HSBC HOLDINGS plc

Shadow Report 1999-2000 Report collated from information available in the public domain but which is not directly provided by the company through its corporate

reports

HSBC Holdings plc – Shadow Report Mission and Governance Report

MISSION AND POLICY STATEMENTS No Data

CORPORATE GOVERNANCE STATEMENT

GROUP BUSINESS PRINCIPLES AND VALUES

The HSBC group has adopted the Global Sullivan Principles.1 These are a set of objectives that aim: to support economic, social and political justice by companies where they do business; to support human rights; to encourage equal opportunity at all levels of employment, including racial and gender

diversity on decision making committees and boards; to train and advance disadvantaged workers for technical, supervisory and management

opportunities; and to assist with greater tolerance and understanding among peoples; thereby helping to

improve the quality of life for communities, workers and children with dignity and equality.

The principles: As a company which endorses the Global Sullivan Principles HSBC pledges to respect the law, and as a responsible member of society to apply these Principles with integrity consistent with the legitimate role of business. They also agree to develop and implement company policies, procedures, training and internal reporting structures to ensure commitment to these principles throughout the organization. Further, the company states the belief that the application of these Principles will achieve greater tolerance and better understanding among peoples, and advance the culture of peace. Accordingly, the company agrees to: Express support for universal human rights and, particularly, those of employees, the

communities within which it operates, and parties with whom it does business. Promote equal opportunity for employees at all levels of the company with respect to issues

such as color, race, gender, age, ethnicity or religious beliefs, and operate without unacceptable worker treatment such as the exploitation of children, physical punishment, female abuse, involuntary servitude, or other forms of abuse.

Respect employees’ voluntary freedom of association. Compensate employees to enable them to meet at least their basic needs and provide the

opportunity to improve their skill and capability in order to raise their social and economic opportunities.

Provide a safe and healthy workplace: protect human health and the environment; and promote sustainable development.

Promote fair competition including respect for intellectual and other property rights, and not offer, pay, or accept bribes.

Work with governments and communities in which it does business to improve the quality of life in those communities - their educational, cultural, economic and social well-being - and seek to provide training and opportunities for workers from disadvantaged backgrounds.

Promote the application of these principles by those with whom it does business. It also agrees to be transparent in its implementation of these principles and provide information which demonstrates publicly its commitment to them.2

DRAFT 2

HSBC Holdings plc – Shadow Report Mission and Governance Report

BOARD AND COMMITTEE STRUCTURE Board of Directors John Bond, the Company chairman was knighted in the Queens birthday honours list. Sir John joined the Hongkong and Shanghai Bank in 1961, and relocated to London following HSBC’s acquisition of the Midland Bank in 1993. He is also a non-executive director of the London stock exchange and Orange, the mobile phone service operator.3

REMUNERATION OF DIRECTORS Directors’ emoluments Sir John Bond, the company chairman, has been identified as “number three in the ten most “underpaid” table.4 It has been argued that his disciplined focus makes HSBC Holdings Plc. the world's best-run bank. In addition to the contribution made by the use of technology, Sir John also credits the bank’s success to a fundamental focus on thrift. He says "I turn out the lights when I leave a room because it costs $700,000 a year just to light our ten main buildings in London". He flies economy, takes the subway to work and his $1.1 million total compensation last year was a fraction of the $164 million package paid to a US counterpart6. Sir John also drives a small car and travels second class, a policy which is believed the have transformed attitudes in the company.5 As a result of this thrifty attitude, HSBC has been sneeringly referred to in the US as the "Home for Scottish Bank Clerks."6

DRAFT 3

HSBC Holdings plc – Shadow Report Employment Report

EMPLOYMENT REPORT

STAFF POLICIES

As a signatory to the Sullivan Principles (see Corporate Governance section) HSBC is committed to respect employees’ voluntary freedom of association. Regulations in the 1999 Employment Relations Act took effect in June 2000, reintroducing compulsory procedures for union recognition in the UK for the first time since the Eighties. This law is expected to assist white collar unions in addition to those in the manufacturing and traditional service sectors. Unifi, the financial services union, has a longstanding dispute with HSBC about recognition for managers, and changes to the Act are expected to assist Unifi in this dispute.7 Graduate employees at HSBC take part in quarterly, six monthly and yearly appraisals. Mike Kinningley, senior manager of executive education, believes that `It's about planning to succeed, we define success and then help the employee to fulfil their potential.' The purpose of an appraisal is to improve performance, and it is realised that measurable targets, meaningful feedback and making staff feel valued result in better performances. The appraisal process involves input from both sides, and is not a pupil-teacher type conversation.8

