RBS 2009 Annual Report Download - page 216

RBS Group Annual Report and Accounts 2009214
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 2009, the company has
complied with all of the provisions of the Combined Code issued by the
Financial Reporting Council in June 2008 (the “Code”) except in the
following respects:
•First, 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.
•Secondly, during the period from 6 February 2009 to 1 June 2009,
the company did not have a senior independent director and from
6 February 2009 to 4 August 2009, the Remuneration Committee
comprised two independent non-executive directors and the
Chairman of the Board, not the three independent non-executive
directors required by the Code. Since the appointment of Sandy
Crombie as Senior Independent Director on 1 June 2009 and as a
member of the Remuneration Committee on 4 August 2009, at which
time the Chairman of the Board stepped down from the
Remuneration Committee, the company has been compliant with
both of these provisions of the Code.
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 company supports and has engaged fully with the review of
governance in banks and financial institutions undertaken by Sir David
Walker and has taken various steps, as described throughout this report
to implement the recommendations of the Walker review, details of
which can be found in the ‘Recent Publications’ section at
www.hm-treasury.gov.uk.
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 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 was a
member of the Remuneration Committee until 4 August 2009, both of
which are permitted by the Code (since the Chairman was considered
independent on appointment). The company’s Audit, Nominations, Risk
and Remuneration Committees are otherwise composed solely of non-
executive directors deemed by the Board to be independent. The NYSE
corporate governance listing standards also require that a
compensation committee has direct responsibility to review and approve
Group Chief Executive remuneration. As disclosed already, in the case
of the company, 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
corporate governance listing standards that relate to the composition,
responsibilities and operation of audit committees. In May 2009, 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 2009 is set out in the Audit Committee Report on pages 219
to 221.
Board of directors
The Board is the main decision-making forum for the company. It has
overall responsibility for management of the business and affairs of the
Group, the establishment of Group strategy and capital raising and
allocation, and is accountable to shareholders for financial and
operational performance. The Board considers strategic issues and
ensures the Group manages risk effectively through approving and
monitoring the Group’s risk appetite, considering Group stress
scenarios and agreed mitigants and identifying longer term strategic
threats to the Group’s business operations. The Board has 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 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.
At the beginning of the year, a number of Board meetings are
scheduled. For 2009, ten Board meetings were scheduled. The directors
were supplied with comprehensive papers in advance of each Board
meeting covering the Group’s principal business activities. The Group
Chief Executive provides a written report on business activities at each
Board meeting. Members of executive management attend and make
regular presentations at meetings of the Board. The Chairman and the
non-executives meet at least once per year without executives present.
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