RBS 2009 Annual Report Download - page 226

RBS Group Annual Report and Accounts 2009224
Letter from the Chairman of the Remuneration Committee continued
•reviewing the remuneration of employees who have a material impact
on Group performance. This includes new processes for reviewing
remuneration for newly recruited senior individuals, who are critical to
the long-term success of RBS; and
•reviewing and providing a strategic overview of all bonus and long-
term incentive plans operating in RBS to ensure their compliance
with shareholder interests, best industry practice and the
requirements of the FSA’s Code of Practice on Remuneration.
The outcome of the Remuneration Committee’s review has included:
•a clear governance framework for incentive plans across the Group,
involving the Risk and HR functions at all key decision points;
•a structure of deferment for incentives for up to three years, with the
ability to claw back any that are shown to have been based on
misstated or misleading results;
•agreement with the Group’s major shareholder, UKFI, on the overall
level of bonuses in respect of 2009 performance and the
arrangements for their deferment in stages to 2012; and
•a new long term incentive plan which is being submitted to
shareholders for approval at the Annual General Meeting following a
comprehensive consultation with major institutional shareholders.
This plan includes a new approach to performance measures to
ensure that awards vest only if the Remuneration Committee is
satisfied that the performance achieved is in line with the Board’s risk
policies and that a balanced performance has been achieved across
a number of risk adjusted metrics.
During the year the terms of reference of the Remuneration Committee
were broadened to include oversight of remuneration policies for all
employees across the Group. To reflect its work, the report of the
Remuneration Committee contains not only information on executive
remuneration, but also a statement of the remuneration policies which
will apply across the whole of the Group.
The remuneration environment is evolving and while I acknowledge
there is still more work to be done, we have already made significant
changes and continue to be one of the leaders in the sector in the
reform of our remuneration policies. The Remuneration Committee has
made significant progress in overseeing the development of policies,
processes and practices that will ensure that employee remuneration at
RBS is properly controlled and fully aligns sustainable performance with
the long term interests of shareholders and customers.
Colin A. M. Buchan
Chairman of the Remuneration Committee
24 February 2010