Royal Bank of Canada - RBC

Royal Bank of CanadaStatement of Corporate Governance Practices(as of February 9, 2021)

Royal Bank of Canada 1

Governance

Governance

Our approach to governance 2

The core principles that drive our approach 2

Our governance structure 3

What the directors oversee 5

Our approach to environmental, social and governance (ESG) matters 6

Our approach to subsidiary governance 7

Engaging with shareholders and other stakeholders 7

Culture and conduct 8

Our Code of Conduct 8

Financial reporting hotline 9

Conflicts of interest 9

Our commitment to diversity and inclusion 9

Board independence 11

Assessing director independence 11

Guidelines to address other professional activities 11

Maintaining independence 12

Nominating, developing and evaluating board members 12

Finding the right director candidates 12

How to submit a nomination 13

Evaluating candidates for the board 13

Board size considerations 14

Majority voting 14

Tenure policy 14

Helping directors succeed in their roles 15

Evaluating the board, committees, chairs and directors 18

Direction compensation 20

The information in this proxy circular is as of February 9, 2021. All dollar amounts are inCanadian dollars, unless stated otherwise.

In this circular, “RBC”, the “bank”, “we” and “our” mean Royal Bank of Canada; “shares”means RBC common shares; and “shareholder” and “you” mean a holder of shares, unlessthe context indicates otherwise.

All references to websites are for your information only. The information they contain andany other websites they refer to are not part of this circular.

2 Royal Bank of Canada

Governance

Our approach to governanceWe are committed to high standards of governance that are consistent with regulatoryexpectations and evolving best practices and are aligned with our strategy and risk appetite.We believe that good governance is not just about overseeing RBC and its practices, butdoing so in a way that is transparent and ethical. It involves an independent board activelyengaging with all stakeholders, knowing the business and its risks, constructively challengingmanagement, understanding the opportunities and challenges of a changing industry andeconomy, setting robust standards and principles that will guide RBC in delivering on itspurpose of helping clients thrive and communities prosper while enhancing value for ourshareholders.

The core principles that drive our approach

Culture and conduct

By setting the tone from above, the board champions the values of trust, integrityand good governance.

Stewardship

Directors are the stewards of RBC, exercising independent judgment inoverseeing management and safeguarding the interests of shareholders.

Strategic oversight

Directors are key advisors to management, advising on strategic direction,objectives and action plans, taking into account business opportunities and thebank’s risk appetite.

Risk oversight

The board oversees the frameworks, policies and systems to identify andmanage risks to the businesses and seeks to embed a strong risk-aware culturethroughout RBC.

Independence

Independence from the bank and management is fundamental to the board’seffective oversight, and mechanisms are in place to ensure its independence.

Accountability

Transparency is a hallmark of good governance. The board is committed to clearand comprehensive financial reporting and disclosure and to constructiveshareholder and stakeholder engagement.

Continuous improvement

The board is committed to continuously improving its corporate governanceprinciples, policies and practices.

The board exercises its authority in accordance with the Bank Act and other applicable lawsand regulations, including those of the Canadian Securities Administrators, the Toronto StockExchange, the New York Stock Exchange and the U.S. Securities and Exchange Commission.


Governance

Our governance structure

Our governance structure establishes the fundamental relationships amongst the board, itscommittees, management, shareholders and other stakeholders.

We define values that set the tone of our organizational culture as well as our strategic andcorporate objectives, and we determine our plans for achieving and monitoring performancethrough this structure.

Senior management

Appoints

Regulators

Governance committee

Human resources committee

Audit committee

AuditorsAppoint

Open dialogue

Elect

ComplianceFinance

Internal Audit

Shareholders

Engage(s)

Independent control

functions

Board of directors

Risk committee

Risk Management

Role of the boardDirectors oversee management and aim to enhance long-term shareholder value.

The board makes major policy decisions, participates in strategic planning and reviewsmanagement’s performance and effectiveness. The Bank Act specifies important matters theboard must address, such as the approval of financial statements and declarations ofdividends. The board reserves the right to make certain decisions and delegates others tomanagement. Management requires board approval for matters that exceed certain dollarthresholds.


Governance

Board oversight during the COVID-19 crisis

In 2020, the board and its committees were agile and proactive, shifting priorities to addressimmediate and emerging risks presented by the COVID-19 pandemic, meeting virtually andmore often, while continuing to work to achieve the priorities set before the pandemic,effectively fulfilling their duty to supervise the management of the business and affairs of thebank.

The board and committees metfrequently during the earlystages of the crisis about therapidly evolving situation.

The board and committeechairs were in constantcommunication with theCEO and senior executivesthroughout the crisis.

Regular written updates fromthe CEO and senior executiveskept board members informedin real time.

Directors and managementwere highly engaged,meeting virtually andextending meeting cycles.

Role of the governance committee

The governance committee oversees board renewal and nominates directors for election orre-election (see page 36 for more information on nominating board members). Thegovernance committee also recommends committee membership and committee chairsuccessors and oversees the process for board chair succession.

The governance committee reviews board, committee and chair mandates, which outlineareas of responsibility and oversight, and allocates responsibilities as required, taking intoaccount regulatory guidance and industry best practices. These reviews ensure that theboard, its committees and the board and committee chairs are adaptive and responsive tonew requirements and continue to practice strong oversight.

