RBS 2011 Annual Report Download - page 281

RBS Group 2011 279
Remuneration policy
The remuneration policy supports the Group’s business strategy and is
designed to:
xattract, retain, motivate and reward high calibre employees to deliver
long term business performance within acceptable risk parameters;
xprovide clear alignment between annual and long-term targets for
individuals and Group/divisional strategic plans; and
xensure that the Group’s metrics, reward structures and governance
processes as a whole provide coverage of the key risks in an
appropriate way.
In the Non-Core division and businesses we are exiting, appropriate
arrangements are put in place to ensure that employees are motivated to
reduce risk effectively, to minimise losses taken on value of businesses/
assets at the point of divestment.
The remuneration policy applies the same principles to all employees
including Code Staff (1).The current key principles underpinning the
Group-wide remuneration policy are set out below:
Base salary Base salaries are reviewed annually. Base salaries should be competitive in the specific market for the business in which the individual
works; reflect the talents, skills and competencies that the individual brings to the Group; and be sufficient so that inappropriate risk-
taking is not encouraged.
Annual
incentives
The annual incentive pool is based on a balanced scorecard of measures including financial performance, risk, people and customer
measures. Capital adequacy and the impact of incentive awards on the balance sheet are also taken into account.
Allocation from the pool depends on divisional, functional and individual performance. Individual performance assessment is supported
by a structured performance management framework.
Guaranteed bonuses are only used in limited circumstances in accordance with the FSA Remuneration Code.
Immediate cash bonuses are limited to a maximum of £2,000.
Deferred awards support a performance culture where employees recognise the importance of sustainable Group, business and
individual performance. Under the Group-wide deferral arrangements a significant proportion of annual incentive awards for our more
senior employees are deferred over a three year period. Deferred awards are subject to clawback.
In certain circumstances, formulaic short-term incentive arrangements are used to align the objectives of employees with the strategy
of the relevant division in which they work. For such schemes, specific design principles are in place, with strict governance
procedures that ensures that all existing and future incentive schemes support our business strategy and risk appetite.
All incentive awards are subject to appropriate governance, including independent review by the Risk Management, Finance and HR
functions, with oversight from the Group Performance and Reward Committee, which has delegated authority from the Group
Remuneration Committee over incentive schemes operating over a period of 12 months or less.
LTIP To encourage the creation of value over the long term and to further align the rewards of the participants with the returns to
shareholders, the Group provides certain employees in senior roles with long-term incentive awards. Awards are structured as
performance-vesting shares. Vesting will be based partly on divisional or functional performance and partly on performance across the
Group. All awards are subject to clawback.
Other share
plans
Employees in certain countries are eligible to participate in share plans which are not subject to performance conditions.
Benefits
(including
pension)
In most jurisdictions, employee benefits or a cash equivalent are provided from a flexible benefits account.
(1) The following groups of employees have been identified as meeting the FSA’s criteria for Code Staff:
Members of the Group Board and Group Executive and Management Committees;
Staff performing a Significant Influence Function within RBS Group;
Employees who have approval authorities such that their decision-making could have a material impact on the RBS Group income statement;
Employees who are responsible for a business or businesses whose performance could have a material impact on the RBS Group income statement; and
Key control function roles.