Royal Bank Of Canada - RBC
Royal Bank of CanadaCorporate GovernanceFrameworkMarch 2021
Table of contentsOur approach to governance . 3The core principles that drive our approach. 4Our governance structure . 5Role of the board . 5Role of the board chair.6Committees of the board . 7Committee chairs .8Audit committee .8Risk committee .8Governance committee . 9Human resources committee . 9External advisors . 9Our approach to environmental, social and governance (ESG) matters . 10Our approach to subsidiary governance . 11The role of management . 11Group executive .11Oversight functions . 12Reporting and escalation of significant issues to the audit committee and risk committee . 13Disclosure controls and certifications . 13Culture and conduct . 14Our Code of Conduct .14Financial reporting hotline . 15Conflicts of interest . 15Our commitment to diversity . 15Board composition . 17Board size. 17Independence of the board . 18Guidelines to address other professional activities . 19Board Interlock Policy . 19Finding the right director candidates . 19Majority voting. 21Tenure policy . 21Board operations. 22Meeting attendance .22Director development .23Evaluating the directors, committees and chairs . 24Director compensation . 26Engaging with shareholders and other stakeholders .27Interaction with regulators .27
Our approach to governanceThis framework provides an overview of the corporate governance structures, principles, policies and practices of the Board ofDirectors (the board) of Royal Bank of Canada (RBC or the Bank), which together enable RBC to meet governance expectations ofthe Office of the Superintendent of Financial Institutions Canada (OSFI), the Canadian Securities Administrators (CSA) and the U.S.Securities and Exchange Commission (SEC).We believe that good governance is not just about overseeing RBC and its practices, but doing so in a way that is transparent andethical. It involves an independent board actively engaging with all stakeholders, knowing the business and its risks, constructivelychallenging management, understanding the opportunities and challenges of a changing industry and economy, setting robuststandards and principles that will guide RBC in delivering on its purpose of helping clients thrive and communities prosper whileenhancing value for our shareholders.To serve the interests of shareholders and other stakeholders, RBC’s corporate governance system is subject to ongoing review,assessment and improvement. The board proactively adopts governance policies and practices designed to align the interests ofthe board and management with those of shareholders and other stakeholders and to promote the highest standards of ethicalbehaviour and risk management at every level of the organization.RBC Common Shares are listed on the Toronto Stock Exchange (TSX), the New York Stock Exchange (NYSE) and the Swiss Exchange.The board exercises its authority in accordance with the RBC Code of Conduct, its By-laws and the Bank Act (Canada), as well asother applicable laws and regulations, including those of the CSA, the TSX, the NYSE and the SEC.RBC’s practices are consistent with Bank Act requirements, the OSFI Corporate Governance Guideline, the CSA’s corporategovernance guidelines (CSA Guidelines) and the CSA’s rules and applicable SEC rules. In addition, although RBC is not required tocomply with most of the corporate governance listing standards of the NYSE (NYSE Rules) applicable to U.S. domestic issuers, RBCmeets or exceeds the NYSE Rules in all significant respects except as summarized on RBC’s governance website.CORPORATE GOVERNANCE FRAMEWORK3
The core principles that drive our approachRBC’s approach to corporate governance is guided by the following core principles:PrincipleDescriptionBy setting the tone from above, the board champions the values of trust, integrity and good governance.Culture andconductStewardshipThese values are well entrenched in the culture of RBC and reinforce the ethical principles on which RBC’s reputation and success arefounded. To enhance shareholder value on a sustainable basis, these values must extend into every segment of RBC operations andbusiness activities.Directors are the stewards of RBC, exercising independent judgment in overseeing management and safeguarding the interests ofshareholders.In fulfilling its stewardship role, the board seeks to instill and foster a corporate environment founded on integrity and to providemanagement with sound guidance in pursuit of long-term shareholder value.Directors are key advisors to management, advising on strategic direction, objectives and action plans, taking into account businessopportunities and RBC’s risk appetite.Strategic oversightRisk oversightIndependenceIn carrying out this oversight role, the board actively engages in setting the long term strategic goals for the organization, reviews andapproves business strategies, corporate financial objectives and financial and capital plans that are consistent with the strategic goals,and monitors RBC’s performance in executing strategies and meeting objectives.The board oversees the frameworks, policies and systems to identify and manage risks to the businesses, and seeks to embed a strongrisk aware culture throughout RBC.The board actively monitors the organization’s risk profile relative to risk appetite and seeks to ensure that management’s plans andactivities provide an appropriate balance of return for the risks assumed and are prudently focused on generating shareholder value.Independence from management is fundamental to the board’s effective oversight, and mechanisms are in place to ensure itsindependence.All direct and indirect material relationships with RBC are considered in determining whether a member of the board is independent.AccountabilityTransparency is a hallmark of good governance. The board is committed to clear and comprehensive financial reporting and disclosureand to constructive shareholder and stakeholder engagement.The board has carefully defined the expectations and scope of duties of the board, its committees and management.CORPORATE GOVERNANCE FRAMEWORK4
