Laporan Keuangan L'Oreal 2014
Laporan Keuangan L'Oreal 2014
Laporan Keuangan L'Oreal 2014
DOCUMENT
2014
ANNUAL FINANCIAL REPORT
Table of contents
6 CORPORATE SOCIAL,
1.7. INVESTMENT POLICY 24
1.8. RISK FACTORS 25
ENVIRONMENTAL AND SOCIETAL
2
RESPONSABILITY* / 209
CORPORATE GOVERNANCE* / 35
6.1. THE L’ORÉAL GROUP’S COMMITMENTS IN THE AREA OF
2.1. FRAMEWORK FOR IMPLEMENTATION OF THE CORPORATE SOCIAL, ENVIRONMENTAL AND SOCIETAL
GOVERNANCE PRINCIPLES 36 RESPONSIBILITY 211
2.2. THE BOARD’S COMPOSITION AND THE WAY IN WHICH 6.2. SOCIAL INFORMATION 216
THE BOARD’S WORK IS PREPARED AND ORGANISED 37 6.3. ENVIRONMENTAL INFORMATION 233
2.3. REMUNERATION OF THE DIRECTORS AND THE EXECUTIVE 6.4. SOCIETAL INFORMATION 246
OFFICERS 73
6.5. TABLE OF CONCORDANCE IN RESPECT OF SOCIAL,
2.4. SUMMARY OF TRADING BY DIRECTORS AND EXECUTIVE ENVIRONMENTAL AND SOCIETAL MATTERS 256
OFFICERS IN L’ORÉAL SHARES IN 2014 89
6.6. STATUTORY AUDITORS' REPORT 258
2.5. INTERNAL CONTROL AND RISK MANAGEMENT
7
PROCEDURES ( REPORT OF THE CHAIRMAN OF THE
BOARD OF DIRECTORS ON INTERNAL CONTROL) 89
STOCK MARKET INFORMATION
2.6. STATUTORY AUDITORS’ REPORT, PREPARED IN
ACCORDANCE WITH ARTICLE L. 225-235 OF THE FRENCH SHARE CAPITAL / 265
COMMERCIAL CODE ON THE REPORT PREPARED BY THE
CHAIRMAN OF THE BOARD OF DIRECTORS 97 7.1. INFORMATION RELATING TO THE COMPANY 266
2.7. STATUTORY AUDITORS' SPECIAL REPORT ON REGULATED 7.2. INFORMATION CONCERNING THE SHARE CAPITAL* 268
AGREEMENTS AND COMMITMENTS WITH THIRD PARTIES 98 7.3. SHAREHOLDER STRUCTURE* 270
7.4. LONG-TERM INCENTIVE PLANS* 275
3
7.5. THE L’ORÉAL SHARE/L’ORÉAL SHARE MARKET 283
KEY FIGURES AND COMMENTS ON 7.6. INFORMATION POLICY 289
THE 2014 FINANCIAL YEAR / 101
3.1.
3.2.
3.3.
THE GROUP’S BUSINESS ACTIVITIES IN 2014*
FINANCIAL HIGHLIGHTS
SIGNIFICANT, RECENT EVENTS AND PROSPECTS
102
107
114
8 ANNUAL GENERAL MEETING
8.1. DRAFT RESOLUTIONS AND REPORT OF THE BOARD OF
DIRECTORS TO THE ANNUAL GENERAL MEETING TO BE
/ 291
4
8.2. STATUTORY AUDITORS’ SPECIAL REPORT ON
2014 CONSOLIDATED FINANCIAL THE AUTHORIZATION FOR THE FREE GRANTING
STATEMENTS* / 117 OF EXISTING SHARES AND/OR SHARES TO BE ISSUED TO
EMPLOYEES AND CORPORATE OFFICERS
4.1. COMPARED CONSOLIDATED INCOME STATEMENTS 119 OF THE COMPANY 308
4.2. CONSOLIDATED STATEMENT OF COMPREHENSIVE 8.3. STATUTORY AUDITORS’ SPECIAL REPORT ON THE SHARE
INCOME 120 CAPITAL INCREASE RESERVED FOR EMPLOYEES
4.3. COMPARED CONSOLIDATED BALANCE SHEETS 121 OF THE COMPANY 309
4.4. CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY 122
9
4.5. COMPARED CONSOLIDATED STATEMENTS OF CASH
FLOWS 123 APPENDIX / 311
4.6. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 124
9.1. STATUTORY AUDITORS 312
4.7. CONSOLIDATED COMPANIES AT DECEMBER 31ST, 2014 174
9.2. HISTORICAL FINANCIAL INFORMATION INCLUDED
4.8 STATUTORY AUDITORS' REPORT ON THE CONSOLIDATED BY REFERENCE 312
FINANCIAL STATEMENTS 178
9.3. PERSON RESPONSIBLE FOR THE REGISTRATION
DOCUMENT AND THE ANNUAL FINANCIAL REPORT 313
5 2014 PARENT COMPANY FINANCIAL 9.4. DECLARATION BY THE PERSON RESPONSIBLE FOR
THE REGISTRATION DOCUMENT AND THE ANNUAL
STATEMENTS* / 179 FINANCIAL REPORT 313
9.5. REGISTRATION DOCUMENT TABLE OF CONCORDANCE 314
5.1. COMPARED INCOME STATEMENTS 180
9.6. ANNUAL FINANCIAL REPORT TABLE OF CONCORDANCE 316
5.2. COMPARED BALANCE SHEETS 181
9.7. TABLE OF CONCORDANCE WITH THE AMF TABLES
5.3. CHANGES IN SHAREHOLDERS' EQUITY 182 ON THE REMUNERATION OF EXECUTIVE OFFICERS
5.4. STATEMENTS OF CASH FLOWS 183 AND DIRECTORS 316
5.5. NOTES TO THE PARENT COMPANY FINANCIAL 9.8. TABLE OF CONCORDANCE OF
STATEMENTS 184 THE MANAGEMENT REPORT 317
5.6. TABLE OF SUBSIDIARIES AND HOLDINGS
AT DECEMBER 31ST, 2014 201
In application of Article 212-13 of the General Regulation of the Autorité des Marchés
Financiers (AMF), this Registration Document was filed
with the AMF on March 17th, 2015.
This Registration Document may be used in connection with a financial transaction
if it is accompanied by an information memorandum approved by the AMF. The
document has been prepared by the issuer and its signatories incur liability
in this regard.
This is a free translation into English of the L’Oréal 2013 Registration Document issued in the French language and is provided solely
for the convenience of English speaking readers. In case of discrepancy the French version prevails.
This document was printed in France by an imprim’Vert-certified printing company, on recyclable, chlorine-free, PEFC-certified
pulp from forests managed according to sustainable environmental, economic and social principles.
This label recognises the most transparent Registration Documents according to the criteria of the Annual Transparency Ranking.
INTERVIEW
INVENTING
THE NEW L’ORÉAL:
UNIVERSAL, DIGITAL
AND SUSTAINABLE
Jean-Paul AGON
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
“
in its growth, mainly reflecting its weaker
performance in the United States, where year of transformation?
– after three years of increasing its market Yes, L’Oréal has undergone substantial
THE GROUP’S share – it marked a pause. strategic transformations this year to
OUR POSITIONS the group. Profitability there is strong, and Carita means that our Professional
IN THREE OF OUR
there are bright prospects for increasing Products Division is moving into a new
our market shares, which are already high market: professional skincare. The
FOUR DIVISIONS in this region.We also made progress in the acquisitions of Magic, Niely and NYX are
”
New Markets, our number one zone since adding to the presence and potential of
2012, where once again we increased our the Consumer Products Division in markets
market shares and recorded high growth. of great strategic importance: skincare
in China and Asia for Magic, hair colour
in Brazil and Latin America for Niely, and
What kind of a year was And in terms of results? make-up in America and the rest of the
2014 for L’Oréal? 2014 was once again a year of very solid world for NYX. Lastly, the acquisition of
It can be summed up in two words: financial results. The Group significantly Carol’s Daughter will underpin our beauty
“progress” and “transformation”. Progress raised its profitability, which reached expertise in order to best serve multicultural
first of all, because the year was marked by a record level at 17.3%. Its net profit customers.
major launches and market share gains. increased, as did net earnings per share
In a volatile economic context and a less and the dividend proposed at the Annual
dynamic market, L’Oréal posted growth General Meeting, which is up by +8%. You have also stepped
across all its Divisions and geographic up digital initiatives.
zones. But 2014 was also a year of Is this another kind of
profound transformation for L’Oréal, to transformation?
further strengthen the group and adapt It certainly is. 2014 was an important year
to a rapidly changing world. for L’Oréal’s digital transformation, with the
appointment of Lubomira Rochet as Chief
Digital Officer and a member of the Group’s
Could you tell us more Executive Committee. I am fully convinced
about the group’s that digitalization will profoundly transform
performance in 2014? the relationship between our brands
The Active Cosmetics Division and L’Oréal and consumers in a positive way. We
Luxe substantially outperformed their strongly believe that digitalisation is
markets in all regions. The Professional a very important factor in the group’s
Products Division grew faster than its success. What is more, our decentralized
market. The Consumer Products Division organisation, entrepreneurial spirit, and
meanwhile saw a temporary slowdown multi-brand and multi-channel approach
Were there any A START-UP terms of organic growth. We will also take
advantage of the favourable impact of
”
other strategic the monetary environment. We will rely,
transformations? as always, on strong ethical principles
2014 was the first year in the roll-out of and on talented and committed L’Oréal
our major corporate social responsibility teams, which are totally dedicated to
project: “Sharing Beauty With All”. Its What are these internal continuing our great adventure: in other
objective is to make L’Oréal into a model transformations words, pursuing our “Beauty for All” mission,
company that is exemplary in terms of and what are our Universalisation strategy and our goal
sustainable innovation, production and your objectives? of attracting one billion new consumers.
consumption, and shared growth by We have started a huge simplification At the same time, we will keep on inventing
2020. This is a vital challenge, because initiative. I am quite convinced that the the New L’Oréal of the 21 st century:
sustainable development is, and more complex the world becomes, the universal, digital and sustainable.
increasingly will be, an essential driver more we need to simplify our approach,
for the durable success of companies so as to be fast, agile, responsive, and
in the 21st century. As you will see in our capable of seizing up-and-coming trends
Progress Report, we have already made and taking advantage of all opportunities.
significant advances in a number of The aim of these transformations is to
fields, especially sustainable innovation adapt the group to a fast-changing world,
and production. For instance, at the end and to prepare it for future success.
of 2014 we achieved a 50% reduction
in CO2 emissions from our factories and
distribution centres compared with 2005.
As for social issues,2014 marked the roll-out
of the “L’Oréal Share & Care” programme,
an unprecedented project aimed at
universalising optimum social protection
for all Group employees worldwide.
Moreover, several strategically important
internal transformations also took place
this year.
1.1. MISSION
For more than a century, L’Oréal has devoted itself solely to one business: beauty. It is a
business rich in meaning, as it enables all individuals to express their personalities, gain
self-confidence and open up to others.
Beauty is a language
L’Oréal has set itself the mission of offering all women and men worldwide the best of
cosmetics innovation in terms of quality, efficacy and safety. It pursues this goal by meeting
the infinite diversity of beauty needs and desires all over the world.
Beauty is universal
Since its creation by a researcher, the Group has been pushing back the frontiers
of knowledge. Its unique Research arm enables it to continually explore new territories and
invent the products of the future, while drawing inspiration from beauty rituals the world over.
Beauty is a science
Providing access to products that enhance well-being, mobilising its innovative strength to
preserve the beauty of the planet and supporting local communities are exacting challenges,
which are a source of inspiration and creativity for L’Oréal.
Beauty is a commitment
By drawing on the diversity of its teams, and the richness and the complementarity of its brand
portfolio, L’Oréal has made the universalisation of beauty its project for the years to come.
1.2. HISTORY
1
Creation of Société Française de Teintures 1909
Inoffensives pour Cheveux by Eugène Schueller
1929 Imédia, the first quick oxidation hair colour
Ambre solaire, the first sun protection oil 1935
with filtering
1954 Cosmair is named as L’Oréal’s agent in the United States
Launch of Elnett hair lacquer 1957
1963 L’Oréal enters the Paris Stock Market
Acquisition of Lancôme 1964
1965 Acquisition of Laboratoires Garnier
Acquisition of Biotherm 1970
1973 Acquisition of Gemey, an open door
to the consumer make-up market
The first model of a reconstructed epidermis 1979
from L’Oréal Research
1981 Creation of Laboratoires dermatologiques Galderma
Acquisition of La Roche-Posay 1989
1993 Acquisition of Redken 5th avenue in the United States
Acquisition of American agents Cosmair 1994
1996 Acquisition of Maybelline in the United States
Acquisition of Softsheen and Carson 1998
in the United States and in South Africa 2000
2000 Acquisition of Matrix and Kiehl’s since 1851
in the United States
L’Oréal becomes the majority shareholder 2003
in Shu Uemura in Japan
2004 Takeover of the Gesparal holding company
Acquisition of The Body Shop 2006
1.3.1.3. COUNTING ON RESEARCH, INNOVATION The Group’s research and marketing teams pay heed to all
AND QUALITY: INVENTING THE FUTURE consumers from everywhere in the world. The laboratories on
OF BEAUTY all continents study their specificities. The Group’s innovation
policy is based on accessibility and adaptation of products to
With 3,782 researchers and a budget representing 3.4% of its
the beauty habits and rituals of all men and women in their
sales, L’Oréal has the largest Research and Innovation team in
infinite diversity.
the cosmetics industry. The Group is continuing to develop its
innovation capabilities through its research centres in France To make Universalisation a really powerful strategy, the global
and increases its research budget very regularly. L’Oréal market has been organised into eight homogeneous strategic
invests in all fields, from Advanced Research to formulation. regions, even more attentive to consumers and closer to their
The cosmetics market is a supply-led market, driven by expectations. The Group’s organisation is now resolutely
innovation, where consumers are always looking for novel multi-centric, with a strong “nerve centre” based in France.
products and improved performances. More than ever, it is the Each major region of the world now has its own centre of
products which are “new, different, better” which make for expertise which groups together the Research and marketing
success and lead to growth, which proves the validity of activities. Research thus has 5 hubs all over the world, led by
L’Oréal’s business model based on the excellence of Research the central teams and fuelled by the Group’s core expertise
and creative marketing. and fundamental knowledge.
The brands are reinvented all the time so that they always The Group’s human and social project revolves around two
match consumer demand perfectly. priorities: the first is individual performance development of
employees and future leaders and the second, social
In addition, new acquisitions regularly provide valuable
performance.
additions to this unique portfolio.
In this field, L’Oréal has launched the global Share & Care
Some of these are brands with a global vocation, like the
programme, with the objective of guaranteeing security,
recently acquired American Urban Decay make-up brand,
protection and well-being for all the Group’s employees,
which makes a tremendous contribution to our L’Oréal Luxe
wherever they may be located in the world.
brands; NYX Cosmetics, an affordable, makeup artist-inspired
brand or Decléor and Carita, which expand growth potential This programme aims at attracting and fostering the loyalty of
in Professional Products in the field of professional skincare. the best talents in all the countries of the world, as has been
the case in France for a number of years.