Directors serve on two committees at a time for a minimum of three years per committee,and many directors serve on every committee during their tenure as director.

The governance committee chair, as well as each committee chair, reports to the boardfollowing each committee meeting.

Role of the board chair

Kathleen Taylor is our independent board chair.

Having an independent, non-executive board chair enhances management’s accountabilityand the board’s independent oversight. The board chair leads board and shareholdermeetings and is responsible for the management, development and effective functioning ofthe board. While she does not serve on any board committee, she attends and participates incommittee meetings. The board chair does not have the deciding vote if a board vote resultsin 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 currentdirectors

• with the governance committee, conducts the board’s effectiveness evaluation (as outlinedon page 42) and plans board succession and recruitment

• 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 keysubsidiaries.


Governance

The board reviews and approves the board chair’s mandate, while the governancecommittee, under the direction of its chair, annually assesses the effectiveness of theboard chair in fulfilling her mandate.

You can find the mandates of the board, board chair and board committees atrbc.com/governance.

What the directors oversee

Culture and conduct • Champion RBC values, as set out in our Code of Conduct

• Oversee our culture of integrity in dealing with clients, communities andothers, in working together, in how we do business and in safeguardingentrusted assets

• Promote a respectful environment where colleagues can speak up andchallenge behaviours when they do not align with RBC values

Strategic planning • Oversee our strategic direction, plans and priorities and ensure theyalign with our risk appetite

• Discuss and challenge enterprise strategy with management andmonitor the implementation of strategic initiatives

• Annually approve the strategic plan, taking into account theopportunities and risks of the businesses

• Approve our financial objectives and operating plans, includingsignificant capital allocations, expenditures and transactions thatexceed delegated authorities

• Review and approve the RBC organizational structure

• Review the results of the annual assessment of business performance

Risk management • Oversee and approve our risk appetite framework

• Oversee strategic risk management by approving risk managementframeworks and policies and monitoring conduct risk

• Promote a strong risk culture and ensure conduct adheres to theenterprise-wide risk management framework

• Meet with regulators to discuss our risk appetite and controlenvironment

Financial reportingand internalcontrols

• Approve the quarterly and annual financial reports

• Oversee compliance with applicable audit, accounting and financialreporting requirements

• Monitor management’s implementation and maintenance of effectiveinternal control systems, including management information systems,and assess their adequacy and effectiveness


Governance

Talent managementand successionplanning

• Supervise succession planning processes, which include the selection,appointment and development of the CEO and officers reporting to theCEO (the Group Executive)

• Evaluate and approve the compensation of the CEO and seniormanagement team in a manner consistent with prudential incentives

• Annually review and approve the CEO’s mandate

• Review strategies and programs for the assessment and developmentof talent and for increasing diversity and inclusion at all levels of theorganization

Governance • Establish appropriate structures and procedures to allow the board tofunction effectively and independently

• Develop corporate governance principles and guidelines

• Monitor best governance practices

Environmental andsocial

• Oversee our enterprise approach to environmental and social mattersand ensure the bank’s business is conducted to meet high standards ofenvironmental and social responsibility

• Oversee our enterprise approach to climate change with an objective tosupport our clients in the transition to a low-carbon economy

• Annually review the bank’s environmental and social disclosure,including the ESG Performance Report and the Task Force on Climate-related Financial Disclosures Report

Our approach to environmental, social and governance (ESG) matters

Our success as a company is defined by the long-term well-being of the people that we serve,the communities in which we operate, and the planet that we will leave to future generations.Our approach to managing ESG matters, including our corporate citizenship strategy,programs and performance, uses a decentralized organizational model that reflects ourbelief that ESG matters should be embedded in our business.

Together our ESG Performance Report, Public Accountability Statement and Task Force onClimate-related Financial Disclosure (TCFD) Report describe and disclose the many waysRBC demonstrates its purpose of helping clients thrive and communities prosper. Theyprovide our investors and other key stakeholders with greater transparency into our strategy,commitments and performance on relevant environmental, social and governance topics aswell as our balanced scorecard approach to delivering leading performance.

The board provides active oversight of our strategic approaches to managing climate-relatedimpacts and carefully assesses whether management’s plans appropriately balance strategicopportunities with appropriate risk discipline. The governance committee is responsible foroverseeing our corporate citizenship programs, policies and performance. It reviews our ESGPerformance Report, our Public Accountability Statement and TCFD Report as well as ourHuman Rights Position Statement. The risk committee oversees our risk management,including management of environmental and social risks. The human resources committeeoversees issues related to major compensation programs, talent management andmanagement succession, and the critical skills needed to execute our strategic goals.

As more fully described on page 71 of this circular, our executive compensation programrewards executives for successfully executing on the bank’s strategy, which includes ESGobjectives.

For more information on our commitment to community and sustainability or to read thesereports, visit rbc.com/community.


Governance

Our approach to subsidiary governanceRBC takes an enterprise-wide approach to subsidiary governance.

The board and its committees oversee subsidiary governance on an enterprise level and thegovernance committee coordinates this oversight. Effective oversight by the board issupported by defined mechanisms for escalating subsidiary risk and governance issues,formal and informal touchpoints between the board, senior management and localsubsidiaries and regular enterprise-wide subsidiary reporting and approval of key enterprise-wide frameworks.