The board is committed to continuously improving its corporate governance principles, policies and practices.ContinuousImprovementRBC’s approach to corporate governance is designed to align the interests of the board and management with those of shareholders, tosupport the stewardship role of the board and to enhance the board’s ability to safeguard the interests of shareholders throughindependent supervision of management.To ensure policies and practices meet or exceed evolving best practices and regulatory expectations, RBC’s corporate governancesystem is subject to ongoing review by the governance committee.Our governance structureOur governance structure establishes the fundamental relationships amongthe board, its committees, management, shareholders and other stakeholders.We define values that set the tone of our organizational culture as well as ourstrategic and corporate objectives, and we determine our plans for achievingand monitoring performance through this structure.Role of the boardThe board is responsible for the overall stewardship of RBC and fulfills thisresponsibility by overseeing management and aiming to enhance long-termshareholder value. Its role consists of two fundamental elements: decisionmaking and oversight. The decision-making function is exercised through theformulation with management of fundamental policies and strategic goals andthe approval of certain significant actions. The oversight function concerns thereview of management decisions, the adequacy of systems and controls andthe implementation of policies. The board makes major policy decisions,participates in strategic planning, delegates to management authority andresponsibility for day-to-day affairs and reviews management’s performanceand effectiveness.The Bank Act specifies certain important matters that the board must address,such as the approval of financial statements and declarations of dividends. TheCORPORATE GOVERNANCE FRAMEWORK5
board reserves the right to make certain decisions and delegates others to management. Any responsibilities not delegated to management remain with theboard and its committees. In some matters, management’s discretion is limited by dollar thresholds beyond which approval by the board is required. Forexample, such thresholds exist for investments and divestitures, decisions relating to mergers and acquisitions, intra-group transactions, operatingexpenditures, capital and funding and project initiatives.The board’s functions are fully described in its charter, which is approved by the board. The specific responsibilities of the board are described in the RBCannual report and management proxy circular and include the following matters: establishing the bank’s purpose, vision and values fostering a culture of integrity and good governance strategic planning identifying risks and overseeing risk management overseeing financial reporting, internal controls, communications and public disclosure talent management and succession planning, evaluating performance and approving compensation of senior management, defining our corporate governance structure – including principles, guidelines and practices – which establishes the fundamental relationships amongthe board, its committees, management, shareholders and other stakeholders, and overseeing our enterprise approach to environmental and social matters, including our approach to climate change.Role of the board chairHaving an independent, non-executive board chair enhances management’s accountability and the board’s independent oversight. The board chair leads boardand shareholder meetings and is responsible for the management, development and effective functioning of the board. While she does not serve on any boardcommittee, she attends and participates in committee meetings. The board chair has unrestricted access to management, as well as the authority to engage, atthe expense of RBC, independent advisors, including legal counsel, and to approve the fees and terms of their engagement. She does not have the deciding voteif a board vote results in a tie.Among other things, the board chair also: advises the CEO on major issues and liaises between the board and senior management participates in the orientation of new directors and the continuing development of current directors with the governance committee, conducts the board’s effectiveness evaluation and plans board succession and recruitmentCORPORATE GOVERNANCE FRAMEWORK6
interacts with directors and senior executives throughout the year meets with regulators, shareholders and stakeholders on behalf of the board, and periodically attends board meetings and meets with independent directors of our key subsidiaries.The board reviews and approves the board chair’s mandate, while the governance committee, under the direction of its chair, annually assesses theeffectiveness of the board chair in fulfilling her mandate.Committees of the boardTo assist in exercising its responsibilities, the board has established four committees: audit committee risk committee governance committee, and human resources committee.The committees all have a written mandate that sets out their responsibilities and qualifications for committee membership under applicable laws andregulations. The governance committee reviews the board and committee mandates, which outline their areas of responsibility, and allocates responsibilities asrequired, taking into account regulatory guidance and industry best practices. These reviews ensure the board and its committees are adaptive and responsiveto new requirements and continue to practice strong oversight.The committees annually assess their effectiveness to ensure that they have effectively fulfilled their responsibilities as set out in their mandates. The chair ofeach committee, in consultation with the committee members and senior management, develops work plans for the year, which provide a thematic view of theforward agenda and are intended to focus the committee on the most important aspects of its mandate with sufficient frequency.Each committee prepares annually a report of its activities over the previous year. These reports, as well as details about the composition and responsibilitiesof each committee, are included annually in the management proxy circular.The committee chairs report to the board following each committee meeting, and make such recommendations as are deemed appropriate in thecircumstances.During their tenure, directors normally serve on two committees at a time for a minimum of three years per committee, and many directors serve on everycommittee during their tenure as director.CORPORATE GOVERNANCE FRAMEWORK7
Committee chairsEach committee is comprised entirely of independent directors and is chaired by an independent director who is responsible for the effective operation of thecommittee and the fulfillment of the committee’s mandate. The board has approved a mandate for the committee chairs. To facilitate open and candiddiscussion among committee members, each committee chair regularly leads in-camera sessions without management present.Audit committeeManagement of RBC is responsible for the preparation, presentation and integrity of the financial statements and for maintaining appropriate accounting andfinancial reporting principles,
talent management and succession planning, evaluating performance and approving compensation of senior management, defining our corporate governance structure – including principles, guidelines and practices – which establishes the fundamental relationships among
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2 RBC FUNDS AND RBC PRIVATE POOLS Annual Information Form Name, formation and history of the funds This annual information form contains information about the RBC Funds (collectively, the RBC Funds) and the RBC Private Pools (collectively, the RBC Private Pools and together with the RBC Funds, the ) listed on the cover page. In this document:funds we, us and our refer to RBC Global Asset .
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