RBS 2006 Annual Report Download - page 110
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RBS Group • Annual Report and Accounts 2006
Governance
Performance evaluation
The Board has undertaken a formal and rigorous annual
evaluation of its own performance and that of its committees
and individual directors.
The performance evaluation of the operation and effectiveness
of the Board, the Remuneration Committee and the Nominations
Committee was undertaken in the autumn of 2006. This was
conducted internally using a detailed questionnaire and individual
meetings with each director. Amongst the areas reviewed were
the role of the Board, Board composition, Board meetings and
processes, Board performance and reporting, external
relationships and Board Committees. A separate performance
evaluation of the Audit Committee was also undertaken internally
in late 2006 using a detailed questionnaire and meetings with
Audit Committee members and attendees.
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 a separate report
on the outcomes of the evaluation of the Audit Committee was
also considered and discussed by the Board. Careful
consideration was given by all directors to the composition of
the Board to assist the Nominations Committee in its future
planning. The Board also considered the range and balance of
its activities and was content that it was allocating appropriate
time to such key matters as monitoring business performance,
risk appetite and strategy.
Taking into account their review and deliberations the directors
have concluded that the Board is effective in meeting its
objectives and fulfilling its duties and obligations. The directors
are also satisfied that each of the Board’s Committees (Audit,
Remuneration and Nominations) carries out its delegated
duties effectively.
In addition, each director discussed his or her own performance
as a director and their Board evaluation with the Chairman. The
senior independent director canvassed the views of the executive
directors and met with the non-executive directors as a group
without the Chairman present to consider the Chairman’s
performance. The Board is satisfied that each director continues
to contribute effectively to the Board and the Group and
demonstrates commitment to his or her role as a director.
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
pages 102 and 103.
The terms of reference of the Audit, Remuneration and
Nominations Committees and the standard terms and
conditions of appointment of non-executive directors are
available on the Group’s website (www.rbs.com) and copies
are available on request.
Audit Committee
All members of the Audit Committee are independent non-
executive directors. The Audit Committee holds at least five
meetings each year. The Audit Committee’s report is set out
on pages 112 and 113.
Remuneration Committee
The members of the Remuneration Committee comprise
independent non-executive directors together with the
Chairman of the Board. In June 2006, the FRC issued a
revised Combined Code (the “revised Code”) which applies to
reporting years beginning on or after 1 November 2006. The
company has adopted provision B.2.1. of the revised Code
early and appointed the Chairman of the Board as a member
of the Remuneration Committee as the company considers him
to have been independent on appointment as Chairman. In
that regard the provisions of the Code have not been complied
with. The Remuneration Committee holds at least three
meetings each year.
The Remuneration Committee is responsible for assisting the
Board in discharging its responsibilities and making all relevant
disclosures in relation to the formulation and review of the
Group’s executive remuneration policy. The Remuneration
Committee makes recommendations to the Board on the
remuneration arrangements for the executive directors and the
Chairman. The Directors’ Remuneration Report is contained
on pages 114 to 124.
Responsibility for determining the remuneration of executive
directors has not been delegated to the Remuneration
Committee, and in that sense the provisions of the Code have
not been complied with. The Board as a whole reserves the
authority to make the final determination of the remuneration of
directors as it considers that this two stage process allows
greater consideration and evaluation and is consistent with the
unitary nature of the Board. No director is involved in decisions
regarding his or her own remuneration.
Nominations Committee
The Nominations Committee comprises independent non-
executive directors, under the chairmanship of the Chairman of
the Board. The Nominations Committee meets as required.
The Nominations Committee is responsible for assisting the Board
in the formal selection and appointment of directors. It considers
potential candidates and recommends appointments of new
directors to the Board. The appointments are based on merit and
against objective criteria, including the time available to, and the
commitment which will be required of, the potential director.
In addition, the Nominations Committee considers succession
planning for the Chairman, Group Chief Executive and non-
executive directors. The Nominations Committee takes into
account the knowledge, mix of skills, experience and networks
of contacts which are anticipated to be needed on the Board
in the future. The Chairman, Group Chief Executive and non-
executive directors meet to consider executive succession
planning. No director is involved in decisions regarding his or
her own succession.