Other acquisitions are aimed at extending the Group’s
geographical coverage: in Colombia with the make-up brand
Vogue, in Kenya with Interbeauty, or in Brazil with Niely 1.3.1.7. A STRATEGY OF CONSTANT, SUSTAINABLE,
Cosméticos(1) and Emporio Body Store, and in China with SHARED GROWTH
Magic Holdings, the leading specialist in cosmetics facial
masks. These newly acquired companies are accelerating the Supported by loyal shareholders, vigilant governance and
Group’s penetration of their markets in a spectacular manner stable management, L’Oréal has always targeted constant,
and contribute to boosting future organic growth. sustainable growth.
s each subsidiary participates, as far as its resources allow, in In all its historical categories (haircare, hair colours, styling and
1
the large corporate philanthropy programmes of the shaping), the Division has built a unique brand portfolio: luxury
L’Oréal Foundation such as “For Women In Science”, hair care (Kérastase, Shu Uemura Art of Hair), general
“Hairdressers against AIDS” and “Beauty for a Better Life”. premium brands (L’Oréal Professionnel, Redken), an
affordable professional brand (Matrix), and a handful of
Above and beyond its solid long-term economic specialist brands.
performances, the Company seeks to be exemplary, and sets
itself demanding standards in order to limit its footprint on the In order to strengthen its brand leadership further, develop
planet. In October 2013, L’Oréal launched its new commitment markets, and accelerate the conquest of new professional hair
to sustainability by 2020: “Sharing beauty with all”. This salons, the strategy is organised:
programme concerns all the Group’s impacts, and covers four
areas: innovating sustainably, producing sustainably, • by region: accelerating growth in the New Markets
consuming sustainably and sharing growth. (Details of the (promotion of the profession through education,
commitments under this programme are set out in chapter 6, development of a customised offering of both products
on pages 212 to 215). and services, leveraging complementary distribution
channels), revitalising growth in mature countries by
making the hair salon experience more engaging
1.3.1.8. A GROUP THAT CONSTANTLY ADAPTS (e-motion concept, exclusive new professional services,
development of expert fashion assistance provided by
L’Oréal relies on great continuity in its strategy. But continuity hairdressers);
does not prevent renewal. L’Oréal transforms its business to
adapt to changes in the world in order to consolidate its • by category: enlarging its professional expertise to two
leadership and increase its chances of success in the future. new segments (nail care and colour, Decléor and Carita
The challenge is twofold: it is necessary both to pursue the skincare): these new activities, which are highly
strategy which has enabled L’Oréal to be successful over the complementary to the profession of hairdresser, will
last hundred years and, at the same time, to invent the new make it possible to enhance the authority of the Division
L’Oréal of the 21st century, perfectly matched and in tune with over the professional beauty business as a whole, in hair
a profoundly changing world. salons and beauty institutes.
• by category: developing to skincare with three Travel retail: the “travellers channel” is a booming channel
multi-category brands and four specialist brands, that conveys an image. Already the leader in this channel, the
developing in make-up with, in particular, global Group decided to create the Group Travel Retail Division
deployment of the recently acquired specialist Urban Worldwide, including multi-division activities. This Division’s
Decay brand, and optimisation of growth in fragrances ambition is to continue to widen the gap, with a “global
by winning major positions in women’s perfumes and shopper” strategy: a personalised, custom-tailored approach,
consolidation of its leadership in the men’s category. according to languages, cultures and beauty rituals, which
makes it possible to respond to the aspirations of this new
s The Active Cosmetics Division: Helping everyone in their generation of travellers.
quest for skin's beauty and health.
1
Professionnal L'Oréal Active Consumer The Body
Products Luxe Cosmetics Products Shop
Research
& Innovation
Digital
Human
Resources
Admin
& Finance
Operations
Comm,
Sustainability
& Public Affairs
Almost all subsidiaries are directly held by L’Oréal parent s the Administration and Finance Division, in charge of the
company with a holding or control percentage equal to or Group’s financial policy, controlling and consolidation,
close to 100%. The detailed list of these subsidiaries is set information systems and legal and tax co-ordination, as
out in the notes to the consolidated and parent company well as financial communications and relations with
financial statements on pages 174 et seq. and pages 201 shareholders and investors and strategic prospective;
et seq.
s the Communication, Sustainability and Public Affairs
NB: On July 8th, 2014, L’Oréal sold all its holdings in the Division, in charge of co-ordination of corporate
companies of the Galderma group to Nestlé. communication, co-ordination of communication by the
Divisions and brands and Sustainable Development.
24.9% 35.5%
OF GROUP COSMETICS SALES OF GROUP COSMETICS SALES
+ 1.1% + 2.4%
Sales growth in 2014 (1) Sales growth in 2014 (1)
+ 2.8% + 0.3%
Market growth in 2014 (2) Market growth in 2014 (2)
SALES SALES
€5,389.4 M €7,697.7 M
OPERATING PROFIT (3) OPERATING PROFIT (3)
18.7% (% of sales) 22.7% (% of sales)
NEW MARKETS
39.6% OF GROUP COSMETICS SALES
+ 6.9% Sales growth in 2014 (1)
+ 5.3% Market growth in 2014 (2)
€8,571.1 M Sales
19.6% Operating profit (% of sales) (3)
(1) Like-for-like
(2) Source: L’Oréal estimates of worldwide cosmetics market based on net manufacturing prices excluding soap, toothpaste, razors and blades.
Excluding currency fluctuations
(3) Operating profit before «non-allocated». See chapter 3, page 109.
/ WORLDWIDE COSMETICS MARKET FROM 2005 TO 2014 (1) The worldwide cosmetics market represents approximately
1
(Annual growth rate as %) €181 billion, and grew by an estimated +3.6% (1) in 2014. It is a
particularly robust market, which is steadily expanding, while
proving very resilient when economic conditions are at their
most difficult. The cosmetics consumer’s behaviour has not
+5.0%
+4.9% changed since the crisis. There has been no devaluation,
+4.6% +4.6% banalisation or massification of the market. On the contrary,
+4.2% consumers’ aspirations for quality are higher than ever, and
+3.8% +3.8% they are always eager for technology and new ideas. The
+3.6% cosmetics market remains a supply-led market, driven by
innovation, where consumers are always looking for quality,
+2.9% performance and perceived results.
+1.0%
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
For the second year running, in 2014, the dermocosmetics of global growth (1) . With growth of +3.5%, mass market sales
market was the most dynamic with growth of +5.1%. The tailed off particularly due to mature countries and Asia.
market was buoyant on all continents, even in Western Europe
with growth of nearly +3%. With growth of +5.2%, the selective From a geographic viewpoint, the New Markets continue to
market continued to grow at a steady pace in 2014; bolstered attain increasing levels of growth: excluding Japan, they
by Asia, the United States and e-commerce, it contributes 29% represent 80% of worldwide market growth this year (1) , due in
half to Asia-Pacific
(1) Source: L’Oréal estimates of the worldwide cosmetics market based on net manufacturer prices excluding soap, toothpaste, razors and blades.
Excluding currency fluctuations.
30.52
21.33 20.50
10.39
7.77
Procter Estée
L’Oréal Unilever & Gamble Lauder Shiseido
(1) Source: Beauty’s top 100 WWD, August 2014, in data for 2013.
Competitive positions and market share held by the Group’s Divisions and brands mentioned in this report are based on studies,
panels and polls obtained from specialised organisations and companies, or, in the absence of comprehensive studies, are the
result of estimates made by L’Oréal on the basis of available statistical data.
LOCAL RESEARCH AND ADAPTATION OF PRODUCTS United States, China, Japan, Brazil and India. These regional
hubs identify consumer needs and cosmetic practices. The
To adapt to consumers all over the world, L’Oréal’s Research
richness of their scientific ecosystem promotes cooperation
teams are present in all geographic zones through its
and partnerships for excellence. The data collected then
18 cosmetics research centres and 16 evaluation centres. The
enables the researchers to develop new products that are
R&I teams draw on the local ecosystem: consumers,
perfectly in tune with local expectations and aspirations. The
universities, suppliers. The research centres are grouped
innovations developed are also shared in a coordinated
together in 3 global centres in France (Advanced Research,
manner to promote the fluidity of exchanges.
Hair métiers and Cosmetic métiers) and 5 regional hubs: in the
Research and Innovation budget Research and Innovation budget Number of patents
(€ millon) (€ million)
2012 680 2012 3,416 2012 551
2013 748 2013 3,590 2013 564
2014 761 2014 3,782 2014 501
1.6. OPERATIONS
The Operations Division has three major formal responsibilities Contributing to innovation
for L’Oréal throughout the world.
Operations play a major role in helping the brands to
differentiate their products for consumers.
1.6.2.1. PROTECTION OF HUMAN RESOURCES In terms of product innovation, the responsibility of the
AND ASSETS Operations Division is mainly exercised in the areas of
The Operations Division guarantees the right for each L’Oréal packaging and development, functional design, design to
employee to work in a safe environment. cost and processes. In 2014, L’Oréal filed 94 patents for
packaging and processes.
The Group has the obligation to guarantee the best conditions
in terms of health and safety at work for all its employees. In order to speed up the innovation process, the Purchasing
Exhaustive programmes have been implemented to reduce Department created an internal trade fair dedicated to
the risks and ensure ongoing improvement. innovation, called Cherrypack, in 2010. The third edition of this
fair was held in November 2013, enabling ten strategic
A managerial safety culture, the setting-up of a safety system suppliers (1) from Asia, Europe and the Americas, to unveil their
and the monitoring of procedures through audits have been latest innovations with regard to finished product packaging
deployed for several years on all the Group’s sites: and Point-of-Sale (POS) advertising exclusively to all the
administrative sites, Research & Innovation centres, factories Group’s brands and to the Research & Innovation teams. This
and distribution centres. It defines high standards and involves event demonstrates L’Oréal’s intention to reinforce its links with
the staff at all levels. its suppliers by gambling on collaborative intelligence. It was
organised in the presence of Jean-Paul Agon and Executive
Through the powerfulness of its systems and the ongoing
Committee members and was attended by around 800
improvements in its results, the Group is today one of the most
employees who were thus able to discover these innovations.
high-performing companies in the world in the area of safety.
Long-term partnerships with suppliers
1.6.2.2. PROTECTION OF QUALITY L’Oréal’s success can also be accounted for by the Group’s
exacting standards in the choice of its suppliers and the
The excellence of quality management across the value chain
longstanding relationships that it sets up with them.
(design and development, production, distribution) is
world-famous and enables the L’Oréal brands to affirm the 2014 was marked by an acceleration of the process to obtain
supremacy of their products and to strengthen the bond with a 360° view of supplier performance. L’Oréal’s strategic
consumers. This demanding quality system mainly aims to suppliers (1) are thus regularly assessed using a scorecard
guarantee the integrity of products with the same stringent consisting of 5 areas of performance of equal importance:
requirements all over the world, while complying with local innovation, quality, competitiveness, the supply chain and
regulations. CSR & Sustainability. Each of these areas is broken down into a
series of precise indicators which have been formally laid
down in order to make it easier to rate them and give
guidance.
(1) Strategic suppliers are those who bring significant value added to the Group by contributing, through their weight, their innovations, their strategic
alignment and their geographic deployment, to accompanying L’Oréal’s strategy on a durable basis.
Durable links with suppliers also require the development of consists in making some of its purchases from local suppliers
local sourcing in strong growth zones. Since 2010, the Group who make commitments in favour of minorities, disabled
has implemented the wall-to-wall programme, which consists workers or workers from underprivileged communities. It may
in setting up a production unit for packaging operated by a also involve very small suppliers or fair trade players that
supplier within the plant itself. This partnership develops L’Oréal calls on to contribute through its suppliers. In 2014, the
responsiveness and industrial flexibility, while reducing the Solidarity Sourcing programme provided access to
transportation of packaging items and the generation of employment for over 27,000 people in a vulnerable situation all
waste related to their packaging. It is aimed at plants with over the world, as compared to 22,000 in 2013. Based on the
highly specialised technologies that produce very large “cascading” concept, L’Oréal wants to enlarge this approach
volumes and have ongoing needs for external resources, such to include the suppliers of its suppliers. This programme was
as the Rambouillet factory in France, the Settimo Torinese officially launched in 2012 for the L’Oréal Group’s suppliers in
factory in Italy or the São Paulo factory in Brazil which source order to incite them, in turn, to develop this same approach
their plastic bottles in this manner. with their own suppliers.
The Operations Division plays a crucial role in the field of Regionalised production
corporate social responsibility and is a big contributor to the
L’Oréal’s 43 factories are located in order to supply all the
“Sharing Beauty with All” programme. L’Oréal incites its
countries in which the Group is present. The strong growth of
suppliers to be more socially responsible and ensures rigorous
products in the Consumer Products Division, particularly in the
monitoring of their commitments through a large number of
New Markets, accounts for the number and geographical
social audits carried out throughout the world; 6,129 social
breakdown of this Division’s factories. Furthermore, in order to
audits have been carried out since 2006. The objective is to
support the drive to win over another billion consumers in the
provide them with support in improving their safety standards
New Markets, the Group opened its new production site in
and in their environmental and social performances (see
Egypt in 2013 and integrated two new industrial entities
chapter 6, section 6.4.4, page 250)
following acquisitions: Vogue in Colombia and Interbeauty in
Furthermore, by creating the Solidarity Sourcing programme in Kenya. In 2014, four new factories were added to this industrial
2010, a highly original programme that is unique on the network: two factories in China, with the acquisition of Magic
market, the Group took the initiative of using the Purchasing Holdings, one in France with the acquisition of Decléor and
function as a driver for social inclusion. This programme Carita and one in India.
EUROPE 1
ASIA, PACIFIC
NORTH AMERICA
LATIN AMERICA
Active Cosmetics:
2 factories
Professional Products:
2 factories
L'Oréal Luxe :
5 factories
Consumer Products:
30 factories
Raw Materials:
3 factories
Devices:
1 factory
Factory specialisation Burgos in 2014, to name a few. In 2014, L’Oréal obtained from
1
the Carbon Disclosure Project very high scores of A for
Factories are generally dedicated to the production of one
performance and 98 for transparency (its score was A 93 in
Operational Division, specialise in particular major industrial
2013) and received a prize for the Best performer in Climate
technologies and are located close to the markets that they
Change Leadership. Details of these scores are set out in
serve. The rotation of brands on the packaging lines is
chapter 6, p. 243)
furthermore assisted by the increased standardisation of
industrial processes. This industrial model helps to improve
performances year on year in terms of output, quality and 1.6.3.3. DISTRIBUTION
control over safety.
L’Oréal’s supply chain covers all information flows and
Cost and quality management “end-to-end” physical flows: from the supplier to the point of
sale. It ensures that the right product is delivered at the right
L’Oréal has set itself the target of continually improving time in accordance with the requests made by distributor
production costs. In 2014, particular emphasis was placed on customers while controlling costs. In 2014, L’Oréal’s supply
the management and reduction of raw material losses in the chain achieved a record level in its rate of service in the world.
plants. In addition to economic savings, this reduction
contributes to the sustainability commitments made by our The supply chain is continuing to modernise to respond to the
industrial facilities. complexity of the cosmetics market. Distribution is now
multi-channel: in addition to the traditional channels –
After the Best Practices award from the AFQP (Association selective, mass market, pharmacies and hair salons –use is
France Qualité Performance) obtained by L’Oréal in 2013, the now made of e-commerce and a multitude of points of sale
Rambouillet factory won the Trophy for industrial excellence (a extending over the New Markets.
competition organised by the Usine Nouvelle magazine in
partnership with INSEAD, a leading graduate business school) For five years, the L’Oréal Group has invested significantly in
in 2014. revamping the information systems of its supply chain in order
to synchronise all the stages of the supply chain and adjust
In 2014, the set-up of the System of Operational Excellence was production to fit as closely as possible with market needs. After
stepped up in all the factories. This continuous improvement Western and Eastern Europe for the Consumer Products
process, based on the close involvement of employees, was Division, the deployment of these solutions all over the world
pursued in a number of areas such as safety, environmental continued in 2014 in Asia, Pacific and also in Latin America
impact, ergonomics and production quality and capacity at where the first pilot projects were launched. In 2015, the
the industrial sites, while improving costs. deployment of these solutions will be extended to the Group’s
Selective Divisions. The geographical location of the
Environmental protection at the heart distribution centres enables L’Oréal to be as close as possible
of production to the 450,000 delivery points of its distributor customers. The
In the field of sustainable production, the Group’s modernisation of tools and practices in these distribution
environmental policy is aimed both at rolling out the best centres, and permanent synchronisation between our
practices with regard to energy efficiency, efficient resource distribution network and changes in customer needs per
consumption and waste reduction and the best possible country, per channel, makes it possible to adjust our physical
waste treatment and at implementing breakthrough projects distribution network on an ongoing basis in order to increase
in an ongoing quest for operational performance combined agility.
with environmental performance.
358
330
342
(1) Ratio calculated for cosmetics factors, excluding device factories - 2014 acquisitions are not included in the 2014 figure.
