Shaping the Group’s mission and strategy

Effectiveness of governance and management are a key success factor.

In the course of taking care of the Company’s affairs, the Board met seven times and was regularly informed of developments through business reports from the Chief Executive Officers, including rolling forecasts as well as strategic and operational plans. The average attendance rate at such meetings was 91%. The Board discussed topics and authorised operations including EADS strategy; reorganisation topics (such as the reshaping of EADS’ divisional structure and headquarter organisation); and major business issues (such as the A350 industrial launch decision, Airbus future product policy, EADS’ strategy in defence including European industry consolidation and the acquisition of Atlas Elektronik together with ThyssenKrupp Technologies, the review of the EADS UAV programmes, the co-development of the EC175 helicopter with China and the review of Sogerma future strategy).

The Board also approved operational plans, budgets, remuneration (including a share option plan and an employee share option plan) and the Group’s financial results and forecasts, as well as financial optimisations and the process of risk management and internal controls. Additionally, it dealt with topics regarding personnel and human resources, such as management qualification as well as attracting, retaining and developing high potential executives in order to ensure the future quality of EADS’ management and the multinational leadership structure. At the 11th May 2005 meeting, Manfred Bischoff and Arnaud Lagardère were re-elected as Chairmen and the two Board Committees were reconstituted with the same composition as previously. At the 25th June 2005 meeting, the Board appointed the following to the Executive Committee: the EADS Chief Executive Officers, the two Chief Operating Officers, the Chief Executive Officer of Airbus, the head of Defence & Security Systems and the head of Eurocopter. It also confirmed appointment of the other Executive Committee members.

The changes to EADS’ corporate governance implemented in 2004 to reflect best practice in jurisdictions relevant to EADS affected a number of matters in 2005, including the new Board members’ introduction packages following their appointment at the Annual General Meeting.

The activities of the Audit Committee and Remuneration and Nomination Committee during 2005 reflected various changes to incorporate best practice in recent years, especially the adopted new internal Directors’ guidelines (the ‘Directors’ Guidelines’) at the Board meeting of 10th December 2004. The Audit Committee met three times during 2005 and had one written consultation. It reviewed the 2004 results as well as the first half-year 2005 results. The Remuneration and Nomination Committee met five times during 2005 to review the compensation policy (including pension schemes), the bonus payments for 2004, the stock option plan and the employee share ownership plan for 2005, and to recommend the appointment of the President and the Chief Executive Officer of EADS Space Transportation, the head of Defence and Communications Systems and the Chief Executive Officer of EADS Sogerma Services.

For all Board members, remuneration contains a fixed and a variable part. Part of the compensation paid to members of the Board is based on generation of cash and EBIT, either at Group or divisional level, as well as on their individual performance. The variable proportion generally represents at least half of total compensation.

Continuous improvement and effectiveness of governance and management of the Group will remain a prime focus and key success factor for EADS.