* Plans cap on maximum bonus, share awards to 10 times pay
* Shareholder Standard Life gives backing to proposals
(Adds details, background)
LONDON, April 15 (Reuters) - HSBC plans a shake-up of its controversial remuneration policy to prevent a repeat of the stinging investor protests on executive pay that marred its annual investor meeting in 2010.
Europe's largest bank has invited shareholders to vote on proposals that would limit long-term incentive plan share payouts to six times basic salary, from seven times.
The plan also makes it harder for employees to cash in quickly on rewards, prolonging the vesting period for share awards from three to five years and crucially making staff hold onto these shares until they retire or leave the bank.
"We believe these proposals will lead the way on better alignment of employee incentivisation with strategy and long-term sustainable value creation for shareholders," HSBC said in a statement on Friday.
The share plan changes are part of a broader pay revamp that caps employees' total payouts, made up of a bonus and long-term incentive share awards, at 10 times salary, from 12.
Awards can also be clawed back, in line with regulatory requirements on pay being imposed across Europe.
Although HSBC is lowering the cap on bonuses from four to three times salary, its criteria for awarding these has not changed and it has no plans to impose a limit on salary levels.
But the bank proposes changing the way it measures rewards under the long-term incentive plan, with a revamped scorecard system to be used in the run-up to an award actually being granted rather than in the years before it vests.
The scorecard measures include some financial criteria, such as return on equity and capital strength, and non-financial ones, including compliance and reputation.
Guy Jubb, head of Governance & Stewardship at UK funds firm Standard Life Investments, one of HSBC's fiercest critics on pay in recent years, swiftly welcomed the proposals and said they deserved support from other long-term investors.
"It demonstrates that HSBC has taken to heart the lessons from the banking crisis and provides a platform to reward and incentivise prudential and profitable growth," Jubb said.
Another resolution to be voted on at HSBC's annual general meeting on May 27 includes increasing fees for non-executive directors to 95,000 pounds ($155,400) a year from 65,000 pounds.
HSBC's proposed changes comes a day after shareholders in BP challenged its remuneration report at its first annual meeting since the Gulf of Mexico oil spill.
Some 11 percent of voting shareholders rejected its pay plans, while a quarter of investors -- representing 60 percent of company shares -- voted against the re-election of Safety Committee Chair Brian Castell.
But the banking industry remains one of the key targets for anger over pay, both from shareholders and from the wider public in the wake of the financial crisis.
Barclays is bracing for a showdown with investors at its meeting later this month after shareholder advisory group PIRC urged investors to oppose its "overly complex" pay plans.
Banks across Europe, meanwhile, are now subject to much stricter rules on bonus payouts, limiting the amount of upfront cash bankers can receive and increasing the deferred portions of the awards. (Reporting by Sinead Cruise and Sarah White, additional reporting by Tommy Wilkes, editing by Jane Merriman and Will Waterman) ($1=.6111 Pound)