RBS 2010 Annual Report Download - page 261

Long-Term Incentive Plan (LTIP)
The LTIP was approved by shareholders in April 2010. It replaced both
the ESOP and the MPP. Details of awards made in prior years under the
ESOP and MPP are shown on pages 260 and 261. Employees in senior
roles (executive level and selected senior management) are eligible to
receive annual awards of long-term incentives. The awards will be
structured as performance-vesting deferred shares.
The performance conditions for the LTIP awards focus on shareholder
value, while factoring in the growing regulatory emphasis on risk-adjusted
financial metrics.
Awards
granted
in 2010
Market
price on
award
£
Awards
vested in
2010
Market price
on vesting
£
Awards held
at 31 December
2010
End of period
for qualifying
conditions to
be fulfilled
Stephen Hester (1) 8,578,432 0.49 8,578,432 14.05.13
Bruce Van Saun (2) 5,182,803 0.49 5,182,803 14.05.13
Notes:
(1) Stephen Hester has agreed to a voluntary holding period of two further years beyond the vesting date for the net post-tax number of vested shares in respect of at least one third of the award.
(2) Bruce Van Saun has agreed to a voluntary holding period of two further years beyond the vesting date for the net post-tax number of vested shares for the amount over 300% of his salary.
No variation was made to any of the terms of the plan during the year.
Performance criteria for awards granted to executive directors
under the LTIP in 2010
Awards to executive directors under the LTIP in 2010 are subject to
improvement in Economic Profit (50%) as well as relative TSR (25%) and
absolute TSR (25%).
Relative TSR
The relative TSR measure compares the Group's performance against a
group of comparator banks from the UK and overseas, weighted towards
those companies most similar to the Group. The comparator companies
and relevant weightings and vesting schedule are the same as those for
the 2011 LTIP awards, as set out on page 252.
Absolute TSR
The absolute TSR measure is based on the achievement of share price
targets by the end of the performance period.
In respect of the absolute TSR performance measure for the LTIP awards
in 2010, vesting is on a straight-line basis and is determined as follows:
xto receive vesting of 100% of the shares, the share price would need
to reach 77.5 pence or more;
xto receive 20% of the award (threshold), the share price would need
to reach 57.5 pence or more; and
xbelow 57.5p, vesting would be zero.
Economic profit
Maximum vesting of the economic profit measure will be triggered by
early delivery of Core business profitability, well ahead of the range
implied by the published Strategic Plan targets and also in excess of the
cost of capital.
Risk underpin and clawback
If the Remuneration Committee consider that the vesting outcome
calibrated in line with the performance conditions outlined above does not
reflect the Group's underlying financial results, or if the Committee
considers that the financial results have been achieved with excessive
risk, then the terms of the awards allow for an underpin to be used to
reduce vesting of an award, or to allow the award to lapse in its entirety.
Awards are subject to clawback.
259RBS Group 2010
Governance