Hermès // 2021 Universal Registration Document

3

CORPORATE GOUVERNANCE THE COMPANY’S CORPORATE GOVERNANCE CODE

Provisions of the Afep-Medef Code not applied due to the Company’s legal form

Explanations

Hermès International’s Supervisory Board holds powers that are strictly defined by the Company’s Articles of Association and does not have the power to appoint the Executive Chairmen or determine their compensation policy. These decisions are the responsibility of the Active partner, Émile Hermès SAS, under the aegis of its Executive Management Board. Furthermore, and this is an essential point of the Company’s governance, the duties of the Supervisory Board do not entail any involvement in the Executive Management, nor any liability for management actions and the results thereof. This provision of the Afep-Medef Code is therefore not applicable to Hermès International, given its legal form and the role assigned to the Supervisory Board (described in § 3.5.1). The Company’s CAG-CSR Committee (described in § 3.6.2) is not in charge of establishing the succession plan for the Executive Chairmen, a task that does not fall within the remit of the Supervisory Board in a société en commandite par actions (partnership limited by shares). In accordance with its rules of procedure, since 2016 the CAG-CSR Committee has been tasked with ensuring the existence of a succession plan for the Executive Chairmen, which is reviewed annually (see § 3.3.5.1). Since 2018, the CAG-CSR Committee has also ensured the existence of a succession plan for the Chairman of the Supervisory Board (see § 3.4.4) and this mission is included in its rules of procedure (see https://finance.hermes.com/en/governing-bodies-rules-procedure-articles-association/ ). The Company’s CAG-CSR Committee (described in § 3.6.2) is not tasked with establishing the compensation policy for the Executive Chairmen, a task that falls within the remit of the Active partner and not the Supervisory Board. The Supervisory Board therefore decided that it was not relevant for an employee representative to be a member. The role of the Supervisory Board in the decision-making process applicable to the compensation policy for the Executive Chairmen is described in § 3.8.1.2. The Supervisory Board determined that slightly less than two-thirds of the Audit and Risk Committee members are independent (60%, i.e. three out of five members). This situation enables the Audit and Risk Committee to carry out its duties in an appropriate manner. The Audit and Risk Committee rules of procedure stipulate that at least one-half of the seats on the Audit and Risk Committee should be held by members who qualified as independent at the time of their appointment and throughout their term of office. The HCGE considers: in its 2014 report “that an Audit Committee with, for example, three independent s members out of five remains compliant with the spirit of the Code, provided that the Chairman is an independent member”; in its 2017 report “that it would prefer to see the proportions not completely achieved s rather than having the independence criteria interpreted too freely (for example by excluding the criterion requiring 12 years of service on the Board), and that it considers that 60% independent members on the Audit Committee or 50% on the other two committees does not constitute a serious deviation”. There are no immediate plans to increase the proportion of independent members of the Audit and Risk Committee to two-thirds, however the Board will review the matter at each annual evaluation. The Company undertook to pay Mr Axel Dumas a severance payment under the conditions described in § 3.8.1.2.4. Given the importance of the Active partner’s role in a société en commandite par actions (partnership limited by shares) – including the power to appoint and dismiss any Executive Chairman – and, in the case of a legal entity, its legal representative, it was decided that any termination of Mr Axel Dumas’ duties as Executive Chairman resulting from the replacement of the Chairman of Émile Hermès SAS should be deemed a forced departure. The Supervisory Board accordingly considered that the deferred compensation undertaking made for the benefit of Mr Axel Dumas complied with the requirements of the Afep-Medef Corporate Governance Code. In its November 2018 report on corporate governance and Senior Executive compensation, the AMF recommends that the Board carry out a regular review of the components of compensation that may be due at the time of or subsequent to the departure of a Senior Executive and that it questions the possibility and desirability of compliance with new Code provisions. No compliance was made necessary by the new provisions of the Afep-Medef Code updated in January 2020.

Board meetings and committee meetings (Article 11.3) It is recommended that at least one meeting not attended by the Executive Corporate Officers be organised each year.

Succession plan for Executive Corporate Officers (Article 17.2.2) The Appointments Committee (or an ad hoc committee) should design a plan for replacement of Executive Corporate Officers. This is one of the Committee’s most important tasks even though it can, if necessary, be entrusted by the Board to an ad hoc committee. The Chairman may take part or be involved in the Committee’s work during the conduct of this task. Composition of the Compensation Committee (Article 18.1) It is recommended that one of its members be an employee director. Proportion of independent members on the Audit and Risk Committee (Article 16.1) Independent directors should account for at least two thirds of Audit and Risk Committee members and the Committee should not include any Executive Corporate Officers.

Severance payment (Article 25.5.1) The performance requirements set out by Boards for these benefits must be evaluated over at least two financial years. They must be demanding and may not allow for the indemnification of a director unless his or her departure is forced, regardless of the form of this departure.

Provisions of the Afep-Medef Code excluded for other reasons

Explanations

None

224 2021 UNIVERSAL REGISTRATION DOCUMENT HERMÈS INTERNATIONAL