The subsidiary governance office manages the corporate governance of RBC subsidiariesthrough a network of global offices that act as regional corporate governance hubs, bringingtogether local expertise and global oversight. This centralized approach provides consistencyand transparency, enabling us to be responsive to evolving business needs, best practicesand regulatory requirements and expectations.

Our policies on subsidiary board composition and functioning enhance our stronggovernance. Active and engaged subsidiary boards play a key role in overseeing our legalentities. Many have independent directors with specific skills and experience to assist theboard in advancing the strategic priorities of RBC and its subsidiaries and constructivelychallenging management. We continue to accelerate gender and non-gender diversity on oursubsidiary boards aligned to enterprise diversity and inclusion strategies and to leverage thesubsidiary board experience to build talent for growth across the organization.

Engaging with shareholders and other stakeholders

Continuous and open dialogue with shareholders and other stakeholders is a key priority forus. The board encourages all stakeholders to provide timely and meaningful feedback,facilitates constructive engagement and regularly reviews its engagement with shareholdersand stakeholders for alignment with best practices.

There are many ways people can engage with us and access important information:

Board of directors Stakeholders can communicate with the directors or the board chair asdescribed at rbc.com/governance.

Management The CEO and other members of the Group Executive, senior management,Investor Relations and the secretary meet regularly with financial analysts,investors and other stakeholders.

Investor Relations Investor Relations is responsible for communicating with the investingpublic on behalf of RBC.

Live broadcasts We broadcast our quarterly earnings calls with analysts live and archivethem on our Investor Relations site for a period of three months after eachcall. Shareholders can also participate in our annual meeting via a livewebcast, which is archived on our Investor Relations site until the nextannual meeting.

Please see the back cover of this circular for the contact details of the board chair,secretary and Investor Relations.


Governance

Culture and conductThe board sets and expects the highest standards of conduct at RBC to build and maintainthe trust of our clients, investors, colleagues and communities. The board, with management,sets the tone from above and promotes an open and transparent culture at RBC. Werecognize that the board’s responsibility to oversee culture and conduct is broad anddemands that we adopt a continuous improvement mindset towards our practices.

To that end, our governance committee oversees the management of culture and conduct. Itcontinues to enhance board and committee reporting on culture and conduct matters –including client complaint handling and outcomes, employee conduct and risk culture as wellas the impact on the integrity, soundness and resilience of financial markets and on ourreputation – and monitor emerging trends and best practices to help refine a holisticapproach to overseeing these critical issues. The governance committee meets on a regularbasis with the Chief Human Resources Officer, the Chief Risk Officer, the Chief ComplianceOfficer and the General Counsel to review key matters and progress on programs thatstrengthen enterprise culture and conduct.

We also encourage our employees to help shape our culture by speaking up and challengingbehaviours when they do not align with our values.

Our Code of Conduct

The RBC Code of Conduct establishes standards of desired behaviours that apply todirectors, senior management and all employees, including the responsibility to be truthful,respect others, comply with laws, regulations and our policies, and engage in sales practicesthat are fair and not misleading.

The board annually approves the Code of Conduct and closely collaborates withmanagement to set the tone from above and promote a strong governance culture thatinfluences RBC at every level and across all our global businesses.

Our Code of Conduct sets out fundamental principles that guide the board in itsdeliberations. It creates a frame of reference for properly addressing sensitive and complexissues, requires all employees to report misconduct and outlines our accountabilities ifstandards of conduct are not upheld.

RBC fosters an open and transparent environment where employees can speak up and raiseconcerns through various channels without any form of retaliation. The RBC global conducthotline is a confidential publicly available channel for all employees to raise concerns andreport misconduct. A third-party, independent of RBC, administers the hotline, and employeescan use it anonymously.

We have an online learning program and annual employee testing and acknowledgement todemonstrate that employees are familiar with and understand the values and principlesoutlined in our Code of Conduct. Directors must acknowledge each year that they have readand understand the Code of Conduct and certify that they are in compliance with it. We alsohave policies and procedures to address more specific aspects of fair business conduct, suchas anti-bribery, anti-corruption and insider trading policies.

Waivers of the application of the Code of Conduct are considered only in exceptionalcircumstances. In the case of executive officers and directors, these waivers must be reportedto the governance committee or the board and must be publicly disclosed in accordance withthe law.

A copy of our Code of Conduct is available at rbc.com/governance and has been filed withthe securities regulators at sedar.com.

The board did not grant any waivers of our Code of Conduct to executive officers ordirectors in 2020.


Governance

Financial reporting hotline

Our stakeholders rely on the accuracy of our financial reporting. Employees,officers, directors and third parties are encouraged to report, on a confidential andanonymous basis, any allegations of wrongdoing relating to accounting, auditing or internalaccounting controls via the RBC global conduct hotline. Details on our reporting hotline canbe found at rbc.com/governance. Issues are investigated internally or by an independentexternal party, and any significant issues are raised with the audit committee chair.

