As a reminder, the rights to the defined benefit pension are uncertain and conditional on the completion of the beneficiary’s career in the Company. These schemes were established by L’Oréal primarily with the goal of attracting and retaining the Company’s senior managers by guaranteeing them a certain level of resources in retirement.
These schemes falling under Article L. 137-11 of the French Social Security Code, are now closed to any new beneficiaries and no longer create rights as from 31 December 2019 pursuant to French Order no. 2019-697 of 3 July 2019 on professional supplementary pension schemes that transposes the European Directive of 16 April 2014.
The main features of these schemes are explained in detail in section 4.3.2.5.
They concern over 500 of L’Oréal’s active or retired senior managers, in France, and are financed by contributions paid to an insurance institution. These contributions are deductible from the corporate income tax and are subject to the employer’s contribution as provided by Article L. 137-11, 2a) of the French Social Security Code at a rate of 24%.
In the light of the legal characteristics of defined benefit pension schemes (the rights only accrue if the beneficiary ends his career in the Company and the funding of this scheme cannot be broken down individually by employee) and on account of the characteristics specific to the L’Oréal schemes, known as “differential” schemes since they take into account, in order to supplement them, all the other pensions such as those resulting, inter alia, from the French basic and supplementary pension schemes, the precise amount of the pension annuity will in fact only be calculated on the date when the beneficiary applies for all his pensions.
The above provisions are subject to the procedure for related‑party agreements.
For Mr Nicolas Hieronimus, an agreement suspending his employment contract was approved by the Annual General Meeting of 20 April 2021 (resolution no. 15). This mechanism is restated every year in the present chapter and in the Statutory Auditors’ special report on related-party agreements.
The Board of Directors at its meeting of 20 April 2021 appointed Mr Nicolas Hieronimus, the then Deputy Chief Executive Officer in charge of Divisions, and an employee of L’Oréal, as Chief Executive Officer following a brilliant career spanning34 years within L’Oréal. The Board of Directors did not wish for Mr Nicolas Hieronimus, by accepting the role of Chief Executive Officer, to be deprived (at the age of 57 and after 34 years with L’Oréal) of the benefits to which he would have continued to be entitled had he remained an employee. Therefore, the Board adopted the following measures, which were approved by the Annual General Meeting of 20 April2021 as part of the procedure for related-party agreements:
The reference remuneration of Mr Nicolas Hieronimus to betaken into account for all rights attached to the employment contract and, in particular, for the calculation of the pension under the defined-benefit scheme described below, is based on his remuneration at the date of suspension of his employment contract. This reference remuneration is €1,750,000 of fixed remuneration and €1,850,000 of variable remuneration. This remuneration will be revised annually by applying the revaluation coefficient in respect of salaries and pension contributions published by the French state pension fund (Caisse Nationale d’Assurance Vieillesse). As at 1 January 2023, it was €1,853,250 for fixed remuneration and €1,959,150 for variable remuneration.
The seniority applied covers his entire career within the Group, including the years spent as an executive corporate officer.
In the event of termination of his suspended employment contract during the term of corporate office, and depending on the reasons for such termination, Mr Nicolas Hieronimus would only be paid termination indemnities, except in the event of gross misconduct or gross negligence, or retirement indemnities in the event of voluntary retirement or at the Company’s request pursuant to the suspended employment contract.
These indemnities, which are attached solely to termination of the employment contract and in strict application of the National Collective Bargaining Agreement for the Chemical Industries (Convention Collective Nationale des Industries Chimiques) and the company-level agreements applicable to all L’Oréal managers, are automatically due pursuant to the public policy rules of French labour law. They are not subject to any condition other than those provided for by the National Collective Bargaining Agreement for the Chemical Industries or the above-mentioned Company-level agreements. The same applies to the non-compete clause and the related financial consideration.
Pursuant to the schedule of indemnities under the National Collective Bargaining Agreement for the Chemical Industries, in the event of dismissal, except in the event of gross misconduct or gross negligence, the indemnity would be capped, in light of Mr Nicolas Hieronimus’ length of service, at 20 months’ remuneration under the suspended employment contract.
In respect of the employment contract, pursuant to the provisions of the National Collective Bargaining Agreement for the Chemical Industries and in the event of termination of the employment contract, the indemnity due in consideration of the non-compete clause would be payable monthly for two years on the basis of two-thirds of the monthly fixed remuneration attached to the suspended employment contract unless Mr Hieronimus were to be released from application of the clause. This clause does not apply in the event of voluntary retirement or compulsory retirement on the Company’s initiative: no consideration for non-competition would be paid in such a situation.
Mr Nicolas Hieronimus will continue to benefit, under his suspended employment contract, from the “Garantie de Ressources des Retraites Anciens Cadres Dirigeants” (Retirement Income Guarantee for Former Senior Managers) scheme closed to new members effective from 31 December 2015. The income guarantee is calculated on the basis of the number of years of professional service in the Company up to 31 December 2019, up to a limit of 25 years. Generally, after 31 December 2019, no new rights will be granted under this scheme pursuant to French Order no. 2019-697 of 3 July 2019 concerning supplementary professional retirement schemes,