REMUNERATION POLICY As a signatory to the Sullivan Principles (see Corporate Governance section) HSBC is committed to compensate employees to enable them to meet at least their basic needs and provide the opportunity to improve their skill and capability in order to raise their social and economic opportunities. HSBC, together with Reuters and Tarmac Quarry Products, has offered joining bonuses of pounds 2,000 or more to ensure they obtain the right candidates. Reportedly large gaps in salary expectations cause many graduates to think twice about choosing a `worthwhile' career, and student penury provides an opportunity to attract the cream of graduates by offering ‘golden hellos’.9 The company is also sensitive to the needs of employees with families for whom HSBC jobs are no longer available, and pays a pounds 1,000 supplement to any laid-off employee who has a child in full-time education.10

EQUAL OPPORTUNITY As a signatory to the Sullivan Principles (see Corporate Governance section) HSBC is committed to “promoting equal opportunity for employees at all levels of the company with respect to issues such as colour, race, gender, age, ethnicity or religious beliefs. It is also committed to operate without unacceptable worker treatment such as the exploitation of children, physical punishment, female abuse, involuntary servitude, or other forms of abuse”. Current Employees HSBC, together with other organisations including Natwest, Mazda Cars, William Hill, Hampshire County Council and the London School of Economics, has introduced an assertiveness training course for male employees. The course was developed by Springboard, which already ran a successful assertiveness programme for women, when it received numerous enquiries from clients about running a similar course for men. A recent report reveals that men are so threatened by the success of their female colleagues that it is affecting their health.11

DRAFT 4

HSBC Holdings plc – Shadow Report Employment Report

Midland Bank, owned by HSBC, has raised its retention rate for women on maternity leave from 30 per cent to 80 per cent by allowing them to work flexibly on their return and by providing childcare support. Working parents are an important facet of the employment agenda, but interest in the issue has also been shown by ethical investors. Stockbrokers Rathbone Neilson Cobbold, for example, now assist clients to invest in companies that look after families. HSBC Midland is well placed to attract such investors, as the company is celebrating “10 years of family-friendliness”.12

As part of its family-friendly strategy, HSBC provides staff with constantly updated information on local childcare schemes, to assist working parents who face the stress of finding full-time childcare during school holidays.13 For employees with younger children, HSBC offers its staff 850 nursery places, 300 of which are on site. As it is heavily involved with the management of the nursery scheme, the company is one of only about 600 organisations that qualify for tax concessions for running nurseries for the benefit of their staff. Flo Armstrong runs the nursery project, currently celebrating its 10th anniversary, with five staff. She says that ''the availability of nursery care then and now is not enough to satisfy demand. So we continue to believe it benefits our employees and the company if we provide affordable and good quality childcare'. The bank subsidises between 40 to 50 per cent of the cost of its nursery care, and parents pay the balance.14 New Employees Expressing support for the employment of older workers, HSBC has argued that 'for all the merits of getting younger unemployed into work, the Government's efforts would be better focused on drawing discouraged older workers back into the market’. Government figures issued in April 1999 revealed that the number of over-fifties gaining work was the fastest-growing part of the labour market. The banking industry, reportedly one of the worst culprits for shedding older people, is having a change of heart - partly because of the damage done to its corporate memories, and partly because of pressure from customers. City analysts noted that the return of older workers was not just good for those who had lost hope. It was also good for the wider economy, as 'a step increase in supply in labour for a given level of demand - as seems to have happened - can only serve to put further downward pressure on wage growth'.15 HSBC, together with Royal Sun Alliance, Barclays and National Westminster, is considering what the banks, together with government, can do to enable financial services companies to offer increased placements for unemployed people under the New Deal Scheme. Government ministers are considering plans to overhaul the New Deal for the unemployed to offer a greater role for private sector intermediaries to train and place the jobless. They have been impressed by US employment intermediaries, such as Wildcat Corp in New York, which have successfully trained and found jobs with Wall Street firms for hundreds of the most socially disadvantaged.16 The HSBC group has also advertised employment opportunities through a pilot issue of Ready Willing And Able, a new recruitment bulletin for disabled people. The bulletin will be distributed free to disabled people looking for work through the Employment Service's advisers, Local Careers Services. Ready Willing And Able, supported by Railtrack, was developed by disabled writers Nick Lewis and Michael Turner, who identified a niche in the market to bring together employers looking to extend their equal opportunities policies and disabled people seeking to enter the workforce.17

HEALTH & SAFETY As a signatory to the Sullivan Principles (see Corporate Governance section) HSBC is committed to provide a safe and healthy workplace, and protect human health.

