L'Oréal - 2018 Registration Document

2 Corporate Governance

ORGANISATION AND MODUS OPERANDI OF THE BOARD OF DIRECTORS

The Strategy Seminar in China was particularly valued: field visits for distribution, exchanges and discussions with the Heads and their teams on all aspects of L’Oréal China, meetings with key players in the Group’s business development in China (the Shanghai authorities, the head of a large Chinese e-commerce company, and an economics expert). The seminar provided deep knowledge of the Chinese beauty market and the opportunities for L’Oréal’s growth in China. Such in-depth understanding of the Group’s issues and development prospects made it possible for the Board to give a well-informed opinion on the acquisition projects that were submitted to it by General Management in 2018. The Board appreciates that the agendas of the Board and the Committee meetings over all of the Group’s business activities - relating not only to business but also to Ethics, CSR, and Human Resources, which give an extremely complete picture of L’Oréal across these topics that are seen as strategic. In conclusion, the Board considered that its driving role for the Group’s strategic decision-making was fulfilled satisfactorily. Concerning Governance topics, the Directors believe that the method of organisation of the General Management chosen, with a Chairman and Chief Executive Officer, is best suited to L’Oréal’s current situation. The balance of power is assured, given the composition of the Board (the presence of major shareholders, the number and background of independent Directors) and the freedom of speech enjoyed by the Directors. In light of this analysis, they do not consider it necessary to appoint a Lead Director. There would be little interest for L’Oréal in doing so, given the Board’s current composition and ways of working. Indeed, the Directors wish to maintain a direct relationship with the Chairman and Chief Executive Officer. By opting once again for the combination of duties in 2018, the Board reaffirmed this choice. The appointment of a Lead Director who would intervene between the Chairman and the other Directors would not be consistent with this choice. The Directors do not have any particular comment to make concerning the organisation of executive sessions. Since 2016, the Directors meet at least once a year without the presence of the executive officer, the Directors representing the employees or any other Group employee. An executive session was held in December 2018. The Board is attentive to the handling of conflicts of interest. It finds that these are well managed by the rules in force: non-participation in discussions and decisions, and an annual declaration of independence. It also attaches particular importance to the analysis of the independence of the Directors, which is carried out in depth each year. When asked about the organisation of meetings with shareholders, investors, and proxy advisors on corporate

governance subjects, the Directors consider that the current procedure (meetings steered by the department in charge of financial communication and shareholder relations) is satisfactory. They appreciate that their expectations are detailed in the minutes taken in the Committee and Board meetings by the Secretary of the Board, who is in attendance. For 2019, various decisions with regard to improvements were made. They concern, in particular, the adherence to timing in the meetings, the time required to provide management information and presentations, and the development of the use of a digital tablet for the Board and Committee meetings. The Directors also stated their desire to go into further detail about certain strategic points. They made proposals with regard to the topics to be included on the Board’s agenda in 2019. After discussion and review, upon a proposal by the Chairman, a list of the subjects considered to be a priority will be adopted by the Board meeting of 7 February 2019. Concerning the Board’s self-evaluation procedure in 2019, the Board did not think it appropriate, as in 2018, to entrust this evaluation to an external body, considering that the current process was satisfactory. The interview guide will be re-examined once again by the Appointments and Governance Committee which will supervise the process in liaison with the Secretary of the Board. The summary of the interviews with the Directors has been discussed at a Board meeting as is the case every year. These Rules are applicable to all present and future Directors, whether they are appointed by the General Meeting or by the employees, and are intended to complement the legal, regulatory and statutory rules and those under the Articles of Association in order to state accurately the modus operandi of the Board of Directors and its committees, in the interests of the Company and of its shareholders. L’Oréal’s Board of Directors refers to the principles of corporate governance as presented by the AFEP-MEDEF Code. The Internal Rules specify the modus operandi of the Board, in the interests of the Company and of all its shareholders, and those of its Committees, whose members are Directors to whom it gives preparatory assignments for its work. The latest updates to the Internal Rules were made on 10 October 2018. They concern the general powers of the Board of Directors and the remit of the Audit Committee, further to the revision of the AFEP-MEDEF Code in June 2018. As was the case for previous versions, the Internal Rules are made public in full in this chapter. APPENDIX: COMPLETE TEXT OF THE INTERNAL RULES OF THE BOARD OF DIRECTORS 2.3.5

REGISTRATION DOCUMENT / L'ORÉAL 2018

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