RBS 2004 Annual Report Download - page 130

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Directors’ remuneration report
Directors’ remuneration report continued
Information regarding executive directors’ service contracts is summarised in the table and notes below.
Date of current contract/ Notice period – Notice period –
Name Employing company Normal retirement age from company from executive
Sir Fred Goodwin 1 August 1998 60 12 months 6 months
The Royal Bank of Scotland plc
Mr McLuskie* 9 October 1997 60 3 months 3 months
The Royal Bank of Scotland plc
Mr Pell 22 May 2002 60 12 months 6 months
National Westminster Bank Plc
Mr Watt 28 September 2000 60 12 months 6 months
The Royal Bank of Scotland plc
Mr Fish 18 February 2004 65 12 months 12 months
Citizens Financial Group, Inc.
* retired 23 August 2004
Except as noted below, in the event of severance of contract
where any contractual notice period is not worked, the
employing company may pay a sum to the executive in lieu of
this period of notice. Any such payment would, at maximum,
comprise base salary and a cash value in respect of fixed
benefits (including pension plan contributions). In the event of
situations involving breach of the employing company’s
policies resulting in dismissal, reduced or no payments may be
made to the executive. Depending on the circumstances of the
termination of employment, the executive may be entitled, or
the Remuneration Committee may exercise its discretion to
allow, the executive to exercise outstanding awards under long-
term incentive arrangements. Exceptions to these severance
arrangements are as follows:
•Gordon Pell was recruited to the board of NatWest from
Lloyds Bank plc at a time when NatWest was subject to a
contested takeover. His recruitment to take management
responsibility for NatWest’s retail operations was seen by the
NatWest board at the time as an essential step to strengthen
the management of NatWest. The terms of his service
contract, which reflected these circumstances, were entered
into after consultation with the Takeover Panel as required by
The City Code on Takeovers and Mergers. If Mr Pell’s
contract is terminated by NatWest without notice, he is
entitled to a compensation payment of base salary relating
to the contractual 12 months’ notice period, his annual
bonus to the date of termination, a payment equal to his
average annual bonus over the previous three years,
payment in lieu of contractual benefits and allowances
including pension and extra payments by way of funded or
unfunded pension and death in service contributions relating
to the notice period.
The Remuneration Committee has reviewed, with the benefit
of legal advice, Mr Pell’s contract, and the circumstances
under which it was entered into. As the exceptional
severance provisions would apply only if NatWest were to
breach the contract by terminating it without notice, the
Committee considers that the contract’s terms, entered into
in good faith by the NatWest board and Mr Pell, should be
honoured.
•If Lawrence Fish's contract is terminated without cause, or if
he terminates the contract for good reason (as defined in the
contract), he is entitled to a lump sum payment to
compensate him for the loss of 12 months salary plus
annual bonus. Mr Fish would also be entitled to receive for
this period health, life insurance and long term disability
coverage and any other benefits determined in accordance
with the plans, policies and practices of Citizens at the time
of termination. The Remuneration Committee have been
advised that these termination provisions are less generous
than the current market practice in the US.