LOREAL_Registration_Document_2017

Corporate governance * ORGANISATION AND MODUS OPERANDI OF THE BOARD OF DIRECTORS

THE ACTIVITIES OF THE BOARD 2.3.2. OF DIRECTORS General missions and Internal Rules 2.3.2.1. The Directors oversee the Group’s economic and financial management and contribute to defining its strategy. They examine and approve the main lines of action adopted by the General Management, which implements them. In this connection, the Board seeks on an ongoing basis to adopt a modus operandi which, while strictly complying with the law, assures the conditions of good corporate governance. The Board’s work is based on Internal Rules, regularly updated, designed to supplement the legal, regulatory and statutory rules and the market recommendations to which the Board refers. The Internal Rules are made public in full in this document and published on L’Oréal’s website. The Board’s work focused on 2.3.2.2. business activities and strategy Thanks to transparent, relevant information based on a constructive, open dialogue with the General Management, the Board actively contributes to development of strategy. The agendas are designed to cover many topics (business, ethics, Social and Environmental Responsibility, digital, Human Resources, etc. ) with the aim of approaching every topic from a strategic angle. The in-depth analysis, at each meeting, of the Group’s activities and results, of the sales generated by Divisions, geographic zones and brands, and market share gains enables the Directors to be immersed in the Company’s economic realities and to be continually informed of the problems faced by L’Oréal. The Board is also informed throughout the year of developments in the cosmetics market, the results of competitors and the Group’s relative positioning. It carefully monitors major changes and trends in consumer trends and, in particular, the development of e-commerce and new distribution channels. It receives regular updates on the consequences of the digital revolution for the Group's activities and the way in which L’Oréal takes on the opportunities provided by this sea change. The Board is thus completely up-to-date on L’Oréal’s economic environment, the new challenges faced and the main changes in the cosmetics business. It meets the Group’s main senior managers regularly and thus benefits from in-depth knowledge of the professions, jobs, performances and challenges specific to each business segment. It is able to forge a clear, independent opinion of the opportunities for the Group’s development over the next few years. In 2017, the Directors welcomed L’Oréal's Executive Vice-President for Research and Innovation with the members of his Management Committee to introduce them to new issues related to research and the challenges it must face. They discussed the strategic orientations set for this field.

The Directors reviewed the changes which are dramatically transforming the industrial world. The Executive Vice-President of Operations of L’Oréal explained the reasons which have led Operations to adapt to deal with the changes taking place in the cosmetics business and the new expectations of customers and consumers, while continuously improving performance. The Executive Vice-President of the Professional Products Division presented the structural changes the professional products market is undergoing to the Directors. She provided a diagnosis of the Group's results in this business sector and identified the areas of growth for the Division in the coming years. The proposals resulted in in-depth exchanges between the members of the Board. The Directors debated with the Executive Vice-President of the Consumer Products Division who gave a comprehensive presentation on the mass market for beauty products and competition in the sector. A diagnostic review was carried out for the Consumer Products Division. The development strategy for the coming years was analysed. The Board also decided to interview the Executive Vice-President Human Resources on the Group’s Human Resources policy. The discussions covered recruitment and talent development. On this occasion, the Simplicity programme, aimed at promoting new ways of working, managing and interacting in order to release the energy required to further increase growth and improve the quality of life at work, was presented to the Directors. The Board also contributes to the development of strategy, by analysing the interest of acquisitions, their impact on the Company’s financial structure and on its long-term development capabilities. In 2017, the Directors reviewed a number of new projects, including CeraVe, a beauty brand which has been added to the Active Cosmetics Division portfolio. The Board paid a great deal of attention to the monitoring of acquisitions made in previous years and requested that it receive a regular update on the transactions carried out: integration within the Group, synergies, complementarity, creation of a business plan developed at the time of acquisition and value creation for L’Oréal. The Board followed the disposal process for The Body Shop which resulted in the signature of a sale agreement with Natura. The Central Works Council was once again consulted and issued an opinion, pursuant to the French law of 14 June 2013 relating to security of employment, on the Company’s strategic orientations, as previously defined by the Board of Directors. The Board reviewed the Central Works Council’s opinion and responded thereto. Every year, the Board makes a full evaluation of its modus operandi and its organisation. It discusses this evaluation when the item is put on the Board meeting agenda. This evaluation leads to proposals for improvements and makes it possible to define the strategic topics on which the Board particularly wishes to focus its reflections (see self-evaluation of the Board of Directors below).

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REGISTRATION DOCUMENT / L'ORÉAL 2017

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