RBS 2003 Annual Report Download - page 120

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The company is committed to high standards of corporate
governance, business integrity and professionalism in all its
activities.
Throughout the year ended 31 December 2003, the company
has complied with all of the provisions set out in section 1 of the
Combined Code issued by the London Stock Exchange in June
1998. In addition, the company has complied with the provisions
set out in the revised Combined Code issued by the Financial
Reporting Council in July 2003 (the ‘Code’) except in relation to:
•the requirement that at least half of the Board should
comprise independent non-executive directors, which is
explained below in the paragraph headed ‘Board balance
and independence.’
•the authority reserved to the Board to make the final
determination of the remuneration of the executive directors,
which is explained below in the paragraph headed
‘Remuneration Committee’.
Under the US Sarbanes-Oxley Act of 2002, enhanced standards
of corporate governance and business and financial disclosure
apply to companies, including the company, with securities
registered in the US. All changes necessary to comply with the
new standards have been implemented.
Board of directors
The Board is the principal decision making forum for the company.
It has overall responsibility for leading and controlling the company
and is accountable to shareholders for financial and operational
performance. The Board approves Group strategy and monitors
performance. The Board has adopted a formal schedule of
matters detailing key aspects of the company’s affairs reserved
to it for its decision. This schedule is reviewed annually.
The roles of the Chairman and Group Chief Executive are
distinct and separate, with a clear division of responsibilities.
The Chairman leads the Board and ensures the effective
engagement and contribution of all non-executive and executive
directors. The Group Chief Executive has responsibility for all
Group businesses and acts in accordance with the authority
delegated from the Board of directors. Responsibility for the
development of policy and strategy and operational
management is delegated to the Group Chief Executive and
other executive directors.
All directors participate in discussing strategy, performance
and financial and risk management of the company and
meetings of the Board are structured to allow open discussion.
The Board meets at least eight times each year. It is supplied
with comprehensive papers in advance of each Board meeting
including financial and business reports covering the Group’s
principal business activities. Members of the executive
management attend and make regular presentations at
meetings of the Board.
Board balance and independence
The Board currently comprises the Chairman, five executive
directors and 11 non-executive directors. The Board functions
effectively and efficiently and is considered to be of an
appropriate size in view of the scale of the company and the
diversity of its businesses. The directors provide the Group with
the knowledge, mix of skills, experience and networks of
contacts required. The Board Committees contain directors
with a variety of relevant skills and experience so that no
undue reliance is placed on any one individual.
The non-executive directors combine broad business and
commercial experience with independent and objective
judgement. The balance between non-executive and executive
directors enables the Board to provide clear and effective
leadership and maintain the highest standards of integrity
across the company’s business activities. The names and
biographies of all Board members are set out on page 113.
The Code requires the Board to determine whether its non-
executive members are independent. The Board considers that
all non-executive directors are independent for the purposes of
the Code, with the following exceptions:
•Mr Emilio Botin and Mr Juan Inciarte, who are
representatives of Santander Central Hispano S.A.
•Sir Angus Grossart and Sir Iain Vallance, who have served
on the Board for 18 and 11 years, respectively.
•Mr Iain Robertson who was formerly an executive director
of the company.
As a result, in terms of the Code, the Board comprises six
independent and 10 non-independent directors (including
executive directors), in addition to the Chairman.
The composition of the Board is subject to continuing review
and the provisions of the Code will be taken into account in
respect of the balance of the Board. It is the Board’s intention
to have a majority of independent directors. Sir Angus Grossart
and Sir Iain Vallance have agreed to offer themselves for re-
election at the company’s annual general meeting on 29 April
2004. However, they have indicated that they would not wish to
submit themselves for re-election in April 2005.
Mr Bob Scott has been nominated as the senior independent
director and would be consulted when necessary on the
concerns of shareholders.
Re-election of directors
At each annual general meeting, one third of the directors will
retire and offer themselves for re-election and each director
must stand for re-election at least once every three years. Any
non-executive directors who have served for more than nine
years will also stand for annual re-election. The proposed re-
election of directors is subject to prior review by the Board.
Corporate governance
Corporate governance