RBS 2008 Annual Report Download - page 154

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Corporate governance
RBS Group Annual Report and Accounts 2008
The company is committed to high standards of corporate governance,
business integrity and professionalism in all its activities.
Throughout the year ended 31 December 2008, the company has
complied with all of the provisions of the Combined Code issued by the
Financial Reporting Council in June 2006 (the “Code”) except in relation
to the provision that the Remuneration Committee should have
delegated responsibility for setting remuneration for the Chairman and
executive directors. The company considers that this is a matter which
should rightly be reserved for the Board. No director is involved in
decisions regarding his or her own remuneration.
During the period following the changes to the Board on 6 February
2009 to the date of this Report and Accounts, the company has not had
a senior independent director and the Remuneration Committee has
comprised two independent non-executive directors and the Chairman
of the Board, not the three independent non-executive directors
required by the Code. The Board is in the process of recruiting three
additional independent non-executive directors and plans to appoint a
senior independent director and an additional member of the
Remuneration Committee as part of the recruitment process.
The company has also complied with the Financial Reporting Council
Guidance on Audit Committees issued in October 2008 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 that the Chairman of
the Board is Chairman of the Nominations Committee and 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.
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 June 2008, the
company submitted its required annual written affirmation to the NYSE
confirming its full compliance with those and other applicable
provisions. More detailed information about the Audit Committee and its
work during 2008 is set out in the Audit Committee Report on pages
157 and 158.
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
executive and non-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 2008. 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, a number of
ad hoc Board meetings and Chairman’s Committee meetings were held
during 2008. These meetings were attended by the majority of directors.
The Board is aware of the other commitments of its directors and has
established procedures for ensuring that the Board’s powers for
authorising directors’ conflicts of interest are being operated effectively.
With effect from 1 October 2008, the Companies Act 2006 introduced a
statutory duty on directors to avoid conflicts of interest. Since that date,
the Board has considered, and where appropriate authorised, any
actual or potential conflicts of interests that directors may have.