DRAFT 5

HSBC Holdings plc – Shadow Report Customers and Products Report

CUSTOMERS AND PRODUCTS REPORT

In line with the trend to make acquisitions across Asia, HSBC is examining opportunities to buy local banks in Indonesia, the Philippines and Thailand. Thailand is of particular interest as HSBC was the first bank to be set up there, but is not the dominant player today. Acquisitions in Malaysia and Singapore would be superfluous since HSBC is already very active in these countries. Above all, HSBC is well positioned in the two most populous countries in Asia: China and India. China has always been a top priority, and whenever new business has been opened up to foreigners HSBC has been among the first to participate. Operations in India are also improving. HSBC’S Asian services incorporate both cash management and custody, and custody is one of the company’s clear strengths in the region, where it is the number one sub-custodian, with $120 billion of assets under custody. In Indonesia it has a particularly dominant position with custody of 45% of foreign-invested assets.18

BUSINESS POLICY As a signatory to the Sullivan Principles (see Corporate Governance section) HSBC is committed to promoting the application of these principles by those organisations with whom it does business.

CUSTOMER CARE AND BUSINESS INTEGRITY

Competition As a signatory to the Sullivan Principles (see Corporate Governance section) HSBC is committed to promote fair competition including respect for intellectual and other property rights, and not offer, pay or accept bribes. Changes in the Hong Kong banking business environment are threatening HSBC’s privileged position as a leading member of the local interest-rate cartel. In the past, this has allowed HSBC and other banks jointly to set interest rates and achieve high returns. The cartel, however, is to be dismantled over the next two years, and the spread between HSBC’s borrowing and lending rates are expected to narrow. To recoup some of these profits, the company is considering charging for services that are currently free, such as low-balance checking accounts and checks. Although this may cause a loss of some customers, the bank believes that its large market power will ensure its continued success, whilst many smaller banks may be forced to merge.19 Following recommendations in the report of the Cruickshank banking enquiry, set up by chancellor Gordon Brown to investigate competition in financial services, the government has ordered a competition commission inquiry into the way small and medium-sized businesses are treated by Britain's leading banks. The 344-page report expressed serious concern that the four main banks enjoyed a near-monopoly of services for the small businesses sector. Cruikshank expressed the view that the breakup of some parts of the major banks' business banking networks was necessary to create local competition, and that without direct government intervention, the prospect of reform was remote. HSBC was reported as welcoming competition, and made the point that the financial services sector, including small business, was already very competitive in the UK.20 The banking industry was nevertheless required to respond to the Cruikshank allegations of anti-competitive behaviour. The report highlighted four areas of banking - credit cards; the way in which banks sell more than one product to customers; the way money is transmitted between people and the way credit is provided to small businesses - as showing evidence of a lack of competition. The share price of HSBC fell following the report’s release, along with share prices of NatWest and Barclays, as analysts warned the review might damage the potential for making profits in the future.21

DRAFT 6

HSBC Holdings plc – Shadow Report Customers and Products Report

In response to allegations in the report that high street banks were ‘ripping off their customers to the tune of pounds 5bn a year’, the chancellor, Gordon Brown, has introduced new standards covering credit cards. He is also requiring the publication of league tables of all financial products and a review of the voluntary banking code with which HSBC and other financial firms comply. The chancellor promised to consult with the banks before creating a new regulatory body - to be known as Paycom - which will oversee the way in which payments take place between banks. The banks had been vulnerable after many of them had revealed record profits, in fact the "big four" banks; HSBC, Lloyds TSB, Barclays and NatWest - at which the Cruikshank report was primarily aimed - had earned pounds 8bn in profit between them in the first half of 2000.22 In response to the Cruikshank recommendations to boost competition between banks, the Chancellor has announced measures that make it more difficult for banks to overcharge their personal and small business customers. He rejected, however, the recommendation that all bank takeovers be referred to the competition commission, and declined to introduce windfall tax on bank profits, currently at record levels.23