Conflicts of interest

In practice, conflicts of interest can arise as a result of professional and contractualarrangements, directorships and other personal or business interests. As part of its oversightof conduct review, the governance committee establishes and monitors procedures toresolve conflicts of interest. Where the personal or business interests of directors andexecutive officers may conflict with those of RBC, they must disclose the nature and extent ofthe conflict of interest as soon as possible, in writing or by requesting to have it entered in theminutes of the meeting. In the event of a conflict of interest, the director or executive officerin question will leave the meeting when the issue is discussed and, in the case of a director,will not vote or participate in the decision.

The governance committee is responsible for overseeing transactions with directors andsenior officers of the bank who are related parties as defined under the Bank Act. Itperiodically approves the procedures governing permitted transactions with related partiesand receives regular reports to ensure that transactions with related parties comply with theBank Act and internal procedures.

Our commitment to diversity and inclusion

Diversity and inclusion has always been a core value at RBC. To support our diversity andinclusion vision to be among the most inclusive and successful companies, putting diversityinto action to help employees, clients and communities thrive, we seek to be a recognizedleader in inclusion and leadership diversity and the financial institution of choice for diverseclient markets, and leverage diversity and inclusion for the growth and success of RBC, ourclients and communities. We also seek to attract and retain the best talent from the entiretalent pool, which requires considering a diverse range of skills and backgrounds andembracing differences. The board is committed to diversity and inclusion at all levels as itprovides RBC access to a wider pool of talent and drives creativity, innovation and growth.

Board Diversity Policy

42% (5 out of 12) of our director nominees are women and 17% (2 out of 12) areBIPOC (Black, Indigenous and people of colour).

A balanced and diverse board is critical to successful board oversight. We firmly believe thatthe board should reflect the diversity of our clients, employees, shareholders andcommunities. We’re proud of the leadership role we play in promoting board gender diversityin corporate Canada and the progress we have made toward achieving a diverse board thattoday has over 40% women. However, we recognize that we need to do more to furtherenhance the representation of BIPOC as well as other diverse groups among board members.

To help achieve our diversity objectives, the board has approved a Board Diversity Policywhich establishes that diversity is a critical lens through which the governance committeeassesses each director candidate necessary to meet our goals of excellence, innovation andsuccess.

Pursuant to our commitment to a balanced and diverse board, gender and non-genderdiversity, ethnicity, race, ancestral origin, age, geography, background, sexual orientationand other dimensions of diversity are always important factors considered by thegovernance committee.


Governance

In particular, the governance committee considers the level of representation of women,BIPOC and other diverse groups on the board in identifying and nominating candidates forelection. The Board Diversity Policy also requires that men and women each comprise atleast 35% to 45% of directors (up from 30%).

We do not establish diversity objectives at the board level for BIPOC or other diverse groupsdue to the small size of the board and the need to carefully consider a broad range of criteriawhen appointing directors, including skills and residency regulatory requirements applicableto directors of Canadian financial institutions.

Every year, the governance committee completes a self-assessment that measures, amongother things, its effectiveness in guiding the board toward its diversity objectives. It alsoreviews the board’s composition and any anticipated vacancies through the lens of our BoardDiversity Policy and our objectives.

Diversity of the executive team

46% of our executives in Canada are women and 21% are BIPOC.1

Diversity is integrated throughout our approach to talent management, which is highlightedon page 88. We believe a stronger future relies on a pipeline of diverse leaders. Our talentmanagement practices ensure we have a diverse group of leaders, including women andBIPOC in executive and senior management roles.

The representation of talent in executive and senior manager roles is a reflection of thediversity of our talent pipeline which drives better performance, stronger growth and greaterinnovation. We focus on accelerating the development of diverse leaders to strengthen oursuccession bench through a number of programs, including: Women in Leadership, Ignite, ourBIPOC leadership development program, and RLaunch, a program for senior-level individualswho have been on a career break for longer than one year.

We also consider diversity when identifying development opportunities for our high-potentialemployees, such as inclusion on executive staffing lists, directorships on subsidiary boards,targeted development plans and participation in formal development and mentoringprograms. We believe staffing matters when it comes to making meaningful change and haveset ambitious diversity staffing goals in addition to representation goals. In 2020, wecommitted to tackle systemic racism and bias across three key pillars through our ActionsAgainst Systemic Racism, one of which was Redefining Inclusive Leadership. As part of thosecommitments, our new executive staffing goals for fiscal 2021 are 50% women and 30%BIPOC (up from 20%) and today we are proud to lead our Canadian peers in therepresentation rate of women and visible minorities in executive roles.2

We do not establish specific diversity targets at the Group Executive level due to the smallsize of this group and the need to carefully consider a broad range of criteria; mostimportantly, the appropriate matching of business needs to drive long-term value for ourstakeholders and the proven skills and capabilities of new appointees. As of the date of thiscircular, 10% (1 out of 10) of the executive officers who make up the Group Executive arewomen.

The RBC Diversity Leadership Council, chaired by the CEO and comprising senior executivesfrom across our businesses, promotes diversity and inclusion and oversees strategies andaction plans with measurable outcomes for all of RBC. We believe that in order to speak upfor inclusion, we need to speak about inclusion and we are taking action to empower, enableand engage our colleagues, communities and clients to have meaningful conversationsthrough our diversity portal at rbc.com/diversity.

1 As of October 31, 2020.2 According to the most recent publicly available employment equity data for businesses in Canada governed by the

Employment Equity Act (Canada).


