2022 Universal Registration Document

Granting of performance shares

Since 2009, the Board of Directors has granted performance shares to employees of the Group and, since 2012, also to its executive corporate officer, within the scope of Articles L. 225-197-1 et seq., L. 22-10-59, L. 22-10-60 and L. 22‑10-8 of the French Commercial Code and the authorisations granted by the Annual General Meeting.

These grants are linked to the performance and their aim is to encourage achievement of the Group’s long-term objectives and the resulting value creation for the shareholders. Consequently, the final vesting of the shares is subject to performance conditions which are recorded at the end of a vesting period of four years from the grant date.

The value of these shares, estimated at the grant date according to the IFRS applied for the preparation of the consolidated financial statements, represents approximately 50% of the executive corporate officer’s annual remuneration and may not exceed 60%.

The Board of Directors reserves the possibility to decide on an additional grant if a particular event justifies it. This potential grant to the executive corporate officer, duly documented by the Board of Directors, may not exceed a total annual ceiling (taking into account any grants already awarded in the year) of 5% of the total number of free shares granted during that same financial year.

The executive corporate officer is required to retain 50% of the free shares finally vested to him or her at the end of the vesting period, in registered form, until the termination of his or her duties, following a review of the performance conditions.

The executive corporate officer makes a formal undertaking not to enter into any risk hedging transactions with regard to the performance shares, until the end of the holding period set by the Board of Directors.

An executive corporate officer may not be granted performance shares at the time of his or her departure.

Performance conditions

The performance criteria cover all shares granted to the executive corporate officer.

They take into account:

• in part, criteria for financial performance based on:
  • growth in comparable cosmetics sales of L’Oréal as compared to a panel of L’Oréal’s major direct competitors;
  • growth in L’Oréal’s consolidated operating profit;
• in part, criteria for non-financial performance based on:
  • fulfilment of environmental and social responsibility commitments made by the Group as part of the L’Oréal for the Future programme (hereinafter “L’Oréal for the Future Commitments”):
    • % of sites with “carbon neutral”⁽¹⁾ status;
    • % of formula ingredients that are bio-sourced, traceable and come from sustainable sources;
    • % of plastic packaging that comes from either recycled or biobased sources;
    • number of people benefitting from the Group’s brands’ social commitment programmes;
  • gender balance within strategic positions including theExecutive Committee.

The Board of Directors considers that both these types of criteria, assessed over a long period of three full financial years and reapplied to several plans, are complementary, in line with the objectives and specificities of the Group and likely to promote continuous, balanced and sustainable long-term growth. They are exacting but remain a source of motivation for the beneficiaries.

The shares are only finally vested at the end of a 4-year period, allowing sufficient time to be able to assess the performance achieved over three full financial years.

Details of weighting of share-based remuneration