Western 43.6%
Europe 35.5%
North 19.2%
America 24.9%
New 37.2%
Markets 39.6%
Production Sales
s the remainder concerns Research and the head offices in s For all these investments, (see note 13 on page 147, note 15
1
different countries; on page 150 and note 28 on page 170 in chapter 4 –
Consolidated Financial Statements).
s IT investments spread over all these categories represented
19% of total investments Despite their strategic nature, each of these investments, when
taken individually, is not of a sufficient amount, at the scale of
the Group, to justify specific information.
Faced with the questions that civil society may ask regarding 39.69% of its cosmetic sales in 2014. The breakdown and
certain substances and their effects on health and the changes in L’Oréal’s sales are given in chapter 3 – Financial
environment, L’Oréal’s position may be summed up in three highlights on pages 103 et seq.
points:
Besides the currency risks mentioned in chapter 4 in note 26.1
s vigilance with regard to any new scientific data; Hedging of currency risk on page 166 and in the
paragraph on currency risk on page 31, political or economic
s cooperation with the relevant authorities; disturbances in countries where the Group generates a
s precautions leading to substitution of ingredients in the significant portion of its sales could have an impact on its
event of a proven risk or a strongly suspected risk. business activities.
The measures taken in favour of consumer health and safety However, its global presence helps to maintain a balance in
are described in further detail in chapter 6 on p. 249-250. sales and enables results to be offset between countries and
geographic regions. In periods of major economic slowdown
or in sovereign debt crisis situations in certain countries, growth
1.8.1.3. RESPONSIBLE COMMUNICATION in the Group’s sales may however be affected (see chapter 3,
page 104,...).
L’Oréal provides consumers with innovative products, and the
success of these products is based on their quality and
performance. The resulting benefits are highlighted in the 1.8.1.6. DISTRIBUTION NETWORK
Group’s communications. In spite of all the care taken to
guarantee the accuracy and fairness of the claims made in To sell its products, L’Oréal uses independent distribution
these communications, there is always a possibility that they channels, except for a limited number of stores which are
may be challenged by the authorities, organisations or owned by the Company. The concentration or disappearance
consumers. of distribution chains and changes in the regulations with
regard to selective distribution could have an impact on the
In order to reduce the risk of challenges of this kind being development of the Group’s brands in the country or countries
made, the International Product Communication Evaluation concerned.
Department makes sure of the conformity of product
communications before they are put on the market. The The presence of the Group’s brands in all types of distribution
Group’s Code of Ethics sets out the fundamental principles of networks helps to attenuate any potential negative effect.
responsible communication and L’Oréal has made a
commitment to implement the International Chamber of
1.8.1.7. COMPETITION
Commerce Consolidated Code of Advertising and Marketing
Communication Practice and the Cosmetics Europe Charter Due to its size and the positioning of its brands, L’Oréal is
and Guiding Principles on responsible advertising and subject to constant pressure from local and international
marketing communication to which the key global cosmetics competitors in all countries.
industry players in Europe adhere.
This competition is healthy; it leads the Group's teams, all over
the world, to always do their best to serve the interests of
1.8.1.4. SEASONAL NATURE OF THE BUSINESS consumers and the Group’s brands. In the context of a
constant struggle to obtain the best positions and launch the
The pace of sales may, in certain cases, and for specific most attractive and most effective product ranges, with an
products, be linked to climate conditions, such as for example optimal price/quality ratio, winning market share, improving
suncare products. The products and brands sought after by operating profitability and thereby ensuring growth are a
consumers as gifts are reliant on a strong concentration of permanent challenge. To win over a billion new consumers,
sales at year-end and during holiday periods. This is the case the Group has rethought its innovation model and constantly
in particular for fragrances and The Body Shop products. Any increases its investments with regard to research. L’Oréal’s
major disruption in either of these factors could affect L’Oréal’s research teams innovate to respond to beauty aspirations all
sales. over the world in their infinite diversity. This ability to implement
L’Oréal endeavours to mitigate these risks through the diversity long-term research programmes now enables L’Oréal to
and enrichment of its product offerings and by arranging maintain its advance over its competitors (see chapter 1.5
product launches and special product promotional events Research & Innovation on page 16).
throughout the entire year.
1.8.1.8. INNOVATION AND CONSUMER
1.8.1.5. GEOGRAPHIC PRESENCE AND ECONOMIC EXPECTATIONS
AND POLITICAL ENVIRONMENT The development of innovative products and their adaptation
L’Oréal has subsidiaries in 69 countries, with 64.5% of its sales to market requirements is an ongoing priority for the Group. If
being generated outside Western Europe. Global growth in the the Group fails to anticipate or interpret changes in consumer
cosmetics market has led L’Oréal to develop its activities in behaviour and new trends, its sales could be affected.
countries of the “New Markets” Zone, which represent over
The Consumer & Market Insights Department, which is part of The Group therefore develops a motivating, engaging
1
the Innovation Division, constantly watches for changes in professional environment, and encourages the attachment to
consumers’ cosmetic expectations by product category and its values, including those put forward by the Code of Business
major regions of the world. This work enables the Group’s Ethics. L’Oréal’s Human Resources policy is moreover
researchers to develop new products that are in line with described in the Report of the Chairman on Internal Control
market needs as mentioned in the paragraph on Local (paragraph on Internal Control organisation and environment,
research and adaptation of products on page 17. The page 90 and in chapter 6, paragraph 6.2. on page 216 et
development of digital communication and e-commerce seq.).
creates greater proximity between L’Oréal and its consumers,
by setting up decision-making aid services with regard to
product purchases and their use. Consumer expectations with 1.8.1.11. SECURITY
regard to Sustainable Development are moreover at the heart The Group’s presence at more than 426 sites (excluding our
of the “Commitments for 2020” published in 2013 (see own shops and the sales outlets of our distributor customers)
chapter 6, page 212 et seq.). exposes it to risks with regard to events of diverse origins –
geopolitical risks, malicious acts, natural disasters. The
consequences of these risks may adversely affect the Group’s
1.8.1.9. EXTERNAL GROWTH TRANSACTIONS
assets: people, tangible and intangible property.
Within the scope of its development strategy, L’Oréal has
made, and may have occasion to make acquisitions or sign For the permanent protection of these items of property (or
licence agreements. Group assets) against malicious acts, the Security Department
contributes in particular to preventive implementation of
Implementation of this strategy nevertheless requires that technical and Human Resources and operational procedures
L’Oréal is able to find development opportunities at an to limit the residual risk of malicious damage and support the
acceptable cost and under acceptable conditions. Group’s international development in high risk countries. It also
provides employees making business trips abroad with a
The Group has introduced a process for the upstream monthly report on “travel risks”.
oversight of these transactions which includes:
Since 2010, concerning the occurrence of natural disasters,
s the setting-up of multidisciplinary teams for the preparation the Real Estate Department has deployed a global
of projects and “due diligence” work; programme to assess site vulnerability to seismic risk in the
s a review by the Strategy and Sustainable Development most exposed zones. At the same time, the Information
Committee of the Board of Directors, then by the Board of Systems Department ensures that the seismic risk is taken into
Directors, of the opportunities for acquisitions or for equity consideration in the IT continuity plans of the countries that are
investment for a significant amount or falling outside the the most at risk.
scope of the Group’s usual business activities, and the
conditions for their implementation.
1.8.1.12. INFORMATION SYSTEMS
These operations may have a negative impact on the Group’s The day-to-day management of activities which notably
results if the Group does not succeed in integrating the include purchasing, production and distribution, invoicing,
activities of the companies that have been purchased, their reporting and consolidation operations as well as exchanges
personnel, their products and their technologies under the of internal data and access to internal information relies on the
anticipated conditions, in achieving the expected synergies proper functioning of all the technical infrastructures and IT
and in handling liabilities which have not been anticipated at applications. The risk of a malfunction or breakdown in these
the time of completion of the transaction and for which L’Oréal systems for exogenous or endogenous reasons (including
has little or no protection from the seller. intrusions, malicious acts, etc.) cannot be precluded.
Acquisitions that have been decided by the Board of Directors In order to minimise the impact that this type of occurrence
are regularly monitored by the Board of Directors which is could have, the Information Systems Department has
informed of the conditions of integration and the introduced strict rules with regard to data back-ups, protection
performances achieved. and access to confidential data and security with regard to
both computer hardware and software applications. In order
to adapt to the evolution of new communication methods,
1.8.1.10. RISKS RELATED TO HUMAN RESOURCES
L’Oréal has introduced an Information and Communication
MANAGEMENT
Technologies Charter. These measures are described in the
One of the keys to the success of L’Oréal lies in the talent of its Report of the Chairman on Internal Control (see chapter 2,
staff. Should L’Oréal not succeed in identifying, attracting, paragraph 2.5.2.4. on page 92). To deal with the growing
keeping and training competent employees who behave threats in the field of cybercrime, L’Oréal takes continuous
responsibly, the development of its activities and its results steps to strengthen the means dedicated to information
could be affected. system security. This plan relies in particular on anti-intrusion
equipment, securing sensitive equipment and overall
supervision to detect irregularities.
1.8.1.13. RISK OF AN INTERNAL CONTROL FAILURE that third parties may claim prior rights with regard to certain
L’Oréal trademarks and models.
L’Oréal has set up an Internal Control system which, even
though adequate, can only provide a reasonable assurance This is a potential risk which has to be cited in order to be
and not an absolute guarantee of achievement of the exhaustive even though the likelihood of its occurrence is low
Company’s objectives due to the inherent limitations of any due to the care taken when conducting prior rights searches.
control. Thus, the Group cannot rule out the risk of an Internal
Control failure that may expose it to an act of fraud in
particular. 1.8.2.2. INDUSTRIAL PROPERTY: PATENTS
Deployment to all the Management Committees of the Research and Innovation are the historic pillars of L’Oréal’s
Group’s subsidiaries of a programme to raise awareness of the development. The dedication of L’Oréal’s research teams has
risk of fraud (presenting the main operational scenarios that made it one of the leading industrial patent filers in its field for
could occur, the alert systems and the existing procedures many years.
and controls) is intended to reduce the Group’s exposure to
In order to protect the Group against the risk of another
this risk. In addition, the Group has published a corruption
company claiming one of its molecules, a production process
prevention guide which completes the commitments and
or packaging, L’Oréal has set up a specific structure, the
principles set out in L’Oréal’s Code of Ethics and which are
International Industrial Property Department as part of the
described in the chapter on “Corporate social, environmental
Research and Innovation Division; this department is
and societal information” (chapter 6).
responsible for filing the Group’s patents, exploiting them and
defending them on a worldwide basis. However, it cannot be
excluded that third parties could contest the validity of certain
1.8.2. Legal risks patents held by the Group.
1.8.2.4. OTHER LEGAL RISKS AND LITIGATION In order to prevent these risks, L’Oréal has prepared business
1
continuity plans for production which aim notably at looking
In the ordinary course of its business, the Group is involved in
for replacement solutions (for example: supplier back-up,
legal actions and is subject to tax assessments, customs
availability of several moulds for articles for strategic products).
controls and administrative audits. It is also the subject of
proceedings initiated by national competition authorities, in
particular in European countries (see note 29.2 Provisions for 1.8.3.3. ENVIRONMENT AND SAFETY
liabilities and charges on page 171 in chapter 4 Consolidated
financial statements). The cosmetics industry has a limited environmental risk profile.
However, as it is the case for any production, distribution,
In order to better prevent these risks, the Group’s Legal research and general administration operation, L’Oréal is
Department has introduced a training session on competition exposed to safety and environmental issues (relating, for
law for the employees concerned. Since 2011, it has also example, to the use of certain raw materials, the use of
distributed an ethical and legal guide on the conditions of fair machines or electrical equipment in production or storage
competition, called “The way we compete”. areas, handling operations liable to cause accidents involving
bodily injury, waste water treatment etc.). The main risk faced
A provision is set aside in the parent company and in the Group’s industrial sites is fire due to the inflammable
consolidated financial statements whenever the Group has an materials used in products (alcohol, propellant gases,
obligation towards another party and will have to face a powders, oxidants and solvents) and the storage of
probable outflow of economic resources whose cost can be combustible products and chemicals.
reliably estimated.
The Group’s Environment, Health and Safety (EHS) policy aims
There are no other governmental procedures, legal or to minimise the impact on the environment and to guarantee
arbitration proceedings, including any proceedings or the health and safety of employees, customers and the
procedures of which the Company is aware, which are communities in which L’Oréal performs its activities. This policy
pending or threatened, that may have, or have had over the systematically leads to identifying the risks inherent in our
last 12 months, material effects on the financial situation or business activities, and to bringing them under control.
profitability of the Company and/or the Group. Furthermore, under the Sharing beauty with all programme,
the Group is pursuing its actions aimed at reducing its
environmental footprint by setting itself ambitious, concrete
1.8.3. Industrial and environmental targets (see chapter 6 pages 233 et seq.).
risks This rigorous EHS policy has been implemented throughout the
Group for many years. It was updated in 2010 as described in
In order to improve the efficiency and productivity of its
“Environmental Information” in the previous paragraph.
industrial processes, L’Oréal carries out most of its production
in 43 factories, each specialising in a specific type of The Operations Division issues Internal Rules providing for the
technology. principles of L’Oréal’s EHS policy. An EHS representative is
appointed at each site. Training programmes are
systematically organised. EHS performance indicators are
1.8.3.1. PRODUCTION AND SUPPLY CHAIN
collected monthly from all production sites, all distribution
Products must be made available on the market on the centres and all research centres. The collection is carried out
scheduled dates to meet time-to-market and customer on a quarterly basis for most of the administrative sites. The fire
demands, in order to enable new product ranges to be risk is dealt with in the framework of very strict fire prevention
referenced by distribution in a cosmetics market that requires standards (National Fire Protection Association standards).
companies to be more and more responsive.
L’Oréal Group operates 105 manufacturing sites, of which two
Therefore, a major stoppage of activity in a factory or a are classified as “Seveso high threshold” and are therefore
distribution centre could have an adverse effect on the subject to strict regulations through the European Union
achievement of commercial objectives. Seveso Directive on the prevention of major accident hazards
due to the storage of chemicals or inflammable products.
In order to prevent this risk, business continuity plans exist for
each operational site. They aim at anticipating the
unavailability of part of the Group supply chain as far as 1.8.3.4. EHS RISK MAP AND AUDITS
possible and at restarting activities as quickly as possible.
Within the scope of this EHS policy, for the industrial sites,
prevention is based on the SHAP (Safety Hazard Assessment
1.8.3.2. SUPPLIER DEPENDENCE Procedure) programme involving the assessment of risks by
employees at grassroots level under the responsibility of the
L’Oréal is dependent on its external suppliers for the delivery of Site Manager. This programme contributes to identifying the
materials (raw materials and packaging items) that are dangers overall and for each workstation and assessing the
essential for the manufacture of finished products, which may corresponding risks. The SHAP method thus makes it possible to
therefore suffer disruption as the result of a default by an prepare a risk mapping for the sites, to evaluate the level of
important supplier. risks and to put in place the necessary means of control. It is
supported by dialogue between persons in charge, thus
contributing to a significant collective improvement in risk
management. This approach is constantly evolving and is
updated regularly depending on changes at sites and
Pursuant to the provisions of the Internal Charter on the insurance cover and provide for uniform insurance cover for all
Management of assets dedicated to the hedging of the its subsidiaries throughout the world, except in countries where
Group’s employee commitments, the allocation by category of this type of structuring is not permitted.
assets is subject to limits aimed in particular at reducing
volatility risks and correlation risks between these different This policy is applied as follows:
categories of assets. A Supervisory Committee for the pension s at parent company level, the Group has negotiated
and benefit schemes offered by the Group’s subsidiaries, insurance programmes on a worldwide basis with first-rate
ensures that these principles are implemented and monitored, insurance companies to cover its main risks on the basis of
as described in the section under “Social information” on the cover available;
Benefit and Pension schemes and other benefits, chapter 6 on
page 221. However, a large, lasting fall in the financial markets s in a local context, subsidiaries have to implement
could have an impact on the value of the portfolios set up mandatory insurance cover, in order to meet their local
(see note 23 Post-employment benefits, termination benefits regulatory obligations and supplement the Group’s
and other long-term employee benefits on pages 158 et seq. worldwide programmes for any specific risks, where
in chapter 4). Furthermore, the Group chooses insurers and applicable.
custodians with robust ratings from the three main specialist
rating agencies. The financial solvency of the insurers chosen is an important
criterion in the Group’s insurer selection process. Most of the
insurance programmes subscribed by the Group involve
1.8.7.6. RISK RELATING TO THE CHANGE IN TAX co-insurance. Globally, the world’s main insurance companies
REGULATIONS are involved in one or more of these Group programmes.
