General Principles

EADS’ remuneration policy aims at attracting and retaining talents that will contribute to the Group’s business success. Shareholders expect a strong commitment from members of the Board of Directors; the compensation policy is therefore designed to focus efforts on what the Group wants to value and reward. To meet these objectives, a significant portion of the compensation is variable and linked to key performance measures and individual objectives. The remuneration is benchmarked regularly against the practice of other global companies based in Europe and the USA to ensure fairness and competitiveness.

The Board of Directors is composed of Non-Executive Directors and Executive Directors (who are also members of the Executive Committee).

The compensation of the Executive Directors and of the members of the Executive Committee combines short-term and long-term reward and is summarized as follows:

Compensation of the Members of the Board of Directors

- The Non-Executive Directors are entitled to receive an accumulated total target compensation as a group of Non-Executive Directors on a full year basis of €900,000. This target compensation includes (i) a fixed part of €30,000 per director and €60,000 per chairman, (ii) a fee for participation in Board of Directors’ meetings and Committee meetings (if such Committee meetings take place on a different date than the Board of Directors’ meetings) of €5,000 per director and €10,000 per chairman, per meeting and (iii) a variable part composed of a collective part (bonus) calculated, on the basis of EBIT^* (75%) and cash (25%) results of the Group, of €50,000 per director and €100,000 per chairman at 100% target achievement. The rules for the collective part calculation on the basis of EBIT^* (75%) and cash (25%) results of the Group for the Non-Executive Directors are the same as for the members of the Executive Committee (see below “2.2.1.3 Compensation of the Members of the Executive Committee”). The Non-Executive Directors do not have termination packages.

- The Executive Directors receive neither fees for participation in Board of Directors’ meetings nor any dedicated compensation as members of the Board of Directors in addition to their compensation as members of the Executive Committee (see below “Compensation of the Members of the Executive Committee”). The Executive Directors are eligible for benefits under Long Term Incentive Plans including stock option plans and performance share plans (see “Long Term Incentives Plans”) and under employee share ownership plans in their capacity as qualifying employees (see also “Employee Share Ownership Plans”). Additionally, the Executive Directors are entitled to pension benefits.

The amounts of the various components constituting the compensation granted to Executive Directors and Non-Executive Directors during 2006 together with additional information such as the number of stock options and performance shares (see “Long Term Incentives Plans”) and details of the pension benefits entitlements of the Executive Directors are set out in “Notes to the Company Financial Statements — Note 11: Remuneration”. 

They are summarized below:

Total remuneration and related compensation costs:

The total remuneration and related compensation costs of the members of the Board of Directors and former directors in 2006 can be specified as follows:

Long term incentives

The table below gives an overview of the Long term Incentive Plans (stock-options and performance shares) granted by EADS to the Executive Members of the Board of Directors in 2006:

In 2006, former Director Mr. Noël Forgeard was no longer eligible to grants of stock-options, nor to grants of performance shares.

Pension benefits:

The pension benefit obligation for the Executive Directors is as follows:

The Executive Directors have pension promises as part of their employment agreements. The general policy is to give them annual pension of 50% of their annual base salary after five years in the Executive Committee of EADS at the age of 60 to 65. In case of the Chief Executive Officers, the retirement age is 60. This obligation increases to 60% after ten years of service in the EADS Executive Committee.

These pension schemes have been implemented and financed through collective executive pension plans in France and Germany. These pension promises have also separate rules e.g. for minimum length of service and other conditions to comply with national regulations.

For the Executive Directors, the amount of the pension defined benefit obligation amounted to €23 million as of 31^st December 2006. This obligation has been partly funded and accrued for in the consolidated financial statements for its unfunded portion.

Termination package:

The Executive Directors are also entitled to a termination package when they leave the Company as a result of a decision of the Company. The employment contracts for Executive Directors are concluded for an indefinite term with an indemnity of up to a maximum of 24 months of their target income. The maximum 24 months indemnity can be reduced pro rata depending on the age of retirement.

