion) in the past year after suffering losses on the US sub-prime mortgage market. One small shareholder said: “With Household, you bought a puppy that turned out to grow up with distemper. How long do we have to put up with paying you so much money to lose so much money?”

Sir Mark Moody-Stuart, who heads the remuneration committee, said: “We have to be market-competitive to attract and keep the best people. The scheme is only going to be realised by achieving the targets we have set.”

Glen Suarez, the chief investment officer of Knight Vinke, said after the meeting: “We suspect it [HFC] could be like a case of gangrene which won't go away if you take a couple of pills, and may have to be amputated.”

The pay packages rely on HSBC increasing its earnings per share by 28per cent over the next three years.

Michael Geoghegan, the chief executive of HSBC, Douglas Flint, the finance director, Stephen Green, the chairman, and board members Sandy Flockhart and Vincent Cheng will benefit from the scheme.

Profits at HSBC rose by 10 per cent to £12.2billion last year owing to its success in emerging markets.

Eric Knight, the founder of Knight Vinke, attacked the board of HSBC over its US sub-prime business, using a recent Goldman Sachs report which said that its Finance USA arm's debts outweighed its value by $46billion.

However, Goldman Sachs yesterday distanced itself from the activist. A spokesman said: “Knight Vinke appears to have misinterpreted Roy [Ramos's] research note on HSBC published on 8 May 2008. Investment research should be considered in totality rather than selectively to fully appreciate the analysis.”

Mr Green said that Knight Vinke had “got it wrong” over its analysis of the US business's funding. He added that the profits generated by HSBC Finance since 2003 had balanced out the cost of its recent losses.

The chairman said that it was too early to call an end to the credit crisis. He told shareholders: “The present turmoil is the worst for a generation. It has claimed many casualties and it's not yet over.”

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