The recent debate surrounding the corporate governance of EADS has proved how hard it is to reconcile the interests of its various partners, particularly as the countries involved (Germany, France and Spain) can’t afford to reduce their dependence on a group whose activity is central to their defence policies. And the recent organisational decisions of policymakers reveal how difficult it is to reconcile their points of view, an issue further complicated by the specific governance of EADS due to its legal status as a Dutch listed company.
The group’s current governance has shown cracks in the plasterwork with regard to its imposed choice of non-executive chairman (who hasn’t exactly proved his mettle) and an industrial project steered by operations directors who have opted for complex organisation involving new country partnerships without having consulted its existing partners about the possibility of such an arrangement.
Notwithstanding, for a number of years we have been plying the directors of EADS with questions that have remained unheeded concerning the possibility of an alternative approach that would reconcile the interests of the various stakeholders: rather than keeping EADS as a listed company, with all the complexity that entails, in order to avoid this key part of Europe’s defence industrial base falling into non-European hands, why not take it off the stock market and replace it with its subsidiary, AIRBUS?
This solution has a number of advantages: it would pave the way for the listing of AIRBUS, whose market positioning and outlook would immediately draw investors, whilst allowing EADS to stay in the game as majority or minority shareholder with responsibility for managing the subsidiary whilst allowing manufacturing companies operating in key growth regions to enter the capital and take part in governance. For example, it would be easier to involve Chinese companies in the governance of AIRBUS than that of EADS.
Another major advantage of this arrangement would be the restoration of control over EADS’s capital and governance and its military strategy to European countries. By bringing together European investors in the framework of a non-listed company, EADS would be well placed to satisfy the essential requirements of its special status as a component of Europe’s defence industrial base. It is impossible to reconcile this status with the possibility that, if it were to remain a listed company, it might one day fall into the hands of external investors or shareholders, a scenario that would of necessity trigger a series of legal contortions in order to bring about “apparent control”, without openly admitting it.
The system we are proposing would also clarify each stakeholder’s role in terms of strategic choices, with management able to take a more detached and discerning stance owing to the fact that the transparency criteria are not the same for listed and non-listed companies.
Finally, our proposal would enable the separation of business activities that international socially responsible investors are finding it hard to keep in their portfolios, although they are long-term investors, and would save the three European states concerned from an awkward predicament if EADS became the target of a hostile takeover bid.
This appears to us to be the most rational course of action, and as such it should be at the core of all current debate on the issue, rather than the discussion that is actually taking place, which smacks more of marketplace haggling.
Olivier de Guerre
Chairman of PhiTrust Active Investors