RBS 2003 Annual Report Download - page 124

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Directors’ remuneration report
Directors’ remuneration report
The Remuneration Committee
The following directors, all of whom are independent non-
executive directors, were members of the Remuneration
Committee during the year ended 31 December 2003.
Bob Scott (Chairman)
Colin Buchan (from 29 October 2003)
Jim Currie
Eileen Mackay
Bill Wilson (deceased 25 December 2003)
During the accounting period, the Remuneration Committee
confirmed the appointment of Ernst & Young and appointed
Mercer Human Resource Consulting to provide advice on
matters relating to directors’ remuneration in the UK and US
respectively. In addition, the Remuneration Committee has
taken account of the views of the Chairman and the Group
Chief Executive on performance assessment.
In addition to advising the Remuneration Committee, Ernst &
Young provided professional services in the ordinary course of
business including actuarial and corporate recovery advice.
Mercer Human Resource Consulting provided advice in
connection with a range of healthcare, actuarial and
investment matters.
Remuneration policy
The executive remuneration policy is kept under review by the
Remuneration Committee and is set out below. There have
been no material changes to the policy which was approved by
shareholders at the company’s annual general meeting in 2003.
The objective of the executive remuneration policy is to
provide, in the context of the company’s business strategy,
remuneration in form and amount which will attract, motivate
and retain high calibre executives. In order to achieve this
objective, the policy is framed around the following core
principles:
•Total rewards will be set at levels that are competitive within
the relevant market, taking each executive director’s
remuneration package as a whole.
•Total potential rewards will be earned through achievement
of demanding performance targets based on measures
consistent with shareholder interests over the short, medium
and longer-term.
•Remuneration arrangements will strike an appropriate
balance between fixed and performance related rewards.
Performance related elements will comprise the major part
of executive remuneration packages.
•Incentive plans and performance metrics will be structured
to be robust through the business cycle.
•Remuneration arrangements will be designed to support the
company’s business strategy, to promote appropriate
teamwork and to conform to best practice standards.
The non-executive directors’ fees are reviewed annually by the
Board, on the recommendation of the Chairman. The level of
remuneration reflects the responsibility and time commitment of
directors and the level of fees paid to non-executive directors
of comparable major UK companies. Non-executive directors
do not participate in any incentive or performance plan.
The Remuneration Committee approves the remuneration
arrangements of senior executives below Board level who are
members of the Group Executive Management Committee,
on the recommendation of the Group Chief Executive, and
reviews all long-term incentive arrangements which are
operated by the Group.
Components of executive remuneration
UK based directors
Salary
Salaries are reviewed annually as part of total remuneration,
having regard to remuneration packages received by executives
of comparable companies. The Remuneration Committee uses
a range of survey data from remuneration consultants and
reaches individual salary decisions taking account of the
remuneration environment and the performance and
responsibilities of the individual director.
Benefits
UK-based executive directors are eligible to participate in The
Royal Bank of Scotland Group Pension Fund (‘the RBS Fund’).
The RBS Fund is a non-contributory defined benefit fund which
provides pensions and other benefits within Inland Revenue
limits. Certain directors receive additional pension and life
assurance benefits in excess of Inland Revenue limits. Details
of pension arrangements of directors are shown on page 131.
Executives directors are eligible to receive a choice of various
employee benefits or a cash equivalent, on a similar basis to
other employees. In addition, like other employees, executive
directors are eligible also to participate in Sharesave, Buy As
You Earn and the Group profit sharing scheme, which currently
pays up to 10 per cent of salaries, depending on the Group’s
performance. These schemes are not subject to performance
conditions since they are operated on an all-employee basis.
Executive directors also receive death in service benefits.
Short-term annual incentives
This typically focuses from year to year on the delivery of a
combination of appropriate Group and individual financial and
operational targets approved by the Remuneration Committee.
Individual UK-based executive directors normally have a
maximum annual bonus potential of 100 per cent of salary