Governance

Board independenceAll 2020 director nominees are independent except for our CEO.

To be effective, the board must be independent. To this end, the board has adopted aDirector Independence Policy that incorporates the “affiliated persons” regulations from theBank Act and the definition of “independence” from the Canadian Securities Administratorsguidelines. It also sets additional standards for members of our audit committee and ourhuman resources committee. The Director Independence Policy is filed with securitiesregulators at sedar.com and is available at rbc.com/governance.

Assessing director independence

Directors are independent only if they are unaffiliated with RBC and the board hasdetermined that they have no direct or indirect material relationship with RBC that couldinterfere with their independent judgment.

To determine whether directors are independent, the board uses information about theirpersonal and business relationships with RBC, including their personal banking and financialservices information. The board collects this information from sources such as:

• director responses to an annual detailed questionnaire

• director biographical information, and

• internal records and reports on relationships between directors, entities affiliated withdirectors and RBC.

The board tests relationships between directors and RBC using materiality thresholds set outin our Director Independence Policy. The board also considers other facts and circumstancesit deems relevant to determine whether any of these relationships could reasonably beexpected to interfere with a director’s independent judgment. It considers the nature andextent of these relationships and their importance not only to directors and to RBC, but alsoto entities with which directors are affiliated.

Under the Bank Act, the CEO must be a member of the board. He is the only director who isnot independent.

Guidelines to address other professional activities

None of the director nominees serve on more than two public company boards, inaddition to RBC.

Directors must notify the board chair, governance committee chair and secretary before theyengage in any new professional activities, including a directorship (public or private),employment or as an advisor or consultant. The board chair and governance committee chairassess whether the directors will have sufficient time and energy to devote to their RBCresponsibilities and evaluate potential circumstances that could impact their independentthinking.

Board interlock policy No more than two RBC board members may serve on the samepublic company board. Currently no RBC director serves onanother public company board with another RBC director.

Service on public companyaudit committees

No member of the RBC audit committee may serve on an auditcommittee of more than two other public companies.


Governance

Maintaining independence

The board has established other important ways to maintain its independence.

Access to management All independent directors have unrestricted access tomanagement and RBC employees.

External advisors Each board committee and, with the approval of the boardchair, individual directors may engage external advisors at theexpense of RBC to ensure they have access to independentadvice.

In camera sessions The board chair and committee chairs lead sessions withoutmanagement to facilitate open and candid discussion amongthe directors.

In fiscal 2020, seven board and all regularly scheduled committee meetings had anin camera session without management.

Nominating, developing and evaluating board membersFinding the right director candidates

We regularly engage independent search firms to help identify high-potentialcandidates.

The board derives its strength from the diversity, qualities, competencies and experience ofits members.

The governance committee oversees board renewal and nominates directors for election tothe board. Fundamental to the committee’s purpose is to build a board that is composed ofdirectors who possess the talent and experience to support the future strategic objectives ofRBC, with strong risk discipline in the context of a rapidly changing and increasinglycompetitive global marketplace and evolving regulatory landscape. The committee reviewsboard composition and any anticipated board vacancies through the lens of the BoardDiversity Policy. RBC shareholders elect the directors at each annual meeting to serve untilthe next annual meeting.

Every year, the governance committee works with the board chair to review the credentials ofcandidates proposed for election or re-election to the board and assess their competenciesand experience against those that the board believes, as a whole, it should possess. As partof this analysis, the committee maintains a matrix (see page 20) indicating the majorcompetencies and major experience that each director contributes.


Governance

The governance committee considers the results of the board and director effectivenessevaluations in its assessment of the skills and competencies needed to support our strategicobjectives.

Candidatepool

Identified by:

• search firms

• directors

• management

• shareholders

• individuals and otherstakeholders

• reference skills matrix

• assessqualifications

• consider diversity

• reviewindependence

• check conflicts

• interview process

• governance committee recommends

• board approves

• shareholders elect

5new directorselected by shareholderssince 2016

ResultsApprovalIn-depthreview

How to submit a nomination

Shareholders Shareholders may submit candidates to the board chair.

Proposal underthe Bank Act

In accordance with the Bank Act, qualifying shareholders maysubmit a formal proposal to nominate an individual for director.

Nomination under theProxy Access Policy

The RBC Proxy Access Policy provides an additional way forshareholders to submit director nominations and can be found atrbc.com/governance.

Individuals and otherstakeholders

Individuals and other stakeholders may also submit candidates tothe board chair.

Contact information can be found on the back cover of this circular.

Evaluating candidates for the board

The governance committee and the board chair work together to consider all qualifiedindividuals and maintain an evergreen list of potential candidates.

The board selects independent nominees possessing business and professional expertise,including relevant financial services industry and risk management expertise, senior-levelinvolvement in major organizations, international experience, a history of achievement andperformance at the highest level, and residency in and familiarity with geographic regionsrelevant to our strategic objectives.

To best support the bank in achieving its purpose of helping clients thrive and communitiesprosper, all director nominees are required to have experience in ESG matters. They mustalso share a commitment to the RBC values of integrity, putting the client first, diversity andinclusion, accountability and collaboration.

