RBS 2004 Annual Report Download - page 122

120
Corporate governance
The company is committed to high standards of corporate
governance, business integrity and professionalism in all its
activities.
Throughout the year ended 31 December 2004, the company
has complied with all of 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 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’.
The company has also complied with the Smith Guidance on
Audit Committees in all material respects.
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. The Group complies with all sections of
the Sarbanes-Oxley Act of 2002 currently applicable.
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. 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 met 10 times during 2004 and was supplied with
comprehensive papers in advance of each Board meeting
covering the Group’s principal business activities. Members of
the executive management attend and make regular
presentations as appropriate at meetings of the Board.
Board balance and independence
The Board currently comprises the Chairman, four executive
directors and 12 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 115.
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. The Code requires the
Board to determine whether its non-executive members are
independent.
Following the annual general meeting in April 2005 when Sir
Angus Grossart, Lord Vallance and Iain Robertson will stand
down from the Board, the Board will comprise eight
independent and five non-independent directors (including
executive directors), in addition to the Chairman. Bob Scott
has been nominated as the senior independent director.
The Board considers that all non-executive directors are
independent for the purposes of the Code, with the following
exceptions:
•Sir Angus Grossart and Lord Vallance, who have served on
the Board for 19 and 12 years, respectively.
•Iain Robertson who was formerly an executive director
of the company.
•Bud Koch who was formerly Chairman, President and Chief
Executive Officer of Charter One Financial, Inc. which was
acquired by Citizens Financial Group, Inc.
As a result, in terms of the Code, the Board currently comprises
eight independent and eight non-independent directors
(including executive directors), in addition to the Chairman.
Re-election of directors
At each annual general meeting, one third of the directors
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 and the Board may
consider their independence at that time. The proposed re-
election of directors is subject to prior review by the Board.
The names of directors standing for re-election at the 2005
annual general meeting are contained on page 117 and further
information will be given in the Chairman’s letter to shareholders
in relation to the company’s annual general meeting.
Corporate governance