Business, Innovation and Skills CommitteeWritten evidence submitted by Standard Chartered Bank

1. We are pleased to submit our response to the Business, Innovation and Skills Committee call for evidence entitled The Kay Review of UK Equity Markets and Long-Term Decision Making. This submission is focused on Kay Review recommendations 3, 5, 15 and 17 as this where we believe we can add most value.

2. By way of background, Standard Chartered is a leading international bank, listed on the London and Hong Kong stock exchanges and is also listed in India (through the issue of Indian Depositary Receipts). It has operated for over 150 years in some of the world’s most dynamic markets and earns around 90% of its income and profits in Asia, Africa and the Middle East.

Executive Summary

3. As a major international bank with dual primary listings, it is our duty to deliver long term value to our shareholders. Standard Chartered’s brand promise is “Here for good” which is a long term promise to our clients, customers and shareholders. As a well functioning board we will always strive to focus on the long term growth of the company while being mindful of the near term return factors and will seek to achieve right balance.

4. We believe that our investors have a good understanding of our strategy and long term focus. This is achieved by the significant commitment Standard Chartered demonstrates in engaging with our investors. We engage with our investors frequently, through forums such as the annual Chairman’s governance dinner, analyst trips in various jurisdictions, twice yearly results presentations, and multiple meeting with our investors (further details are provided in Appendix 1 (section 3). We have a strong Investor Relations team of 10 who exist solely to communicate and build relationships with investors. We believe the Annual General Meeting provides a good forum for challenge and encourage shareholder attendance and engagement. Therefore any new rules regarding Investor Forums would need to be carefully constructed to ensure that it is complementary to the existing and highly successful Investor Relations engagement. It would not be feasible for all shareholders to be represented on this Forum. Different types of shareholders have different needs and therefore careful thought would need to be given into how membership is defined and controlled while adhering to the principle that all shareholders (within the Forum or not) should have the same access to company information and share the same rights.

5. Director’s remuneration is a key topic and Standard Chartered has actively contributed to various consultations during 2012. Much has been achieved within the past few years with many financial services companies having implemented sensible levels of deferral in their remuneration policies. We understand the sentiment of what the Kay Review is intending but need to understand the unintended consequences. Please see Appendix 1 (section 5) for further details.

6. We agree that it is desirable for individual investors to hold shares directly on an electronic register. To achieve this, it is important to ensure that the chosen model for dematerialisation preserves the advantages of the current UK model. This includes direct ownership rights, transparency for issuers in relation to who owns their shares, the choice for shareholders regarding ownership arrangements (via an intermediary or directly on the register) and a continued ability for retail shareholders to trade on a “real-time” basis.

7. We hope that you find our response useful in your deliberations and would welcome having a continued dialogue in relation to this. In the meantime, please do not hesitate to contact me if there is any additional information you require.

Annemarie Durbin
Group Company Secretary

25 January 2013

APPENDIX 1

RESPONSES TO CALL FOR EVIDENCE

(3) An investors’ forum should be established to facilitate collective engagement by investors in UK companies

3.1 Standard Chartered PLC (the “Company”) proactively engages in ongoing dialogue with shareholders and we find that, in general, shareholders are very receptive to this approach. Dialogue occurs both informally and in scheduled forums as well as in relation to major corporate actions such as the 2009 appointment of our current Chairman, the 2010 listing in India and the 2010 rights issue. We maintain a dynamic shareholder engagement plan in relation to our investors. Senior management typically meet individually with our top 25 investors annually. On a biennial basis, we organise a trip to two or three core markets in which we operate. During these visits investors have an opportunity to meet local management and get a detailed understanding of how the Company operates the business on the ground. This is particularly important given that a large portion of our register is represented by UK or US investors who do not normally have the opportunity to see the Company operating on a day to day basis, and the fact that over 90% of our revenue and profits are generated outside the UK in our key markets of Asia, Africa and the Middle East. We are in regular contact with our investors at conferences, on roadshows, in one-to-one and group meetings or dinners, on reverse roadshows and we regularly respond to investor requests for information. We have a strong Investor Relations team of 10 who exist solely to communicate and build relationships with investors and we periodically conduct an investor perception study to gauge investors’ views on Standard Chartered. In 2012 the Investor Relations team hosted a series of presentations focusing on our Asia businesses, Consumer Banking, Wholesale Banking and Group perspectives in China as part of the biennial Investor Trip last November. The event spanned over three days with presentations from senior management covering the scale of business opportunities in our key footprint markets, our progress so far and our plans for the future. Materials from the event are readily available on the IR website for the broader investment community.

3.2 We believe strongly that it is important to engage our shareholders in relation to our corporate governance practices as well as in relation to the investment proposition we offer. In addition to the investor meetings described above where we often talk through governance issues, annually the Chairman hosts a Governance dinner where investors are invited to join an open dialogue on our governance and management structure. The Chairman, the Chair of the Remuneration Committee, and the Group Company Secretary also meet individually with shareholder representative bodies (such as the ABI) as well as individual shareholders to discuss key governance issues. Furthermore, we participate in a broad range of industry conferences and other investor events to ensure all investors seeking access to the Company have plenty of opportunities to engage with us. The Chairman, Group Chief Executive, Group Finance Director and other members of the senior management team are regularly present at these investor events.

