RBS 2007 Annual Report Download - page 101

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RBS Group • Annual Report and Accounts 2007
Governance
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 2007, the company
has complied with all of the provisions of the revised
Combined Code issued by the Financial Reporting Council in
June 2006 (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 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 (the “Act”), specific
standards of corporate governance and business and financial
disclosures apply to companies with securities registered in
the US. The company complies with all applicable sections of
the Act.
The New York Stock Exchange
As a foreign issuer with American Depositary Shares (“ADS”)
representing ordinary shares, preference shares and debt
securities listed on the New York Stock Exchange (“NYSE”), the
company must disclose any significant ways in which its
corporate governance practices differ from those followed by
US companies under the NYSE’s corporate governance listing
standards. In addition, the company must comply fully with the
provisions of the listing standards that relate to the
composition, responsibilities and operation of audit
committees. These provisions incorporate the relevant rules
concerning audit committees of the US Securities Exchange
Act of 1934.
The company has reviewed its corporate governance
arrangements and is satisfied that these are consistent with the
NYSE’s corporate governance listing practices, with the
exception of the following. The Nominations Committee is
chaired by the Chairman of the Board, who may not be
currently considered independent under the UK Combined
Code, and the Chairman of the Board is a member of the
Remuneration Committee, both of which are permitted by the
UK Combined Code (since the Chairman was considered
independent on appointment). The company’s Audit,
Nomination and Remuneration Committees are otherwise
composed solely of non-executive directors deemed by the
Board to be independent. The NYSE’s corporate governance
listing standards also require that a compensation committee
has direct responsibility to review and approve Group Chief
Executive remuneration. The Board, rather than the
Remuneration Committee, reserves the authority to make the
final determination of the remuneration of the Group Chief
Executive, which is explained on page 101 in the paragraph
headed ‘Remuneration Committee’.
The Group Audit Committee complies with the provisions of the
NYSE’s corporate governance listing standards that relate to
the composition, responsibilities and operation of audit
committees. In May 2007, the company submitted its required
annual written affirmation to the NYSE confirming its full
compliance with those and other applicable provisions. In
addition, following the listing of ADS representing common
shares on the NYSE, an interim written affirmation was required
and was filed in October 2007. More detailed information about
the Audit Committee and its work during 2007 is set out in the
Audit Committee’s Report on pages 103 and 104.
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 by 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 the financial and risk management of the company.
Meetings of the Board are structured to allow open discussion.
There were nine scheduled Board meetings during 2007. The
directors were supplied with comprehensive papers in
advance of each Board meeting covering the Group’s principal
business activities. Members of executive management attend
and make regular presentations at meetings of the Board. In
addition to scheduled meetings, 20 ad hoc Board meetings
and Chairman’s Committee meetings were held during 2007 to
consider the acquisition of ABN AMRO. These meetings were
attended by the majority of directors.
The Board is aware of the other commitments of its directors
and is satisfied that these do not conflict with their duties as
directors of the company.
Board balance and independence
The Board currently comprises the Chairman, six executive
directors and ten non-executive directors (with effect from 1
May 2008, and the change in role of Larry Fish to non-
executive director of the company, the Board will comprise the
Chairman, five executive directors and eleven 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
individual.