HERMES_REGISTRATION_DOCUMENT_2017

3

CORPORATE GOVERNANCE

SUPERVISORY BOARD’S REPORT ON CORPORATE GOVERNANCE

Changes to the two components of the compensation of Executive Chairmendependuponobjectiveand comprehensiblequantitative crite- ria that have not changed for many years andwhich are public and prede- fined by nature, as described in paragraphs 1 and 2 on page 155. Henri- Louis Bauer, the Legal Representative of Émile Hermès SARL (Executive Chairman), does not personally receive any compensation from Hermès International. He receives compensation from Émile Hermès SARL for his functions as Executive Chairman of this Company, which are unre- lated to the appointment as Executive Chairman of Émile Hermès SARL in Hermès International. The Executive Chairmen do not receive any compensation or benefits of any kind from the subsidiaries of Hermès International. The Executive Management wished the principle of variability contained in the aforementoined provisions of the Articles of Association to be applied strictly to the compensation of the natural person serving as Executive Chairman. As such, inaccordancewith theseprinciples, it was decided tomodify the compensation of Axel Dumas in 2017 by strictly applying the variation observed between 2015 and 2016 on the two objective quantitative criteria used as a reference for managerial compensation for many years (article 17 of the Articles of Association), namely consolidated pre-tax profit and consolidated revenue. As regards the remuneration of Émile Hermès SARL, the legal entity serving as Executive Chairman, the Executive Management Board has decided to limit its compensation to the amounts indicated. A breakdown of effective compensation paid to the Executive Chairmen set by the Executive Management Board of Émile Hermès SARL for the last two financial years is provided in table 2 on page 158. Each year, the Compensation, Appointments and Governance Committee of the Supervisory Board of Hermès International is responsible for ascertai- ning that compensation paid to the Executive Chairmen complies with the provisions of the Articles of Association and the decisions made by the Active Partner. In order to comply with the AFEP-MEDEF Corporate Governance Code, Axel Dumas decided on 5 June 2013 to end his employment contract when he was appointed Executive Chairman of Hermès International. Service agreements No Executive Chairman directly or indirectly invoices services to the Company. Under a services contract dated 1 September 2005, amended several times since, Émile Hermès SARL makes use of the services of Hermès International to fulfil routine or exceptional legal, financial or secretarial duties. Any modification of the tasks assigned or re-invoicing specified (other than annual indexing) must be the subject of an amendment. This contract and its existing or future amendments are subject to the proce- dure on regulated agreements, as indicated in the special report from the Statutory Auditors on pages 341 to 344. Directors’ fees in the Company and in the subsidiaries of the Group The Executive Chairmen do not receive any directors’ fees paid by the Company or by the subsidiaries of the Group.

Note that the rules for the distribution of directors’ fees within the Group specify that the members of the Executive Committee of Hermès International who are Directors in subsidiaries do not receive directors’ fees in this regard. The Active Partner Under the terms of Article 26 of the Articles of Association the Company pays an amount equal to 0.67% of distributable profits to the Active Partner which was as follows for the last two financial years: 3.1.4.2

2017

2016

Émile Hermès SARL

€5,214,348.05 €7,311,168.66

The Supervisory Board, Audit Committee and Compensation, Appointments and Governance Committee

3.1.4.3

Directors’ fees and compensation Supervisory Board members receive directors’ fees and compensation in a total amount that is approved by the shareholders at the General Meeting and that is apportioned by the Supervisory Board. Compensation paid to members of the Audit Committee and of the Compensation, Appointments and Governance Committee is deducted from the total amount of directors’ fees. TheGeneral Meeting of 6 June2017 raised the total amount of directors’ fees and compensation for the Supervisory Board to €600 k to take into account the appointment of new members of the Board. The previous distribution rules dating from 2010 and the increase in the average annual number of meetings to seven in recent years justify, according to the CAG Committee, increasing the maximum individual amount paid to the members of the Supervisory Board. On the proposal of the CAGCommittee, the Supervisory Board at itsmee- ting of 7 July 2017decided tomodify the terms governing the distribution of directors’ fees so as to: s take into account market practices (€58,000 in attendance fees of average for the SBF 120); s acknowledge the work of the Board and Committee chairs; s reflect the results obtained over the last 10 years. The following changes were made: s the annual fixed amount of directors’ fees and compensation paid to the Chairman of the Board was increased from €100,000 to €140,000; s the annual fixed amount of directors’ fees and compensation paid to the chairs of the Audit and CAG Committees was increased from €20,000 to €28,000; s the annual fixed amount of directors’ fees paid to members and the deputy chairs of the Board was increased from €8,000 to 10,000; s make allowance for days devoted to site visits; s make allowance for new responsibilities;

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2017 REGISTRATION DOCUMENT HERMÈS INTERNATIONAL