The banking sector feels that the government is treating them very harshly. A review is proposed of the self -regulatory code under which the financial services sector operates and which was recently updated, and the new version of the code tackles many of the issues for which the industry has been criticised by the Cruikshank enquiry. The banks are now pledged to introduce an eight-week notice period on closure of branches, even though they feel that branch closures are a commercial issue for each individual bank. The new code also lays down the regime under which banks must notify customers of the charges for withdrawing money from cash machines, and will make it easier for customers to transfer their accounts to rival banks. These issues, which have affected the industry this year, have also served to show how financial services firms cannot all be grouped together, and the banks believe that the government is wrong to think of the banking industry as a monolithic whole. The clearing banks - the big four of HSBC, Lloyds TSB, Barclays and NatWest - are particularly affected by investigations into small-business banking and current accounts, whilst the former building societies – including the Abbey National and Halifax - are more concerned about issues such as mortgages and savings. It is believed that the former building societies could stand to benefit from attempts to make it easier to transfer current accounts.24 The banks had been anticipating proposals designed to make it easier for companies to move their accounts, and had believed that the Cruikshank enquiry would propose that small business customers be given computer discs containing all their banking details. The banks have taken steps to make it easier for customers to move their bank accounts with the help of clearing association Apacs. In particular, they are co-operating in a pilot scheme enabling transfer of customers' direct debit details between one bank and another, which has been a major factor deterring customers from switching their current accounts. Fewer banks are now providing facilities for small business, and these banks, which include HSBC, NatWest, Barclays and Lloyds/TSB, have large branch networks considered vital to providing small businesses banking facilities.25

Pricing policies

HSBC is piloting a scheme that could reduce loan rates for customers depending on how many products they have bought from the bank.26 Further ‘differential pricing’ is under consideration for services across all the bank’s distribution channels, and prices may depend on whether accounts are accessed through the telephone, Internet, cash machines or directly from the branch.27 The Guardian newspaper has reported28 that banks including HSBC are “ripping off their customers by more than pounds 80m a year by luring them away from branches and on to the internet”. Lower interest rates are being paid on internet accounts, even though the costs to service these accounts are a fraction of those incurred to serve branch customers. On average the "big four" - HSBC, Lloyds TSB, NatWest and Barclays – are reported to be paying 0.1% rates on internet current account balances while specialist online banks are offering up to 40 times higher rates of interest.

DRAFT 7

HSBC Holdings plc – Shadow Report Customers and Products Report

HSBC, together with Barclays and Lloyds TSB, was also planning to charge customers up to £1 to withdraw money from cash machines, but, following controversy, these plans have been abandoned, and most of the 28,000 cash machines in the Link network will be free of charges from next year. Further plans for "disloyalty fees" - penalties from the customers' own bank for using other cash machines – of up to £2.50 per transaction were also abandoned when the government threatened banks and building societies with multimillion pound fines should they proceed with the proposed fee structure. The banks had argued that the fees were needed to meet the cost of running the cash machine network.29 Profitability An antiquated cheque clearing system is allowing the HSBC and other UK banks to make large profits on interest payments owing to delays of up to 11 days in clearing cheques.30 The Consumers' Association is calling on the government to set up an independent regulator of payment systems. It has been discovered that all the cheques paid into Barclays and NatWest, and half the cheques paid into Lloyds TSB, cleared a day later than they should have. In the case of HSBC, Co-operative Bank and Nationwide, only a quarter of cheques were cleared a day late.

HSBC has taken steps to make its mortgage products more customer-friendly, and attributes its larger than expected profits rise in the first six months of 2000 to the global nature of its business and the quality of its products. Douglas Flint, the finance director, said that "People are beginning to trust us . . . and trust leads to margin".31

DRAFT 8

HSBC Holdings plc – Shadow Report Community Report

COMMUNITY REPORT

COMMUNITY POLICY As a signatory to the Sullivan Principles (see Corporate Governance section), HSBC is committed to work with governments and communities in which it does business. It aims to improve the quality of life in those communities, including their education, cultural, economic and social wellbeing, and to seek to provide training and opportunities for workers from disadvantaged backgrounds.

