Director/PDMR Shareholding

RNS Number : 3268U

Royal Bank of Scotland Group PLC

23 June 2009

 



COMPANY ANNOUNCEMENT

FILE FOR RNS AT 0700 ON JUNE 23, 2009

FOR IMMEDIATE RELEASE WITHOUT EMBARGO

THE ROYAL BANK OF SCOTLAND GROUP PLC

DIRECTOR/PDMR SHAREHOLDING

The Royal Bank of Scotland Group plc announces that the following awards were made to Stephen Hester, the Group Chief Executive on 22 June 2009. 

• Award over 4.8 million ordinary shares granted under The Royal Bank of Scotland Group plc 2001 Medium-term Performance Plan. The award will vest on 22 June 2012 subject to performance conditions as explained below. The award will take the form of the cash equivalent of a nil-cost share option. The exercise period will be from 22 June 2012 to 21 June 2019.

• Share Options over 9.55 million ordinary shares granted under The Royal Bank of Scotland Group plc 2007 Executive Share Option Plan. The option price is £0.372 and the options will vest on 22 June 2012 subject to performance conditions as explained below. The exercise period will be from 22 June 2012 to 21 June 2019.

No consideration is payable for the grant of options or awards. 

This announcement is made in accordance with the requirements of DTR 3.1.4.

Group Chairman, Philip Hampton, said:

'Over the last few months we have been consulting with shareholders on the most appropriate way to incentivise and reward RBS's Chief Executive, Stephen Hester . We now have support for a remuneration plan that ensures the majority of Stephen's reward is non cash and based on his performance. This means his financial interests are strongly aligned to the interests of all our shareholders in the short-term and over the coming years. 

' RBS has the largest balance sheet in world banking so it is critical that Stephen succeeds. If he does, the UK Government will be able to sell its shares at a profit and all shareholders will benefit. The long term incentives are worth little or nothing without a strong return to shareholders and there is no reward for failure in our remuneration policy.'

For further Information :-

Neil Moorhouse

Head of Group Media Centre

Tel: [phone]

[phone]

Notes to Editors

• As set out in the 2008 Report and Accounts, the Group is undertaking a root and branch review of remuneration policy, the outcome of which will be presented to shareholders at the Group's AGM in April 2010. However, in the meantime, incentive plans will be based on existing shareholder approved programmes (Medium-term Performance Plan  'MPP' and Executive Share Option Plan 'ESOP').

• This award is made on four principles:

  • No reward for failure. If Stephen Hester is unsuccessful these awards will be worth little or nothing.

  • Exacting Performance criteria. The maximum vesting is dependent on an almost doubling of the company's value (to 70p) and the relative out performance (top quartile) of a panel of peer companies. 

  • Tied to long term shareholder value. If Stephen Hester is eligible for the maximum vesting at 70p this will represent an uplift in shareholder value of £18.5 billion from the closing share price 37.2 p on 19 June 2009. 

  • Dependent on underlying performance. Nothing will be released under these awards unless the Group's Remuneration Committee is satisfied with the Group's underlying performance. Clawback will apply and the Remuneration Committee reserves the right to vary these awards downward depending on the underpinning issues of financial performance, capital requirements and risk. 

• We have disclosed the performance criteria linked to these awards in order to further improve transparency in the area of remuneration.

• The Remuneration Committee has developed this package in consultation with the ABI, a number of institutional investors and United Kingdom Financial Investments. 

• As announced on 26 February 2009, the Group remains committed to increase its lending to UK homeowners and businesses in 2009 and 2010.   

Appendix 1: Stephen Hester total compensation

Appendix 2: Stephen Hester performance criteria  Appendix 1: Breakdown of Stephen Hester's total compensation

(Assuming on target bonus and full vesting of awards at share price of 70p.) 

Salary	1,200,000	As disclosed in 2008 Annual Report
Pension funding	420,000	35 % of salary.
Benefit funding	26,250
Total fixed reward	1,646,250
Deferred bonus opportunity	1,600,000	For on target performance 133% of salary is payable. As announced in 2008 Annual Report.
MPP	3,360,000	Based on achievement of share price of 70p
ESOP	3,132,400	Based on achievement of share price of 70p
Total potential compensation	9,738,650

Appendix 2: Performance Criteria

In order for the maximum number of shares and options to vest, the following performance criteria would need to be met. These apply equally to both MPP and ESOP: 

1. Relative Total Shareholder Return (50% weighting for both MPP and ESOP)

TSR represents share price appreciation assuming any dividends are re-invested. This relative measure will compare the Group's performance against a basket of banks from the UK and overseas, weighted towards those companies most similar to the Group (see table below). To receive any of the shares and options subject to this performance measure, the Group's performance must be at least as good as the average of the comparator companies, with vesting as follows:-

• To receive 100% of the shares and options, RBS would need to be in the top quartile of its relative TSR group. 
• To receive 25% of the shares and options, RBS would need to be at the median of its relative TSR group. 

Comparator	Weighting
1.  Lloyds Group 2.  Barclays	200%
3.  Banco Santander  4.  HSBC 5.  Standard Chartered	150%
6.  Citigroup 7.  Deutsche Bank 8.  JP Morgan Chase	100%
9.   BNP Paribas 10. Bank of America  11. Societe Generale 12. Credit Agricole 13. Credit Suisse Group 14. Royal Bank of Canada 15. Wells Fargo 16. National Australia Bank 17. BBVA 18. UBS 19. The Toronto Dominion        Bank 20. Unicredito Italiano	50%

2. Absolute Total Shareholder Return (50% weighting for both MPP and ESOP)

To receive 100% of the shares and options the share price would need to reach 70 pence or more. 

To receive 50% of the shares and options the share price would need to reach 55 pence or more.

To receive 25% of the shares and options the share price would need to reach 40 pence. 

3. Underpin

If the Group's Remuneration Committee consider 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 plan allow for an underpin to be used to reduce vesting of an award, or to allow the award to lapse in its entirety.   

 

END

 

 

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