DOUGLAS Flint, the Scot who receives more than £2 million a year as chairman of HSBC, is underpaid, the bank's remuneration chief has said, as it faced a substantial shareholder rebellion on pay.

Mr Flint got a £1.5m salary plus a cash payment in lieu of a pension contribution of £750,000 last year.

The bank had proposed handing him shares worth another £2.25m but did a U-turn ahead of its annual shareholder meeting yesterday and agreed to cap his incentive at just in excess of £1m.

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HSBC's pay committee chairman Sir Simon Robertson told the meeting: "I think Douglas is underpaid frankly for what he does and he does an extremely good job."

Some shareholders are uncomfortable that Mr Flint is still part of HSBC's bonus arrangements despite stepping up from finance director to chairman a year ago, a role that usually merits a flat fee.

But HSBC argued that the unusual circumstances, which has seen a massive overhaul of the bank to cut costs and avoid a repeat of a money laundering scandal in Mexico, have led the Glaswegian banker to take on more onerous duties than expected.

But Louise Rouse, director of engagement at campaign group Share Action said: "We expect the non-executive directors of the bank to recognise that and act appropriately.

"Actually in this case several institutional shareholders recognised this and took action to ensure that the proposed package was more moderate.

"Why weren't the non-executive directors able to recognise this themselves?

"Why is the is the response of the remuneration committee chairman to say that the chairman is underpaid?"

Sir Simon said the change to Mr Flint's proposed package showed it had a strong relationship with investors.

"Our discussions with the major shareholders is exactly how the system should work" he said.

He warned that the bank's main assets are its staff and "people can walk away".

He told investors: "You would be the first to crucify me next year if key people moved out of this bank and we were left in a vulnerable position.

"I make no apology for what I am proposing."

Retired HSBC staff member David Howell said: "Why are us shareholders being asked to vote for another increase in senior executive remuneration?"

He called for the money to be diverted to dividends or reinvested in the business.

Private investor John Farmer asked Mr Flint: "Surely after having received all you have had from the bank you could stand back and moderate your greed?"

Sir Simon insisted that the bank pays less than key rivals.

"We pay way under what the American banks pay.

"We, as a bank, are in direct competition with JPMorgan and Citigroup."

Mr Flint warned the bank would be damaged if investors didn't back a policy to pay bonuses of more than 100 per cent of salary because many of HSBC's top profit generators are based outside the European Union which implemented the pay cap.

"We would lose the very significant competitive advantage we have built up over 150 years and our competitors would smile," he said.

Some shareholders showed they were still dissatisfied with HSBC's pay with 20.65 per cent voting against its remuneration policy for the next three years.

Its remuneration report won the backing of 83.95 per cent of those who cast a vote.

It won 98.01 per cent support to pay top bankers a bonus of greater than the EU's 100 per cent cap.

While most directors were elected with close to unanimous support, Sir Simon saw 10.57 per cent of investors oppose his re-election.

Mr Flint had 97.44 per cent support.

He said that the bank would consider publishing the pay ratio between HSBC's highest paid and average staff.

"We will look at whether we can do it and if we can do it whether we choose to disclose that."