CORPORATE CITIZENSHIP HSBC has been accused of withholding information from the treasury-backed Cruickshank investigation into banking competition because of the company’s concerns about confidentiality. The big banks were criticised by Cruickshank for ‘uncooperative behaviour and delaying tactics’ that prevented the enquiry from meeting its reporting deadline. Keith Whitson, HSBC’s chief executive, insisted, however, that the bank, which has 17% of the small-business market and 14% of all current accounts in the UK, had been cooperating with the inquiry. The panel’s use of external consultants was the reason given for the bank’s unwillingness to release some of the information until confidentiality agreements had been signed.32 On the international front, “just as the western industrial powers and their economic arm, the International Monetary Fund, were allowing themselves a moment of self-congratulation at having tamed the 1997-98 Asian meltdown”, the banks’ Indonesian operations were further affected by the return of conflict to East Timor. Although much of the immediate focus has been on the west's sales of arms, far greater levels of investment have been made in Indonesia's low-cost and entrepreneurial workforce. The HSBC, together with other large British banks including Standard Chartered and the Royal Bank of Scotland, has large sums of money dependent on the return of growth and financial stability to Indonesia. As “the banking towers that dominate the Jakarta skyline are a monument to western support for Indonesian capitalism”33, the Indonesian operations of other western banks are also at risk. At a domestic level, HSBC has become a member of the Leeds advisory group of Cares InCorporated. The group operates in several areas and is run by local partnerships representing leading interests in each area. The Leeds group includes representatives from the private and voluntary sectors and the city council. HSBC’s partners on the advisory group include Yorkshire Bank and Barclays, organisations that would usually be seen as competitors. However, benefits have already been gained from the participants working together to address social issues in Leeds that affect all their businesses and staff.34 HSBC has also joined with Barclays, Lloyds TSB, Royal Bank of Scotland/NatWest, Abbey National and the Halifax to help finance the government’s plan for a post office-based universal bank. The group has agreed to contribute to the cost of the new service, designed to ease social exclusion by providing a wide range of universal banking services for the less well-off. Whilst agreement on the final figure are ongoing, the group will be expected to contribute about £75m each year for the next five years, considerably less than the £125m a year originally sought by the Treasury.35 The government’s plan is also aimed at supporting the post office network.36 At the individual customer level HSBC was accused of exclusivity in a Guardian article of September 199937, which revealed that a disabled ex-soldier was refused service by HSBC, Lloyds, NatWest and Barclays. The report said:

“Sporting a green mohican haircut and a half-inch spike through his lower lip, Tim Wright, 38, accepts he may not be a bank manager's vision of an ideal customer. But the former Royal Artillery gunner with an exemplary service record and pounds 17,000 to invest, never

DRAFT 9

HSBC Holdings plc – Shadow Report Community Report

imagined he would be denied a current account. Mr Wright, who was medically discharged from the army in 1982 after shattering a knee on active service in Northern Ireland, received a cheque for pounds 17,366 in backdated disability pension … but has been unable to open an account despite repeated attempts at HSBC, Lloyds, NatWest and Barclays. Mr Wright, who walks with a stick, does not have a driving licence or a valid passport, the primary forms of identification demanded by the banks. `You are not required to have a passport or a driving licence by UK law, yet without them I'm excluded from the banking system,' he said. `I put my arse on the line for this country, and I've got a cheque for 17 grand from Her Majesty's paymaster general that I want to pay in, yet still no-one will accept my money.' Under laws introduced in 1993 to combat money laundering, banks and building societies are required to have proof of identity and address. Normally a driving licence and a utility bill bearing name and address are deemed sufficient. Mr Wright, who is unemployed and lives in a housing collective in Lewisham, south-east London, has neither. Instead, he presented his army certificate of service and letters bearing his name and address from his landlord and local council without success. Mr Wright has been a Big Issue seller for the last four years. Philip Telford, senior policy researcher at the Consumers' Association, said: `This man has not only a regular pension but a lump sum too. I can't think why banks won't give him an account . . . As he has a government cheque one imagines the bank isn't worried about money laundering. This appears as much an issue of prejudice as anything.' Tim Wright is an alias. All his bank account applications, supporting documents and cheques bear his real surname.”

