L'Oréal - 2018 Registration Document

2 Corporate Governance

ORGANISATION AND MODUS OPERANDI OF THE BOARD OF DIRECTORS

reviewed the Central Works Council’s opinion and responded thereto. The Board of Directors also handled many subjects including Human Resources and Ethics, with the aim of approaching every topic from a strategic angle. And so the Board interviewed the Executive Vice-President Human Resources on the Group’s Human Resources policy. The discussions covered recruitment and talent development. On this occasion, a progress update on the Simplicity programme, aimed at promoting new ways of working, managing and interacting in order to release the energy required to further increase growth and improve the quality of life at work, was presented to the Directors. The Chief Ethics Officer presented the Board with an overview of the geography of risks in terms of Human Rights and corruption. He reiterated the ethical principles that guide the actions and behaviour of L’Oréal and that of its employees when doing business, and described the tools being deployed in the Group to develop an Ethics culture. Strategy Seminar in Shanghai In June 2018, the Board traveled to Shanghai for three days, one of which was spent touring the distribution facilities, preceded by a presentation of the market and an “e-market visit.” The Directors were welcomed at every point of sale by the heads of the various Divisions and business segments. At the Global Harbour Shopping Mall, they stopped at Watson, Sephora, and the Maybelline store, then visited Carrefour Gubei. They continued their visit in Department Stores where the Group’s most prestigious brand kiosks are located. Finally, at the IFC Shopping Mall, they saw the Kérastase brand in a hair salon, then the Lancôme, Yves Saint Laurent Beauté, Kiehl’s, Shu Uemura, SkinCeuticals, and Atelier Cologne shops. After these field visits, the Directors spent more than one day reviewing L’Oréal’s strategy in China. The President L'Oreal China introduced the review by presenting the major trends in the beauty market in China and then the outlook and three-year plan by Division, business segment, and distribution network. The heads of the different business segments then laid out the challenges specific to their activity. The Strategy Seminar was the opportunity for many discussions between the Directors and the members of the Management Committee of L’Oréal China and their close associates. Meetings were also held with key actors in the Group’s business development in China (the Shanghai authorities, the head of a large Chinese e-commerce company, and an economic expert). The seminar provided deep knowledge not only of the specifics of the Chinese cosmetics market but also the innovations that are transforming the beauty universe, for which China is in the vanguard.

It carefully monitored the major changes in consumer trends and, in particular, the development of e-commerce and new distribution channels. It received regular updates on the consequences of the digital revolution for the Group’s activities and the way in which L’Oréal takes on the opportunities provided by this sea change. The Board is thus completely up-to-date on L’Oréal’s economic environment, the new challenges faced and the main changes in the cosmetics universe. The Board is informed of the Audit Committee’s in-depth work, specifically on internal control and risk management. In 2018, it asked to meet with the Global IT Department Head, with a particular focus on the cybersecurity programme deployed in the Group. Strategy The Board meets with the Group’s main senior managers regularly and thus benefits from in-depth knowledge of the professions, jobs, performances and challenges specific to each business segment. It is able to forge a clear, independent opinion of the opportunities for the Group’s development over the next few years. In 2018, the Directors welcomed L’Oréal’s Executive Vice-President Chief Digital Officer, who presented them with the new digital technology and the results of the digital transformation at L’Oréal. She outlined the programme in place and its strategic objectives aimed at making L’Oréal into a “Beauty Tech Company”. The Deputy Chief Executive Officer in charge of Divisions gave an in-depth explanation of the transformation of distribution networks and the strong growth in e-commerce. He also presented the Board with the developments in business drivers (expenses relating to the advertising and promotion of products to customers and consumers), in the highly digitised cosmetics universe. The Directors then debated the challenges and opportunities of these sea changes for the Group. The Board also contributes to the development of strategy, by analysing the interest of acquisitions and the conclusion of licencing contracts. It studies their impact on the Company’s financial structure and its long-term development capabilities. In 2018, the Directors once again reviewed a number of new projects, including the acquisition of ModiFace, renewal of the Armani licence, acquisition of Stylenanda and Pulp Riot, signature of the Valentino licence, and acquisition of Logocos Naturkosmetik, which were added to the brand portfolio of the Group’s various Divisions. The Board also paid a great deal of attention to the monitoring of acquisitions made in previous years and requested that it receive a regular update on the transactions carried out: integration within the Group, synergies, complementarity, creation of a business plan developed at the time of acquisition and value creation for L’Oréal. The Central Works Council was once again consulted and issued an opinion on the Company’s strategic orientations, as previously defined by the Board of Directors. The Board

REGISTRATION DOCUMENT / L'ORÉAL 2018

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