In the difficult market conditions of 2008, the board’s role in overseeing management of the principal risks of RBC’s businesses took on added significance. The Board of Directors has been actively engaged in reviewing RBC’s risk profile, while overseeing management’s progress throughout the year in implementing business strategies in the face of a rapidly changing marketplace. In doing so, we have brought our collective business experience to bear in assessing whether management’s plans and activities are prudent and focused on generating shareholder value and achieving success in the short, medium and long term within an effective risk control environment. During 2008, we regularly measured corporate performance against objectives, approving significant capital expenditures and major transactions that were in alignment with the strategic plan approved by the board. Balanced by our careful oversight of policies, processes and systems that are designed to support prudent management of risks, we provided forward-looking advice to management concerning several strategic initiatives, including the significant expansion of RBC’s presence in Canada and internationally. In particular, the board played an important role in advising management on major acquisitions that further built RBC’s business in Canada (PH&N), the U.S. (ANB and FBW) and the Caribbean (RBTT).

To maximize our contribution, the Board of Directors is committed to adapting best practices in governance to the needs of the organization. This year we are the private sector winner of the National Award in Governance, conferred by The Conference Board of Canada and Spencer Stuart. While our governance practices, policies and processes have received recognition in the past, this latest award is especially meaningful. It recognizes the creation of a performance management framework aimed at enhancing the flow and quality of information to management and the Board of Directors. The availability of more timely, accurate and actionable information facilitates insightful analysis by directors and promotes constructive debate, both within the board and between the board and management.

This innovation reflects RBC’s continuous improvement of its progressive governance processes. This approach to corporate governance supports us in our role as stewards of the organization, safeguarding the interests of shareholders by exercising independent supervision, while acting as key advisors to management in pursuit of a shared goal: enhancing long-term shareholder value.

Harnessing the energies and talents of strong individuals into a dynamic team is among my duties as non-executive Chairman. My goal is to provide leadership to enable the Board of Directors to continue to add value to RBC’s performance. This involves instilling a common vision, maintaining high standards of board independence and overseeing processes of board assessment and peer review to optimize the board’s effectiveness in fulfilling its mandate. Another priority is our continuing education program which equips directors to provide current and knowledgeable guidance to management in a rapidly evolving regulatory and business environment. Over the past year, the board received presentations dealing with such matters as methodologies used in assessing and controlling risk, the implications of the Basel II Capital Accord, financial institution disclosure practices, and implementation of International Financial Reporting Standards.

The ability of board members to contribute from a diversity of thought and business experience enhances the value we bring to the organization. Acting through our Corporate Governance and Public Policy Committee, the board places considerable importance on the process of selecting director candidates, weighing the existing strengths of the board against the evolving needs of the organization. We seek highly capable and independent individuals with a grasp of strategic management, who have been actively engaged in business leadership and have demonstrated high personal standards of behaviour and values. In 2008 we were pleased to welcome our newest director, Edward Sonshine, Q.C., president and chief executive officer of RioCan Real Estate Investment Trust, whose experience adds an important dimension to the board.

In a challenging year for the financial services industry, Royal Bank of Canada maintained its momentum and continued to build on past successes. Your Board of Directors is proud to be actively engaged in the organization’s achievements. On behalf of the board, I would like to extend appreciation to management and employees around the world for their contributions to the success of the organization. While continuing to operate in a challenging environment, the Board of Directors, management and employees remain focused on serving RBC’s clients and creating value for shareholders.

David P. O’Brien
Chairman of the Board