RESPONSIBLE FINANCING In July 2000 the Nigerian government formally asked Britain to freeze the bank accounts of the late military dictator General Sani Abacha, who allegedly stole $4.3bn during his five years in office from 1993. In the world's largest case of known government corruption, the Nigerian authorities believe that up to $450m of stolen funds are deposited in some of London's leading banks. The request is the latest in a series of disclosures which has exposed weaknesses in the international banking system's regulation of money laundering by corrupt politicians. Most of the British funds are believed to be in more than 20 accounts at the HSBC, Barclays, Citibank, the French bank Credit Agricole-Indosuez, and subsidiaries of two Nigerian and four other European banks. The British Bankers Association chairs the joint money laundering steering group, and has pointed out that it has been sometimes notoriously difficult to establish the beneficial owners of accounts.38 The Abacha accounts in Switzerland were frozen after the general's death at the request of the new Nigerian government. Swiss investigators found that $123m of the funds had originally come from the UK and another $219m had been transferred out again to British banks. Swiss banking sources say the money flowing from Britain came from companies that bribed the Abacha family to win contracts in Nigeria, and, unlike the rest of the industrialised world, Britain has yet to introduce legislation that would make it a crime to bribe foreign officials. By September 2000, the British authorities had not yet acted on Nigeria's formal request in June to restrain and confiscate all the stolen money identified.39 In response to problems such as these, eleven of the largest international banks, including the HSBC, have committed themselves to a set of global guidelines, named the Wolfsberg Principles, that are aimed at eliminating money laundering and preventing financial crime. The other signatories include the private banking arms of Barclays, ABN Amro, Banco Santander, Chase Manhattan, Citibank, Credit Suisse, Deutsche Bank, JP Morgan, Societe Generale and UBS, and other banks are being urged to adopt the principles, developed with the help of Transparency International and the OECD. This represents a clear recognition by the private commercial banks of their responsibility in the fight against serious international crime. The guidelines adopt the highest European standards and apply them globally, but there are yet no provisions for sanctions or checks on enforcement. The voluntary code establishes clear procedures for staff to identify customers and beneficial owners wherever they are doing business, including offshore centres. It also advocates monitoring, and the banks are pledged to either reject a suspicious client or report them to the authorities.40

DRAFT 10

HSBC Holdings plc – Shadow Report Community Report

PHILANTHROPY, SPONSORSHIP AND EDUCATION HSBC is part of a group of business organisations that, under the patronage of the Prince of Wales, has donated £5 million to a scheme at Manchester Grammar School aimed at offering assisted paces to bright children from poor families. The abolition of the government’s assisted places scheme has meant that schools such as Manchester Grammar, which took 300 pupils under the scheme, have had to either seek funding in the private sector or refuse entry to students whose families are unable to pay fees.41 As part of its corporate philanthropic philosophy, HSBC also donates 5p per transaction to the National Trust.42 Further, the company also supports the community through the encouragement of staff volunteer groups and "action days". Company volunteering schemes are believed to be a far more constructive and economical way of "bonding" colleagues than costly corporate "days out".43

ETHICS Sir John Bond, HSBC Chairman, believes that capitalism has to be practised with a conscience, but that human rights might be a relative concept. In an interview in December 1999 he said, in relation to China, that we “cannot expect a country whose average income per head is $750 to adopt the same approach to human rights as those whose average incomes are more than 20 times that. It is an `extraordinarily important event' that China is becoming a fully fledged member of the World Trade Organisation; but don't expect as fast a movement on democracy. That will follow from growing richer, but cannot anticipate it. The Chinese regime necessarily has a relative concept of human rights. It believes it is right for 1.2 billion people to be clothed and fed, and have a decent standard of living, before they move on to the sort of rights that are prevalent in a mature economy.”44 In support of ethical education, HSBC Holdings has made a donation of US$1million (£632,000) to Harvard University to establish the Edmond J Safra Fellowships in Ethics at the university's Centre for Ethics and the Professions. Mr Safra founded Republic New York bank, bought by HSBC for US$10 billion after his death. Mr Safra was a long-standing benefactor of Harvard, having endowed the Robert F Kennedy Professorship in honour of his father.45

