Corporate governance

Beyond compliance

Our practices and policies fully comply with guidelines established by Canadian securities regulators as well as applicable provisions of the U.S. Sarbanes-Oxley Act of 2002 and requirements adopted by the New York Stock Exchange and the U.S. Securities and Exchange Commission. Strategically, our governance approach is to look beyond regulatory compliance with a view to building on our strong governance fundamentals by implementing best practices in support of the goals of the organization.

In these pages we summarize some of the steps taken in recent years to achieve leading standards of corporate governance. A more complete description of RBC’s corporate governance practices may be found in our Management Proxy Circular and on our website at

Building on our tradition of excellence

Over the past few years, RBC has adopted many significant leading governance practices, including:

•  New rules requiring directors to tender their resignations following the Annual Meeting if they fail to receive majority shareholder support
Increased minimum share ownership guideline for directors to $500,000 from the previous level of $300,000, to strengthen alignment of their interests with those of shareholders
Increased minimum share ownership requirements for top executives, with the CEO’s minimum threshold rising from six times to seven times average base salary, to further align management and shareholder interests
A requirement for senior executives to retain for at least one year Royal Bank common shares with a value equal to the after-tax gain realized on the exercise of options, so as to increase the alignment of their interests with those of shareholders
A Performance Deferred Share Program to strengthen the alignment of the interests of management with shareholders by tying senior management’s rewards to the performance of RBC relative to a peer group of competing North American financial institutions
Diminished share dilution resulting from the reduction of the number of stock option grants awarded to management by approximately 70 per cent since 2003.

In addition:

•  Our comprehensive Director Independence Policy has continued to evolve in response to best practices and regulatory refinements. Under this policy, 14 of the 17 currently serving directors are independent
Meetings of independent directors are held regularly
All members of the board’s Audit Committee, Human Resources Committee, and Corporate Governance and Public Policy Committee are independent, and a majority of members of the Conduct Review and Risk Policy Committee are independent
For the Audit Committee, more stringent independence criteria have been implemented, a financial expert has been designated, financial literacy requirements have been defined and a policy limiting the service of our Audit Committee members on the audit committees of other companies has been approved
The Audit, Human Resources and Corporate Governance and Public Policy committees have sole authority to retain and approve the fees of independent, external advisors. The Human Resources Committee retains an independent compensation consultant
Board and director evaluation procedures have been enhanced, with written peer reviews added to complement the established peer assessment practice of one-on-one interviews with the Chairman
The process of selecting individuals for nomination as directors has been formalized to ensure that the strengths of potential candidates are weighed against the competencies and skills that the board as a whole should possess.

Demonstrating leadership

These measures build on our previous governance initiatives, which include, among many others:

•  Ensuring independent leadership of the Board of Directors by being first among our peer companies to separate the positions of Chairman and Chief Executive Officer in 2001
Adopting a policy limiting interlocking directorships of board members
Discontinuing grants under the Director Stock Option Plan in 2002
Being among the first major Canadian companies to expense stock options in financial statements, which we have done since 2003
Providing continuous educational material, presentations and programs to directors so they remain knowledgeable and informed about the ever-changing business and regulatory environment and the specialized and complex aspects of finance and our business operations.

Enhancing our disclosure

In keeping with our goals of continuously improving governance and providing greater transparency and simplicity in our communications, in recent years we have enhanced disclosure in our Management Proxy Circular, including:

•  More detail on the compensation paid to individual directors and their share ownership
Greater clarity on senior officers’ compensation relative to fiscal year performance
Three-year, easy-to-read overviews of senior officers’ compensation
Total aggregate compensation of the top management team as a percentage of market capitalization and a percentage of net income after tax
Increased disclosure regarding executive pensions, including the impact of changes in interest rates, annual service cost, accrued obligation and value of retirement plans for top executives.

Important information about our governance practices

The following additional information on our governance practices is available at

•  Our Statement of Corporate Governance Practices and Guidelines
Our Code of Conduct
The charters of our Board of Directors and each of its committees
Our Director Independence Policy
Position descriptions for the Chairman of the Board, the chairs of committees of the board, and the President and Chief Executive Officer
A summary of significant differences between the NYSE rules and our governance practices
Our Corporate Responsibility Report.

2007 Annual Meeting

Shareholders are invited to attend our Annual Meeting at 9 a.m. (Eastern Standard Time) on Friday, March 2, 2007, at the Metro Toronto Convention Centre, North Building, 255 Front Street West, Toronto, or to listen to a webcast of the event. Further details will be made available on our investor relations website at investorrelations/conference.



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