RBS 2009 Annual Report Download - page 229

227RBS Group Annual Report and Accounts 2009
Governance
•the primary requirement for awards to vest is that the Remuneration
Committee should be satisfied that risk management during the
performance period has been effective at a Group and division/
functional level. The Remuneration Committee’s determination will be
informed by input from the Group’s Board Risk Committee and the
Chief Risk Officer. Specifically, prior to vesting, the Remuneration
Committee will have regard to risk and compliance across the Group
and divisions and make an assessment of future risks as
appropriate. It will also review whether there are any individual or
more general cases where clawback should be operated;
•for participants below Board level, vesting of share and option
awards will be based on delivery of the strategic plan. Performance
will be considered against metrics that reflect the five strategic tests
in the strategic plan including:
– risk measures
– returns
– efficiency
– growth
– customer franchise measure
For the most senior roles, vesting will be based partly on divisional or
functional performance and partly on performance across RBS
Group. From a behavioural perspective, the Remuneration Committee
must also be satisfied that financial results have been achieved
without excessive risk. The Remuneration Committee will consider
both the financial performance and risk information and assess
whether it considers that the outcome driven by the metrics on which
the vesting of share awards depends is appropriate against this
context;
•for awards granted in 2010, performance will be measured over a
three year period, and the Remuneration Committee will review this
approach for future years’ awards; and
•clawback will apply to all awards. This allows the Remuneration
Committee to retrospectively limit any compensation at the time of
vesting if it considers that the performance factors on which reward
decisions were based have later turned out not to reflect the
corresponding performance in the long-term.
Pension arrangements
The Group provides competitive retirement benefits in a manner that
does not create an unacceptable level of risk for the Group. New
employees are eligible for a cash allowance in lieu of pension provision
and the facility to choose to have part of their remuneration in the form
of contributions to The Royal Bank of Scotland Group Retirement
Savings Plan.
Some employees continue to participate in defined benefit
arrangements. The following two changes have been made to the main
defined benefit pension plans:
•a yearly limit on the amount of any salary increase that will count for
pension purposes; and
•a reduction in the severance lump sum for those who take an
immediate undiscounted pension for redundancy.
Executive remuneration policy
Components of executive directors’ remuneration 2010
Salary
Base salaries of executive directors are reviewed annually. It has been
agreed that no increases in base salaries will be made as part of the
2010 review.
Benefits
Executive directors are eligible to receive various employee benefits or a
cash equivalent from a flexible benefits account, on a similar basis to
other employees.
Details of pension arrangements of directors are shown on page 236.
Executive directors also receive death-in-service cover.
For all executive directors joining on or after 1 October 2006, pension
provision is in the form of a pension allowance which may be used to
participate in The Royal Bank of Scotland Group Retirement Savings Plan
which is open to all employees, or to invest in alternative pension
arrangements, or to take all or some of the allowance in cash. In addition,
as employees, executive directors are eligible to participate in Sharesave
and Buy As You Earn Plans. These plans are not subject to performance
conditions since they are operated on an all-employee basis.
The 2008 Report and Accounts reported on the pension paid to the
former Group Chief Executive, Sir Fred Goodwin, on his retirement from
the Group on 31 January 2009. Following discussions between Sir Fred
and the Group, he volunteered to make a substantial reduction to his
pension to the level of £342,500 a year.
Gordon Pell will retire from the Group and the Board on 31 March 2010,
shortly after his normal pension age of 60. Details of his pension are
shown in this report. As agreed by the Board in 2005 his pension is
based on his 39 years of service with Lloyds TSB and the Group, part
of which has been funded by a transfer payment from a Lloyds TSB
pension plan.
Following Gordon Pell’s retirement, no current director will be a member
of one of the Group’s final salary pension plans. The RBS Group
Pension Fund is closed to employees, including executive directors,
joining the Group after 30 September 2006. Any new executive director
would only be a member if he or she is already a current employee who
is a member of the plan. The provision for an undiscounted pension on
early retirement at employer request would not apply to any executive
director appointed in the future.