RBS 2011 Annual Report Download - page 286

284 RBS Group 2011
Executive directors long-term incentive plan (LTIP) awards
The following tables provide a current assessment of executive
directors' performance against LTIP awards granted in previous years.
The Group Remuneration Committee does not believe that these
outcomes are reflective of the executive directors' performance over the
period 2009 to 2011. As highlighted in the opening letter to this
remuneration report, very significant progress has been made across the
Group’s strategic plan targets since 2009, resulting in a significantly
safer, more resilient and sustainable bank. However, this is not being
reflected in the LTIP outcomes. In 2009 and 2010, LTIPs were linked
entirely to share price and economic profit targets. In line with the whole
sector, and exacerbated by its legacy portfolio, RBS's performance
against these metrics has been heavily impacted by the economic and
regulatory environment.
2011
The table below summarises the assessment of the first year of a three
year performance period. Each measure has the ability to deliver a
number of shares worth up to 100% of salary; however, the number of
shares that vest will be subject to an overall cap in value of 375% of
salary. Awards are due to vest in 2014. An assessment of performance
of each relevant element is provided by the control functions and an
external firm assesses relative Total Shareholder Return (TSR)
performance. The Group Remuneration Committee determines overall
vesting based on these assessments including consideration of the
drivers of performance and the context against which it was delivered.
The assessment is analytical and if any discretion is used, it would be
explained. This award is due to be assessed in March 2014 to determine
the level of vesting. The table below represents an early indication only.
Performance
measure Weighting Rationale Vesting Current assessment of performance
Core Bank
Economic
Profit
25% Ensures that
performance reflects
risk adjusted enduring
earnings for the Bank.
Threshold: 25% vesting for average return on tangible
equity over the performance period at a reasonable
margin above the cost of capital.
Maximum: 100% vesting for performance ahead of the
Group’s Strategic Plan.
Continued difficult economic
conditions in a number of our
key markets mean that based
on performance to date, the
threshold targets have not yet
been met.
Relative TSR 25% Ensure alignment with
shareholders.
Threshold: 20% vesting if the Group’s TSR is at the
median of the companies in the comparator group.
Maximum: 100% vesting if the Group’s TSR is at the
upper quartile of the companies in the comparator
group.
Pro-rata vesting in between these points.
Based on share price
performance to date, the
threshold targets have not yet
been met.
Balance Sheet
&Risk
25%
Strategic
Scorecard
25%
Ensure alignment with
the advancement of
the strategic position
and capability of the
organisation and the
building of a
sustainable business.
Vesting will be qualified by Group Remuneration
Committee discretion. Indicative vesting levels are:
xOver half of objectives not met: 0%;
xHalf of objectives met: 25%;
xTwo-thirds of objectives met: 62.5%; and
xObjectives met or exceeded in all material
respects: 100%.
Most targets have been met or
exceeded. Strong performance
on capital, leverage and funding
measures, risk appetite
embedded.
Good progress on brand
franchises (e.g., ‘Helpful
Banking’ in UK), sustainability
and employee engagement
measures. Further work
needed on cost:income ratio.
Directors’ remuneration report continued