3.3 Standard Chartered’s shareholder base consists of 28,000 shareholders on the UK register, 32,000 on the Indian register and 3,000 on the Hong Kong register. A large portion of these shareholders are small institutional and retail shareholders. We therefore believe strongly that minority shareholders should have access to information on the Group and be able to fully exercise their shareholder rights. The AGM has historically been the main forum for retail shareholders to meet the Directors of the Company, probe them on any issues and ask questions. Standard Chartered has always believed that the AGM is a key event and believes companies should continue to make it accessible to retail shareholders. Due to the international nature of our register we also offer an audio webcast of the AGM which can be accessed by all shareholders. Questions can be sent into the Company through a dedicated AGM email if shareholders are unable to attend and ask questions in person. Our Directors take shareholder engagement seriously which is evidenced by the fact that they ensure that they are available to “mingle” with shareholders after the AGM during refreshments. We have received feedback from shareholders that they really appreciate this gesture and time spent with Directors.

3.4 We therefore believe that any new rules regarding Investor Forum membership, meetings, engagement, communication, reporting and rights would need to be carefully constructed to ensure that it is complementary to existing investor communication methods and does not replace the existing and highly successful Investor Relations activity. It would not be feasible for all shareholders to be represented on this Forum. Different types of shareholders have different needs and therefore careful thought would need to be given into how membership is defined and controlled while adhering to the principle that all shareholders (within the Forum or not) should have the same access to company information and share the same rights.

(5) Companies should consult their major long-term investors over major board appointments

5.1 Standard Chartered does consult its major shareholders regarding major board appointments and believes that this practice represents good governance. One example of this was the 2006 appointment of Lord Davies as the chairman of Standard Chartered. Lord Davies had been an employee of the group for 15 years and held the role of group chief executive for the five years prior to his appointment as chairman. This appointment did not comply with the UK Code “comply or explain” principle that a CEO should not move into a chairman role for the same company.

However, we engaged with our institutional shareholders to understand their perspectives and to explain why we believed that this appointment was, given all the circumstances, in shareholders’ best interests. It was hugely beneficial to have stability of leadership between Lord Davies and Peter Sands (who moved to the group chief executive role) throughout the extreme turmoil in the banking sector during 2007 and 2008. Responding to institutional investor feedback, we did appoint a new independent deputy chairman at this time. This decision has also proven to be in shareholders’ long term interests as it enabled the board to continue to perform effectively in 2009, despite Lord Davies stepping down to take a UK Government appointment. Looking back, this situation was a particularly good example of how “comply or explain” increases focus on the rationale and mitigation of corporate governance concerns; whereas a more arbitrary rule based system could result in company actions that do not benefit shareholders.

(15) Companies should structure directors’ remuneration to relate incentives to sustainable long-term business performance. Long-term performance incentives should be provided only in the form of company shares to be held at least until after the executive has retired from the business

15.1 Arguably the aims of Kay Review can and are already being achieved by sensible levels of deferral which can now be seen in many financial services companies. Many organisations already have shareholding guidelines in place. Deloitte’s September 2012 remuneration study showed that most FTSE100 CEOs held 5x base salary in shares. Whilst understanding the sentiment expressed by the Kay Review, we suggest that care needs to be taken to avoid unintended consequences. For example, making executives retain shares could in effect encourage the wrong behaviours like incentivising them to leave the organisation to realise value from their locked in holdings. Alternatively executives nearing retirement could be tempted to take actions designed to drive up the share price in the short term.

15.2 It should also be noted that any reforms could create an uneven playing field. European banks could be at a competitive disadvantage if forced to adhere to EU/FSA/BIS rules globally irrespective of the location of executives. Standard Chartered competes for talent against local banks in Asia, Africa and the Middle East which do not have such constraints. There are also taxation (and securities) issues in many overseas jurisdictions in relation to equity ownership. For example executives may need to dispose of shares to pay for relevant taxes when share awards vest and/or are exercised and potentially subsequently when physical shares are held.

(17) The Government should explore the most cost effective means for individual investors to hold shares directly on an electronic register

17.1 We note the recent Proposal for European regulation on improving securities settlement in the European Union and on Central Securities Depositaries (the “CSD Regulation”). We welcome the goals of the CSD Regulation in harmonising the regulation of CSDs and improving settlement efficiency across Europe, but are mindful to ensure this is not achieved across the wider European Union at the expense of retrograde steps for issuers or their shareholders here in the UK.

17.2 It is evident from Article 3(1) of the draft CSD Regulation that mandatory dematerialisation of securities will be introduced. We are aware of the benefits that a properly designed and implemented system of dematerialisation can deliver for the UK market; a move which we believe could meet this recommendation 17 of the Kay review. However, in moving to dematerialisation it is important to preserve the advantages of the current UK model, including direct ownership rights, transparency for issuers in relation to who owns their shares, the choice for shareholders regarding ownership arrangements (via an intermediary or directly on the register) and a continued ability for retail shareholders to trade on a “real-time” basis.

17.3 We understand that certain market participants, including the share registrars, are drawing up detailed proposals for how dematerialisation might best be delivered for the UK market and we are broadly supportive of their approach.

Prepared 24th July 2013