Hermès - Registration Document 2016

2016 REGISTRATION DOCUMENT

HERMÈS INTERNATIONAL

125

CORPORATE GOVERNANCE

REPORT FROM THE CHAIRMAN OF THE SUPERVISORY BOARD ON THE CORPORATE GOVERNANCE PRINCIPLES

3.2.3

PRINCIPLES AND RULES FOR

DETERMINING COMPENSATION AND

BENEFITS OF ANY KIND GRANTED TO

CORPORATE OFFICERS

The presentation of the principles and rules for determining compensa-

tion and benefits of any kind granted to Corporate Officers is not required

by partnerships limited by shares, pursuant to Article L. 225-68 by

reference to Article L. 226-10-1 of the French Commercial Code

(Code

de commerce),

but is the subject of a presentation by the Executive

Management (see Management report pages 138 et seq.).

3.2.4

CAPITAL STRUCTURE AND FACTORS

LIABLE TO AFFECT THE OUTCOME OF A

PUBLIC OFFER

The presentation of information concerning the capital structure and

factors liable to affect the outcome of a public offer is not required by

partnerships limited by shares, pursuant to Article L. 225-68 by refe-

rence to Article L. 226-10-1 of the French Commercial Code

(Code

de commerce),

but is the subject of a presentation by the Executive

Management (see Management report page 253).

3.2.5

SPECIAL TERMS AND CONDITIONS FOR

PARTICIPATING IN GENERAL MEETINGS

General Meetings are convened as provided by law and Article 24 of the

Articles of Association (see page 250).

A double voting right is attributed in the conditions set out in Article 12 of

the Articles of Association (see page 245).

Any crossing of a legal threshold (Article L. 233-7 of the French

Commercial Code and L. 433-3

et seq.

of the French Monetary and

Financial Code (

Code monétaire et financier

)) or a statutory threshold

(Article 11 of the Articles of Association – see page 245) in capital or

voting rights is subject to a declaration under the conditions indicated in

the above texts, failing which the shareholder will be deprived of the right

to vote at General Meetings.

3.2.6

INTERNAL CONTROL AND RISK

MANAGEMENT SYSTEMS ESTABLISHED

BY THE COMPANY

Pursuant to Articles L. 225-37, L. 225-68, L. 823-19 and L. 823-20 of

theFrenchCommercial Code

(Codede commerce),

below is the report on

the principal riskmanagement and internal control procedures instituted

within the Company, using the new “Reference Framework” published by

the AMF in 2010, AMF position recommendation DOC-2016-05 “Guide

to periodic information addressed to all companies listed on Euronext

Paris” and the AFEP-MEDEF Corporate Governance Code revised in

November 2016. This report has been prepared by the Chairman of the

Supervisory Board with the assistance of the Audit Committee and the

relevant functional departments. It was approved by the Board at its

meeting on 21 March 2017.

3.2.6.1

Objectives of risk management and internal

control systems at Hermès International

Riskmanagement systems are designed to frequently examine themajor

risks. This includes methods for identifying and prioritising risks and for

handling themain internal andexternal risks at theappropriateoperating

level in order to reduce the Company’s exposure.

Internal control systems rely on ongoing, recurring actions that are inte-

grated into the Company’s operating processes. They apply to all func-

tions and processes, including those associated with the production of

financial and accounting information.

The Hermès internal control objectives are to ensure:

compliance with laws and regulations;

proper observance of the Group management’s instructions and

strategy directions;

operating efficiency of the Company’s internal procedures, particu-

larly those that help to protect its assets, as well as the safety and

security of property and persons;

the reliability of financial information and, in general, the internal

control system enables the Company to maintain control over its acti-

vities, to enhance the efficiency of its operations and to optimise the

use of its resources.

3.2.6.2

Control environment

While Hermès has attained the stature of an international group, it has

also retained its human dimension, with family ideals. The Company is

dedicated to a culture and spirit of craftsmanship and seeks to cultivate

strong values among its employees.

Among these values, quality is paramount – the very essence of Hermès’

business. The Group’s commitment to quality applies not only to its

products and services, but also to its management methods. Hermès

attaches great importance to its Senior Executives’ Managerial skills.

The Hermès culture, which is propagated mainly through integration

programmes for new managers and special training, imparts to each

individual a thorough understanding of their role in the organisation and

the need to abide by the Group’s code of conduct and rules of beha-

viour. The quality-oriented values and mentality shared by all employees

serve as a solid foundation to underpin behaviours and observance

of stringent internal control policies and procedures. The way in which

these values work together and their balance are contingent on the

control environment which forms their common base, and more specifi-

cally, on the Company’s ingrained risk management and internal control

culture, management style and corporate values. With this in mind, to

underpin the risk management culture promoted by the Group, a formal

ethics charter was adopted and disseminated to its employees in 2009.

In 2013, it was completed by the business code of conduct, that sets

out the behaviour expected from Group employees. Both documents

are available on the Company intranet and have been subject to for-

mal acknowledgment of receipt since 2016 when given to employees.

Additional training sessions on anti-corruption laws have also been orga-

nised for operational staff. However, no risk management and internal

control system, no matter how well-designed and applied, can provide

absolute certainty that the Company will achieve its objectives.