The above provisions are subject to the procedure for related‑party agreements.
The benefits that may be due under Mr Jean-Paul Agon’s suspended employment contract were approved by the Annual General Meeting of 27 April 2010 pursuant to Article L. 225-38 of the French Commercial Code.
The Annual General Meeting of 17 April 2018 approved the implementation of the provisions of Mr Jean-Paul Agon’s employment contract regarding defined benefit pension scheme commitments for the duration of his renewed corporate office.
For Mr Nicolas Hieronimus, an agreement suspending his employment contract was approved by the Annual General Meeting of 20 April 2021 (resolution no. 15). This mechanism is restated every year in the chapter on the remuneration of corporate officers and in the Statutory Auditors’ special report on related-party agreements.
Mr Jean-Paul Agon was appointed as Chief Executive Officer in April 2006, following a brilliant career spanning 27 years with L’Oréal.
The Board of Directors did not wish for Mr Jean-Paul Agon, who accepted the office of Chief Executive Officer after 27 years within L’Oréal, to be deprived of the benefits to which he would have continued to be entitled had he remained an employee, and adopted the following measures:
The remuneration under the suspended employment contract to be taken into account for all the rights attached thereto, and in particular for the calculation of the defined benefit pension referred to below, is based on the amount of remuneration at the date of suspension of the contract in 2006, namely fixed remuneration of €1,500,000 and variable remuneration of €1,250,000. This reference remuneration is revised annually by applying the revaluation coefficient in respect of salaries and pension contributions published by the French state pension fund (Caisse nationale d’assurance vieillesse). As of 1 January 2021, the fixed remuneration amounted to €1,731,000 and the variable remuneration to €1,442,500.
The seniority applied covers his entire career within the Group, including the years he was Chief Executive Officer and Chairman and Chief Executive Officer.
Payment of the indemnities due under the suspended employment contract had been approved by the Annual General Meeting on 27 April 2010.
In the event of termination of his suspended employment contract during the term of corporate office, and depending on the reasons for such termination, it was foreseen that Mr Jean-Paul Agon would only be paid termination indemnities, except in the event of gross misconduct or gross negligence, or retirement indemnities in the event of voluntary retirement or at the Company’s request pursuant to the suspended employment contract.
These indemnities, which are attached solely to termination of the employment contract and in strict application of the National Collective Bargaining Agreement for the Chemical Industries (Convention Collective Nationale des Industries Chimiques) and the company-level agreements applicable to all L’Oréal managers, are automatically due 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 Bargaining Agreement for the Chemical Industries or the above-mentioned company-level agreements. The same applies to the non-compete clause and the related financial consideration.
Pursuant to the schedule of indemnities under the National Collective Bargaining Agreement for the Chemical Industries, in the event of dismissal, except in the event of gross misconduct or gross negligence, the indemnity could be capped, in light of Mr Jean-Paul Agon’s length of service, at 20 months’ remuneration under the suspended employment contract.
In respect of the employment contract, pursuant to the provisions of the National Collective Bargaining Agreement for the Chemical Industries, in the event of termination of the employment contract, provided that the indemnity due in consideration of the non-compete clause would be payable every month for two years on the basis of two-thirds of the monthly fixed remuneration attached to the suspended employment contract unless Mr Jean-Paul Agon were to be released from application of the clause. This clause does not apply in the event of voluntary retirement or compulsory retirement on the Company’s initiative: no consideration for non-competition would be paid in such a situation.
Mr Jean-Paul Agon benefits, under his suspended employment contract, from the “Garantie de Retraite des Membres du Comité de Conjoncture” (Pension Cover of Members of the Comité de Conjoncture) scheme closed to new members effective from 31 December 2000.
The main features of this scheme, which falls under Article L. 137–11 of the French Social Security Code, are as follows:
The financing of this pension scheme is out sourced to an insurance institution. The premiums paid are deductible from the corporate income tax and are subject to the employer’s contribution as provided by Article L. 137-11, 2a) of the French Social Security Code at a rate of 24%.
The above provisions are subject to the procedure for related-party agreements. The corresponding agreement was approved by the Annual General Meeting on 27 April 2010 making a decision with regard to the Special Report prepared by the Statutory Auditors.
The provisions of this agreement remained unchanged within the scope of the appointment of Mr Jean-Paul Agon as Chairman and Chief Executive Officer as from 18 March 2011 and the renewal of his term of office on 17 April 2014 and 17 April 2018. Pursuant to Article L. 225-40-1 of the French Commercial Code, this agreement was examined by the Board of Directors on 11 February 2021, which confirmed the relevance and terms there of. The Annual General Meeting of 17 April 2018 approved, pursuant to the old Article L 225-42-1 of the French Commercial Code, the implementation of the provisions of Mr Jean-Paul Agon’s employment contract for the duration of the renewed corporate office, as approved by the Annual General Meeting on 27 April 2010, corresponding to defined benefit pension scheme commitments. The Board of Directors subordinated the increase in conditional rights for the period to the achievement of the performance conditions, assessed in light of the Company’s performance.
The increase for a financial year therefore depends on the achievement of at least 80% of the performance targets taken into account to determine the annual variable remuneration of Mr Jean-Paul Agon. If the 80% threshold is not met, no increase will be granted for the financial year in question.
Pursuant to the provisions of the agreement to suspend the employment contract on defined benefit pension commitments for the tenure of his new term of office, the Chairman and Chief Executive Officer benefits from:
At its meeting of 11 February 2021, the Board of Directors noted that the performance conditions were fully met. Therefore, the Board decided that the Chairman and Chief Executive Officer benefits from the principle of the revaluation of his pension on the basis of the salaries and contributions revaluation coefficient published by the French State pension system (Caisse Nationale d’Assurance Vieillesse) (coefficient equal to 1.004 for 2020).
