RBS 2004 Annual Report Download - page 123

section
02
121
Annual Report and Accounts 2004
Corporate governance
Governance
Information, induction and professional development
All directors receive accurate, timely and clear information on
all relevant matters. Any requests for further information or
clarification are dealt with or co-ordinated by the Group
Secretary.
The Group Secretary is responsible for advising the Board,
through the Chairman, on all governance matters. All directors
have access to the advice and services of the Group
Secretary who is responsible to the Board for ensuring that
Board procedures are followed and that applicable rules and
regulations are complied with. In addition, all directors are
able, if necessary, to obtain independent professional advice
at the company’s expense.
Each new director receives a formal induction, including visits
to all the Group’s major businesses and meetings with senior
management. The induction is tailored to the director’s specific
requirements. Existing directors undertake such professional
development as they consider necessary in assisting them to
carry out their duties as directors.
Performance evaluation
The annual performance evaluation of the Board and its
Committees was undertaken in the autumn of 2004. The
evaluation, which focused particularly on the Board Committees,
was conducted by the Group Secretary using a detailed
questionnaire and meetings with each of the Board Committee
members and attendees to discuss the performance of the
Committees.
In addition, each director discussed his or her own performance
with the Chairman and the senior independent director met
individually with the executive directors and with the non-
executive directors as a group without the Chairman present,
to consider the Chairman’s performance. The report on the
Board evaluation, which was designed to assist the Board in
further improving its performance, was considered and
discussed by the Board as a whole and specific actions are
currently being implemented. A performance evaluation is
conducted on an annual basis.
Board Committees
In order to provide effective oversight and leadership, the
Board has established a number of Board Committees
with particular responsibilities. The Committee chairmanship
and membership are reviewed on a regular basis. The names
and biographies of all Board Committee members are set out
on page 115.
Audit Committee
All members of the Audit Committee are independent non-
executive directors. The Audit Committee has five meetings
each year, two of which are held immediately prior to
submission of the interim and year-end financial statements to
the Group Board. The Audit Committee meets executive
directors and management and the external and internal
auditors privately.
The Board is satisfied that the Audit Committee members have
recent and relevant financial experience. Although the Board
has determined that each member of the Audit Committee is
an ‘Audit Committee Financial Expert’ as defined in the SEC
rules under the US Securities Exchange Act of 1934, the
members of the Audit Committee are selected with a view to
the expertise and experience of the Audit Committee as a
whole, and the Audit Committee reports to the Board as a
single entity. The designation of a director or directors as an
‘Audit Committee Financial Expert’ does not impose on any
such director any duties, obligations or liability that are greater
than the duties, obligations and liability imposed on such
director as a member of the Audit Committee and Board in the
absence of such a designation. Nor does the designation of a
director as an ‘Audit Committee Financial Expert’ affect the
duties, obligations or liability of any other member of the Board.
The Audit Committee is responsible for assisting the Board in
discharging its responsibilities and making all relevant
disclosures in relation to the financial affairs of the Group, the
arrangements for accounting and financial reporting and
regulatory compliance, the standards of internal control, and
arrangements for internal audit, risk management and the
external auditors.
The Audit Committee has a policy on the engagement of the
external auditors to supply audit and non-audit services, which
takes into account relevant legislation regarding the provision
of such services by an external audit firm. Details of the audit
and non-audit services carried out by the external auditors are
set out in Note 4 to the Group’s accounts. This policy is
reviewed annually by the Audit Committee. In addition, the
Audit Committee reviews and monitors the independence and
objectivity of the external auditors when it approves non-audit
work to be carried out by them, taking into consideration
relevant legislation and ethical guidance. A detailed submission
is also made by management to the Audit Committee prior to
certain appointments. The submission contains, in particular,
details as to why the proposed appointment would not breach
auditor independence.
The Audit Committee also undertakes an annual evaluation
to assess the independence and objectivity of the external
auditors and the effectiveness of the audit process, taking
into consideration relevant professional and regulatory
requirements. The results of the evaluation were reported
to the Board.
The Audit Committee will make recommendations to the Board
in relation to the remuneration and terms of engagement of the
external auditors and the re-appointment by the shareholders
at the annual general meeting in April 2005 of Deloitte &
Touche LLP as the external auditors.
In 2004, the Audit Committee commissioned KPMG to conduct
an external review of the effectiveness of Group Internal Audit.
It is intended that there will be an external review of Group
Internal Audit every three years with internal reviews continuing
in the intervening years.