RBS 2011 Annual Report Download - page 291

RBS Group 2011 289
Risk underpin and clawback
The Group Remuneration Committee will also review financial and
operational performance against the Strategic Plan and risk performance
prior to agreeing vesting of awards. In assessing this, the Committee will
be advised independently by the Board Risk Committee. If the Group
Remuneration Committee considers 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. All awards are subject
to clawback.
Service contracts
The company's policy in relation to the duration of contracts with directors
is that executive directors' contracts generally continue until termination
by either party, subject to the required notice, or until retirement. The
notice period under the service contracts of executive directors will not
normally exceed twelve months. In relation to newly recruited executive
directors, subject to the prior approval of the Group Remuneration
Committee, the notice period may be extended beyond twelve months if
there is a clear case for this. Where a longer period of notice is initially
approved on appointment, it will normally be structured such that it will
automatically reduce to twelve months in due course. All new service
contracts for executive directors are subject to approval by the Group
Remuneration Committee. Those contracts normally include standard
clauses covering the performance review process, the company's normal
disciplinary procedure, and terms for dismissal in the event of failure to
perform or in situations involving actions in breach of the Group's policies
and standards. Any compensation payment made in connection with the
departure of an executive director will be subject to approval by the
Group Remuneration Committee, having regard to the terms of the
service contract and the reasons for termination.
Information regarding the executive directors' service contracts is shown
below:
Date of current contract
Notice period -
from the company
Notice period -
from executive
Stephen Hester 4 November 2008 12 months 12 months
Bruce Van Saun 8September 2009 12 months 12 months
Except as noted below, in the event of severance where any contractual
notice period is not worked, the employing company may pay a sum to
the executive in lieu of the notice period. In the event of situations
involving breach of the employing company's policies resulting in
dismissal, reduced or no payments may be made to the executive.
Depending on the circumstances of the termination of employment, the
executive may be entitled, or the Group Remuneration Committee may
allow, outstanding awards under long-term incentive arrangements to
vest, subject to the rules of the relevant plan.
Stephen Hester
In the event of his personal underperformance, the company is entitled,
after giving reasonable opportunity to remedy any failure, to terminate
Stephen Hester’s contract by giving written notice with immediate effect
and without making any payment in lieu thereof and Stephen Hester will
forfeit any unvested stock awards. In the event that Stephen Hester's
employment is terminated by the company (other than by reason of his
personal underperformance), he will be entitled to receive a payment in
lieu of notice to the value of base salary, bonus and benefits (including
pension contributions). If he resigns voluntarily and the company does
not require him to work out his notice period, Stephen Hester may receive
apayment in lieu of notice based on salary only (i.e. no bonus or
benefits). In both cases the treatment of any other unvested stock awards
will be determined at the discretion of the Group Remuneration
Committee.
Bruce Van Saun
In the event that Bruce Van Saun's employment is terminated by reason
of his personal underperformance, the company is entitled, after giving
reasonable opportunity to remedy any failure, to terminate by giving
written notice with immediate effect and without making any payment in
lieu of notice. Any payment in lieu of notice that may be made to Bruce
Van Saun would be based on salary only (i.e. no bonus or benefits). The
company has agreed that, provided certain conditions are met, on leaving
employment, Bruce Van Saun will not forfeit awards under the rules of
the Group’s share plans.