back 
General Principles
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 U.S.A. to ensure fairness and competitiveness.
Following the Governance changes decided at the Extraordinary General Meeting of Shareholders held on 22nd October 2007, the Board is now made up of ten Non-Executive Members of the Board and one Executive Member of the Board: the Chief Executive Officer (who is also member of the Executive Committee).
The compensation of the Executive Member of the Board (the Chief Executive Officer) and of the members of the Executive Committee combines short-term and long-term reward and is summarized as follows:
|
|
Compen- |
Main drivers |
Performance measures |
Variation of payment as % of Total target income/% of vesting |
|
|
|
|
|
|
|
Short-term |
Base salary |
Position/job value |
Individual performance/ Market practice |
- |
|
Variable pay |
Achievement of Group business and financial yearly objectives and reward of individual performance |
Collective part (50% of Target variable pay): |
EADS Chief Executive Officer and Airbus CEO: 55% of Total target income (range from 0% to 175%) | |
|
Individual bonus (50% of Target variable pay): achievement of annual individual objectives |
Other members of the Executive Committee: 50% of Total target income (range from 0% to 175%) | |||
|
Mid- and Long-term |
Performance unit plan |
Achievement of long-term operational profit, measured through cumulative EBIT* achievement |
The number of Performance units which will vest is based on 2nd and 3rd year cumulative EBIT* achievement |
Vested Performance units will range from 0% to 100% of initial grant |
Compensation of the Members of the Board of Directors
- The Board has decided to review the compensation structure of the Non-Executive Members of the Board in order to reflect European best practice and compensate for time commitment and responsibilities in the new governance structure. Therefore, the Board has resolved to remove the variable pay element and to provide separate fees for chairmanship and membership of Board Committees.
Effective 1st January 2008, each Non-Executive Member of the Board will receive an annual fixed fee of €80,000 and a fee for participation in Board meetings of €5,000 per meeting attended.
The Chairman of the Board will receive an annual fixed fee of €180,000 for carrying out this role and a fee for participation in Board meetings of €10,000 per meeting attended.
The Chairmen of each of the Board Committees will receive an additional annual fixed fee of €30,000. The Members of each of the Board Committees will receive an additional annual fixed fee of €20,000 for each Committee membership.
Committee Chairmanship and Committee Membership annual fees are cumulative if the concerned Non-Executive Members of the Board belong to two different Committees.
- The Chief Executive Officer receives neither fees for participation in Board of Directors’ meetings nor any dedicated compensation as member of the Board of Directors in addition to his compensation as member of the Executive Committee (see below “Compensation of the Members of the Executive Committee”). The Chief Executive Officer is eligible for benefits under Long Term Incentive Plans including performance unit plan (see “Long Term Incentives Plans”) and under employee share ownership plans in his capacity as qualifying employees (see also “Employee Share Ownership Plans”). Additionally, the Chief Executive Officer is entitled to pension benefits.
The amounts of the various components constituting the compensation granted to the Chief Executive Officer and to Non-Executive Directors during 2007, together with additional information such as the number of performance units (see “Long Term Incentives Plans”) and details of the pension benefits entitlements of the Chief Executive Officer 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 2007 can be specified as follows:
|
(in €) |
2007 |
2006 |
|
|
|
|
|
Fixum |
4,194,733 |
4,564,086 |
|
Bonus (related to reporting period) |
3,294,312 |
2,361,451 |
|
Fees |
390,000 |
395,000 |
|
Total |
7,879,045 |
7,320,537 |
The cash remuneration of the members of the Board of Directors was as follows:
| ||||||||
|
2007 |
Fixum |
Bonus related to 2007 |
Fees |
Total | ||||
|
|
|
|
|
| ||||
|
Directors |
|
|
|
| ||||
|
Rüdiger Grube |
30,000 |
109,813 |
85,000 |
224,813 | ||||
|
Louis Gallois |
1,147,701 |
957,885 |
- |
2,105,586 | ||||
|
Rolf Bartke |
- |
11,766 |
15,000 |
26,766 | ||||
|
Dominique D’Hinnin |
- |
11,766 |
15,000 |
26,766 | ||||
|
Juan Manuel Eguiagaray Ucelay |
30,000 |
62,750 |
50,000 |
142,750 | ||||
|
Arnaud Lagardère |
60,000 |
113,734 |
60,000 |
233,734 | ||||
|
Hermann-Josef Lamberti |
- |
11,766 |
10,000 |
21,766 | ||||
|
Lakshmi N. Mittal* |
- |
- |
- |
- | ||||
|
Sir John Parker |
- |
11,766 |
20,000 |
31,766 | ||||
|
Michel Pébereau |
- |
41,833 |
25,000 |
66,833 | ||||
|
Bodo Uebber |
- |
41,833 |
10,000 |
51,833 | ||||
|
|
|
|
|
| ||||
|
Former directors |
|
|
|
| ||||
|
Manfred Bischoff |
60,000 |
31,375 |
50,000 |
141,375 | ||||
|
Thomas Enders** |
1,218,157 |
800,275 |
- |
2,018,432 | ||||
|
Jean-Paul Gut |
818,937 |
388,500 |
- |
1,207,437 | ||||
|
Hans-Peter Ring** |
769,938 |
597,282 |
- |
1,367,220 | ||||
|
Francois David |
30,000 |
50,984 |
30,000 |
110,984 | ||||
|
Michael Rogowski |
30,000 |
50,984 |
20,000 |
100,984 | ||||
|
Total |
4,194,733 |
3,294,312 |
390,000 |
7,879,045 | ||||
Long term incentives
The table below gives an overview of the Long term Incentive Plans (performance units) granted by EADS in 2007 to the Chief Executive Officer:
| |||||
|
Unit plan: number of performance units* |
granted |
|
vesting date | ||
|
|
|
|
| ||
|
Louis Gallois |
33,700 |
Vesting schedule is made up | |||
|
a) 25% expected in May 2011; | |||||
Pension benefits
The Members of the Executive Committee have pension promises as part of their employment agreements. The general policy is to give them annual pensions of 50% of their annual base salary upon reaching 5 years of service in the Executive Committee of EADS at the age of 60 or 65.
