Aer Lingus 2010 Annual Report Download - page 29

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Directors’ Report Aer Lingus Group Plc – Annual Report 2010
Events after the reporting date
In the second half of 2010, the Group faced gradually escalating
industrial action from those members of our cabin crew who are
members of the IMPACT union. These staff, who previously voted in
favour of fl ying 850 hours a year, expressed dissatisfaction with some
elements of the rosters designed to implement the agreement.
Matters came to a head in early 2011, which necessitated the hiring in
of aircraft to maintain the fl ight schedule. On 4 February 2011, the
Group reached a successful conclusion to its industrial dispute with the
IMPACT cabin crew union on the full implementation of the Greenfi eld
plan including changes in rosters to deliver 850 annual fl ying hours.
On 3 March 2011, the Group announced that a settlement had been
agreed with the Irish Revenue Commissioners and as a result, the Group
would reduce the exceptional provision announced on 24 February 2011,
from €32.5 million to €29.5 million. The exceptional provision relates to
PAYE, PRSI, interest, penalties and related costs arising from payments
to 715 staff under a restructuring programme negotiated in 2008 at the
Labour Relations Commission and implemented in 2009. The reduced
exceptional provision represents the revised likely total cost of dealing
with this matter.
Financial risk management
Details regarding fi nancial risk management are set out at Note 3 to the
consolidated fi nancial statements.
Corporate Governance Statement
– Year ended 31 December 2010
The Report of the Remuneration Committee on Directors’ Remuneration
is set out on pages 37 to 41. The Directors’ Corporate Social
Responsibility Statement is set out on pages 20 to 23.
The Company is committed to maintaining the highest standards of
corporate governance and the Directors recognise their accountability
to the Company’s shareholders in this regard.
Under Statutory Instrument 450/2009 European Communities (Directive
2006/46/EC) Regulations 2009 and the Listing Rules of the Irish Stock
Exchange (ISE), the Directors are required in this statement to describe
how the principles of section 1 of the Combined Code on Corporate
Governance (June 2008) published by the Financial Reporting Council in
the UK have been applied by the Company in the year.
The Directors note that on 29 September 2010, the Irish Stock Exchange
(ISE) amended the Listing Rules of the ISE to require companies with a
primary equity listing to comply or explain against the provisions of the
UK Corporate Governance Code. The UK Corporate Governance Code
applies to accounting periods beginning on or after 29 June 2010. In
addition, the ISE introduced the Irish Corporate Governance Annex to
apply to accounting periods beginning on or after 17 December 2010.
A copy of the Combined Code on Corporate Governance (June 2008) and
the UK Corporate Governance Code (June 2010) can be obtained from
the Financial Reporting Council’s website, www.frc.org.uk . A copy of the
Irish Corporate Governance Annex can be obtained from the ISE’s
website, www.ise.ie.
Statement of compliance
Except as disclosed below, the Directors consider that the Company has
complied with all relevant provisions of the Combined Code on Corporate
Governance (June 2008) throughout the year. The Directors recognise
the signifi cant corporate governance code changes introduced in 2010
and it is the Directors intention in future annual reports to describe the
extent of the Company’s compliance with the principles of the UK
Corporate Governance Code and the Irish Corporate Governance Annex.
• Rotation of Directors: The Minister for Transport of Ireland (acting
through the Minister for Finance of Ireland in his capacity as
shareholder) has specific rights under the Company’s Articles of
Association in relation to the nomination and rotation of up to 3
Directors. These rights may not comply with the requirement under
the Combined Code that the Appointments Committee lead the
process for Board appointments and make recommendations to the
Board regarding Board appointments and the requirement under the
Combined Code that all Directors be submitted for re-election at
regular intervals. During 2010, Aer Lingus ESOP Trustee Limited had
specific rights under the Company’s Articles of Association in
relation to the nomination and rotation of up to 2 Directors. In
December 2010, it ceased have any of these rights when it ceased
to hold 1% of the issued share capital of the company.
Board of Directors
Role
The duties of the Board and its committees are set out clearly in formal
terms of reference which are reviewed regularly and state the items
specifi cally reserved for decision by the Board.
The Board is responsible for the leadership and control of the Company.
There are matters formally reserved to the Board for consideration and
decision. The Board is responsible for establishing overall group strategy.
It approves the Group’s commercial strategy and the operating budget
and monitors performance through the receipt of monthly operating
information and fi nancial statements. The approval of acquisitions is
also a matter reserved for the Board. Similarly, there are authority levels
covering capital expenditure which can be exercised by the Chief
Executive or by the Chairman and Chief Executive jointly. Beyond these
levels of authority, projects are referred to the Board for approval.
Directors’ Report (continued)