HERMES_REGISTRATION_DOCUMENT_2017

CORPORATE GOVERNANCE

SUPERVISORY BOARD’S REPORT ON CORPORATE GOVERNANCE

SUPERVISORY BOARD’S REPORT ON CORPORATE GOVERNANCE

3.1

This report was drawn up in accordance with Article L. 226-10 of the French Commercial Code and the recommendations issued by the Financial Markets Authority (AMF). It was jointly prepared by the Chairman of the Supervisory Board, the Compensation, Appointments and Governance (CAG) Committee, the Audit Committee, the Board Secretary and the functional departments concerned. It was approved by the Board at its meeting of 20 March 2018.

CORPORATE GOVERNANCE CODE

With each revision of the AFEP-MEDEF Code, the CAG Committee per- forms an exhaustive comparative analysis of the Company’s application of the code’s recommendations, and reports to the Supervisory Board.

3.1.1

3.1.1.1 Corporate governance principles applied The Supervisory Board officially adopted the latest version of the AFEP-MEDEF recommendations on corporate governance in 2009, as it deemed these recommendations to be entirely in keeping with the Group’s corporate governance policy. The guidelines include the AFEP- MEDEF Corporate Governance Code for listed companies, revised in November 2016, and the recommendations from the HCGE (Corporate Governance High Committee), that further elaborate this code’s recommendations.

3

Provisions of the November 2016 AFEP-MEDEF Corporate Governance Code not applied by virtue of the Company’s legal form or other reasons

3.1.1.2

The table below lists the provisions of the AFEP-MEDEF Code not applied by the Company. In line with the recommendations of the AMF the pro- visions not applied on account of the Company’s legal form are singled out from those not applied for other reasons with the corresponding explanations.

Provisions of the AFEP-MEDEF Code not applied due to the Comapny’s legal form

Explanations

In view of the role of the Supervisory Board (described on page 129), this provision does not apply to a société en commandite par actions (SCA – a partnership limited by shares).

Board meetings and committee meetings (Art. 10.3) It is recommended that a meeting not attended by the executive Officers be organized each year. Succession plan for Executive Corporate Officers (Art. 16.2.2.) The nominations committee (or an ad hoc committee) should design a plan for replacement of company Officers. This is one of the committee’s most important tasks even though it can be, if necessary, entrusted to an ad hoc committee by the Board. The Chairman may take part or be involved in the committee’s work during the conduct of this task. Composition of the Compensation Committee (Art. 17.1) It is recommended that the Chairman of the committee be independent and that one of its members be an employee director.

The CAG Committee (see description starting on page 150) is not in charge of establishing the succession plan for the Executive Chairmen which task does not fall within the remit of the Supervisory Board in an SCA. In accordance with its rules of procedure, the CAG Committee has since 2016 had to ensure the existence of a succession plan for the Executive Chairmen which it first did in 2017 with annual reviews thereafter (see page 149). In 2018, the CAG Committee ensured there was a succession plan for the Chairman of the Supervisory Board and added this duty to its rules of procedure. The CAG Committee (see description starting on page 150) is not in charge of setting the compensation paid to the Executive Chairmen which task in an SCA does not fall within the remit of the Supervisory Board. The Supervisory Board therefore decided that it was not relevant for an employee representative to be a member. On 19 January 2019 Robert Peugeot will reach 12 years as member of the Supervisory Board. The Supervisory Board, in agreement with the Active Partner, decided to ask the General Meeting of 5 June 2018 to extend his term by one year to best facilitate his replacement with a new independent member at the 2019 General Meeting. The Supervisory Board deemed it better to have a slightly lower proportion of independent members on the Board (25%) and Audit Committee (40%) than required by the AFEP-MEDEF Code for a few months rather than not apply an independence criterion with regard to Robert Peugeot. Explanations

Provisions of the AFEP-MEDEF Code not applied for other reasons

Proportion of independent members on the Supervisory Board (Art. 8.3) Independent directors should account for at least a third of Board members.

2017 REGISTRATION DOCUMENT HERMÈS INTERNATIONAL

117