These rights can gradually increase to 60% after a second term, usually after ten years of service in the EADS Executive Committee.
These pension schemes have been implemented 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 Chief Executive Officer, the amount of the pension defined benefit obligation amounted to €0.8 million as of 31st December 2007, while the amount of current service and interest cost related to his pension promise accounted for during fiscal year 2007 represented an expense of €0.6 million.
This obligation has been accrued for in the Consolidated Financial Statements.
Termination package
Under the terms of his employment contract, the Chief Executive Officer has an indefinite term contract (whereas, in accordance with the Articles of Association of the Company, the length of the mandate is limited). The employment contract can be terminated at any time with six months notice.
As part of his employment contract, the Chief Executive Officer is entitled to a termination package when the parting results from a decision by the Company. The Board has decided to reduce the maximum termination indemnity from 24 months (cf. report of the Board of Directors 2006) to 18 months of annual total target salary.
This new rule is applicable to the Chief Executive Officer from the renewal of his employment contract in October 2007. The indemnity could be reduced pro rata or would even not be applicable depending on age and date of retirement.
Apart from the Chief Executive Officer, no other Director who is in office is entitled to a termination package.
Non-competition clause
A non competition clause is included in the contract of the Chief Executive Officer. This clause is applicable for a one-year period, starting at the end of the employment contract, and is renewable for one year at the Company’s initiative.
The Chief Executive Officer will receive a compensation based on his monthly salary (including variable pay) in return of the application of the non competition clause.
Other benefits
The Chief Executive Officer is entitled to a company car. The value of his company car as at 31st December 2007 is €23,977.
Compensation of the Members of the Executive Committee
The members of the Executive Committee, including the Chief Executive Officer, are entitled to receive for the year 2007 an accumulated total target compensation on a full year basis of €12,379,099. This target compensation is calculated pro rata for the members of the Executive Committee present in the Company on 31 December 2007. This compensation is divided for the EADS Chief Executive Officer and Airbus Chief Executive Officer into a 45% fixed part and a 55% variable part on target and for the other members of the Executive Committee into a 50% fixed part and a 50% variable part on target.
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 in 2008);
- 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 as 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 Chief Executive Officer 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. Louis Gallois, Chief Executive Officer, during the year 2007, was €1,405,313 (this sum includes the payments of his January to December 2007 fixum and the pro rata 2006 variable pay for the period from July 2006 until December 2006, paid in May 2007).
Former Executive Directors:
- The total compensation paid by EADS and all its Group companies to Mr. Thomas Enders in 2007, for the period in accordance with his membership with the Board of Directors, was €1,760,625 (this sum includes the payments of his fixum from 1st January 2007 until end of October 2007 and the 2006 variable pay paid in May 2007).
- The total compensation paid by EADS and all its Group companies to Mr. Hans Peter Ring, in 2007, for the period in accordance with his membership with the Board of Directors, was €1,226,465 (this sum includes the payments of his fixum from 1st January 2007 until end of October 2007 and the 2006 variable pay paid in May 2007).
- The total compensation paid by EADS and all its Group companies to Mr. Jean-Paul Gut, in 2007, for the period in accordance with his membership with the Board of Directors, was €1,663,964 (this sum includes the payments of his fixum from 1st January 2007 until 16th September 2007, the 2006 variable pay paid in May 2007 and the 2007 variable pay paid in 2007, which is calculated pro rata for the period as Director of EADS).
Under the terms of his employment contract, Jean-Paul Gut was entitled to:
- Six-month notice period, reduced to four-month notice period at Jean-Paul Gut’s request, which represents a payment of €466,667 gross (salary and bonus);
- A termination package of €2,800,000 (two years of total target income);
- An indemnity aiming at compensating his accumulated pension rights at the date of his departure.
In addition, EADS has concluded with Jean-Paul Gut a long-term Service Provider’s Agreement, in order to retain Mr. Gut’s specific expertise in the field of marketing and M&A activities.