Our director effectiveness framework lays out the skills, commitment and conduct we expectfrom new and current directors (see page 42 for more on this). In line with our BoardDiversity Policy and our commitment to further improve diversity among board members, thegovernance committee also considers other important factors such as gender and


Governance

non-gender diversity, ethnicity, race, ancestral origin, age, geography, background, sexualorientation and other dimensions of diversity. In particular, it considers the level ofrepresentation of women, BIPOC and other diverse groups when considering candidatesto nominate.

Board size considerationsThis year, 12 nominees are standing for election as a director.

When determining its optimal size, the board balances two competing priorities:

• the business need for diversity of experiences, perspectives and backgrounds that alignwith the near- and long-term strategic objectives of RBC and reflect its diverse client andstakeholder base, and

• the need to be small enough to facilitate open and effective dialogue and thorough andresponsive decision-making.

Regulatory requirements and succession planning also play key roles in the board’sdetermination of its optimal size.

Majority voting

The board’s Majority Voting Policy states that any nominated director in an uncontestedboard election must immediately tender their resignation if they are not elected by at least amajority (50% plus 1 vote) of the votes cast in their election. The board will determinewhether to accept the resignation within 90 days. Absent exceptional circumstances, theboard will accept the resignation, making it effective immediately.

A director who tenders a resignation will not participate in any meeting where the board or acommittee is considering their resignation. RBC will promptly issue a news release with theboard’s decision. If the board determines not to accept the resignation, the news release willfully state the reasons for that decision.

Tenure policy

We have a tenure policy that outlines term limits in order to:

• balance the benefits of experience with the need for new perspectives, and

• achieve ongoing board renewal.

Directors* A director’s term lasts 15 years or until they reach the age of 70, whichevercomes first.

New directors may serve for at least six years, regardless of their age.

Board chair The board chair’s term is eight years.

Committee chairs A committee chair’s term is three years, which may be extended for up to twoyears, if appropriate, considering the expertise required to lead the relevantcommittee.

* For directors who joined the board prior to May 27, 2011, the term starts on March 1, 2012.

The board, upon the recommendation of the governance committee, may waive the termand/or age limits for the directors, the board chair and the committee chairs. In 2020, in lightof the ongoing COVID-19 crisis, the board approved the extension of the board chair’s tenureby one year until 2023 annual meeting.

Term limits do not take precedence over our annual director effectiveness evaluation.Nominations for re-election as director will be based on the needs of the board and RBC givenits strategic objectives and will take into consideration the results of the effectivenessevaluation and peer reviews.


Governance

A director is expected to submit their resignation to the board chair if:

• their qualifications, independence or other credentials change

• they no longer meet the eligibility rules under the board’s conflict of interest guidelines, or

• they are no longer qualified under the Bank Act or other applicable laws.

The governance committee will make a recommendation to the board on whether it shouldaccept the resignation. A director who tenders a resignation does not participate in thediscussion or decision-making process.

Helping directors succeed in their rolesThe board strives to ensure that new directorsreceive a thorough introduction to the role and alldirectors have access to the resources they need tofocus on ongoing development. The governancecommittee is responsible for making the transitionof new directors as seamless as possible andequipping them with the right tools to succeed andmake valuable contributions to the board and RBC.

Our principles-based approach reflects three keypillars to facilitate an agile and adaptive board, eachof which proved to be even more important in 2020as we moved to a virtual environment.

Key pillar Director activities and resources

Orientation andonboarding

• In-depth orientation guide covering our governance principles and policiesincluding our Code of Conduct and Director Independence Policy

• Strategic and business deep-dives with members of the Group Executiveand senior management

• Onboarding sessions with key governance, legal and function executives toadvise directors on their obligations and the internal controls and practicesin place at RBC

• Attendance at committee meetings even if a director is not a member

• Committee chair orientation with executive sponsors and the secretary

Integration • Mentorship program matching new directors with experienced members

• One-on-one meetings with the board chair and committee chairs toenhance their understanding of the board’s culture and dynamics

• Ongoing engagement with members of the Group Executive and seniormanagement to deepen knowledge of our strategic objectives and fosteropen dialogue and constructive relationships

Personaldevelopment

• Education sessions and materials:

- presentations by senior executives on the business and regulatoryenvironment, including specialized and complex aspects of ourbusinesses and operations

- RBC Speaker Series, where external guest speakers provide insightson a variety of topics, including the economic and politicallandscape as well as emerging industry, regulatory and markettrends

- areas of shared concern or oversight covered in joint educationalsessions across committees


Governance

Key pillar Director activities and resources

- daily and weekly media updates and investor relations reports onkey issues, the bank’s media presence and market trends

- regular updates about educational opportunities outside RBC

Directors have full access to committee meetings and educationsessions regardless of committee membership. They also receiveeducational materials and updates between board meetings on mattersrelevant to our businesses.

• Tailored programming:

- programs to address the particular needs of each director based ontheir background, experience and personal focus areas

- opportunities relevant to directors at large financial institutions(e.g., Global Risk Institute, Group of Thirty, Bank GovernanceLeadership Network)

• Membership at the Institute of Corporate Directors (Canada) and NationalAssociation of Corporate Directors (U.S.)