DRAFT 11

HSBC Holdings plc – Shadow Report Environmental Report

ENVIRONMENTAL REPORT

ENVIRONMENTAL POLICY As a signatory to the Sullivan Principles (see Corporate Governance section) HSBC is committed to protect the environment and promote sustainable development. HSBC is also participating in a UN Environment Program (UNEP) scheme, which was launched nine years ago to encourage banks to consider environmental issues. Members commit themselves to a UNEP statement on sustainable development, and promise to integrate environmental considerations into their operations, asset management, and other business decisions, in all markets. The programme also commits the bank to incorporate into its management system “relevant developments in environmental management”. This is important, as environmental commitment in the financial services sector is reported to be low, with only 12% of financial institutions certified to ISO 14001, and 9% registered under EMAS. The core principles also commit the bank to communicating environmental information.46 However, the Ethical Consumer Research Association (ECRA) has noted that HSBC’s Environmental Policy Statement claims to abide by the environmental laws of the countries in which the company operates, but contains no specific performance data or targets. It is further noted that the company claims to support sustainable development as a basis of sound business management, but the policy statement does not mention any environmental screening policy for lending to new ventures.47 Further, Mr Michael Meacher, the environment minister, said in March 2000 that many leading businesses are using `voluntarism' as an excuse for doing nothing, and are failing to take environmental issues seriously. HBSC was amongst the companies named in his report.48

GLOBAL ENVIRONMENT HSBC has been one of the most vocal and ardent supporters of the UNEP (United Nations Environment Program) Initiative over a number of years. The bank is seeking to explore the opportunities available to it and its customers in promoting good environmental practice and good business. At a September, 1998, conference in Cambridge, the Executive Director of the United Nations Environment Programme (UNEP), Mr. Klaus Toepfer and the Rt. Hon. Michael Meacher, Minister of Environment, were among the keynote speakers addressing some 200 representatives of leading financial institutions from around the world. The meeting was held to discuss major environmental challenges of concern to the financial sector.49

This conference followed HSBC’s hosting of a meeting of Senior executives and experts from 80 Asian financial institutions for a two-day UNEP Round table on Finance and the Environment in December 1997. That meeting focused on the relevance of the environment for the financial services sector and topics discussed included credit risk management in the Asian Region, financing environmental investment in Asia, an Asian perspective of eco-efficiency, risk management tools for wholesale finance, and other issues.50

ANIMAL WELFARE REPORT No Data

DRAFT 12

HSBC Holdings plc – Shadow Report References

1 “HSBC signs up with Sullivan”, Ethical Performance, Volume 2 Issue 7, December 2000 2 http://tigger.stthomas.edu/mccr/SullivanPrinciples.htm 3 Finch, J and Gow, D “7-1 for the bosses against unions in honours” ,The Guardian, Business, 12 June 1999, p.26 4 Waples, J & Stretton, M, Sunday Times Business Section, 5 November 2000, p.13 5 Donkin, R, “Survey - FT director: Era of the understatement: PERKS, The Financial Times, 20 November 1998, p.6 6 Morais, R.C. “Bullterrier Banking”, Forbes, New York, Jul 24, 2000 pp.68-74 7 Morgan, O., “'One out, all out' fallout: American consultants and British lawyers are showing employers how to combat the drive for union recognition”, The Observer, Business, 4 June 2000, p.2 8 Ebbage, A., “Rise: Aim to be positive when appraisals come around”, The Guardian, 13 November 1999, p.5 9 Insley, J., “Cash: Careers on Trial: Nice work ... if you can afford it”, The Observer, Business, 7 May 2000, p.2 10 MacErlean, N., “You're fired ... in a caring sort of way”, The Observer, Business, 26 March 2000, p.18 11 Chaudhuri, A., “Working lives: The new boy network”, The Guardian, Features, 26 May 1999, p.6 12 MacErlean, N., “Who's left holding the babies?” The Observer, Business, 1 August 1999, p.16 13 Hilpern, K., “Office Hours: School holiday headache”, The Guardian, Features, 24 July 2000, p.2 14 Weekend Guardian, “Tots paying for tax on nurseries”, The Guardian, Features, 6 February 1999, p.6 15 Browne, A. & Salva, M., “Grey power is just the job”, The Observer, Business, 18 April 1999, p.3 16 Bennett, R., “New Deal plans for jobs in financial services”, The Financial Times, National News, 9 December 1999, p.3 (London Edition 2) 17 Pandya, N., “Working week: Disabled get their own employment network”, The Guardian, Features, 2 October 1999, p.25 18 Irvine, S., Dyson, J., & Featherstone, J., “Euromoney awards for excellence 1999: Asia”,

Euromoney, London, Issue 363, July 1999 pp.10-115 19 Capell, K & Clifford, M, “John Bond’s HSBC”, Business Week, New York; September 20, 1999, p.20 20 Elliott, L & Jones, R., “Banks face further cartel inquiry”, The Guardian, Business, 21 March 2000, p.25 21 Treanor, J., “Watchdog warns on service standards”, The Guardian, Business, 26 January 1999, p.18 22 Treanor, J., “Brown targets banks’ pounds 5bn rip-off”, The Guardian, Home News, 5 August 2000, p.2