1
reduction of commitments by major insurance companies
The Group has set up an insurance programme to cover the
could be noted on the credit insurance market as they may
transportation of all its products by road, sea and air. All
decide to reduce their cover of amounts receivable in certain
subsidiaries subscribe to this worldwide programme, which
countries. The insurance policies put in place in these
ensures optimum transport insurance for all flows of goods.
countries could be affected by this trend.
* This information forms an integral part of the Annual financial Report as provided for an article L451-1-2 of the French Monetary and Financial Code.
This chapter describes the way in wich the Board's work is prepared
and organised and includes, in particular, a summary of the
principles of organisation guaranteeing a balance of powers. It
includes the complete text of the Internal Rules of the Board of
Directors. All components of the remuneration of the Directors and
executive officers are mentioned as well as the trading by Directors
and executive officers in L'Oréal shares in 2014.
In accordance with the provisions of Article L. 225-37, s the limitations imposed by the Board of Directors on the
paragraphs 6 to 10 of the French Commercial Code, this powers of the Chief Executive Officer.
chapter integrates the Report of the Chairman of the Board of
Directors regarding the Board's composition, the ways in which The other information provided for in Article L. 225-100-3 of the
the Board's work is prepared and organised, and the internal French Commercial Code and particularly that relating to the
control procedures. This chapter deals also with the following in share capital and the shareholders are published in chapter 7,
particular: page 270.
s the Board’s composition and the application of the Pursuant to the Article L. 225-37 of the French Commercial
principle of balanced representation of men and women on Code, the Board of Directors of L’Oréal approved this chapter
the Board; at its meeting on February 12th, 2015.
s the ways in which the Board’s work is prepared and In accordance with the updated recommendations of the
organised; AFEP-MEDEF Code, this chapter identifies in a summary table
(page 87), those provisions of the code which were not
s the Code of Corporate Governance to which the Company applied and explains the reasons for that choice.
refers, the provisions which have not been applied and the
reasons for this non-application;
THE BOARD OF DIRECTORS HAS A WIDE ARRAY OF CAREFUL MANAGEMENT OF CONFLICTS OF INTEREST
MEANS AT ITS DISPOSAL
The Internal Regulations specify that the Directors are required
The Board has the means to enable it to handle the questions to act in all circumstances in the interest of the Company and
that concern it with complete freedom, particularly when this in the interests of all the shareholders. Each Director has a
involves determining the Company’s strategic orientations, formal obligation to notify the Board of potential conflicts of
ensuring and monitoring their implementation and overseeing interest that may concern him/her and, in any event, in such
good management of the Company. The General case, the Director must refrain from participating in the
Management communicates transparently and has the corresponding discussions and deliberations.
support of the Board of Directors in the strategic choices that it
proposes and which are finally decided by the Board. The
Chairman conducts the Board’s work to build this cohesion WELL-STRUCTURED, SPECIALISED BOARD COMMITTEES,
without which General Management and its Executive WHOSE REMITS HAVE BEEN ADDED TO
Committee would not be able to commit themselves The setting up of the Board Committees, their composition and
completely and ensure the Company’s development with the enlargement of their roles and responsibilities contribute to
complete confidence and tranquillity. It is naturally in the a good balance of powers and are a point to which the Board
interest of all the shareholders but also of all the stakeholders of Directors pays attention, in particular within the scope of the
for the Chairman to lead the debates and encourage annual evaluation of the way it operates. The Board of
discussions on the Board of Directors. It can hold meetings at Directors has clearly defined the remits of the Committees in its
any time depending on topical issues that may arise. Internal Rules.
Mr. Peter Brabeck-Letmathe, Mrs. Christiane Kuehne, (the in the beauty sector which requires strong, coherent
2
two Vice-Chairmen of the Board being chosen from among communication at all times.
these members);
Finally, this method of organisation of the General
s seven independent Directors: Mrs. Belén Garijo (since Management is appropriate for L’Oréal’s particular
April 17th, 2014), Mrs. Virginie Morgon, Mrs. Annette Roux, shareholder structure: stable, loyal shareholders with, in
Mr. Charles-Henri Filippi, Mr. Xavier Fontanet, particular, two main shareholders, highly committed to the
Mr. Bernard Kasriel and Mr. Louis Schweitzer; Group’s long-term development.
s two Directors representing the employees, Within this framework, the modus operandi of the Board of
Mrs. Ana Sofia Amaral and Mr. Georges Liarokapis, since Directors was subject to particular attention to make certain
July 2014. that the Board is in a position to fully carry out its role and the
balance of powers on the Board is ensured.
The changes in the Board of Directors in 2014 and 2015 are
described later in this chapter, on page 56. The Board of Directors considered that the balance of powers
was satisfactory.
Following the appointment of the Directors representing the
employees to the Board of Directors, an elected representative This balance of powers is principally based on:
of the Central Works Council of L’Oréal, Mr. Thierry Magontier,
also attends Board meetings, with an advisory vote. s a well-structured composition of the Board of Directors,
alongside of Mr. Jean-Paul Agon, strongly committed and
The breakdown of L’Oréal’s share capital at December 31st, vigilant Directors, regardless of whether they are the 5
2014 is included in chapter 7 of this document. Directors appointed by the main shareholders, who include
the 2 Vice-Chairmen of the Board, the 7 independent
2.2.1.1. METHOD OF GENERAL MANAGEMENT Directors who are in the majority (7 out of 13 Board
CHOSEN members excluding the employee Directors) and the 2
In 2011, after a period of 5 years, between 2006 and 2011, Directors representing the employees;
during which the duties of Chairman of the Board of Directors
s the relations organised between the Board and the
and those of Chief Executive Officer were separated in order to
General Management, formally provided for in the Internal
ensure a smooth transition between Sir Lindsay Owen-Jones
Rules of the Board, which specify in particular the obligation
and Mr. Jean-Paul Agon, the Board of Directors decided to
of provision to each of the Directors of all the documents
reunify these duties and to appoint Mr. Jean-Paul Agon as
and information required for the accomplishment of their
Chairman and Chief Executive Officer of L’Oréal.
assignment at any time during the life of the Company, and
On April 17th, 2014, the Annual General Meeting renewed the which also offers the Board the possibility to meet with the
tenure of Mr. Jean-Paul Agon as Director. At its meeting on the senior managers of L’Oréal at the time of presentations or
same day, the Board of Directors decided to continue the sessions dedicated to strategy;
combination of the duties of Chairman and Chief Executive
s a limitation on the operational powers of the General
Officer and to entrust Mr. Jean-Paul Agon with such duties
Management, transactions for a significant amount or
once again.
outside the normal course of business of the Company are
This decision was made, following the recommendations by submitted to the Board;
the Appointments and Governance Committee, in the best
s active, effective Board Committees that are free to define
interest of the Company and with the constant concern that
their respective agendas, reporting on their work and
the mode of governance chosen will make it possible to
making recommendations to the Board of Directors, in
optimise the Group’s financial and economic performances
order to give the Board all the necessary information to
and to create the most favourable conditions for its long-term
make its decision;
development.
s the independence and quality of the preparatory work of
The Board of Directors indeed considers that this method of
the Appointments and Governance Committee with
governance is particularly suited to the specificities of L’Oréal.
regard to the composition and governance of the Board;
L’Oréal has always had senior managers and executive
officers who are loyal to the Company, they have a clear vision s a regular evaluation of the method of organisation and
of the Group’s future prospects based on their precise the modus operandi of the Board: in this way, at the end of
knowledge of the commercial entities and the businesses. 2014, within the scope of the evaluation of its work and in
Furthermore, the Company has to be responsive, firstly in a particular its relations with the executive, the Board of
business sector in which decisions have to be taken quickly in Directors confirmed that the current method of governance
a highly competitive international environment, and secondly was well-balanced and effective. The decision-making
processes are clear, as is the allocation of powers.
2.2.1.2. DIRECTORS
The composition of the Board of Directors is in compliance with the recommendations of the June 2013 AFEP-MEDEF Code of
Corporate Governance.
Jean-Paul Agon
French.
Age: 58.
Joined the L'Oréal Group in 1978. Following an international career as General Manager of the Consumer Products Division in
Greece and of L'Oréal Paris in France, International Managing Director of Biotherm, General Manager of L'Oréal Germany, Executive
Vice-President of the Asia Zone, President and CEO of L'Oréal USA, Jean-Paul Agon was appointed as Deputy Chief Executive Officer
of L'Oréal in 2005 and then Chief Executive Officer in April 2006 and finally Chairman and CEO in 2011. A Director of L'Oréal since
2006, he is also Chairman of the L'Oréal Coprorate Foundation and Chairman of the Strategy and Sustainable Development
Committee. Jean-Paul Agon is also a director of Air Liquide.
Peter Brabeck-Letmathe
Austrian.
Age: 70.
Holds the main position outside L'Oréal of Chairman of the Board of Directors of Nestlé. Peter Brabeck-Letmathe has been a Director
of L'Oréal and Vice-Chairman of the Board of Directors since 1997. He has been a member of the Strategy and Sustainable
Development Committee since 2005, and is a member of the Appointments and Governance Committee and the Human Resources
and Remuneration Committee.
Jean-Pierre Meyers
French.
Age: 66.
Has Been a Director of L'Oréal since 1987, Vice-Chairman of the Board of Directors since 1994, and is a member of the Strategy
2
and Sustainable Development Committee, the Appointments and Governance Committee and the Human Resources and
Remuneration Committee. He is Vice-Chaiman of the Supervisory Board and Chief Executive Officer of the family-owned holding
company Téthys and Vice-Chairman of the Bettencourt Schueller Foundation.
Charles-Henri Filippi
French.
Age: 62.
Spent his career within the HSBC Group, in which he was notably Chariman and Chief Executive Officer of HSBC France from 2004
2
to 2007 and Chairman of the Board of Directors in 2007 and 2008. Charles-Henri Filippi has been a Director of L'Oréal since 2007
and is a member of the Audit Committee (President until February 2013) and the Human Resources and Remuneration Committee
and of the Appointments and Governance Committee since 2014. He is a Director of Orange and Chairman of Citigroup for France.
Xavier Fontanet
French.
Age: 66.
Former Chairman and Chief Executive Officer (1996-2009) and former Chairman of the Board of Directors of Essilor (2010-2012)
and member of the Supervisory Board of Schneider Electric, Xavier Fontanet has been a Director of L'Oréal since 2002 and has
been the Chairman of the Appointments and Governance Committee since 2011.
Belén Garijo
Spanish.
Age: 54.
She is Chief Executive Officer of Merck Healthcare, a company bringing together the pharmaceutical businesses of German Group
2
Merck. She is also a member of the company's Executive Committee and has been a Director of L'Oréal since 2014. She is also a
Director of BBVA (Spain).
Bernard Kasriel
French.
Age: 68.
He is a former Chief Executive Officer of Lafarge. He has been a Director of L'Oréal since 2004, the Chairman of the Human
Resouces and Remuneration Committee since 2007 and is a member of the Strategy and Sustainable Development Committee. He
is also a Board member of Arkema and Nucor (United States).
Christiane Kuehne
Swiss.
Age: 59.
She is the Head of the Food Strategic Business Unit at Nestlé which she joinded in 1977. Christiane Kuehne has been a member of
L'Oréal's Board of Directors and a member of the Audit Committe since 2012.
Georges Liarokapis
French and Greek.
Age: 52.
Coordinator of Sustainability for L'Oréal Western Europe, Georges Liarokapis was appointed in 2014 by the CFE-CGC as a Director
representing the employees.
Jean-Victor Meyers
French.
Age: 28.
He has been a member of the Supervisory Board of the family holding company Téthys since January 2011. He has been a Director
2
of L'Oréal since February 2012 and member of its Audit Committee since April 2014.
Virginie Morgon
French.
Age: 45.
She is the Chief Executive Officer of Eurazéo (Chief Investment Offcier) which she joined in 2008 after working for 16 years at
Lazard. She has been a Director of L'Oréal since 2013 and is a member of the Audit Committee. She is also a Board member of
Accor and Vivendi.
Annette Roux
French.
Age: 72.
Chairperson and Managing Director of Bénéteau from 1976 to 2005, then Vice-Chairperson of the Supervisory Board, Annette Roux
2
has been a member of L'Oréal's Board of Directors since 2007. She is also Chairperson of the Bénéteau Corporate Foundation.
Louis Schweitzer
French.
Age: 72.
Chairman and Chief Executive Officer of Renault from 1992 to 2005, Chairman of the Board of Directors until 2009. Louis
Schweitzer has been a Director of L'Oréal since 2005, is a member of the Audit Committee and Chairman of that Committee since
February 2013, and a member of the Strategy and Sustainable Development Committee. He is also General Commissioner for
Investment.
Since July 2014, the composition of the Board has been The Appointments and Governance Committee is continuing
enlarged with the appointment of two Directors representing its selection process in order to make proposals of candidates
the employees. to the Board of Directors. In any event, in 2017, the
composition of the Board will be in compliance with the French
Mrs. Ana Sofia Amaral was appointed by the Instance law which requires a minimum proportion of 40% of Directors of
Européenne de Dialogue Social/European Works Council each gender.
(IEDS/EWC) and holds the duties of Scientific and Technical
Affairs Director for L’Oréal Portugal. The changes in the Board of Directors in 2014 are described
later, on page 56.
Mr. Georges Liarokapis was appointed by the CFE-CGC, the
most representative trade union in L’Oréal for France and 2.2.1.2.5. Independent Directors
holds the duties of Coordinator of Sustainability for L’Oréal
ALL THE DIRECTORS OF L’ORÉAL EXERCISE FREEDOM OF
Western Europe. JUDGMENT
With the particular looking glass related to their wide The balance of powers on the Board is ensured through a very
knowledge of the Company, they provide further insight that precise definition and sharing of the tasks to be carried out by
enriches the quality of the Board’s debates and decisions. everyone.
The Directors representing the employees have the same roles All the Directors receive information on an ongoing basis and
and responsibilities and duties as the other Directors. Like any have suitable means for the performance of their duties. They
new Director, they benefit from a personalised training all have a duty of acting with due care and attention and
programme adapted to the performance of their new term of participate, in total independence, in the decisions and work
office, in order to ensure that they take up their duties under of the Board and its Committees.
the best possible conditions. Their tenure covers a period of
four years and they receive attendance fees according to the They are all required to comply with the rules in force with
same rules of allocation as the other Directors. The regard to conflicts of interest.
components of their remuneration as employees are not
THE DIRECTORS WHO QUALIFY AS INDEPENDENT IN LIGHT OF
published. THE CRITERIA DEFINED BY THE AFEP-MEDEF CODE
They both resigned from their duties as employee A member of the Board is considered as independent when
representatives before joining the Board of Directors. he/she does not maintain any relationship of any kind with the
Company, its group or its General Management which may
It is usual practice at L’Oréal for new Directors to serve on
interfere with his/her freedom of judgement.
Committees after an integration period enabling them to learn
how the Board works and about the major issues facing the In this spirit, the criteria which guide the Board in determining
Company. whether a member can qualify as independent are the
following criteria specified by the AFEP-MEDEF Code:
At the Board meeting on February 12th, 2015, on the proposal
of the Appointments and Governance Committee, it was s the member must not be an employee or corporate officer
decided that Mrs. Ana Sofia Amaral and Mr. Georges of the Company, employee or Director of its parent
Liarokapis would join the Human Resources and Remuneration company or a company which it consolidates in its
Committee and the Audit Committee respectively after the financial statements, and must not have held any of these
Annual General Meeting on April 22nd, 2015. positions during the previous five years (criterion 1);
s the member must not be a customer, supplier, investment s the member must not have been the Company’s auditor
banker or financial banker (criterion 3): over the five previous years (criterion 5);
• which is important for the Company or its group; or s the member must not have been a Director of the
Company for more than twelve years (criterion 6).