Periodically, the board also participates in tours of our operations and attends talent dinnerswith employees to further learn about our businesses and activities. In January 2020, theboard held meetings in Los Angeles, which gave directors an opportunity to meet with theexecutive leadership team and learn more about City National Bank’s strategy, including risksand opportunities, and the U.S. Wealth Management business. Directors engaged with localemployees and clients, and participated in talent panel discussions.

In 2020, the board and management needed to be agile, focusing on the key issues impactingRBC as well as our employees, clients, communities and other stakeholders. Education andother presentations were tailored to reflect the new COVID-19 environment and evolvingperiod of uncertainty and disruption.

Quarter Education presentations AttendanceCity National Bank Strategic Overview Board

Q1 2020

Cyber Security Annual Update BoardDavos 2020 – RBC Debrief BoardFireside Chat – Evolving Entertainment Industry BoardGlobal Trends in Director Compensation Practices GovernanceRegulatory and Government Affairs Update GovernanceCity National Bank Talent Overview HRCity National Bank Key Risks and Risk Oversight RiskRBC Approach to Climate Risk Management Risk

Q2 2020

COVID-19 Impact on RBC and the Markets BoardMacro-Impacts From COVID-19 and the “New Normal” BoardInternational Financial Reporting Standards (IFRS) 9 Update BoardCredit Provisioning Amid the COVID-19 Pandemic AuditBusiness Continuity Management in Light of COVID-19 RiskLiquidity and Funding Update in Light of COVID-19 RiskMarket and Counterparty Credit Risk in Light of COVID-19 RiskPandemic Stress Testing RiskRetail and Wholesale Credit Risk in Light of COVID-19 Risk2020 Enterprise-Wide Stress Testing Scenarios Audit/RiskInterbank Offered Rate (IBOR) Benchmark Reform Audit/RiskOperational Risk Under a Pandemic Audit/Risk


Governance

Quarter Education presentations Attendance

Q3 2020

RBC Ongoing Commitment to Diversity & Inclusion andActions Against Systemic Racism

Governance

Regulatory and Government Affairs Update GovernanceOperational Risk in Light of COVID-19 Risk (May)Risk Pandemic Stress Testing RiskPayment Deferral Programs for RBC Clients Audit/RiskOperational Risk in Light of COVID-19 Audit/Risk

(July)

Strategic performance drivers for RBC BoardDiversity and Inclusion at RBC BoardIFRS 17 - Insurance Contracts Accounting AuditLeadership Strategy Update, including Focus on Diverse &Inclusive Leadership

HR

Industry Review of Stock Options in the Equity Mix ofExecutive Compensation

HR

Q4 2020 Machine Learning and Artificial Intelligence in RiskManagement Practices

Risk

Managing Loan Deferral Expiries RiskModel Risk Update: Artificial intelligence RiskPandemic Stress Testing Audit/Risk

RBC Speaker Series presentation


Governance

Evaluating the board, committees, chairs and directors

The board and its committees annually review their effectiveness as part of theircommitment to continuously improve their oversight, guidance and constructive challenge ofmanagement. Managed by the governance committee, this process also includes separateevaluations of the board chair and each committee chair and a peer review of each director.The results inform the board’s development of priorities and action plans for the followingyear. The evaluations also form part of the governance committee’s assessment of the skillsand competencies director nominees need for election or re-election.

Expectations of our directorsOur director effectiveness framework identifies the key characteristics and behaviours theboard considers essential for each director to fulfil their role successfully. This frameworkforms the basis of the peer evaluation components of the assessment and reflects thedirector’s commitment to improvement at a board and individual level.

Dedication

Courage

Strategic orientationBusiness acumen

Integrity

Directoreffectiveness

Engagement

Prioritizes the needs of RBC

Appropriately challengesthe status quoCan make tough decisionsChampions change

Discusses pros and cons offuture growth strategies

Focuses on the rightperformance outcomes

Works for the greatergood of RBCDemonstrates highethical standardsUpholds RBC values

Engages fully and makesa meaningful contributionat all meetingsActively promotes collegialityConsiders the input ofothers and providesthoughtful advice

Balances short-, medium-and long-term objectivesExhibits sound judgmentand thoughtfully balancestrade-offs

Assesses globalopportunities for alignmentwith RBC strategy

Seeks to continuouslyimprove and raise the bar

Commits fully to theaccountability and successof the board

Annual evaluationsAnnual evaluations of the board and each committee are supplemented with input frommembers of the Group Executive on areas such as board and committee processes,materials, interaction with management and overall effectiveness. We review our evaluationand effectiveness frameworks annually to align them with best practices and regulatoryguidance.

In 2020, we added COVID-19-related topics to the evaluations to gain insight into theboard’s effectiveness amidst the pandemic.


Governance

Updates on priorities and action plans are provided to the board and committees by theboard chair and committee chairs on a regular basis throughout the year. This approachcreates an effectiveness evaluation that is an ongoing, dynamic part of the functioning of theboard and its committees.

Feedback Analysis Outcomes

Feedback is collected throughquestionnaires and throughmeetings between the boardchair and the committee chairsas well as one-on-one meetingsbetween the board chair andeach director.

The board is evaluated byall directors and the GroupExecutive.

The board chair is evaluatedby all directors, including theCEO.

The committees andcommittee chairs areevaluated by committeemembers and applicablesenior management.

