LOREAL_Registration_Document_2017

2 Corporate governance *

REMUNERATION OF THE EXECUTIVE OFFICERS

TERMINATION INDEMNITIES AND 2.5.2. PENSION SCHEME These benefits are not related to performance of the corporate office, but could be due under the suspended employment contract.

Termination indemnities, retirement 2.5.2.2. indemnities in the event of voluntary

retirement or retirement at the Company’s request, financial consideration for the non-competition clause

In the event of departure, and depending on the reasons for such departure, the executive officer will only be paid the termination indemnities, except in the event of gross misconduct or gross negligence, or the retirement indemnities in the event of voluntary retirement or retirement at the Company’s request due pursuant to the employment contract that has been suspended, to the exclusion of any indemnity due in respect of the corporate office. These indemnities, which are attached solely to termination of the employment contract and in strict application of the National Collective Agreement for the Chemical Industries and the Company-level agreements applicable to all L’Oréal’s managers, are due in any event pursuant to the public policy rules of French labour law. They are not subject to any condition other than those provided for by the National Collective Agreement for the Chemical Industries or the above-mentioned company-level agreements. The same applies to the non-competition clause and the related financial consideration. Defined benefit pension scheme 2.5.2.3. The executive officer, subject to ending his career in the Company, will benefit from one of the defined benefit pension schemes currently applicable to the Group’s senior managers. This is the scheme to which he was subject as an employee. The main features of these schemes, which fall under Article L. 137-11 of the French Social Security Code, are as follows: they concern all the senior managers of L’Oréal in France, whether s active or retired, thereby involving more than 500 people; the minimum length of service requirement for access to s the schemes is 10 years; the increase in the potential rights takes place over a long s period of time, from 25 to 40 years depending on the scheme in question; the reference period taken into account for the calculation s of the benefits is three years; the average of the amounts of remuneration for the best three years out of the last seven years is used; the schemes are financed by contributions paid to an s insurance institution. These contributions are deductible from corporate income tax and are subject to the employer’s contribution as provided by Article L. 137-11.2°a) of the French Social Security Code at a rate of 24%. In the light of the legal characteristics of defined benefit pension schemes (the rights only accrue if the beneficiary ends his career in the Company and the funding of this scheme cannot be broken down individually by employee) and on account of the characteristics specific to the L’Oréal schemes, known as “differential” schemes since they take into account, in order to supplement them, all the other pensions such as those resulting, inter alia , from the French basic and supplementary pension schemes, the precise amount of the pension annuity will in fact only be calculated on the date when the beneficiary applies for all his pensions.

Maintenance of the employment 2.5.2.1. contract and separation of the

benefits attached to the employment contract on the one hand and to the corporate office on the other

The AFEP-MEDEF Code to which L’Oréal refers, recommends, but does not mandatorily require, that companies should put an end to the practice of combining an employment contract with a corporate office. L’Oréal’s Board of Directors shares the objectives of this recommendation which aims at avoiding the possibility of concurrently obtaining benefits both from the employment contract and the corporate office and at prohibiting any interference with the possibility of removing executive officers ad nutum . The Board of Directors has formally provided for the methods of application of the objectives of the recommendation, as adapted to the context in the L’Oréal Group. The Board’s intention is to use the treatment set out below for any new corporate officer appointed who has over 15 years’ length of service in the Group at the time of his appointment. As L’Oréal’s ongoing policy is to appoint employees who have completely succeeded in the various stages of their careers in the Group as executive officers, the Board does not want these executives to be deprived of the benefits to which they would have continued to be entitled had they remained employees, after spending many years of their career at L’Oréal. The Board of Directors has considered that the objective pursued by the AFEP-MEDEF recommendation could be fully achieved by maintaining the suspension of the employment contract and clearly separating out the benefits related to the employment contract on the one hand from those relating to the corporate office on the other. Remuneration in respect of the corporate office will in no event be taken into consideration for calculation of the indemnities due pursuant to the collective agreement and the Company-level agreements applicable to all L’Oréal’s senior managers. The remuneration under the suspended employment contract to be used to calculate all the rights attached thereto, and in particular for the calculation of the defined-benefit pension, will be established on the basis of the remuneration at the date of suspension of the contract. This remuneration will be revised every year by applying the revaluation coefficient in respect of salaries and pension contributions published by the French State pension fund. The length of service applied will take into consideration the entire career, including the years spent as an executive officer.

REGISTRATION DOCUMENT / L'ORÉAL 2017

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