RBS 2010 Annual Report Download - page 237

The company is committed to high standards of corporate governance,
business integrity and professionalism in all its activities.
Throughout the year ended 31 December 2010, 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 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.
Although not applicable to the current accounting period, the company
has also complied with the main provisions of the UK Corporate
Governance Code issued by the Financial Reporting Council in May 2010
(the “new Code”) except as noted above. The company has also taken
steps to implement the recommendations arising from the review of
governance in banks and financial institutions undertaken by Sir David
Walker (the “Walker Review”), details of which are described in this
section. A copy of the new Code can be found at
http://www.frc.org.uk/corporate.
The company has also complied in all material respects with the Financial
Reporting Council Guidance on Audit Committees issued in December
2010.
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 representing
ordinary shares, preference shares and debt securities listed on the New
York Stock Exchange (the “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 (“Exchange Act”).
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 also the Chairman of the Nominations Committee, which is
permitted under the Code (since the Chairman was considered
independent on appointment). The company’s Audit, Board Risk,
Remuneration and Nominations 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
the Group Chief Executive’s remuneration.
As stated above, 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 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 2010, 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
2010 is set out in the Audit Committee report on pages 240 to 243.
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 the allocation and raising
of capital, 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 bi-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 the Group Finance Director.
All directors participate in discussing strategy, performance and the
financial and risk management of the company. Meetings of the Board
are structured to allow sufficient time for consideration of all items and the
Chairman encourages constructive challenge and debate.
For 2010, eleven Board meetings were scheduled. Individual attendance
at these meetings is set out on page 238. The directors were supplied
with comprehensive papers in advance of each Board meeting. 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-executive directors meet at least once per year without executive
directors 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 introduced a
statutory duty on directors to avoid conflicts of interest unless authorised.
Since that date, the Board has considered, and where appropriate
authorised, any actual or potential conflicts of interests that directors may
have.
235RBS Group 2010
Governance
Corporate governance