Each independent directorcompletes a personal andpeer review.

An independent consultantanalyzes the feedback andprepares the reports.

The board and governancecommittee review the boardand board chair reports.The governance committeechair reports to the boardon the effectiveness of theboard chair.

The governance committeeand applicable committeesreview the committee andcommittee chair reports.The board chair also reviewsthe committee chair reports.

The board chair reviews theindependent directorreports and peer feedback.

Priorities and action plans aredeveloped for the board andcommittees as well as thecommittee chairs and theboard chair.

Development opportunities areidentified, as required, for each independent director.

Reports and peer reviews aretaken into consideration duringthe renomination process.


Governance

Director compensation

Our approach to compensation

Experienced, focused and talented directors are essential to achieve our strategic objectivesand provide effective guidance to and oversight of management.

The governance committee is responsible for all aspects of director compensation andannually reviews the amount and form of non-executive director compensation, taking thefollowing into account:

• size, complexity and geographic scope of RBC

• expected time commitment of directors

• overall expertise and experience required

• need for compensation that is fair and positions RBC to attract highly qualified directors,and

• alignment of interests between directors and shareholders.

Decision-making process

The governance committee assesses the design and competitiveness of directorcompensation in the context of industry best practices and with reference to a core Canadiancomparator group of companies (including financial institutions) of similar size, complexityand geographic scope to RBC. It also considers a broader reference group of U.S. andinternational financial institutions of similar size, complexity, business mix, scale ofoperations outside their home country and financial condition.

Canadian comparator group

Financial institutions Non-financial institutions

Bank of Montreal Manulife Financial BCE Nutrien

Bank of Nova Scotia Sun Life Financial Canadian National Railway Suncor Energy

Canadian ImperialBank of Commerce

Toronto-Dominion Bank Enbridge TC Energy

U.S. and international reference group

U.S. financial institutions International financial institutions

Bank of America U.S. Bancorp ANZ Banking Group

Citigroup Wells Fargo Commonwealth Bank of Australia

JPMorgan Chase & Co. National Australia Bank

PNC Financial Westpac Banking Corporation


Governance

Compensation structure

We believe in an effective and transparent compensation structure. Each non-executivedirector is paid a flat annual fee covering all of their responsibilities, attendance and workperformed during the year, including membership on two board committees. The board chairand the committee chairs each receive an additional retainer.

Directors are also reimbursed for travel and other expenses incurred to attend board,committee and other meetings or business at the request of RBC.

In fiscal 2020, RBC directors were compensated as follows: Annual retainers ($)

Director 300,000

Board chair 275,000

Committee chair 50,000

David McKay, as President and Chief Executive Officer (CEO) of RBC, does not receive anydirector compensation.

Non-executive directors do not receive stock options and do not participate in RBC pensionplans.

No changes to compensation

There are no changes recommended or approved for 2021.

Alignment of director and shareholder interests

The board believes the following three measures effectively align the interests of ourdirectors and shareholders.

1. Share ownership requirement

During fiscal 2020, directors were required to own RBC equity with a total aggregate value ofat least $1,200,000 or four times the total director retainer within five years of joining theboard. Directors must own at least 1,000 RBC common shares as part of this investment.

2. Investment of director fees

Director investments in RBC equity arefacilitated through the director sharepurchase plan (for RBC common shares) andthe director deferred stock unit plan (fordirector deferred stock units or DDSUs).DDSUs are notional units that have the samevalue as RBC common shares. When a DDSU iscredited to or redeemed by a director, itsvalue is calculated using the average closingprice on the TSX of an RBC common shareover the five preceding trading days.

Breakdown ofannual director retainer

60%

40%

RBC equityCash

Directors must invest at least 60% ($180,000 in fiscal 2020) of their annual director retainer(the equity portion) in either RBC common shares or DDSUs. Until a director owns at least1,000 RBC common shares, the equity portion of the director retainer is paid in shares.Shares are purchased at market price. Directors may invest up to 100% of the cash portion oftheir annual director retainer in either DDSUs or shares. Directors cannot sell sharespurchased with the equity portion of their annual director retainer or redeem any DDSUs untilthey retire from the board.


Governance

Beginning November 1, 2020, the board chair must also invest at least 40% ($110,000 infiscal 2021) of the annual board chair retainer in either RBC common shares or DDSUs. Theboard chair cannot sell shares purchased with the equity portion of the annual director orboard chair retainers or redeem any DDSUs until retirement from the board.

3. Restrictions on trading and hedging RBC securities

Directors cannot:

• sell RBC securities directly or indirectly if they do not own or have not fully paid for them (ashort sale)

• directly or indirectly buy or sell a call or put on RBC securities, or

• enter into equity monetization transactions that would have an effect equivalent tocreating call or put rights in respect of RBC securities or other financial instrumentsdesigned to hedge or offset a decrease in the market value of RBC securities.

Compensation for membership on subsidiary boards

Non-executive directors may be asked to serve as directors of RBC subsidiaries and are paidfor their services and reimbursed for travel and other expenses. Mr. Chisholm serves on theboard of RBC US Group Holdings LLC, our U.S. intermediate holding company. During fiscal2020, Mr. Chisholm was paid a director retainer of US$135,000 and received hiscompensation in DDSUs.

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