• for which the Company or its group represents a
significant portion of activities; At its meeting on November 28th, 2014, the Board of Directors
examined, on a case-by-case basis, the situation of each of
s the member must not have any close family links with a the members concerned in light of the independence criteria
corporate officer (criterion 4); provided for in the AFEP-MEDEF Code.
(1) On the basis of the work carried out by the Appointments and Governance Committee, the Board of Directors analysed, as it
does every year, the financial flows that took place during the financial year between L’Oréal and the companies in which the
Directors who qualify as independent also hold an office. It appears that the nature of these business relationships is not significant.
Concerning the relations between L’Oréal and Citigroup France of which Mr. Charles-Henri Filippi is the Chairman, the Board noted
that they were not significant in terms of their volume or with regard to their nature. They mainly involve currency hedging fees.
Furthermore, the possibility for L’Oréal to use a panel of banks, in a competitive context, rules out all relationship of dependence.
Furthermore, Mr. Filippi is aware that he is under the obligation of notifying the L’Oréal Board of Directors of all situations constituting
a conflict of interest, even if such conflict is only potential, and that he must refrain from participating in the corresponding
decisions. Furthermore, at Citigroup, he will not take part in the work that is liable to concern L’Oréal.
(2) The Board of Directors carefully examined the situation of Mr. Xavier Fontanet whose tenure exceeded 12 years after its renewal,
on April 17th, 2014. The Board of Directors took into account the objectiveness that Mr. Xavier Fontanet has always shown at the
time of the debates and decisions of the Board and his ability to express his convictions and make a balanced judgment in all
circumstances with regard to the General Management. It considered that his personality, his leadership and his commitment,
recognised by the shareholders of L’Oréal, 98.28% of whom approved the renewal of his tenure on April 17th, 2014, were all
guarantees of his independent-mindedness.
The Board also considered that the experience of Mr. Xavier In sum, at December 31st, 2014, 7 members of the Board of
Fontanet with regard to governance and the attention he has Directors out of 13 (excluding the Directors representing the
always paid to the due and proper functioning of the Board in employees) qualify as independent (i.e. 53.8% of the Board of
his capacity as Chairman of the Appointments and Directors):
Governance Committee are essential in light of the recent,
significant appointments of new independent Directors and s Mrs. Belén Garijo;
the integration of the Directors representing the employees. s Mrs. Virginie Morgon;
These qualities, combined with a good understanding of the
challenges facing the Company, contribute to a great extent s Mrs. Annette Roux;
to the continuity of the Board’s discussions and help to put its
decisions into perspective. s Mr. Charles-Henri Filippi;
2
shareholder, in particular due to the presence of seven
HANDLING OF CONFLICTS OF INTEREST
independent Directors on the Board of Directors. See also
Within the scope of the law and the rights and obligations of chapter 7 concerning agreements relating to shares in the
the Directors as defined in the Internal Rules of the Board of Company’s capital.
Directors of L’Oréal and in accordance with the AFEP-MEDEF
Information on services contracts with members of the
Code, the Directors are subject to compliance with the rules in administrative bodies (Article 16.2 of the Annex)
force with regard to conflicts of interest and stock market
ethics. No corporate officers or Directors have a service contract with
L’Oréal or any of its subsidiaries providing for the granting of
Thus, “the Directors are under the obligation of notifying the benefits upon termination of such contract.
Board of all situations constituting a conflict of interest, even if
such conflict is only potential, and must refrain from STOCK MARKET ETHICS
participating in the corresponding deliberation”. In this regard, The Board took cognizance of the rules to be applied to
on the basis of the reports made by each Director, the Board prevent insider trading, in particular regarding the periods
has not identified any conflict of interests. The information during which it is prohibited to trade in shares. It decided to
pursuant to Annex I of European Regulation No. 809/2004 set amend its Internal Rules accordingly and issued
out hereafter contains additional details in this respect. recommendations to General Management to update
INFORMATION RELATING TO DIRECTORS AND CORPORATE L’Oréal’s Stock Market Code of Ethics and the Fundamentals of
OFFICERS PURSUANT TO ANNEX I OF EUROPEAN REGULATION Internal Control.
NO. 809/2004
On the basis of the legal provisions, regulations and
Family relationships existing between the corporate
officers or Directors (Article 14.1 of the Annex) recommendations, this code points out that inside information
must only be passed on and used for professional purposes.
Mrs. Françoise Bettencourt Meyers is Mr. Jean-Pierre Meyers’
wife and the mother of Mr. Jean-Victor Meyers. Inside information is precise information of a non-public
nature, which, if made public, could have a significant
Mr. Jean-Pierre Meyers is the husband of Mrs. Françoise influence on the share price. Such inside information may, in
Bettencourt Meyers and the father of Mr. Jean-Victor Meyers. particular, fall into one of three main categories: strategic,
linked to the definition and application of the Group’s growth
Mr. Jean-Victor Meyers is the son of Mrs. Françoise Bettencourt
strategy; recurring, linked to the annual schedule for
Meyers and of Mr. Jean-Pierre Meyers.
production and publication of annual and interim financial
No conviction or incrimination of the corporate officers statements, regular releases or periodic meetings devoted to
and Directors (Article 14.1 of the Annex) financial information; exceptional, linked to a specific
programme, project or financial transaction.
To the Company’s knowledge, over the last five years, the
corporate officers and Directors have not been convicted for The Stock Market Code of Ethics states that any person in
fraud, associated with a bankruptcy, receivership or possession of inside information must proceed with the
liquidation, or the subject of any official public incrimination or greatest caution when trading in or enabling others to trade in
sanction imposed by statutory or regulatory authorities L’Oréal shares, and emphasises that any misconduct in this
(including designated professional bodies) or a decision by a area may result in criminal proceedings. The Internal Rules of
court disqualifying them from acting as a member of an the Board point out specifically that a Director, who has
administrative, management or supervisory body or from permanent insider status, is requested to refrain from trading in
acting in the management or conduct of the business of any L’Oréal shares precisely in certain periods and when he/she
issuer. has access to inside information.
Potential conflicts of interest between the duties of the Lastly, Directors are required to notify the Autorité des Marchés
corporate officers and Directors with regard to L’Oréal,
and their private interests and/or other duties Financiers (AMF) of each transaction carried out by them or
(Articles 14.2 and 18.3 of the Annex) their close relatives and friends related to L’Oréal shares. The
Company reminds them regularly of this obligation (see
Paragraph 2.2.1.2.5 reviews the situation of each of the
Summary of trading by Directors and corporate officers in
Directors with regard to the independence criteria provided for
L’Oréal shares in 2014 – see § 2.4 page 89).
in the AFEP-MEDEF Code. The method of organisation and
modus operandi adopted by the Board would allow it, where
EVOLUTIONS IN 2014
s Renewal of the tenure as Directors of M. Jean-Paul Agon Mr. Charles-Henri Filippi is an independent Director, with no
and M. Xavier Fontanet conflicts of interest, available and competent.
The Annual General Meeting held on April 17th, 2014 has The business relations between L’Oréal and Citigroup
renewed the tenures of Mr. Jean-Paul Agon and Mr. Xavier France, of which he is the Chairman, are analysed in detail
Fontanet for four years. every year in relation with the assessment of the
independence of the Directors. The Board noted that they
s Appointment of Mrs. Belén Garijo as Director were not significant either with regard to their nature or in
The Annual General Meeting held on April 17th, 2014 has terms of their volume, as they mainly involve foreign
appointed Mrs. Belén Garijo for a four-year tenure. exchange commissions.
s Resignation of Mr. Paul Bulcke as Director The possibility for L’Oréal to use a panel of banks, in a
competitive context, moreover rules out all relationship of
Mr. Paul Bulcke has resigned as Director on July 8th, 2014, dependence.
as the number of administrators from Nestlé on the Board
was adjusted from three to two in order to reflect the Furthermore, Mr. Charles-Henri Filippi is aware that he is
change in the stakeholding of Nestlé in the governance of under the obligation of notifying the L’Oréal Board of
L’Oréal following the strategic transaction signed between Directors of all situations constituting a conflict of interest,
L’Oréal and Nestlé on February 10th, 2014 and finalized on even if such conflict is only potential, and that he must
July 8th, 2014. refrain from participating in the corresponding decisions.
Furthermore, at Citigroup, he doesn't take part in the work
s Nominations of Mrs. Ana Sofia Amaral and Mr. Georges that is liable to concern L’Oréal.
Liarokapis as Directors representing the employees in July
2014. s Appointment of a new Director in 2015: Mrs. Sophie Bellon
CHANGES SCHEDULED IN 2015 The Board will propose to the Annual General Meeting as a
candidate for appointment as a new Director
s Tenure as Director expiring in 2015: Mrs. Annette Roux Mrs. Sophie Bellon, responsible for Research, Development
and Innovation Strategy at Sodexo and Vice-Chairman of
After 8 years of active participation in the work of the Board,
the Board of Directors of Sodexo.
Mrs. Annette Roux will not be seeking the renewal of her
tenure which expires at the end of the 2015 Annual General Mrs. Sophie Bellon, 53 years of age, a French national, is a
Meeting. graduate of the leading French graduate business school
EDHEC and began her career in 1985 in the United States, in
Mrs. Roux was appointed as a L’Oréal Director in 2007. The
finance, as a Mergers and Acquisitions Advisor, then in the
Board warmly thanked Mrs. Roux for the quality of her
fashion industry as an agent for major international fashion
contribution to the Board’s debates and decisions.
brands.
s Renewal of the tenure as Director of Mr. Charles-Henri
After this experience working in the United States for nearly 10
Filippi
years, Mrs. Sophie Bellon returned to France and joined
As the tenure of Mr. Charles-Henri Filippi as Director is due to Sodexo in 1994 where, for over 20 years, she has taken part,
expire in 2015, the renewal of such tenure for a term of four through each of the positions she has held, in the major
years is submitted to the Annual General Meeting. stages of growth of the Sodexo group: first of all in the Finance
Department where she participated in important acquisition
In 2014, Mr. Charles-Henri Filippi attended all the meetings projects; she continued her career in the Sales and Marketing
of the Board of Directors and all the meetings of the three Department and in 2008 she became the Managing Director
Committees of the Board of Directors of which he is a for Sodexo’s Corporate segment in France.
member (Audit Committee, Human Resources and
Remuneration Committee and Appointments and Sodexo is an international group, the world leader in quality
Governance Committee), except for one meeting of the of life services, with 420,000 employees in 80 countries.
Appointments and Governance Committee.
Since January 2013, Mrs. Sophie Bellon has been
A member of the Audit Committee since 2008, he smoothly responsible for Research, Development and Innovation
and efficiently rounds out the Board’s competencies in the Strategy at Sodexo.
financial field. Also a member of the Human Resources and
In November 2013, the Board of Directors of Sodexo
Remuneration Committee and the Appointments and
appointed Mrs. Sophie Bellon as Vice-Chairman of the
Governance Committee, he thus has cross-functional
Board of Directors, so that she succeeds Mr. Pierre Bellon,
expertise which is useful for the work of each of these
Chairman and Founder of Sodexo, as Chairman of the
Committees.
Board of Directors in January 2016.
Strongly committed to diversity and gender mix, Mrs. Bellon Regularity of attendance at meetings by Director
2
is also Co-Chair of SWIFT (Sodexo Women’s International
In 2014, the Board met 7 times. The average attendance rate
Forum for Talent), a programme aimed at increasing the
at Board meetings was 93.5% in 2014 (as against 91.4% in
representation of women in Sodexo’s decision-making
2013). The average attendance rate at Committee meetings is
bodies.
available pages 59 to 62.
Mrs. Sophie Bellon will bring to the Board her
The allocation of attendance fees, established on the basis of
multi-disciplinary knowledge of companies at the highest
the regularity of attendance of each of the Directors at Board
level and her strategic vision, her human values and strong
meetings and the presence on its committees, is described in
convictions with regard to societal responsibility, one of the
detail page 73.
L’Oréal Group’s priorities for development within the scope
of the “Sharing Beauty With All” programme. The rules for allocation of attendance fees in respect of the
2014 financial year take into account the recommendations of
The appointment of Mrs. Sophie Bellon as an independent
the AFEP-MEDEF Code, a predominantly variable portion
Director for a term of 4 years is submitted to the Annual
overall rewarding regularity of attendance at Board and
General Meeting. The percentage representation of women
Committee meetings.
and the number of independent Directors would therefore
remain unchanged as compared to those at
December 31st, 2014. 2.2.2.2. THE ACTIVITIES OF THE BOARD OF
DIRECTORS
2.2.2. The ways in which the Board’s General missions and Internal Rules
work is prepared The Directors oversee the Group’s economic and financial
management and contribute to defining its strategy. They
and organised examine and approve the main lines of action adopted by the
General Management, which implements them.
2.2.2.1. GENERAL INFORMATION ON BOARD
In this connection, the Board searches on an ongoing basis for
AND COMMITTEE MEETINGS IN 2014
a modus operandi which, while strictly complying with the law,
assures the conditions of good corporate governance.
Committed Directors, with in-depth knowledge
of the Company The Board’s work is based on Internal Rules designed to
The preparation and holding of Board meetings and meetings supplement the legal, regulatory and statutory rules to which
of its Committees require increasing availability and a the Board refers. These Internal Rules were updated by the
significant investment by the Directors. Board on February 10th, 2014 to reflect, in particular, firstly, the
changes in the AFEP-MEDEF Code in June 2013 and, secondly,
L’Oréal’s Directors are regularly informed of all the Company’s the French Law on Employment Security of June 14th, 2013. The
activities and its performances in a highly competitive Internal Rules are made public in this report and published on
environment. L’Oréal’s website.
The Board also pays a lot of attention to follow-up of the and, secondly, in a sale of the 50% holding of L’Oréal in Swiss
acquisitions made in previous years and asks for a regular dermatology company Galderma to Nestlé (owned in equal
report on transactions carried out in previous years: integration shares by L’Oréal and Nestlé).
into the Group, synergies, areas of complementarity,
achievement of the business plan prepared at the time of the In 2014, the Central Works Council (CWC) was consulted and
acquisition and value creation for L’Oréal. issued an opinion, pursuant to the French Law on Employment
Security of June 14th, 2013, on the Company’s strategic
In order to benefit from the best possible knowledge of orientations, as previously defined by the Board of Directors.
L’Oréal’s business activities, the Board of Directors regularly The Board of Directors reviewed the opinion of the Central
meets with the senior managers. Each of their presentations Works Council and replied to it.
gives the Directors the opportunity to take stock of an aspect
that characterises its business and its organisation, enabling Provision of information to the Board
them to forge an opinion and to make their decisions with the on the financial situation, the cash position
benefit of all the relevant information. and the Company’s commitments
Thus, in 2014, the Directors analysed the issues of logistics and The financial situation and the cash position are reviewed at
the supply chain in detail in the presence of the Group’s least twice a year at a Board meeting, at the time of closing of
Executive Vice-President Operations. the annual financial statements and the review of the interim
financial statements or at any other time if necessary. The
They also had the occasion to discuss in detail L’Oréal’s balance sheet structure remains solid and the Group is not in
situation and outlook on the Group’s leading market, Western debt.
Europe, with a full presentation by the Executive Vice-President
for the Zone. The Company’s commitments are reviewed within the
framework of the annual renewal of the authorisations given to
A full-day session was devoted to the Consumer Products the Chairman and Chief Executive Officer and the delegations
Division for a concrete analysis of the developments in the of authority he grants.
highly competitive cosmetics market in the mass market
segment. As attested to by the preparatory work of its committees (see
below), the Board also analyses other aspects of strategy, the
Furthermore, the Group’s Senior Vice-President, Chief Ethics Group’s economic and financial management and the
Officer described to the Directors the progress made in this Company’s commitments in the environmental, social and
field and presented to them the 3rd edition of the Group’s societal fields. The Committee’s work systematically gives rise
Code of Ethics. Among the new topics addressed in this to a report presented by their Chairman at Board meetings.
edition, the Board noted: lobbying, money laundering, Human
Rights and the introduction of more stringent requirements with
regard to advertising, marketing, personal data and social 2.2.2.3. THE ACTIVITIES OF THE BOARD COMMITTEES
media.
