LOREAL_Registration_Document_2017

Corporate governance * REMUNERATION OF THE EXECUTIVE OFFICERS

growth in market share as compared to the main s competitors; growth in operating profit as compared to the previous s year; growth in net earnings per share as compared to the s previous year; growth in cash flow as compared to the previous year. s And for 40% of: extra-financial criteria related, in particular, to progress in s the Sharing Beauty With All sustainable development programme and implementation of the Human Resources and digital development policy; as well as qualitative criteria. s The financial and extra-financial criteria are simple and quantifiable. They represent a predominant portion of the annual variable remuneration. A limit on the qualitative portion is set every year. The weighting of each of the criteria and the objectives to be met are set at the beginning of the year concerned and communicated to the executive officer. Award of performance shares a) Since 2009, the Board of Directors has awarded performance shares to employees of the Group and, since 2012, also to its executive officer, within the scope of Articles L. 225-197-1 et seq. of the French Commercial Code and the authorisations voted by the Annual General meeting. The objective of these awards is to encourage achievement of the Group’s long-term objectives and the resulting value creation for the shareholders. Consequently, the final vesting of the shares is subject to performance conditions which are recorded at the end of a vesting period of four years as from the date of grant. The value of these shares, estimated at the date of grant according to the IFRS applied for the preparation of the consolidated financial statements, represents approximately 50% of the executive officer’s total remuneration and may not exceed 60%. The Board of Directors reserves the possibility to decide on an additional grant if a particular event justifies it. This potential grant to the executive officer, duly documented by the Board of Directors, cannot exceed the annual ceiling of 10% of the total number of free shares granted in respect of that same financial year. The executive officer is required to retain 50% of the free shares finally allocated to him at the end of the vesting period, in registered form, until the termination of his duties. Other benefits

The executive officer makes a formal undertaking not to enter into any risk hedging transactions with regard to the performance shares, until the end of the holding period set by the Board of Directors. An executive officer may not be awarded performance shares at the time of his departure. Performance conditions The performance criteria concern all the shares granted to the executive officer. They take into account partly: growth in like-for-like cosmetics sales of L’Oréal as s compared to a panel of L’Oréal’s major direct competitors; growth in L’Oréal’s consolidated operating profit. s The Board of Directors considers that these two criteria, assessed over a long period of 3 full financial years and reapplied to several plans, are complementary, in line with the objectives and specificities of the Group and are of a nature to promote continuous, balanced long-term growth. They are exacting but remain a source of motivation for the beneficiaries. The shares only vest at the end of a four-year period, allowing sufficient time to be able to assess the performance achieved over three full financial years. Thresholds for final vesting: Pursuant to the criterion relating to sales , in order for all the free shares granted to finally vest for the beneficiaries at the end of the vesting period, L’Oréal must outperform the average growth in sales of the panel of competitors consisting of the following companies: Unilever, Procter & Gamble, Estée Lauder, Shiseido, Beiersdorf, Johnson & Johnson, Henkel, LVMH, Kao and Coty. Below this level, the grant decreases. The Board defines a threshold, not made public for confidentiality reasons, below which no share will finally vest pursuant to this criterion. Pursuant to the criterion related to operating profit , in order for all the free shares granted to finally vest at the end of the vesting period, a level of growth defined by the Board, but not made public for confidentiality reasons, must be met or exceeded. Below that level, the grant decreases. If the operating profit does not increase in absolute value over the period, no share will finally vest pursuant to this criterion. The results recorded each year to determine the levels of performance achieved are published in chapter 6.

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REGISTRATION DOCUMENT / L'ORÉAL 2017

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