2021 UNIVERSAL REGISTRATION DOCUMENT

B/ Policy on fixed and variable remuneration and granting of performance shares to the executive corporate officer

The key for allocating annual remuneration

The annual remuneration of the executive corporate officer consists of a fixed remuneration, an annual variable remuneration and the granting of performance shares.

It does not include any exceptional components.

The Board of Directors adopts the various components of this remuneration, paying attention to the necessary balance between each of them.

Each component of annual remuneration corresponds to a well-defined and clearly substantiated objective.

The various components of annual remuneration form a balanced whole with a breakdown that is approximately:

• 50/50 between fixed remuneration and target annual variable remuneration;
• 50/50 between annual remuneration and long-term remuneration (performance shares);
• 50/50 between cash remuneration and share-based remuneration; and
• 75/25 between remuneration subject to performance conditions and remuneration not subject to performance conditions.

DIAGRAM SHOWING THE BALANCE BETWEEN THE DIFFERENT COMPONENTS OF THE TARGET ANNUAL REMUNERATION

N.B.: the employer’s contributions to the additional social protection plans are to be added to the above.

Fixed remuneration

The fixed remuneration must reflect the responsibilities of the executive corporate officer, his/her level of experience and skills. It is stable for several years and may be re-examined at the time of renewal of the term of office. It serves as a basis to determine the maximum percentage of the target annual variable remuneration. 

Annual variable remuneration

The target annual variable remuneration may amount to a maximum of 100% of the fixed remuneration.

The annual variable remuneration may exceed 100% of the fixed remuneration and up to a maximum of 120% of this remuneration in order to be able to remunerate out performance. This out performance is assessed on a criterion-by-criterion basis.

The aim is not to encourage in appropriate and excessive risk taking. For this purpose, the annual variable remuneration remains reasonable in comparison with the fixed portion.

The variable remuneration is designed to align the executive corporate officer’s remuneration with the Group’s annual performance and to promote the implementation of its strategy year after year.

The variable remuneration is based on precise performance appraisal criteria determined at the beginning of the year by the Board of Directors.

These criteria are financial, non-financial and qualitative.

The financial and non-financial criteria are simple and quantifiable. They represent a predominant portion of the annual variable remuneration.

A limit is set on the qualitative portion.

The weighting of each of the criteria and the objectives to be met are set at the beginning of the year in question and communicated to the executive corporate officer.

These criteria are the following:

• for 60% of the annual variable remuneration:
  • financial criteria directly correlated with the Company’s performance indicators:

 - evolution in comparable sales as compared to the budget (15%),

 - evolution in market share compared to that of key competitors (15%),

 - evolution in operating profit as compared to the budget (10%),

- evolution in net earnings per share as compared to the budget (10%), and

- evolution in cash flow as compared to the budget(10%);

• for 40% of the annual variable remuneration:
• non-financial criteria, linked in particular to:

  - the progress of the L’Oréal for the Future programme, which combines L’Oréal’s commitments to sustainable development for 2030 (10%),

  - the implementation of the Human Resources policy with special attention to the development of gender balance in the management bodies (7.5%), and

  - the digital development policy(7.5%);

• qualitative criteria (15%).

The quantifiable, financial (60%) and non-financial (25%) criteria account for 85% of annual variable remuneration.