RBS 2003 Annual Report Download - page 126

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Directors’ remuneration report continued
Directors’ remuneration report
US based director – Mr Lawrence Fish
Salary
Mr Fish’s salary is reviewed annually as part of his total
remuneration, having regard to levels of remuneration paid to
executives of comparable US companies and Mr Fish’s
performance.
Benefits
Mr Fish accrues pension benefits under a number of
arrangements in the US. Details are provided on page 131.
In addition, Mr Fish is entitled to receive other benefits on a
similar basis to other employees.
Short-term annual incentives
Mr Fish’s short-term performance rewards take the form of an
annual incentive plan which rewards the achievement of
Group, business unit and individual financial and non-financial
targets. In line with US market practice, the maximum annual
bonus potential is normally 200 per cent of salary, although
additional amounts to a maximum of an additional 200 per
cent of salary may be awarded, at the discretion of the Board,
for exceptional performance as measured by the achievement
of significant objectives.
Longer term incentives
Mr Fish currently participates in two long term incentive plans
established for executives of Citizens and may be eligible to
participate in the company’s long tem incentive plans. The
Remuneration Committee believes that it is appropriate to
include, as part of his total remuneration package, an element
of reward which is based on the value created in Citizens. It is
also necessary to ensure that Mr Fish’s total remuneration
package is competitive for the US market.
Citizens Long Term Incentive Plan
Mr Fish is eligible for an annual award under the Citizens Long
Term Incentive Plan, a cash compensation plan designed to
reward participants for achieving long-term financial results. A
separate three-year cycle commences each year. The
maximum award payable to him annually is 105 per cent of his
average salary over the previous three-year period. These
awards are not, in normal circumstances, payable until the
relevant three-year performance target has been met. Each
three-year performance target is based on the annual pre-tax
income target for Citizens. For the maximum award to be paid
in respect of each three-year target, Citizens must achieve 130
per cent of the three-year aggregate budgeted profit figure.
This performance target has been chosen because it focuses
on the profit targets of Citizens, which the Remuneration
Committee believes are challenging, and aligns Mr Fish’s
reward with the performance of Citizens. This performance
target is measured by taking the pre-tax income for Citizens,
which is a simple and transparent method of measuring a
profit figure target.
Citizens Phantom 2000 Plan
Mr Fish has received two annual grants of awards under the
Phantom 2000 Plan and, in line with the grant schedule put in
place when the plan was approved by shareholders in 2000,
no further awards will be made to him. Under this plan, units
are awarded which are a cash-based proxy for share options.
The value of the units at the time of vesting is performance-
linked and depends on a formula, based on the absolute
cumulative levels of economic profit generated by Citizens, the
trend in economic profit earnings, and on the external market
trends in the US banking sector, using the price/earnings ratios
of comparator banks. This performance target has been chosen
because it establishes a clear link between the level of potential
incentive and the performance of Citizens. It is designed to
provide competitive executive rewards in the US environment.
Mr Fish may, in normal circumstances, exercise the award only
between four and five years from the date of grant.