RBS 2010 Annual Report Download - page 238

Board balance and independence
The Board currently comprises the Chairman, two executive directors and
eight independent non-executive directors, one of whom is the Senior
Independent Director. 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 and experience 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 Group’s business activities.
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’s website (www.rbs.com)
and copies are available on request.
Re-election of directors
In accordance with the provisions of the new Code, all directors of the
company will stand for re-election by shareholders at the company’s 2011
Annual General Meeting and annually thereafter. Colin Buchan will stand
down as a non-executive director on 5 August 2011 following the
announcement of the Group’s interim results, having served just over
nine years on the Board.
The names and biographical details of directors are shown on pages 226
and 227. Further information in relation to the company’s Annual General
Meeting can be found in the Chairman’s letter to shareholders.
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
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.
In line with recommendations of the Walker Review and the new Code,
the company has reviewed the induction programme for new directors.
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 and key stakeholders. The induction is
tailored to the director’s specific requirements.
The company has undertaken a comprehensive review of the ongoing
professional development programme for directors. 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.
Performance evaluation
Following the external Board evaluation carried out in 2009, a number of
initiatives were implemented aimed at improving the overall performance
and effectiveness of the Board, including greater advance planning in
relation to Board agendas to allow more in-depth discussion of
businesses and enhancement of Board engagement in risk management
and setting risk appetite.
Aformal and rigorous internal evaluation of the performance of the Board
and Nominations Committee during 2010 was carried out by the Group
Secretary. A detailed framework of questions was used to structure
individual meetings held by the Group Secretary with each director and
regular meeting attendees. The Group Secretary then discussed the
outcomes and recommendations with the Chairman. Amongst the areas
reviewed were the role and organisation of the Board and Board
Committees, Board and Committee composition, Board processes, the
structure and frequency of meetings, Board performance and reporting,
strategy and risk management and external relationships, including those
with shareholders and regulators.
The Board has considered and discussed reports on the outcomes of the
evaluation and is satisfied with the way in which the evaluation was
conducted. The evaluation concluded that the Board is strong and
operating effectively, headed by an excellent Chairman, who facilitates
good, constructive debate. Generally, the Board is viewed as currently
being of the appropriate size and has a good dynamic, although Board
composition should be kept under continual review to ensure that the
correct balance of skills and experience is maintained, particularly on
Board Committees. On the structure of Board meeting agendas it was
suggested that greater time could be allocated for discussions on key
issues to allow in-depth focus on items which are material to the Group
and to encourage an emphasis on debate and discussion rather than
formal presentation.
Separate in-depth evaluations were carried out for each of the Audit
Committee, Board Risk Committee and Remuneration Committee by the
Group Secretary, where appropriate in conjunction with the Committee
Chair. Further information on the evaluations carried out in relation to the
Audit Committee, Board Risk Committee and Remuneration Committee is
set out on pages 243, 245 and 249 respectively.
Additionally, directors were asked to provide feedback on their fellow
directors. This feedback was shared with each director by the Chairman,
who met with each director individually to discuss their own performance
and ongoing professional development.
Separately, the Senior Independent Director canvassed the views of the
executive directors and met with the non-executive directors as a group,
without the Chairman present, to consider the Chairman’s performance.
Feedback was sought on governance and stewardship of the Group,
relationships with key external and internal stakeholders, execution of the
Group’s Strategic Plan and delivery of value and return to shareholders.
The Senior Independent Director also canvassed views from United
Kingdom Financial Investments Limited (UKFI) and the FSA. The results
of this were then shared with the Chairman who agreed to consider the
points raised and provide separate responses in due course.
RBS Group 2010236
Corporate governance continued