The Board’s discussions and decisions are assisted by the work
Finally, the Executive Vice-President Human Resources performed by its Committees, which report to it after each of
addressed the Board to present the dual challenge, both their meetings. The remits of each Committee are described in
individual and collective, of Human Resources: giving the detail in the Internal Rules of the Board of Directors, which were
Group the talents it needs to develop on each and every updated in this respect at the beginning of 2014.
continent; creating a collaborative environment in which
The Committees were again given responsibility by the Board
everyone works together and in which everyone can prove
for preparing its decisions in 2014. The composition of these
himself and give the best he can.
Committees, their remits and their work in 2014 are clarified
In 2014, the Board of Directors studied and gave its prior and described in detail in this report.
authorisation for the strategic transaction with Nestlé,
The Board’s Committees act strictly within the framework of the
approved by the Annual General Meeting of shareholders on
remits given to them by the Board. They prepare actively for its
April 17th, 2014. This transaction consisted, firstly, in the
work and make proposals but they do not have any
buy-back of 48.5 million L’Oréal shares (representing 8% of its
decision-making powers.
share capital) from Nestlé with a view to their cancellation
Composition
st
Composition at December 31 , 2014:
Main remits
s Throwing light, through its analyses, on
Main activities in 2014
s Analysis of sales, update on business
2
s Jean-Paul AGON (Chairman) the strategic orientations as submitted to activities, markets and competition.
the Board s Analysis of the performance of the latest
s Françoise BETTENCOURT MEYERS
s Monitoring the implementation and product launches.
s Peter Brabeck-LETMATHE
advancement of significant operations in s Examination of the Group’s strategic
s Bernard KASRIEL progress and ensuring that the main development prospects.
s Jean-Pierre MEYERS financial balances are maintained
s Review of all the acquisitions projects: the
s Louis SCHWEITZER s Examination of the main strategic lines of following projects were, among others,
development, options or projects presented to the Board:
presented by the General Management,
All these Directors participate in Committee s Magic
and their economic and financial
meetings with complete freedom of judgment consequences, opportunities for s Decleor / Carita
and in the interest of all the shareholders. It is acquisitions and financial transactions s Niely Cosmeticos
specified that two members are part of the liable to significantly change the balance
s NYX
Bettencourt family and one member is from sheet structure.
Nestlé. s Carol’s Daughter
s Verification of the integration of the
The Committee met six times in 2014, with an Company’s commitments with regard to s Proposal to the Board of Directors of a
attendance rate of 100%. Sustainable Development, in light of the summary on the strategic orientations
issues specific to the Group’s business within the framework of consultation of
activities and its objectives. the Central Works Council.
s Examination of the proposed strategic s Recommendations to the Board of
orientations defined by the Board with a Directors on the choices to be made
view to consultation of the Central Works following the passing of Law No.
Council. 2014-384 of March 29th, 2014 “aimed at
reconquering the real economy” commonly
referred to as the “Florange Law”.
/ AUDIT COMMITTEE
Composition
st
Composition at December 31 , 2014:
Main remits
s Reflections and recommendations to the
Main activities in 2014
s Combination of the roles of Chairman and
2
s Xavier FONTANET (Chairman) Board with regard to the conditions of Chief Executive Officer: review of the
performance of General Management and conditions for performance of the roles of
s Peter BRABECK-LETMATHE
the status of the executive officers. Chairman and of Chief Executive Officer.
s Charles-Henri FILIPPI
s Issuing an opinion on proposals made by s Composition of the Board (diversity,
s Jean-Pierre MEYERS the Chairman of the Board of Directors for complementary profiles, competencies,
appointment of the Chief Executive gender balance, etc.), selection of, and
Officer. meetings with candidates, and proposals to
The Directors actively participate in Committee
s Proposal to the Board of new Directors. the Board for validation.
meetings, with complete freedom of
judgement and in the interest of all the s Examination of the classification as s Proposal for the choice of the appointment
shareholders. independent Directors which is reviewed by process of two Directors representing the
the Board every year prior to publication of employees.
At the Board meeting on February 2014, it was
decided that Mr. Charles-Henri Filippi would the Annual Report. s Composition of the Board committees:
join this Committee. s Verification of the due and proper proposal for assignment of Directors to
application of the Code of Corporate Committees.
The Chairman and Chief Executive Officer can
attend Committee meetings except with Governance to which the Company refers. s Development of the integration process for
regard to any matters on the agenda that s Discuss governance issues related to the new Directors.
concern him directly. functioning and organisation of the Board. s Examination of the independence of each
The number of independant Directors is 2 out s Procedure for preparation of succession of the Directors in light of the criteria set out
of 4, namely 50%. plans for the executive officers in the in the AFEP-MEDEF Code.
The Committee met six times in 2014, with an event of an unforeseen vacancy. s Determination of the conditions of the
attendance rate of 91%. s Conducting the reflection process with annual evaluation of the Board.
regard to the Committees that are in s Analysis of the 2014 reports of the Autorité
charge of preparing the Board’s work. des Marchés Financiers and the High
s Preparation for the decisions by the Board Committee on Corporate Governance (Haut
with regard to updating its Internal Rules. Comité de Gouvernement d’Entreprise).
s Review of the succession plans with a
view to ensuring the continuity of General
Management.
s Examination of the key positions from the
perspective of ensuring the continuity of
business activities (in the short-term).
2.2.2.4. SELF-EVALUATION BY THE BOARD collective decisions of the Board, and, where applicable, in
OF DIRECTORS conducting preparatory work and making proposals through
the Board Committees.
Every year, the Board carries out the formal evaluation
provided for by the AFEP-MEDEF Code of its composition, its The Board considered that the quality of its meetings has
organisation and its modus operandi, in particular in order to continued to improve, in light of what were considered as
verify that, under these conditions, the agenda for its work duly avenues of progress following the self-evaluation carried out at
covers the scope of its assignments, that important questions the end of 2013, particularly with regard to the strategic
have been appropriately prepared for and discussed and to challenges faced by the Group which are regularly debated
assess the contribution made by each member to the Board’s and discussed, in the presence of the senior managers who
work. are members of the Executive Committee.
This evaluation is carried out within the framework of the Once again this year, the strategy was examined in detail in
AFEP-MEDEF Code, to which the Board refers and market the course of the Board’s work with regard to the development
recommendations like those of the AMF. On the basis of the of the brands, the countries and the markets on which the
summary of prior individual interviews between the Director Group operates.
and the Secretary of the Board of Directors, such interviews
being conducted on the basis of a guide which sets out the In this respect, the day devoted to the strategy of the
principles provided for in the code and the recommendations, Consumer Products Division and the presentation on the
the Board considers the avenues of progress that still remain market in Western Europe, in the presence of a large number
open and, at the end of the discussion that takes place, of senior managers, were particularly appreciated.
adopts the improvement measures that it considers
Furthermore, the Board continued with its in-depth analysis of
appropriate.
performance, in light in particular of that of competitors, once
The Directors again exercised their complete freedom of again within the scope of the strategic orientations validated
judgement in 2014. This freedom of judgement allowed them by the Board.
to participate, in total independence, in the work and
In 2014, the Board once again appreciated the pace, employees, and are intended to complement the legal,
2
frequency and format of the information provided to it in regulatory and statutory rules and those under the Articles of
connection with business activities in general and the main Association in order to state accurately the modus operandi of
events in the life of the Group. Making documentation the Board of Directors and its Committees, in the best interests
available prior to Board or Committee meetings, in of the Company and of its shareholders.
compliance with the requirements of confidentiality and the
time constraints with which the Company is faced, favours the L’Oréal’s Board of Directors refers to the principles of corporate
quality of the debates. governance as presented by the AFEP-MEDEF Code. The
Internal Rules specify the modus operandi of the Board, in the
The Directors made new proposals of topics to be included on interests of the Company and of its shareholders, and those of
the agenda for meetings in 2015. its Committees, whose members are Directors to whom it gives
preparatory assignments for its work. The Internal Rules were
amended by the Board of Directors on February 10th, 2014 to
2.2.2.5. APPENDIX: COMPLETE TEXT take into account, in particular, firstly the changes to the
OF THE INTERNAL RULES OF THE BOARD AFEP-MEDEF Code in June 2013 and, secondly, the Law on
OF DIRECTORS Employment Security of June 14th, 2013. As was the case for
These Rules are applicable to all present and future Directors, previous versions, the Internal Rules are made public in full in
whether they are appointed by the General Meeting or by the this Management Report.
1.2. RELATIONS BETWEEN THE GENERAL within the strict framework of their remits and duties. In
MANAGEMENT AND THE BOARD consultation with the General Management, the Board and
the Committees may use external consultants if they consider it
1.2.1. Form of General Management
necessary.
General Management of the Company is carried out, under
his responsibility, by either the Chairman of the Board of The Board is informed, at the time of closing of the annual
Directors (the Chairman and Chief Executive Officer) or by financial statements and the review of the interim financial
another individual with the position of Chief Executive Officer. statements or at any other time if necessary, of the Company’s
Leaving the possibility to choose between the separation or financial situation and cash position.
combination of roles, the Law does not give preference to any
form and gives the Board authority to choose between the two 2. Composition of the Board
methods of organisation of the General Management in light
2.1. THE DIRECTORS
of the specificities of the Company.
The Directors of the Company:
Whether the General Management is carried out by a
Chairman and Chief Executive Officer or a Chief Executive s provide their expertise and professional experience;
Officer, the Board has the same prerogatives. It may in
particular take all specific measures aimed at ensuring the s are required to act with due care and attention and
continued balance of powers. participate actively in the work and discussions of the
Board;
1.2.2. Powers of General Management
s have complete freedom of judgement.
The General Management, which may be carried out by the
Chairman of the Board of Directors or by a Chief Executive This freedom of judgement enables them in particular to
Officer, is vested with the broadest powers to act in all participate, in total independence, in the decisions and work
circumstances in the name of the Company. It must exercise of the Board, and, where appropriate, of its Committees.
these powers within the limit of the Company’s purpose
2.1.1. Independence
subject to the powers expressly granted by French Law to
General Shareholders’ Meetings and the Board of Directors. The Board reviews the independence of each of its members
every year, after obtaining the opinion of the Appointments
The Board has the possibility to provide for limitations on the
and Governance Committee, in particular in light of the
powers of the General Management. Thus, transactions which
independence criteria in the AFEP-MEDEF Code and taking
may materially impact the scope of consolidation of the
account of the specificities of L’Oréal. The findings of this
Company, in particular, transactions involving an amount in
evaluation are reported to the shareholders and made
excess of €150,000,000, and all new transactions which are
available to the general public.
outside the normal course of business, must be submitted to
the Board. In any event, the Board of Directors must be 2.1.2. Diversity
informed of the conclusion and implementation of all
The Board considers the issue of the desirable balance of its
transactions.
composition and that of its Committees, notably in the
The General Management represents the Company in its representation of men and women, nationalities and diversity
dealings with third parties. of skills. The objectives, terms and conditions and results of its
policy in this area are made public in the Report of the
Upon a proposal by the Chief Executive Officer, the Board may Chairman approved by the Board and included in the
appoint one or more individuals responsible for assisting the Registration Document.
Chief Executive Officer, who will hold the corporate office of
Deputy Chief Executive Officer(s). 2.1.3. Renewal of tenures
1.2.3. The duties of the General Management The length of the term of office of Directors is 4 years. However,
the staggering of the terms of office is organised in order to
Whatever the form of organisation chosen (Chairman and avoid renewal of too many Directors all at once and favour the
Chief Executive Officer or Chief Executive Officer), the General harmonious renewal of the Directors.
Management is required to provide each Director with all the
documents and information required to carry out their duties. In principle, it is agreed by the Board members that all
Directors will tender their resignation to the Board prior to the
More specifically, the General Management provides the General Shareholders’ Meeting following their 73rd birthday
Board members with useful information in connection with the and that they will no longer apply for renewal of their tenure if
preparation of meetings, or at any time during the life of the this rule does not enable them to perform their office for at
Company if the importance or urgency of the information so least two years.
requires. This ongoing information provision also includes any
relevant information concerning the Company, and in In any event, in accordance with French law and the Articles
particular press articles and financial analysis reports. of Association, the total number of Directors who are over
70 years of age may not exceed one third of the Directors in
The General Management gives the Board and its committees office.
the possibility to meet with the senior managers of L’Oréal
2.2. THE CHAIRMAN OF THE BOARD 3.2. RESPECT FOR THE INTERESTS OF THE COMPANY
The Board of Directors must elect a Chairman from among its
members.
The Directors are required to act in all circumstances in the
interest of the Company and all its shareholders. 2
The Chairman of the Board organises and oversees the The Directors are under the obligation of notifying the Board of
Board’s work and reports thereon to the General Shareholders’ all situations constituting a conflict of interest, even if such
Meeting. conflict is only potential, and must refrain from participating in
the corresponding deliberations.
He sets the dates and the agenda for Board meetings and
leads the discussions. The Directors inform the Board every year of the offices and
positions they hold in other companies and of any conflicts of
The Chairman is actively involved in defining the Company’s interest, even if they are only potential, that they have
growth strategy and encourages and strengthens, inter alia, identified (see Annual Report on independence under
links between the Company and the main market players. Article 4.4).
The Chairman oversees the work of the Company’s bodies The Board furthermore discusses every year the assessment of
responsible for corporate governance and ensures, in whether or not the business relationships maintained between
particular, that the Directors are able to perform their duties. the companies in which the Directors hold their offices and the
He may ask for any document or information that is likely to Company are significant. It reports on its evaluation in the
assist the Board of Directors in preparing for its meetings. Registration Document.
The Chairman of the Board must use his best efforts to promote
the values and image of the Company at all times. The 3.3. OBLIGATION OF DILIGENCE AND PROVISION
Chairman expresses his views in that capacity. OF INFORMATION
The Director must devote the necessary time and attention to
He is provided with the material resources required to perform
his duties.
his duties.
He must limit the number of offices held so as to ensure his
The Chairman of the Board takes care, particularly in the event
availability.
of separation of roles, to develop and maintain a trustful and
regular relationship between the Board and the General A Director must not hold more than four other terms of office in
Management, in order to guarantee continuous, ongoing listed companies outside the Group, including foreign
implementation by the General Management of the companies. The Director concerned is given enough time to
orientations defined by the Board. bring his/her situation into compliance with this rule, where
required.
3. Rights and obligations of Directors
The Director must keep the Board informed of the terms of
3.1. AWARENESS OF AND COMPLIANCE office held in other companies, including his/her participation
WITH REGULATORY TEXTS, RECOMMENDATIONS on the Board Committees of such French or foreign
AND OBLIGATIONS companies.
Each of the members of the Board declares that he/she is An executive officer must not hold more than two tenures as
aware of: Director in listed companies outside the Group, including
foreign companies. The Director must ask for the Board’s
s the Company’s Articles of Association;
opinion before accepting a new corporate office in a listed
s the legal and regulatory texts that govern French sociétés company.
anonymes within the framework of the functioning of a
Each Board member undertakes to be diligent:
Board of Directors and in particular the rules relating to:
s by attending all Board meetings, where necessary by
• the number of offices that may be held simultaneously,
means of videoconference or telecommunication facilities,
• the agreements and transactions concluded between except in the case of a major impediment;
the Director and the Company,
s by attending, wherever possible, all the General
• the definition of the powers of the Board of Directors, Shareholders’ Meetings;
• the rules relating to the holding and use of privileged s by attending the meetings of the Board Committees of
information, which are set out hereafter in point 3.6.; which he/she is a member.
s recommendations defined by the AFEP-MEDEF Code; In connection with decisions to be made, the Director
must ensure that he/she has all the information he/she
s L’Oréal’s Code of Ethics; considers as essential for the smooth conduct of the work
of the Board or the Committees. If this information is not
s L’Oréal’s Stock Market Code of Ethics; and
made available to him/her, or he/she considers that it
s the provisions of these Rules. has not been made available, he/she must request such
information from the Chairman of the Board who is
required to ensure that the Directors are in a position to
perform their duties.
