LOREAL_Registration_Document_2017

Corporate governance * REMUNERATION OF THE EXECUTIVE OFFICERS

Competitive remuneration in comparison to a coherent and stable reference panel The remuneration of the executive officers must be competitive in order to attract, motivate and retain the best talents in the top positions in the Company. This remuneration is assessed overall, namely by taking into account all the components that make it up. To assess the competitiveness of this remuneration, a coherent and stable reference panel is defined with the assistance of an external consulting firm. It is made up of French and international companies that hold the position of global leader. These companies operate on similar markets and are, in the cosmetics sector, direct competitors of L’Oréal, or operate on the wider everyday consumer goods market, as regards all or part of their business activities. For 2018, the panel consists of the remuneration of the executives of the following companies: This panel is re-examined every year by the Human Resources and Remuneration Committee in order to check its relevance. It may evolve, to take into account the changes in the structure or business activities of the selected companies, on the basis of the proposals made by the external firm. Remuneration that is directly linked to the Company’s strategy Close links with the strategy a) The remuneration policy applied to the executive officers is directly linked to the Group’s strategy. It supports its development model. It promotes harmonious, regular, durable growth, both over the short and long-term. The Board of Directors’ constant desire is indeed to incite the General Management both to maximise performance for each financial year and to ensure that it is repeated and regular year-on-year. Coty Kimberly Clark Reckitt Benckiser Beiersdorf Danone GSK Henkel LVMH Unilever Colgate Palmolive Estée Lauder Johnson & Johnson Procter & Gamble

The choice of correlating the performance criteria for the executive officer’s remuneration with the Company’s performance indicators, particularly those of a financial nature, is the guarantee of a decipherable, relevant remuneration policy. These criteria make it possible to assess L’Oréal’s intrinsic performance, namely its progress year-on-year via internal performance indicators and also its relative performance as compared to its market and its competitors via external growth indicators. The objectives adopted generate long-term value creation. In particular, the choice of varied operational financial criteria aims at encouraging durable, balanced growth. An overall long-term performance results from the convergence of these criteria. These objectives also have to be an incentive for the executive officer to adapt the Group’s strategy to the profound transformations in the world of beauty, and the digital revolution in particular. subject to performance conditions The executive officers’ remuneration has to include a predominant portion subject to performance conditions, with annual and multi-annual assessment periods adapted to the time horizon of each of these objectives. Remuneration that is directly in line with the Group’s ambitious social, societal and environmental commitments The remuneration must be designed to favour a regular and sustainable development, in line with the Group’s commitments with regard to ethics, and respectful towards the environment in which L’Oréal operates. The annual variable portion of the remuneration is based on extra-financial criteria, in particular relating to environmental and societal commitments and Human Resources, which will be assessed year-on-year in a long-term perspective. Predominant share of remuneration c) Remuneration that creates medium or long-term value for the shareholders The executive officers’ remuneration must be linked to the changes over the medium to long-term in the Company’s intrinsic value and in share performance. A significant portion of the executive officers’ remuneration thus consists of performance shares, a significant percentage of which is retained until the end of their corporate office, with the undertaking not to carry out risk hedging transactions. This leads to alignment with the shareholders’ interests, understood as long-term value creation (see paragraph 6.5.2.2. on total shareholder return).

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b)

Performance targets that are directly correlated with those of the Company and create value

The Board of Directors chooses to correlate the executive officer’s performance directly with the Company’s performance by using the same performance indicators, in particular of a financial nature.

REGISTRATION DOCUMENT / L'ORÉAL 2017

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