Non competition clause:

A non-competition clause is included in the contracts of the Executive Directors. This clause is applicable for a 2-year period, starting at the end of the employment contract. If the company does not revoke the application of the said clause, the Executive Directors will receive a compensation based on his monthly salary (including variable pay) in return for his obligation not to compete.

Other benefits:

Executive Directors are entitled to a company car. The value of the company cars of appointed Executive Directors is as follows: For Thomas Enders €81,772, for Louis Gallois €23,752, for Jean-Paul Gut €69,483 and for Hans-Peter Ring €96,400.

Mr. Thomas Enders benefits also from a free accommodation in France. The monthly lease amounts to €3,878 on average.

Compensation of the Members of the Executive Committee

The members of the Executive Committee, including Executive Directors but also members of the Executive Committee who are not members of the Board of Directors, are entitled to receive for the year 2006 an accumulated total target compensation on a full year basis of €11,373,997. This target compensation is calculated pro rata for the Executive Directors present in the Company on 31 December 2006. This compensation is divided for the Chief Executive Officers into a 45% fixed part and a 55% variable part and for the other members of the Executive Committee into a 50% fixed part and a 50% variable part (in practice, the variable part can exceed 55% and 50% respectively of the total compensation in case of overachievement of the targets). The variable part is calculated on the basis of two equal components: (i) a collective part calculated on the basis of EBIT^* (75%) and cash (25%) results of the Group and (ii) a bonus corresponding to individual achievements.

The variable part is calculated on the basis of two equal components:

• Collective part (50% of the variable part) to reward business performance at Group level or division level (if applicable). Cash and EBIT^* are the financial indicators chosen to measure collective performance (EBIT^* represents 75% of the collective part and cash represents 25% of the collective part);
• Individual bonus (50% of the variable part) to reward individual performance measured against the achievement of individual objectives.

The Group is committed to setting individual and financial targets, the achievement of which would reflect the real performance of EADS. The choice of EBIT^* and cash financial indicators ensures the alignment of Directors and top Executive with EADS priorities.

Based on the level of performance, the collective as well as the individual payout can vary from 0% to 175% of the target payment.

On target payment at 100% for both individual and financial targets would indicate strong personal and company performance.

The Remuneration and Nomination Committee reviews and makes recommendations to the Board of Directors on bonus payments to the members of the Board of Directors and to the members of the Executive Committee; the Board of Directors makes the final decision.

The total compensation paid by EADS and all its Group companies to Mr. Thomas Enders, Chief Executive Officer, during the year 2006, was €2,015,781 (this sum includes the payments of his January to December 2006 fixum and the 2005 variable pay paid in May 2006, which is calculated pro rata for the periods as Head of Defence & Security Division and Chief Executive Officer of EADS).

The total compensation paid by EADS and all its Group companies to the new Chief Executive Officer, Mr. Louis Gallois, appointed in July 2006, during the year 2006, was €450,000 (this sum includes the payments of his July to December 2006 fixum).

Former Chief Executive Officer:

The total compensation paid by EADS and all its Group companies to Mr. Noël Forgeard, in his role as Chief Executive Officer of the Company, during the year 2006 was €2,469,950 (this sum includes the payments of his January to June 2006 fixum, the 2005 variable pay paid in May 2006, which is calculated pro rata for the periods as Chief Executive Officer of Airbus and Chief Executive Officer of EADS, the 2006 variable pay paid in 2006, which is calculated pro rata for the period as Chief Executive Officer of EADS).

Under the terms of his employment contract, Noël Forgeard was entitled to:

• A 6 month notice period, which represents an amount of €1,223,317 (gross salary and bonus);
• A termination package of €4,893,268 (i.e. 24 months of total gross annual income);
• A 2-year non-compete indemnity, which represents a monthly gross amount of €101,917 gross (from 2007 onwards).