RBS 2011 Annual Report Download - page 283

RBS Group 2011 281
Shareholding guidelines
The Group operates shareholding guidelines for executive directors. The
target shareholding level for the Group Chief Executive is 200% of gross
annual salary and 100% of gross annual salary for executive directors. A
period of five years is allowed in which to build up shareholdings to meet
the guideline levels.
The mix of executive directors’ remuneration
The charts below show the composition of remuneration opportunity for
on-target annual performance, with the long term incentive awards shown
at the expected value. Short term incentive payments earned in relation
to 2012 performance will be deferred and will vest, subject to satisfactory
performance. The actual value of the long term incentive awards will
depend on performance over the period 2012 to 2014 and the share price
at the time the awards vest.
Group Chief Executive - Stephen Hester
Group Finance Director - Bruce Van Saun
2009-2011 average compensation outcome for Group Chief Executive
The preceding charts are based on target/expected values of total
compensation. Press commentary tends to focus either on these values,
or on maximum values assuming all performance conditions are met.
However, in practice over the period 2009 to 2011, the value received will
be significantly less than the maximum or even target value incentives, in
light of bonus waivers, performance conditions and share price fall over
the period. The chart below shows the likely average pay-out to the
Group Chief Executive from salary, pension and incentives from awards
made over the 2009-2011 period. The average maximum award is shown
on the left, but is then adjusted allowing for the impact of LTIP
performance conditions, bonus conditions and voluntary waivers and
finally the impact of the share price fall on the remaining value of awards.
The data shows that Stephen Hester is likely to receive just 10% of the
maximum value of his incentives awarded over the last three years, and
around 29% of his maximum total compensation. This is despite the
majority of financial and non-financial targets for RBS having been met
when measured over the three year period since 2009. In comparison,
levels of pay-out at RBS are expected to be at least one-third lower than
recent levels of pay-out in the FTSE-30 and less than half recent pay-
outs in the international banking sector.
Salary
Benefits
Pension allowance
On-Target Bonus (deferred
into shares)
Long-term incentive award
(expected value)
Salary
Benefits
Pension allowance
On-Target Bonus (deferred
into shares)
Long-term incentive award
(expected value)
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
Maximum
award
Impact of LTIP
performance
conditions
Impact of bonus
conditions /
waivers
Impact of share
price fall
Likely
outcome
2 0 0 9 - 2 0 1 1 A v e r a g e A n n u a l T o ta l C o m p e n s a t io n (£ 0 0 0 's )
LTIP
Bonus
Pension
Base Salary
10% of
maximum
incentives
29% of
maximum
total
ti
Salary
Benefits
Pension allowance
On-Target Bonus (deferred into shares)
Long-term incentive award (expected value)
LTIP
Bonus
Pension
Base Salary
2009-2011 Average Annual Total Compensation (£000’s)
9,000
8,000
7,000
6,000
5,000
4,000
3,000
2,000
1,000
0
Maximum
award
Impact of LTIP
performance
conditions
Impact of bonus
conditions /
waivers
Impact of share
price fall
Likely
outcome
10% of
maximum
incentives
29% of
maximum total
compensation
Salary
Benefits
Pension allowance
On-Target Bonus (deferred into shares)
Long-term incentive award (expected value)