These training programmes are organised and proposed by Furthermore, it is prohibited for them, in accordance with the
the Company and are provided at its expense. recommendations of the French financial markets supervisory
authority (AMF), to trade in the Company’s shares over the
3.5. OBLIGATION OF RESERVE AND CONFIDENTIALITY following periods:
The Directors undertake not to express themselves individually s a minimum of 30 calendar days before the date of
other than in the internal deliberations of the Board on publication of the press release on the annual and halfyear
questions raised at Board meetings. results;
Outside the Company, only collegial expression is possible, s a minimum of 15 calendar days before the date of
particularly in the form of releases intended to provide the publication of the press release on quarterly financial
markets with information. information.
3.6.1. Principles The Directors and individuals closely related to them must
submit their report to the AMF by e-mail(1) within five trading
The Company has put in place a Stock Market Code of Ethics
days following completion of the transaction.
that is regularly updated, in particular to take into account
changes in the regulations in force. The Board complies with These individuals must simultaneously provide a copy of this
the Principles of Stock Market Ethics “relating to the use and notice to the Secretary of the Company’s Board of Directors.
communication of privileged information” provided for by such
code. The declarations are then posted on the AMF’s website and
are mentioned in an annual summary set out in the
Privileged information must only be used by the Director in the Company’s Management Report.
exercise of his office. Such information must in no case be
communicated to a third party other than in the exercise of 3.7. HOLDING OF A MINIMUM NUMBER OF SHARES
the Director’s duties, and for any other purpose or any other
activity than those for which it is held. In accordance with the AFEP-MEDEF Code and independently
of any obligation to hold shares under the Articles of
It is the duty of all Directors to refrain from trading in, having Association, the Directors must personally be shareholders of
others trade in, and enabling others to trade in the securities of the Company and hold a significant number of shares.
the Company on the basis of this information until such time as
the information has been made public. Each Director owns at least 1,000 shares in the Company.
It is the personal responsibility of each Director to determine The decision as to whether or not all or some of the shares held
whether the information he/she holds is privileged or not, and by the Director should be registered is the responsibility of the
accordingly whether he/she may or may not use or transmit Director.
any of the information, and whether he/she may or may not
This stock ownership obligation is not applicable to the
trade or enable others to trade in the Company’s securities.
Directors representing the employees.
(1) On the AMF’s secure website called ONDE after requesting identifiers by email sent to the following address
(ONDE_Administrateur_Deposant@amf-france.org).
4. Modus operandi of the Board of Directors telecommunication facilities, with the Secretary of the meeting
2
having the task of initialling the register for them.
4.1. CONVENING THE BOARD
4.3. MINUTES OF THE BOARD
The Board is convened by any appropriate means. Notices
convening a meeting may be transmitted by the Board Minutes are prepared of the deliberations of each Board
Secretary. They are sent in writing at least eight days prior to meeting.
each meeting, except in particular circumstances. The notices
specify the venue of the meeting, which may be the registered The minutes of the meeting mention the use of
head office or any other venue. videoconference or telecommunication facilities and the
name of each person who participated in the Board by such
All the documents that are necessary to inform the Directors means. The minutes also indicate whether any technical
about the agenda and about any questions submitted to the incidents occurred during a meeting held by means of
Board for review are enclosed with the notice convening the videoconference or telecommunication facilities, if such
meeting or are sent or provided to them within a reasonable incidents disrupted the course of the meeting.
period of time, prior to the meeting.
The minutes of the deliberations include a summary of the
These documents may be provided to them on a secure debates and specify the decisions that were made. They
digital platform, within a reasonable period of time prior to the mention the questions raised or the reservations expressed by
meeting. They may in exceptional cases be provided at the participants.
meeting.
The draft minutes of the last Board meeting are sent or given to
all the Directors at the latest on the date when the next
4.2. BOARD MEETINGS AND METHOD OF
meeting is convened.
PARTICIPATION
The Board meets as often as required in the best interest of the The Secretary of the Board is empowered to issue and certify
Company, and at least 5 times per year. copies or extracts of the minutes of Board meetings.
The dates of the Board meetings for the following year are set 4.4. THE SECRETARY OF THE BOARD
no later than the beginning of the summer, except in the case
of Extraordinary Meetings. The Secretary is appointed by the Board. He/she assists the
Chairman in organising the Board’s work and in particular with
The frequency and length of Board meetings must be such regard to the definition of the annual work programme and
that they allow for an in-depth review and discussion of the the dates of Board meetings.
matters that fall within the scope of the remits of the
Committees. With the support of the General Management, he/she ensures
the quality and production, sufficiently in advance, of the
In accordance with the legal and regulatory provisions and documents and drafts put to the vote of the Board at its
with Article 9 paragraph 2 of the Articles of Association, meetings.
Directors who take part in Board meetings by means of
videoconference or telecommunication facilities are deemed He/she prepares the draft minutes of Board meetings, which
to be present for the purpose of calculating the quorum and are submitted for the Board’s approval.
the majority.
He/she is responsible for the secure IT platform made available
These means must guarantee simultaneous, continuous to the Directors.
retransmission of the debates.
He/she monitors on an ongoing basis changes in the
However, these means of participation are excluded when the regulations and reflections in the marketplace with regard to
Board so decides and in any event when it decides with the corporate governance of listed companies.
regard to closing of the Company’s parent company and
The Secretary organises, together with the Chairman, the
consolidated financial statements and on the preparation of
annual evaluation of the Board’s work and receives the
the Management Report.
Annual Reports on independence by each Director (see
A Director who participates by means of videoconference or Article 3.2).
teletransmission must ensure that the confidentiality of the
Every Director may consult the Board Secretary at any time
debates is preserved.
with regard to the scope of the rights and obligations linked to
The attendance register mentions the Board members who his/her office.
attend Board meetings by means of videoconference or
4.5. ANNUAL EVALUATION OF THE FUNCTIONING For each Committee meeting, its members may decide to
OF THE BOARD invite any other person of their choice to attend as needs be
and on an advisory basis, when they consider it appropriate.
Every year, the Board carries out an evaluation of its ability to
respond to the expectations of the shareholders by reviewing In its field of competence, each Committee makes proposals
its composition, its organisation and its modus operandi. and recommendations and expresses opinion as the case
may be. For this purpose, it may carry out or have carried out
At its last meeting for the year and on the basis of a summary
any studies that may assist in the deliberations by the Board.
of the interviews that are previously organised and conducted
When they use the services of external consultants, the
with each Director, on the basis of a guide which includes the
Committees must ensure that their service is objective.
recommendations adopted by the AFEP-MEDEF Code, the
Board discusses points of view and opinions expressed. It
5.1. STRATEGY AND SUSTAINABLE DEVELOPMENT
draws the conclusions from this with the aim of improving the
conditions for the preparation and organisation of its work and
COMMITTEE
that of its Committees.
5.1.1. Remit
The results of the evaluation, with the avenues of progress that
The remit of the Strategy and Sustainable Development
remain open, are passed on to the shareholders in the Annual
Committee is to throw light, through its analyses and debates,
Report and at the time of the General Shareholders’ Meeting.
on the Group’s strategic orientations as submitted to the Board
of Directors and to monitor the implementation and
5. Board committees advancement of significant operations in progress.
If the Board sets up any Committees, it will appoint the
members of these Committees and determine their duties and The Committee examines:
responsibilities.
s the main strategic lines of development, options and
The Committees act within the remit granted to them by the projects presented by the General Management, and their
Board and therefore have no decision-making power. The economic, financial, societal and environmental
committees may not at any time take over the powers of the consequences;
General Management as set out in chapter 1.2.2. of these
s opportunities for acquisitions or investments which involve
Rules.
significant amounts or which represent a departure from
The Committee members are Directors. They are appointed by the Group’s usual business operations, and the conditions
the Board in person and may not be represented. All Board relating to their implementation;
members have the necessary qualifications due to their
s financial transactions liable to significantly change the
professional experience. They actively take part in Committee
balance sheet structure;
meetings with complete freedom of judgement and in the
interest of the Company. s the Company’s commitments with regard to Sustainable
Development, in light of the issues specific to the Group’s
The task of secretary of each Committee is carried out by a
business activities and its objectives, and the means and
person appointed in agreement with the Chairman of the
resources put in place;
Committee. It may also be performed by the Secretary of the
Board. s the proposed strategic orientations to be defined by the
Board with a view to consultation of the Central Works
Each Committee defines the frequency of its meetings. These
Council.
meetings are held at the Company’s registered head office or
at any other place decided by the Chairman of the More generally, the Committee debates all questions
Committee. considered essential for the future strategy of the Group and
for preserving its main financial balances.
The Chairman of each Committee prepares the agenda for
each meeting.
5.1.2. Work organisation
The Committees may make contact, in the performance of
It meets when convened by the Chairman of the Committee
their duties, with the Company’s main senior managers, in
whenever he or the Board considers this appropriate.
agreement with the Chairman of the Board and after informing
the General Management and will report on such contacts to The agenda of the meetings is set by the Chairman of the
the Board. Committee, in conjunction with the Board of Directors if the
Board initiates the meeting.
The Board may entrust a Committee Chairman, or one or more
of its members with a special assignment or project to carry The Strategy and Sustainable Development Committee reports
out specific research or study future possibilities. The on its work to the Board whenever necessary, and at least
designated individual will report on this work to the committee once a year.
concerned such that the Committee may deliberate on this
work and in turn report thereon to the Board.
5.2. AUDIT COMMITTEE It reviews the breakdown of the fees billed by the Statutory
2
Auditors between audit services as such, audit-related work
5.2.1. Remit and any other services they provide;
The Audit Committee, acting under the responsibility of the s the Statutory Auditors’ independence.
members of the Board, is responsible for monitoring issues
relating to the preparation and control of accounting and It makes a recommendation with regard to the Statutory
financial information. Auditors proposed to the Annual General Meeting for
appointment.
The Audit Committee must make sure that the General
Management has at its disposal the means to enable it to This monitoring enables the committee to issue
identify and manage the economic, financial and legal risks recommendations, if necessary, concerning the improvement
facing the Group inside and outside France in carrying out its of existing procedures and the possible setting up of new
normal and exceptional operations. procedures.
Without prejudice to the areas of authority of the Board of The Audit Committee can be consulted for all questions
Directors, this Committee is responsible in particular for relating to procedures for controlling risks of an unusual
monitoring: nature, particularly when the Board or the General
Management considers it appropriate to submit such
s the process for preparation of financial information: questions to it.
s The Audit Committee’s review of the financial statements is The agenda of the meetings is set by the Chairman of the
accompanied by a presentation by the Vice-President, Committee, in relation with the Board if the latter initiated the
Finance describing the Company’s exposure to significant convening of the meeting. The agenda is sent to the
risks. Committee members before the meeting, together with the
information which is useful for their debates.
s the statutory audit of the annual and, where applicable,
the consolidated accounts by the Statutory Auditors. To carry out its mission, the Audit Committee may also, in
agreement with the General Management, obtain information
It reviews the audit plan and the programme for work by from people who are able to assist it in the performance of its
the Statutory Auditors, the results of their audits, their mission, and in particular senior managers in charge of
recommendations and the follow-up action taken further to economic and financial issues and those in charge of
such recommendations. information processing.
5.2.3.1. RELATIONS WITH THE STATUTORY AUDITORS 5.3. APPOINTMENTS AND GOVERNANCE COMMITTEE
The Committee regularly interviews the Statutory Auditors,
5.3.1. Remit
including outside the presence of management.
The main missions of the Appointments and Governance
The Statutory Auditors inform the Audit Committee of:
Committee, within the context of the work of the Board, are to:
1) their general work programme implemented as well
s review and propose to the Board candidates for
as the various sampling tests they have carried out;
appointment as new Directors;
2) the changes which they consider should be made
s provide the Board with clarifications on the conditions of
to the financial statements to be closed off or other
performance of General Management and the status of the
accounting documents, making any appropriate
executive officers;
observations on the valuation methods used to
prepare them; s issue an opinion on proposals made by the Chairman of
the Board for appointment of the Chief Executive Officer;
3) the irregularities and inaccuracies they may have
discovered; s ensure the implementation of a procedure for preparation
of succession plans for the executive officers in the event of
4) the conclusions resulting from the above
an unforeseen vacancy;
observations and rectifications with regard to the
results for the period compared to those for the s ensure the application of the AFEP-MEDEF Code to which
previous period. the Company refers;
The Statutory Auditors also assess, with the Audit Committee, s discuss governance issues related to the functioning and
the risks with regard to their independence and the protective organisation of the Board;
measures taken to mitigate these risks. For this purpose, the
Committee obtains a statement of independence from the s decide on the conditions in which the regular evaluation of
Statutory Auditors. the Board is carried out;
They inform the committee of significant Internal Control s discuss the classification of Directors as independent which
weaknesses, with regard to the procedures for preparation is reviewed by the Board every year prior to publication of
and processing of accounting and financial information, and the Annual Report;
provide it with the documents required by law every year.
s conduct the reflection process with regard to the
5.2.3.2. ACTIVITY REPORT Committees that are in charge of preparing the Board’s
work;
The Audit Committee regularly reports to the Board on the
performance of its missions and takes note of the Board’s s prepare for the decisions by the Board with regard to
observations. updating its Internal Rules.
The Committee informs the Board without delay of any difficulty 5.3.2. Work organisation
encountered.
The Committee meets after being convened by its Chairman
In its report, the Audit Committee makes the recommendations whenever the Chairman or the Board considers it useful.
it considers appropriate with regard to:
The agenda of the meetings is set by the Chairman of the
s the suitability of the various procedures and of the system Committee, in relation with the Board if the latter initiated the
as a whole in terms of achieving the objective of managing convening of the meeting.
information and risk;
The Committee may meet at any time it considers to be
s the effective application of the procedures in place, and appropriate, for example to assess the performance of the
where appropriate the means implemented to achieve this Company’s senior managers.
aim.
The Chairman of the Board is associated with its work, except
It also formulates in its report all recommendations and with regard to all the topics concerning him personally.
proposals aimed at improving the effectiveness of the various
procedures or at adapting them to a new situation. The Committee must regularly report on its work to the Board
and makes proposals to the Board.
If during its work the Committee detects a substantial risk
which in its view is not adequately taken into account, it warns
the Chairman of the Board accordingly.
5.4. THE HUMAN RESOURCES AND REMUNERATION s the rules of ethical conduct, as set out in the Code of
2
COMMITTEE Business Ethics, and the Group’s strong values, such as
respect and integrity, that must be widely disseminated,
5.4.1. Remit known and put into practice.
2.2.3. Specific terms and conditions 2.2.4. Principles and rules adopted
of participation by the Board of Directors to
by shareholders in the Annual determine the remuneration
General Meeting and benefits of all kinds
It is to be noted, in accordance with Article 12 of the
granted to the executive
Company’s Articles of Association, that the terms and officers
conditions of participation by the shareholders in Annual
General Meetings are those provided for by the regulations in The Board of Directors defines the remuneration policy for
force, and that any shareholder may, if the Board of Directors L’Oréal’s executive officers and the objectives pursued.
so decides when calling the Annual General Meeting, The Board of Directors decides on the various components
participate in the meeting by videoconference or by any which make up the remuneration while paying attention to the
telecommunication or remote transmission means including need to reach a balance between each of them.
the Internet, under the conditions provided for by the
applicable regulations at the time of their use. Where Details of all the remuneration components of the executive
applicable, this decision is communicated in the meeting officer are set out pages 74 to 86.
notice published in the Bulletin des Annonces Légales et
Obligatoires (BALO), the official French gazette.
2.3.2.1. PRINCIPLES AND RULES ADOPTED BY THE The quantitative criteria that are used to measure
BOARD OF DIRECTORS TO DETERMINE performance must be sufficiently varied in order to measure
THE REMUNERATION AND BENEFITS OF ALL both long-term value creation, development in sales and the
KINDS GRANTED TO THE EXECUTIVE Company’s profitability, the Company’s cash position and
OFFICERS investment capacity. They are re-examined periodically and
their respective weight is adjusted in order to be intimately
The Board refers to the recommendations of the June 2013
linked with the Company’s strategy.
