The remuneration of the executive corporate officer must be competitive in order to attract, motivate and retain the best talents in the Company’s top positions.
This remuneration is assessed overall, namely by taking into account all the components that make it up.
To assess the competitiveness of this remuneration, a coherent and stable reference panel is defined with the assistance of an external consulting firm.
The panel consists of French and international companies that have leading global positions. These companies operate on similar markets and are, in the cosmetics sector, direct competitors of L’Oréal, or operate on the wider everyday consumer goods market, as regards all or part of their business activities.
This panel is composed of the remuneration of executives in the following companies:
| Coty | Kimberly Clark | Reckitt Benckiser | Beiersdorf | Danone |
|---|---|---|---|---|
| GSK | Henkel | LVMH | Unilever | Colgate Palmolive |
| Estée Lauder | Johnson & Johnson | Procter & Gamble | Kering |
This panel is re-examined every year by the Human Resources and Remuneration Committee in order to check its relevance. It may evolve, particularly to take into account the changes in the structure or business activities of selected companies, on the basis of the proposals made by the external advisory firm.
The Board of Directors has aligned the remuneration policy for an executive corporate officer in the interests of the Company, in order to ensure the long-term sustainability and development of the Company, taking into consideration the social and environmental challenges of its business activity and the sense of purpose (raison d’être) of L’Oréal.
The remuneration policy applied to the executive corporate officer is directly linked to the Group’s strategy. It supports its development model. It promotes harmonious, regular, durable growth, both over the short and long term. The Board of Directors’ constant desire is indeed to incite the General Management both to maximise performance for each financial year and to ensure that it is repeated and regular year-on-year. This is in line with L’Oréal’s stated objective of economic and societal excellence.
The Board of Directors chooses to correlate the executive corporate officer’s performance directly with the Company’s performance by using the same performance indicators, financial indicators in particular.
The choice of correlating the performance criteria for the executive corporate officer’s remuneration with the Company’s performance indicators, particularly those of a financial nature, is the guarantee of a clear and relevant remuneration policy.
These criteria make it possible to assess L’Oréal’s intrinsic performance, namely its progress year-on-year via internal performance indicators and also its relative performance as compared to its market and its competitors via external growth indicators.
The objectives adopted generate long-term value creation. In particular, the choice of varied operational financial criteria aims at encouraging durable, balanced growth. Overall long-term performance results from the convergence of these criteria.
These objectives must also be an incentive for the executive corporate officer to adapt the Group’s strategy to the profound transformations in the world of beauty, and the digital revolution in particular.
The executive corporate officer’s remuneration must include a predominant portion subject to performance conditions, with annual and multi-annual assessment periods adapted to the time horizon of each of these objectives.
The remuneration must be designed to favour a regular and sustainable development, in line with the Group’s commitments with regard to ethics, and respectful of the environment in which L’Oréal operates. In 2020, L’Oréal announced its Corporate Social Responsibility vision by 2030 in the context of the L’Oréal for the Future programme, which has a set of objectives for climate, biodiversity, water and the use of natural resources.
The social and societal commitment is just as important since no environmental transition is possible without an inclusive society. The annual variable portion of the executive corporate officer’s remuneration, and their long-term remuneration, includes non-financial criteria related to L’Oréal’s sense of purpose and the commitments made by the Group, particularly in the context of its corporate social, societal and environmental responsibility programmes.
These criteria will be assessed year-on-year with a long-term perspective.
The executive corporate officer’s remuneration must be linked to the changes over the medium‑to long-term in the Company’s intrinsic value and share performance. A significant portion of the executive corporate officer’s remuneration thus consists of performance shares, a significant percentage of which is retained until the end of his/her corporate office, with the undertaking not to carry out risk hedging transactions.
This leads to alignment with the shareholders’ interests, understood as long-term value creation.
