Hermès - Registration Document 2016

CORPORATE GOVERNANCE

REPORT FROM THE CHAIRMAN OF THE SUPERVISORY BOARD ON THE CORPORATE GOVERNANCE PRINCIPLES

PRINCIPLES AND RULES FOR DETERMINING COMPENSATION AND BENEFITS OF ANY KIND GRANTED TO CORPORATE OFFICERS

3.2.3

Objectives of risk management and internal control systems at Hermès International

3.2.6.1

Riskmanagement systems are designed to frequently examine themajor risks. This includes methods for identifying and prioritising risks and for handling themain internal andexternal risks at theappropriateoperating level in order to reduce the Company’s exposure. Internal control systems rely on ongoing, recurring actions that are inte- grated into the Company’s operating processes. They apply to all func- tions and processes, including those associated with the production of financial and accounting information. The Hermès internal control objectives are to ensure: s proper observance of the Group management’s instructions and strategy directions; s operating efficiency of the Company’s internal procedures, particu- larly those that help to protect its assets, as well as the safety and security of property and persons; s the reliability of financial information and, in general, the internal control system enables the Company to maintain control over its acti- vities, to enhance the efficiency of its operations and to optimise the use of its resources. Control environment While Hermès has attained the stature of an international group, it has also retained its human dimension, with family ideals. The Company is dedicated to a culture and spirit of craftsmanship and seeks to cultivate strong values among its employees. Among these values, quality is paramount – the very essence of Hermès’ business. The Group’s commitment to quality applies not only to its products and services, but also to its management methods. Hermès attaches great importance to its Senior Executives’ Managerial skills. The Hermès culture, which is propagated mainly through integration programmes for new managers and special training, imparts to each individual a thorough understanding of their role in the organisation and the need to abide by the Group’s code of conduct and rules of beha- viour. The quality-oriented values and mentality shared by all employees serve as a solid foundation to underpin behaviours and observance of stringent internal control policies and procedures. The way in which these values work together and their balance are contingent on the control environment which forms their common base, and more specifi- cally, on the Company’s ingrained risk management and internal control culture, management style and corporate values. With this in mind, to underpin the risk management culture promoted by the Group, a formal ethics charter was adopted and disseminated to its employees in 2009. In 2013, it was completed by the business code of conduct, that sets out the behaviour expected from Group employees. Both documents are available on the Company intranet and have been subject to for- mal acknowledgment of receipt since 2016 when given to employees. Additional training sessions on anti-corruption laws have also been orga- nised for operational staff. However, no risk management and internal control system, no matter how well-designed and applied, can provide absolute certainty that the Company will achieve its objectives. 3.2.6.2 s compliance with laws and regulations;

The presentation of the principles and rules for determining compensa- tion and benefits of any kind granted to Corporate Officers is not required by partnerships limited by shares, pursuant to Article L. 225-68 by reference to Article L. 226-10-1 of the French Commercial Code (Code de commerce), but is the subject of a presentation by the Executive Management (see Management report pages 138 et seq.).

CAPITAL STRUCTURE AND FACTORS LIABLE TO AFFECT THE OUTCOME OF A PUBLIC OFFER

3.2.4

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The presentation of information concerning the capital structure and factors liable to affect the outcome of a public offer is not required by partnerships limited by shares, pursuant to Article L. 225-68 by refe- rence to Article L. 226-10-1 of the French Commercial Code (Code de commerce), but is the subject of a presentation by the Executive Management (see Management report page 253).

SPECIAL TERMS AND CONDITIONS FOR PARTICIPATING IN GENERAL MEETINGS

3.2.5

General Meetings are convened as provided by law and Article 24 of the Articles of Association (see page 250). A double voting right is attributed in the conditions set out in Article 12 of the Articles of Association (see page 245). Any crossing of a legal threshold (Article L. 233-7 of the French Commercial Code and L. 433-3 et seq. of the French Monetary and Financial Code ( Code monétaire et financier )) or a statutory threshold (Article 11 of the Articles of Association – see page 245) in capital or voting rights is subject to a declaration under the conditions indicated in the above texts, failing which the shareholder will be deprived of the right to vote at General Meetings.

INTERNAL CONTROL AND RISK MANAGEMENT SYSTEMS ESTABLISHED BY THE COMPANY

3.2.6

Pursuant to Articles L. 225-37, L. 225-68, L. 823-19 and L. 823-20 of theFrenchCommercial Code (Codede commerce), below is the report on the principal riskmanagement and internal control procedures instituted within the Company, using the new “Reference Framework” published by the AMF in 2010, AMF position recommendation DOC-2016-05 “Guide to periodic information addressed to all companies listed on Euronext Paris” and the AFEP-MEDEF Corporate Governance Code revised in November 2016. This report has been prepared by the Chairman of the Supervisory Board with the assistance of the Audit Committee and the relevant functional departments. It was approved by the Board at its meeting on 21 March 2017.

2016 REGISTRATION DOCUMENT HERMÈS INTERNATIONAL

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