RBS 2009 Annual Report Download - page 217

215RBS Group Annual Report and Accounts 2009
Governance
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. The
Walker review recommends that the Chairman should be expected to
commit a proportion of his time, probably not less than two thirds, to the
business. In November 2009, Philip Hampton joined the Board of Anglo
American plc as a non-executive director. This appointment was fully
disclosed to the Board and it was satisfied that there were no issues in
relation to his time commitment to RBS. Philip Hampton has confirmed
that RBS remains his priority.
Board balance and independence
The Board currently comprises the Chairman, three executive directors
and eight independent non-executive directors. The Board functions
effectively and efficiently and is considered to be of an appropriate size.
The directors provide the Group with the knowledge, mix of skills,
experience and networks of contacts required. The Board Committees
comprise directors with a variety of relevant skills and experience so
that no undue reliance is placed on any individual.
The non-executive directors combine broad business and commercial
experience with independent and objective judgement. The balance
between non-executive and executive directors enables the Board to
provide clear and effective leadership and maintain the highest
standards of integrity across the company’s business activities. The
names and biographies of all Board members are set out on pages 8
and 9.
The Board considers that the Chairman was independent on
appointment and all non-executive directors are independent for the
purposes of the Code. The standard terms and conditions of the
appointment of non-executive directors are available on the Group
website (www.rbs.com) and copies are available on request.
Re-election of directors
Directors must stand for re-election by shareholders at least once every
three years. Any non-executive directors who have served for more than
nine years will also stand for annual re-election and the Board will
consider their independence at that time.
The names of directors standing for election at the 2010 Annual General
Meeting are included on page 212 and further information is given in the
Chairman’s letter to shareholders in relation to the company’s Annual
General Meeting.
Information, induction and professional development
All directors receive accurate, timely and clear information on all
relevant matters, and have access to the advice and services of the
Group General Counsel and Group Secretary who is responsible to the
Board for ensuring that Board procedures are followed and that
applicable rules and regulations are complied with. In addition, all
directors are able, if necessary, to obtain independent professional
advice at the company’s expense.
Each new director receives a formal induction on joining the Board,
including visits to the Group’s major businesses and meetings with
directors and senior management. The induction is tailored to the
director’s specific requirements. Directors are advised of appropriate
training and professional development opportunities and undertake the
training and professional development they consider necessary in
assisting them to carry out their duties as a director.
In line with recommendations of the Walker review, the company is
currently undertaking a comprehensive review of its Board induction
and continuing development programme for directors. As a result, the
induction programme has recently been expanded to include sessions
with external advisers as well as the heads of key business areas.
Performance evaluation
Following the Board evaluation last year, a number of initiatives were
implemented in 2009 aimed at improving the overall performance and
effectiveness of the Board, including further Board appointments,
restructuring Board agendas and papers and allowing more time at
Board meetings to consider strategic issues. In addition, reporting to the
Board on risk matters, capital, liquidity and funding was enhanced.
The Board has again undertaken a formal and rigorous evaluation of its
own performance and that of its committees and individual directors.
In 2009, this process was independently facilitated by Spencer Stuart*,
using a detailed framework of questions which was used to structure
the individual meetings held with each director. Amongst the areas
reviewed were the role and organisation of the Board and its
Committees, Board composition and the staffing of Committees, Board
processes, the structure and frequency of meetings, Board and
Committee reporting, and external relationships including those with
shareholders and regulators. The Board has considered and discussed
reports on the outcomes of the evaluations and is satisfied with the way
in which the evaluations have been conducted.
The evaluation concluded that the Board is operating effectively and has
benefited from the reduction in size and changes in composition which
have been successfully implemented during 2009. The composition of
the Board and staffing of key Committees, along with the shape of
Board agendas and meeting formats are under continual review to build
on this and further increase effectiveness. The separation of
responsibilities between the Audit Committee and the newly formed
Board Risk Committee to meet the recommendations of the Walker
review will assist the Group in focusing on risk management as a whole
and continuing to improve on areas such as risk analysis and reporting.
Separately, the Senior Independent Director canvassed the views of the
executive directors and met with the non-executive directors individually
and as a group, without the Chairman present, to consider his
performance. The Senior Independent Director also canvassed views
from UKFI, the FSA and the Association of British Insurers. The results
of this were then shared with the Chairman.
* The Board is satisfied that no potential conflict of interest exists between conducting this
board evaluation and the other executive search services which Spencer Stuart has provided
for the Group in 2009 in its operating divisions.