For several years, L’Oréal has set up long-term incentive plans in favour of its employees and corporate officers in an international context, in the form of grants of performance shares.
These grants serve a dual purpose:
Within the context of the 19th resolution submitted for the approval of the Annual General Meeting of 21 April 2022, the Board of Directors, at its meeting of 9 February 2022 and on the recommendation of the Human Resources and Remuneration Committee, decided to introduce new criteria to assess the extra financial performance in addition to the financial performance within the long-term incentive plans, in order to align them with L’Oréal’s strategy in which economic and social performance go hand-in-hand (see section 7.4.4. of this document).
Until 2009, L’Oréal’s Board of Directors exclusively granted stock options to the senior managers and corporate officers whom L’Oréal wished to reward for their performance and their important role in business development and in the Group’s current and future projects, wherever they might be geographically located.
In 2009, L’Oréal’s Board of Directors enlarged its policy by introducing a mechanism for the conditional grants of shares to employees (ACAs).
The objective was:
In 2011, L’Oréal’s Board of Directors decided to make ACAs the primary instrument for its long-term incentive policy by extending the grant of shares to the main senior managers of the Group who until then had only received stock options: In 2012, at the suggestion of the Human Resources and Remuneration Committee, the Board of Directors went one step further in this policy and decided to replace the grant of stock options with conditional grants of shares for all beneficiaries as of the 2013 Plan.
The plans are proposed by General Management to the Board of Directors which decides, after receiving the opinion of the Human Resources and Remuneration Committee, the principle of these plans and the applicable conditions and rules.
In accordance with the AFEP-MEDEF recommendation, these grants are made over the same period each year: between 2009 and 2019 they were put in place following the approval of the financial accounts for the previous financial year by the Annual General Meeting and since 2020 they have been put in place at the end of the year, provided that the first year the performance conditions are assessed is the financial year following the year of grant.
The decision with regard to each individual grant is, in every case, contingent upon the quality of the performance rendered at the time of implementation of the plan with particular attention being paid to the main talents for the future. According to the eligibility criteria linked to the position held by the beneficiary and the size of the entity or the country in which the beneficiary works, to ensure worldwide fairness, these grants are made every year, on a recurring basis every two to three years, or more regularly.
The General Management and the Board of Directors reiterate the importance that is given to bringing together the interests of the beneficiaries of conditional grants of shares and those of the shareholders themselves.
The beneficiaries (employees and executive corporate officers) share with the shareholders the same confidence in the strong steady growth of the Company with a medium and long-term vision. This is why stock options were granted for a period of 10 years including a 5 year vesting period, and conditional grants of shares for a period of 4 years followed, for France up until the 2015 Plan, by a 2-year holding period during which these shares cannot be transferred.
The attention of the beneficiaries of conditional grants of shares is drawn to the regulations in force concerning persons holding “inside information”. The beneficiaries of conditional grants of shares undertake to read the Stock Market Code of Ethics included when settling the conditional grants of shares plans that they benefit from and to comply with the provisions thereof.
53% of the beneficiaries of the 7 October 2021 Plan are women. More than 3,600 employees, representing approximately 9.5% of the managers around the world, nearly 58% of whom are in international subsidiaries, benefit or have benefited from at least one conditional grant of shares plan since 2017 and were still employees of the Company on 31 December 2021.
* This information forms an intregral part of the Annual Financial Report as provided in Article L.451-1-2 of the French Monetary and Financial Code.
