Sound corporate governance has been fundamental to Bombardier’s suc- cess over the years. Consistent with that tradition—and in the context of a broader public debate around corporate governance issues, as well as major changes to securities regulations—Bombardier undertook, in the first half of 2003, a comprehensive review of the structure and responsibilities of the Board of Directors. That review prompted a number of changes designed to further enhance the Corporation’s governance structure. 

Among the latest reflections of this proactive approach to governance was the January 2004 appointment of a corporate Compliance Officer to assist the Board in ensuring full adherence to applicable laws and regu- lations and strict compliance with Bombardier’s Code of Ethics and Business Conduct. The Code of Ethics and Business Conduct, which was reviewed and updated during the year—along with a new complaint reporting program designed to encourage employees and other stakeholders to step forward and report any concerns or complaints—are on schedule for introduction in fiscal year 2005. 

## Pension oversight and asset management 

In June 2002, the Corporation created the Retirement Pension Oversight Committee, which was given the mandate to oversee, review and monitor investment of the assets of the Corporation’s pension plans and related matters. As well, the team responsible for providing management services to the Corporation’s pension plans and pension committees with respect to plan assets now reports directly to the Senior Vice President and Treasurer. This change was made with a view to enhancing controls and realizing synergies with other treasury-related functions. 

Finally, the Investment Policy that defines the permissible asset mix of the various plans has been revised with the aim of reducing the volatility of returns. To that end, the portion of assets to be invested in stocks has been reduced. 

## Ensuring compliance with new securities regulations 

Another priority during the past year was the launch by the corporate finance function, in collaboration with the Audit Committee of the Board of Directors, of a global finance transformation initiative designed to ensure full compli- ance with new Canadian securities regulations. 

The regulations, which came into effect as of March 30, 2004, include new requirements with respect to continuous disclosure obligations, audit committees’ responsibilities and certification by the Chief Executive Officer and Chief Financial Officer of annual and interim filings. Ultimately, this process will be closely aligned with that required under the U.S. Sarbanes- Oxley Act. 

## CORPORATE governance 

The new regulations regarding audit committees oblige Canadian public companies to have audit committees comprised of independent directors who are financially literate. Issuers will have to include a description of the relevant education and experience of each member of the committee in their annual information forms. As well, audit committees must have a written man- date setting forth certain prescribed responsibilities. Although the Corporation has until July 5, 2005 to comply with these particular changes, the existing charter of the Audit Committee of Bombardier’s Board of Directors is already in compliance. 

Bombardier meets—and in some instances exceeds—the new Canadian securities regulations, as well as the corporate governance guidelines of the Toronto Stock Exchange. 

## Accounting treatment of stock options 

In keeping with current best governance practices, the Corporation has opted to expense stock options granted to key employees and directors. This change took effect as of February 1, 2004 and reflects all options granted during the course of the fiscal year. 

## Clearly-delineated governance roles 

During fiscal year 2004, the mandates and roles of the Board of Directors and its committees, the Executive Chairman and the President and Chief Executive Officer have all been reviewed and clearly delineated, as sum- marized below. 

## Board of Directors 

As part of its stewardship responsibility, the Board of Directors advises management on significant business issues and is responsible for approving 

Bombardier’s strategy and monitoring: 

• financial matters and internal controls; 

• pension fund matters; 

• environmental, safety and security matters; and 

• corporate governance issues. 

The Board also assesses succession planning and the compensation policy. 

Four committees of Bombardier’s Board of Directors—comprised exclu- sively of reputable, qualified and independent (non-related) directors—help ensure adherence to the very highest standards of corporate governance. 

In addition, in June 2003, a formal structure was implemented to enable the Board of Directors to function independently of management. Prior to or after each regular meeting of the Board, the directors who are not part of management meet under the chairmanship of James E. Perrella in his capacity as Lead Director. 

