RBS 2011 Annual Report Download - page 253

RBS Group 2011 251
Dear Shareholder,
Iam pleased to present our Corporate governance report for the 2011
financial year.
2011 has been a challenging year for the Group given the continued
pressure on financial markets and the Eurozone challenges as well as
UK developments such as the recommendations from the Independent
Commission on Banking. During 2011, key areas of focus for the Board
were: financial performance; strategy; risk; and regulatory developments
and reports. The Board was supported by the work of key Board
committees.
Further details on the role and principal activities of the Board are
contained within the Corporate governance report on pages 252 to 295.
Individual reports from the Group Audit Committee, Board Risk
Committee and Group Remuneration Committee are also included.
Corporate governance in RBS
The Group is working hard to achieve a very challenging and complex
turnaround and good corporate governance is a key element of
supporting delivery of our strategy and underpinning cultural change
across the Group.
In May 2011, the Board introduced a new Corporate Governance Policy
to demonstrate that we are committed to the highest standards of
governance, integrity and professionalism throughout the Group. The
policy comprises ten principles and related guidance that apply across
the Group in all divisions and jurisdictions. The principles cover areas
such as decision making, individual and collective responsibility,
identifying and managing risks, risk and reward and escalation and
transparency. We want to ensure we have the right structures and
systems in place so that sound business decisions are made and it is
important to us that we demonstrate high standards of governance in all
of our activities. A clear corporate governance policy is helping us
achieve this and we will be monitoring compliance with the policy on a
continuing basis.
Our statement of compliance with the UK Corporate Governance Code
issued by the Financial Reporting Council in May 2010 (the “Code”) is set
out on page 296.
The Board
During 2011, we were pleased to welcome three new independent non-
executive directors to the Board: Alison Davis, Tony Di Iorio and
Baroness Noakes. They have brought with them a wealth of relevant and
diverse experience in both the public and private sectors, along with a
strong global perspective and have made a significant contribution to the
work of the Board since joining. Their appointments have also
strengthened the membership of a number of Board committees with
Alison Davis joining the Group Remuneration Committee, Tony Di Iorio
joining the Group Audit Committee and Board Risk Committee, and
Baroness Noakes joining the Group Audit Committee. In addition to our
new Board members, Colin Buchan retired as a director in August 2011
following nine years on the Board and John McFarlane will step down
from the Board on 31 March 2012. We have greatly appreciated the
experience, commitment and knowledge they brought to the Board and
Committees.
Leadership and Board effectiveness
As Chairman, I am responsible for ensuring we have an effective Board
and for leading the Board. I am supported by the Group Nominations
Committee in reviewing Board composition and the recruitment of new
directors and by the Group Secretary on induction, continuing
professional development, Board process and evaluation.
Akey part of my role in leading the Board is to ensure that directors
develop a good understanding of the Group’s business so that the Board
is able to provide input to help shape future strategy. This is achieved
through site visits, in-depth board presentations and, for new directors,
their induction programme. I believe it is important to encourage a culture
and environment in the boardroom that facilitates debate and where non-
executive directors are able to provide constructive challenge to the
executive team.
We conduct an annual evaluation of the effectiveness of the Board and
this year’s evaluation was conducted internally, led by the Group
Secretary. I also evaluate the individual performance of each of the non-
executive directors and all directors stand for re-election annually. Further
details on performance evaluation are set out on page 260. During 2011,
we saw further improvements to the flow of information to the Board both
in terms of the quality of papers and the use of new technology to deliver
these to directors. The Board continued to focus on strategic priorities
and the composition of the Board, including succession planning for
senior executives, was kept under review by the Group Nominations
Committee.
Diversity
The diversity agenda has remained a key priority for RBS in 2011. The
Group made a public statement on its website www.rbs.com in
September 2011 regarding its aspirations in relation to gender diversity in
the boardroom. We expect to meet the aspirational target of 25 per cent
female board representation in 2012. In December 2011, the Board
approved a formal boardroom diversity policy which aims to promote
diversity in the composition of the Board. Under this policy, all Board
appointments will be made on the basis of individual competence, skills
and expertise measured against identified objective criteria. Further
details on the boardroom diversity policy can be found on page 262.
Iwould like to thank both the executive and non-executive directors for
their outstanding commitment and their contributions to the Board and
Committees in 2011. This year is shaping up to be another challenging
year for the Group and the Board but I am confident that we are on track
to restore the performance of the Group in all material aspects.
Philip Hampton
Chairman
22 February 2012
Letter from the Chairman