DRAFT 13

HSBC Holdings plc – Shadow Report References

23 Treanor, J., “Brown's customer charter: Chancellor makes it harder for banks to rip off customers”, The Guardian, Business, 5 August 2000, p.20 24 Treanor, J., “Pity the poor beleaguered bankers: News analysis: Fear of new regulations forces lenders to act”, The Guardian, Business, 27 September 2000, p.26 25 Treanor, J., “Clearing banks fear end to their monopoly of small firm accounts”, The Guardian, Business, 22 November 1999, p.22 26 Treanor J., “Treasury wary as banks reward 'best' customers” The Guardian, Business, 14 July 2000, p.26 27 Anonymous, “HSBC plans tiered charges system”, Marketing Week, London, Volume 22 Issue 34, September 23, 1999, p.9 28 Treanor, J “Home News: How big banks pocket millions from the online rip-off”, The Guardian, 20 November 2000, p.3 29 Treanor, J., “Banks cave in on cash machine charges” The Guardian, Home News, 4 July 2000, p.1 30 Wilson, J., “Banks are profiting from cheque clearance delay”, The Guardian, Home News, 1 June 2000, p.11 31 Treanor, J., “HSBC profit forces City to think bigger”, The Guardian, Business, 1 August 2000, p.19 32Treanor , J., “HSBC delays telling all to bank inquiry”, The Guardian, Business, 3 August 1999, p.18 33 Brummer, A., “Crisis in East Timor: Economy: Loans to Jakarta test nerve of west”, The Guardian, Home News, 8 September 1999, p.4 34 Pike, A., “Leeds initiative aims to promote voluntary work”, The Financial Times, National News: Business in the Community (London Edition 2), 23 September 1999, Page 13 35 Elliott, L & Treanor, J., “High street bail-out saves Labour's universal bank”, The Guardian, Business, 21 December 2000, p.24 36 Business, “Post Office offers sweeter deal for universal bank players”, The Guardian, 25 October 2000, p.26 37 Kelso, P., “Disabled ex-soldier barred from paying in pounds 17,000”, The Guardian, Home News, 4 September 1999, p.9 38 Pallister, D. & Capella, P., “British banks set to freeze dictator's millions”, Home News, The Guardian, 8 July 2000, p.2 39 Pallister, D. “Pennies from heaven: Many of Nigeria's missing millions were laundered through greedy banks in London”, The Guardian, Comment & Analysis / Features, 7 September 2000, p.19 40 Capella, P., “Banks agree to end laundering: Eleven sign up to global guidelines”, The Guardian, Business, 31 October 2000, p.23 41 Targett, S., “Education reform risks widening the class divide: The end of the assisted places scheme will force schools to turn to families that can afford to pay fees”, The Financial Times, National News (London Edition 2), 4 May 1999, p.13 42 Wallis, V., “Your shopping can raise a trolley-load of cash for charity”, The Observer, Business, 23 July 2000, p.2 43 Dhingra, M., “Office Hours: Charity begins at work”, The Guardian, Features, 4 December 2000, p.5

DRAFT 14

HSBC Holdings plc – Shadow Report References

44 Hutton, W., “The Interview: Capitalist with a conscience”, The Observer, Business, 12 December 1999, p.6 45 Harris, C., “Gift for Harvard HSBC Holdings”, Financial Times, National News (London Ed2), 10 March 2000, p.4 46 “Banks struggle on environment in decision making”, The Ends Report No. 289, Environmental Data Services Ltd., London, February 1999, p.8 47 Research Supplement Banks and Building Societies, Ethical Consumer Part 60, Environment, HSBC Holdings PLC, ECRA, August /September 1999 48 Cowe, R., “Meacher shames green slackers”, The Guardian, Business, 2 March 2000, p.29 49 UNEP News Release, “Financial institutions meet to discuss environmental challenges”, re UNEP's Fourth International Roundtable Meeting on Finance and the Environment Cambridge UK, 17 to 18 September, issued 16 September 1998 50 UNEP, Press release. Bankers meet in Asia to discuss the Environment, Singapore, 4 December 1997 Taken from web site in January 2001

DRAFT 15