RBS 2010 Annual Report Download - page 250

Membership of the Remuneration Committee
The current members of the Remuneration Committee are Penny Hughes
(Chair since 1 June 2010), Sandy Crombie, and John McFarlane. The
members of the Remuneration Committee are all independent non-
executive directors. Colin Buchan stepped down as Chairman and
member of the Remuneration Committee on 1 June 2010. Attendance of
each member at meetings of the Remuneration Committee in 2010 is
shown on page 238.
Responsibilities
The Remuneration Committee is responsible for setting the Group’s
policy on remuneration and overseeing its implementation, considering
executive remuneration and making recommendations to the Group
Board in respect of the remuneration arrangements of the executive
directors of the Group. No director is included in decisions regarding his
or her own remuneration.
The Remuneration Committee is also responsible for setting the
remuneration arrangements for members of the Group’s Executive
Committee and Management Committee, as well as all higher-earning
employees and any employees falling within the definition of “Code Staff”
under the FSA Code. Details of the FSA Code can be found at
www.fsa.gov.uk.
The Remuneration Committee undertakes a regular review of the
adequacy and effectiveness of the remuneration policy to ensure it is fully
aligned with the Group's long-term objectives. The Committee receives a
number of reports to assist it in its oversight of remuneration policy, such
as on risk and financial performance across the Group.
In determining directors’ remuneration, the Remuneration Committee has
taken into account pay and employment conditions of employees of the
company. It does this using an analysis of annual market data against an
assessment of the competitiveness of current base salary ranges or
benchmarks and actual salaries in payment. Salary increases for
executive directors are also considered in the context of salary increases
for the wider employee population.
The Remuneration Committee considers remuneration in the context of
the wider Group agenda such as talent development and the external
market environment. The Remuneration Committee recognises that
remuneration is only one aspect of the value proposition which the Group
presents to our employees, and that engagement, flexibility and career
development are important factors. It has received in-depth presentations
from Human Resources functions in the USA and Asia so as to have a
better understanding of the unique issues in these areas. Penny Hughes
has also attended a number of external meetings and workshops with
organisations such as Women in Business and the Young Bankers’
Association to gain a broader understanding of the people agenda.
The Remuneration Committee also receives regular updates on
regulatory developments and general remuneration issues, as well as
market and benchmarking data from its remuneration advisors to support
its decisions.
In December 2010, the Asset Protection Scheme Performance and
Reward Committee (APSPRC) was formed. It is responsible for reviewing,
reporting and, in certain cases, making recommendations to the
Remuneration Committee in respect of (i) collective overall and individual
performance of individuals who manage business units or assets which
are assigned to or participate in the Asset Protection Scheme (APS), and
members of the Group executive against the APS performance targets;
(“APS In-Scope employees”) (ii) the individual proportion of the incentive
and bonus components of the remuneration of those employees to be
evaluated against APS performance targets for each calendar year and
(iii) whether clawback should be applied to any deferred compensation
elements of the remuneration of those employees prior to their vesting.
The Remuneration Committee considers recommendations and reviews
reports from the APSPRC and is responsible for determining the
remuneration of APS In-Scope employees.
Remuneration advisors
On 14 September 2010, the Remuneration Committee appointed
PricewaterhouseCoopers LLP (“PwC”) as its remuneration advisors,
replacing Towers Watson. PwC were appointed after a formal selection
process of panel interviews following the submission of detailed written
proposals by a number of remuneration advisors. One aspect taken into
account as part of the selection process was that the remuneration
advisors be signatories to the voluntary code of conduct in relation to
executive remuneration consulting in the UK. Both PwC and Towers
Watson are signatories to the code of conduct and the relationship
between the Remuneration Committee and both companies takes
account of this.
During the year, as well as advice received from Towers Watson and
PwC, the Committee took account of the views of the Group Chairman,
Philip Hampton; Group Chief Executive, Stephen Hester; Group Human
Resources Directors, Neil Roden (until October 2010) and Elaine Arden
(from October 2010); the Group General Counsel and Group Secretary,
Miller McLean (until April 2010); and the Group Secretary, Aileen Taylor
(from May 2010). Advice was received from Nathan Bostock, Head of
Restructuring and Risk, on risk-adjustment of measures for bonus pool
funding and a risk review of individual performance evaluations for the
Management Committee. The Chairman of the Board Risk Committee,
Philip Scott, also attended a Remuneration Committee meeting to advise
the Committee on matters relating to risk adjustment.
PwC also provides professional services in the ordinary course of
business including assurance, advisory, tax and legal to subsidiaries of
the Group. Towers Watson also provides actuarial advice to subsidiaries
of the Group and investment consulting and actuarial advice to the
trustees of some of the Group's pension funds. The advisors to the
Remuneration Committee are appointed independently by the Committee,
which reviews its selection of advisers annually. The Committee is
notified of any work that is being undertaken by its advisors and is
satisfied that there are processes in place to ensure that the advice it
receives is independent.
RBS Group 2010248
Directors’ remuneration report