RBS 2012 Annual Report Download - page 338

Performance conditions for outstanding LTIP share awards granted in 2011 and 2012
The table below summarises the assessment of performance to date against the 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 for
the 2011 awards and 300% of salary for the 2012 awards. Awards are due to vest in 2014 and 2015 respectively. An assessment of performance of
each relevant element is provided by the control functions and an external firm assesses relative TSR performance. The 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 in the final assessment, it will be explained. The table below represents an early indication of
potential vesting outcomes only.
Performance
measure Weighting Rationale Vesting
2011 LTIP
Current assessment of
performance
2012 LTIP
Current assessment of
performance
Core Bank
economic profit
25% Ensures that
performance reflects
risk adjusted
enduring earnings for
the Bank.
Threshold: 25% vesting for meeting
minimum economic profit targets.
Maximum: 100% vesting for
performance ahead of the Group’s
Strategic Plan.
Continued difficult
economic conditions have
been experienced in a
number of our key
markets, however
threshold targets could be
met.
Performance broadly in
line with expectations.
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 up to 31
December 2012, the
threshold targets have not
yet been met.
Based on share price
performance up to 31
December 2012, 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
Performance and Remuneration
Committee discretion. Indicative
vesting levels are:
x Over half of objectives not met:
0%;
x Half of objectives met:
25%;
x Two-thirds of objectives met:
62.5%; and
x Objectives 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.
Majority of performance
targets hit, particularly
those around securing
confidence in safety and
soundness and being
within risk appetite. On
track to achieve other
objectives by end of 2014.
Despite some difficult
reputational issues,
progress being made
against most customer,
community and employee
metrics. Core cost:
income ratio remains
challenging to achieve
due to market-driven
income pressures.
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