HERMÈS - 2019 Universal Registration Document

3

CORPORATE GOVERNANCE SUPERVISORY BOARD'S' REPORT ON CORPORATE GOVERNANCE

PLURALITY AND NUMBER OF OFFICES

each year when the Universal registration document is prepared. s The declaration describes all possible situations, with precise examples, inviting the members of the Board to declare all situations that could represent a potential conflict of interest. The declaration serves as a basis to evaluate the material nature of business relationships that could affect the independence of a Supervisory Board member as required by recommendation 9.5.3 of the Afep-Medef Code updated in January 2020. The business relationship evaluation criteria are quantitative (amount of sales or revenue generated during the financial year and the percentage represented by those amounts in relation to the counterparty’s total sales or revenue) and qualitative (nature of existing business relationships). As regards the quantitative criteria, the Supervisory Board did not consider it appropriate, given the diversity of possible situations, to set a threshold below which a business relationship would be deemed immaterial. The evaluation is made on a case-by-case basis. Ms Monique Cohen, Ms Estelle Brachlianoff and Mr Alexandre Viros have not declared any business relationships with the Company. Ms Dominique Senequier declared a non-significant business relationship described on page 339 under related-party transactions. After examining each of these situations in early 2020, the CAG-CSR Committee concluded that none of them were of such a nature as to constitute a conflict of interest for the persons concerned and that none of the independent members of the Board had, directly or indirectly, significant business relationships with the Company or its group. No service contract exists between the Supervisory Board members and the Company, or any of its subsidiaries, that would result in benefits being granted pursuant to such a contract.

3.4.6.5

The offices of members of the Supervisory Board are not taken into account when calculating the plurality of offices, Articles L. 225-21 and L. 225-77 of the French Commercial Code ( Code de commerce ) being expressly excluded from the provisions applicable to partnerships limited by shares. The examination of the situation of each member of the Supervisory Board and of the Executive Chairmen as regards the plurality and number of offices, showed that no member of the Supervisory Board or Executive Chairman was in a situation of concurrent holding of offices, with regard to both the legal rules and to the principles set out in Article 19.4 of the Afep-Medef Code updated in January 2020. The rules of procedure, since their adoption in 2009, require Supervisory Board members, except for the employee representatives, for whom this requirement is waived, to own a relatively significant number of registered shares. The number was originally set at 200. But in view of the high price of Hermès International shares, the CAG-CSR Committee proposed in 2019 that the number of shares to be held by Board members be reduced to 100, which was approved by the Board on 4 June 2019. Based on the Hermès International share price at 31 December 2019 (€666.20), the value of these shares is equal to more than two years of directors’ fees. At its meeting of 10 January 2020 the Supervisory Board noted that all members of the Supervisory Board complied with this obligation. As briefly mentioned on page 213 above, the primary role of the Supervisory Board of a société en commandite par actions (SCA – partnership limited by shares) is to maintain ongoing control over the Company’s management in accordance with the law and the Articles of Association. In this respect, the Supervisory Board is responsible for evaluating the advisability of strategic choices; monitoring the correctness of Executive Management’s actions; ensuring equal treatment of all shareholders; and verifying the procedures implemented by the Company to ensure the fairness and accuracy of the parent company and consolidated financial statements. To fulfil these obligations, every year, the Supervisory Board presents any comments it may have on the parent company financial statements, decides on the proposed allocation of net income, and provides all recommendations and authorisations. The functions exercised by the Supervisory Board do not entail any interference with the Executive Management, or any liability arising from the management’s actions or from the results of such actions. The Supervisory Board describes the due diligence procedures it carried out during the financial year ended 31 December 2019 in a report presented to the General Meeting called to approve the financial statements (page 439). NUMBER OF SHARES TO BE HELD BY MEMBERS 3.4.6.6 OF THE SUPERVISORY BOARD FUNCTIONING OF THE SUPERVISORY BOARD ROLE OF THE SUPERVISORY BOARD 3.4.7 3.4.7.1

2019 UNIVERSAL REGISTRATION DOCUMENT HERMÈS INTERNATIONAL

242