RBS 2004 Annual Report Download - page 128

126
Directors’ remuneration report
Directors’ remuneration report continued
US based director – Lawrence Fish
Lawrence Fish's total remuneration package was reviewed in
2004 by the Remuneration Committee as a result of the
acquisition of Charter One and his changing RBS
responsibilities in North America. In the review the
Remuneration Committee confirmed its overall policy in relation
to his package is to ensure competitiveness with the market
levels of total remuneration for chairmen and executives of US
banks of similar size and complexity.
As a result of that review, proposals will be submitted at the
annual general meeting to introduce a cash long term incentive
plan, which will replace the Citizens Phantom 2000 Plan in
which Mr Fish participated from 2001. Subject to agreement to
these proposals, the total remuneration policy for him will be as
follows:
Base salary will be set having regard to the levels of base
salary in other US banks and the appropriate balance of fixed
and variable remuneration for US based executives of UK
listed companies operating within the corporate governance
frameworks of the UK. In light of this policy, and having
reviewed the relevant market data, Mr Fish’s base salary was
increased to $1.5 million with effect from 1 October 2004.
Benefits Mr Fish accrues pension benefits under a number of
arrangements in the US. Details are provided on page 133. In
addition he is entitled to receive other benefits on a similar
basis to other Citizens employees.
Short term performance rewards will take the form of an
annual incentive plan which rewards the achievement of
Group, business unit and individual financial and non-financial
targets. The normal maximum annual bonus potential will be
two times salary, although additional amounts to a maximum of
two times salary may be awarded, at the discretion of the Board,
for exceptional performance as measured by the achievement
of significant objectives.
Long term incentives will consist of the following components:
•The two grants made under the Citizens Phantom 2000 Plan
vested and will vest on 1 January 2005 and 1 January 2006,
respectively. The value of units at the time of vesting is
performance-linked and is based on the cumulative
economic profit generated by Citizens, the trend in
economic profit and on the external market trends in the US
banking sector, using price/earnings ratios of comparator
US banks. This measure was chosen to establish a clear link
between the potential incentive and the performance of
Citizens. No other grants will be made under this plan.
•A grant under the RBS medium-term performance plan
within the levels, and on the same terms, available to UK
based executives.
•A grant under the executive share option scheme within the
levels, and on the same terms, available to UK based
executives.
•A grant under the new Citizens Long Term Incentive Plan.
Performance will be measured on a combination of Growth
in Profit before Tax and Relative Return on Equity based on a
comparison of Citizens with comparator US banks. The
targets for this plan will be set on an annual basis over the
three year term of the grant.
In the event that the proposed new Citizens Long Term Incentive
Plan is not approved, Mr Fish will participate in existing
approved short and long term cash plans already operating
in Citizens.
The existing approved Citizens Long Term Incentive Plan is 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
Mr Fish annually is 105 per cent of his average salary over the
previous three-year period. 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 is
measured by taking the pre-tax income for Citizens, which is a
simple and transparent method of measuring a profit figure target.