AFEP-MEDEF Code for the determination of the remuneration
and benefits granted to the executive officers. REMUNERATION ALIGNED WITH THE INTERESTS OF
SHAREHOLDERS
It ensures that the decisions made comply with the principles
of comprehensiveness, balance, consistency, transparency A significant portion of the remuneration of the executive
and proportionality and take into account market practices. officers must consist of performance shares with the aim of
involving them in the long-term value development of the
It makes sure that the components of the remuneration are Company and of the stock market price of its share.
perfectly consistent with the objectives pursued by the defined
policy. The Board of Directors also wants to promote personal
investment in the Company’s shares by setting stringent rules
Finally, it is attentive to ensuring that the decision-making for retaining performance shares or shares resulting from the
procedure with regard to remuneration guarantees the due exercise of stock options.
and proper application of the rules set.
BALANCED REMUNERATION TAKING ACCOUNT OF
STAKEHOLDER EXPECTATIONS
2.3.2.1.1. Remuneration policy and objectives
pursued The remuneration must favour a measured, sustainable
method of development, in line with the Group’s commitments
In accordance with the recommendations of the AFEP-MEDEF
with regard to ethics and respectful of the environment in
Code, the Board of Directors defines the remuneration policy
which L’Oréal operates.
for L’Oréal’s executive officers and the objectives pursued by
such policy. It must not lead to taking inappropriate, excessive risks.
COMPETITIVE REMUNERATION In this respect, the annual variable portion of the remuneration
remains reasonable in comparison with the fixed portion. The
The remuneration of the executive officers must be competitive
Board of Directors defines the maximum percentage of the
in order to attract, motivate and retain the best talents in the
fixed portion that may be represented by the variable portion.
highest level positions in the Company.
The annual variable portion of the remuneration is linked to
The Board of Directors has defined a stable, coherent
extra-financial criteria, in particular of an environmental,
benchmark consisting of French and international companies
societal, and human resources nature, which will be assessed
which are world leaders in their sector.
year after year with a long-term perspective.
They operate on similar markets, being direct competitors of
L’Oréal when they are in the cosmetics industries, or on the 2.3.2.1.2. Remuneration components
wider market of usual consumer goods. The Board of Directors decides on the various components
PERFORMANCE-RELATED REMUNERATION which make up the remuneration while paying attention to the
need to reach a balance between each of them.
The remuneration of the executive officers must be closely
linked to performances in order to promote the achievement Each remuneration component corresponds to a clearly
of short-and long-term objectives. defined objective.
In fact, the Board of Directors constantly strives to incite the FIXED REMUNERATION
General Management both to maximise performance for It must reflect the responsibilities of the executive officer, his
each financial year and to ensure the repetition and regularity level of experience and his skills.
of performances year after year.
It has been stable for several years. It serves as a basis to
The Board of Directors considers that the remuneration of the determine the maximum percentage of annual variable
executive officers has to consist of a significant variable part remuneration.
with annual and multi-annual periods for performance
assessment adapted to each of these objectives.
2
the Group’s long-term objectives and the resulting valuation
It is designed to align the remuneration allocated to the
creation for the shareholders. In order to do so, the final
executive officer with the Group’s annual performance and to
vesting of the shares is subject to performance conditions in
promote the implementation of its strategy year after year.
accordance with the authorisation.
It is expressed as a percentage of fixed remuneration. This
Performance condition
percentage can reach 100% at most of fixed remuneration.
The performance criteria concern all the shares awarded to
The remuneration is based on precise performance evaluation the executive officer. They take into account partly growth in
criteria determined at the beginning of the year by the Board comparable cosmetics sales of L’Oréal as compared to a
of Directors, based both on operational objectives and on panel of L’Oréal’s biggest direct competitors and partly growth
extra-financial and/or qualitative objectives. in L’Oréal’s consolidated operating profit.
The financial criteria which represent 60% of the annual The Board of Directors considers in this regard that these two
variable remuneration are as follows: criteria, assessed over a long period of 3 full financial years
and reapplied to several plans, are complementary, in line
s growth in comparable sales as compared to the budget;
with the objectives and specificities of the Group and of a
s growth in operating profit as compared to the previous nature to promote continuous balanced long-term growth.
year; They are exacting but remain a source of motivation for the
beneficiaries.
s growth in market share as compared to the main
competitors; In order for all the free shares granted to finally vest for the
beneficiaries at the end of the vesting period pursuant to the
s growth in net earnings per share as compared to the criterion related to sales, L’Oréal’s growth must be at least as
previous year; good as average growth in sales of a panel of L’Oréal’s
biggest direct competitors. The Board defines a threshold,
s growth in cash flow as compared to the previous year.
which is not made public for reasons of confidentiality, below
The extra-financial criteria represent 40% of the annual variable which no share will finally vest pursuant to this criterion.
remuneration. They make it possible to measure performance
In order for all the free shares granted to finally vest for the
as compared to the objectives set in respect of Corporate
beneficiaries at the end of the vesting period pursuant to the
Social and Environmental Responsibility (CSR) and Human
criterion related to operating profit, a level of growth defined
Resources. The other criteria used to evaluate the
by the Board not made public for reasons of confidentiality,
extra-financial performance of the executive officer may be of
must be met or exceeded. Below that level, the grant
a qualitative nature such as, for example, addressing specific
decreases. If the operating profit does not increase in absolute
priorities for the year.
value over the period, no share will finally vest pursuant to this
This balance between financial and extra-financial criteria criterion.
should make it possible to measure, at the end of each
The shares only finally vest at the end of a period of 4 years,
financial year, the progress made with regard to the Group’s
which is a sufficiently long time to be able to assess the
strategic objective of global growth and in light of the
performance achieved over 3 full financial years.
sustainability commitments ("Sharing Beauty With All"
programme, see chapter 6). The figures recorded each year to determine the levels of
performance achieved are published in chapter 7 of this
The weighting of each of these criteria and the objectives to
document.
be met are set at the beginning of the year concerned and
communicated to the executive officer. Rules governing the grants made to the executive
officers
AWARD OF PERFORMANCE SHARES (ACAS)
The value of these grants, estimated according to the IFRS
Since 2012, the Board of Directors has awarded performance applied for the preparation of the consolidated financial
shares to employees of the Group and to its executive officer, statements, represents approximately 50% of the executive
within the scope of Articles L. 225-197-1 et seq. of the French officer’s total remuneration and may not exceed 60%.
Commercial Code and the authorisations voted by the Annual
General Meeting. The Board of Directors reserves the possibility to decide on an
exceptional grant in the event of a particular event that
justifies it.
The total number of free shares granted to the executive BENEFITS IN KIND
officers during a financial year may not represent more than
For the purpose of transparency, it is not in principle planned
10% of the total number of free shares granted in respect of
to supplement the executive officers’ fixed remuneration by
that same financial year.
granting benefits in kind.
The executive officer is required to retain 50% of the free shares
The executive officer benefits from the necessary material
allocated to him at the end of the vesting period in registered
resources for performance of his office such as, for example,
form until the termination of his duties.
the provision of a car with a chauffeur. These arrangements,
No free shares may be granted to an executive officer at the which are strictly limited to professional use, to the exclusion of
time of termination of his duties. all private use, are not considered as benefits in kind.
The executive officer makes a formal undertaking not to enter THE BALANCE BETWEEN THE VARIOUS COMPONENTS OF TOTAL
REMUNERATION
into any risk hedging transactions with regard to the
performance shares, until the end of the holding period set by The various components of remuneration form a balanced
the Board of Directors. whole with an allocation that is approximately:
Fixed
remuneration
25%
Performance
shares 50%
Annual
variable
remuneration
25%
TERMINATION INDEMNITIES, PENSION SCHEME, ADDITIONAL The AFEP-MEDEF Code, to which L’Oréal refers, recommends
SOCIAL PROTECTION that companies should put an end to the practice of
These components of remuneration are not related to combining an employment contract with a corporate office
performance of the corporate office, but could be due under (point 22) although it does not impose this as a mandatory
the suspended employment contract. requirement.
interference with the possibility of removing executive officers to any condition other than those provided for by the National
2
ad nutum. The Board of Directors has formally provided for the Collective Bargaining Agreement for the Chemical Industries or
methods of application of the objectives of the the above-mentioned Company-level agreements. The same
recommendation, as adapted to the professional context in applies to the non-competition clause and the related
the L’Oréal Group. financial consideration.
The Board’s intention is to use the treatment set out below for Defined benefit pension scheme
any future corporate officer appointed who has over 15 years’
The executive officer, subject to ending his career in the
length of service in the Group at the time of appointment.
Company, will benefit from one of the defined benefit pension
Maintenance of the employment contract and schemes currently applicable to the Group’s senior managers
separation of the benefits attached to the employment as described in detail in chapter 6 of this document.
contract on the one hand and to the corporate office on
the other The main features of these schemes, which fall under
As L’Oréal’s ongoing policy has been to appoint employees Article L. 137-11 of the French Social Security Code, are as
who have completely succeeded in the various stages of their follows:
careers in the Group as executive officers, the Board does not
Approximately 400 senior managers for the pension scheme
want these executives to be deprived of the benefits to which
that opened on January 1st, 2001 and 120 senior managers for
they would have continued to be entitled had they remained
the scheme that closed on December 31st, 2000, either active
employees, after spending many years at L’Oréal.
or retired, are concerned.
The Board of Directors has considered that the objective
The minimum length of service requirement for access to the
pursued by the AFEP-MEDEF recommendation could be fully
schemes is 10 years.
achieved by maintaining the suspension of the employment
contract and clearly separating out the benefits related to the The increase in the potential rights takes place over a long
employment contract on the one hand from those relating to period of time, amounting to 25 years for the scheme which is
the corporate office on the other. open and 40 years for the scheme that has closed.
Remuneration in respect of the corporate office will in no event The reference period taken into account for calculation of the
be taken into consideration for calculation of the indemnities benefits is 3 years; the average of the remunerations for the 3
due pursuant to the collective bargaining agreement and the best years out of the last 7 years is used.
Company-level agreements applicable to all L’Oréal’s senior
managers. In the light of the legal characteristics of defined benefit
pension schemes (the rights only accrue if the beneficiary
Remuneration under the suspended employment contract to ends his career in the Company and the funding of this
be used to calculate all the rights attached thereto and in scheme cannot be broken down individually by employee)
particular for the calculation of the defined-benefit pension, and also on account of the characteristics specific to the
will be established on the basis of the remuneration at the L’Oréal schemes referred to as “differential” since they take
date of suspension of the contract. This remuneration will be into account, in order to complete them, all the other pensions
revised every year by applying the revaluation coefficient in such as those resulting, inter alia, from the French basic and
respect of salaries and pension contributions published by the supplementary pension schemes, it should be noted that the
French State pension fund. pension annuity will in fact only be calculated on the date
when the beneficiary applies for all his pensions.
The length of service applied will take into consideration the
entire career, including the years spent as an executive officer. An evaluation of the level of the pension annuity that might be
paid to the executive officer, in accordance with the
Termination indemnities, retirement indemnities in the
event of voluntary retirement or retirement at the recommendations of the AFEP-MEDEF, is made for information
Company’s request, financial consideration for the purposes (section 8.1.1. of this document page 300) with,
non-competition clause however, all the necessary reservations due to the
In the event of departure, and depending on the reasons, the characteristics of the schemes described above.
executive officer will only be paid the dismissal indemnities, Additional social protection schemes
except in the event of gross misconduct or gross negligence,
or the retirement indemnities in the event of voluntary The executive officer will continue to benefit, due to the fact
retirement or retirement at the Company’s request due that he is treated in the same way as a senior manager during
pursuant to the employment contract that has been the term of his corporate office, from the additional social
suspended to the exclusion of any indemnity due in respect of protection schemes and in particular the employee benefit
the corporate office. and healthcare schemes applicable to the Company’s
employees. These schemes are described in detail in
These indemnities, which are attached solely to termination of chapter 6 of this document.
the employment contract and in strict application of the
National Collective Bargaining Agreement for the Chemical All these provisions, which are subject to the regulated
Industries and the Company-level agreements applicable to agreements and commitments procedure, are approved by
all L’Oréal executives, are due in any event pursuant to the the Annual General Meeting deciding on the basis of the
public policy rules of French labour law. They are not subject Statutory Auditors’ Special Report.
2.3.2.1.3. Procedure for setting the The principles of the Human Resources policy conducted are
remuneration of the executive officer regularly presented to the Committee members or at a Board
meeting by the Executive Vice-President in charge of Human
It is established in such a way as to guarantee the due and Resources. Similarly, the Senior Vice-President, Chief Ethics
proper application of the policy and rules set by the Board of Officer, also regularly explains the policy and the actions
Directors. It bases its decision on the work and conducted in this field. This information contributes to
recommendations of the Human Resources and Remuneration evaluation of the qualitative portion of the annual variable
Committee. remuneration.
The Human Resources and Remuneration Committee has all The Committee can also carry out a more in-depth evaluation
the necessary information to prepare its recommendations, of the Company’s performance by contacting the Company’s
and more specifically to assess the performance of the main senior managers, after informing the General
executive officer in light of the Group’s short-and long-term Management.
objectives.
THE MEMBERS OF THE HUMAN RESOURCES AND
THE HUMAN RESOURCES AND REMUNERATION COMMITTEE REMUNERATION COMMITTEE MAY ALSO SERVE ON OTHER
HAS COMPARATIVE STUDIES CONDUCTED BY AN INDEPENDENT BOARD COMMITTEES, AND THUS HAVE INFORMATION FROM
FIRM DIFFERENT SOURCES
These studies enable it to measure: This information enriches their vision of the Company’s strategy
and its performances and those of its executive officer.
s the competitiveness of the executive officer’s total
remuneration in comparison with an international panel of In this manner, three out of the four members of the Human
companies that are world leaders; Resources and Remuneration Committee, including its
Chairman, are members of the Strategy and Sustainable
s the comparative results of L’Oréal and those of the same Development Committee at which the actions taken with
world leaders in light of the criteria adopted by the Group regard to Research and Innovation and the programmes with
to assess the executive officer’s performance; regard to the Group’s social and environmental responsibility
s the link between the executive officer’s remuneration and are discussed.
his performance; Similarly, one of the four members of the Human Resources
s the relevance over time of the remuneration structure and and Remuneration Committee is a member of the Audit
the objectives assigned to him. Committee and participates in the closing of the financial
statements as well as the examination of the risk prevention
THE HUMAN RESOURCES AND REMUNERATION COMMITTEE policy.
HAS ALL USEFUL INTERNAL INFORMATION
All this information enables the members of the Human
This information enables it to assess the performance of the
Resources and Remuneration Committee to have all the
Company and that of its executive officer both from an
precise data required to make a complete measurement of
economic standpoint and in extra-financial fields.
the various performance criteria for the executive officer.
The Group’s annual economic and financial results are
The recommendations to the Board of Directors are made on
presented every year completely and exhaustively to the
these bases, and the Board then makes its decisions
Human Resources and Remuneration Committee at its
collectively concerning the executive officer’s remuneration.
meeting in February, and are used as a basis for the
assessment of the financial performance criteria for the
executive officer’s variable remuneration.
/ BELOW IS A DIAGRAM SHOWING THE ORGANISATION OF THE WORK OF THE HUMAN RESOURCES AND REMUNERATION
2
COMMITTEE CONCERNING THE REMUNERATION OF THE EXECUTIVE OFFICER
February 2014 April 2014 June 2014 November 2014 February 2015
Recommendations made Recommendations for the Review of the third version Analysis of the 2013 Say Presentation of the study
to the Board of Directors 2014 ACAs plan: of the Business Code of On Pay vote: on the remuneration
with regard to: Ethics of the executive
• policy and rules for • analysis of the vote; officer carried out by
• evaluation and grants including
• discussion on the an independent firm
setting of the those applicable to project for 2014.
2013 variable the executive officer; including:
remuneration after a
• list of beneficiaries Preliminary analysis • link between
review of the annual including the concerning the draft performance and
results for 2013 and executive officer; resolution on free grants remuneration;
assessment of the of shares proposed to the
qualitative aspects • level of grants 2015 AGM and the 2015
• balance and
including those to structure of the
of management; ACAs Plan:
the executive officer. remuneration.
• setting of the fixed • benchmark;
remuneration for Recommendations made
2014; • evaluation of the to the Board of Directors
policy implemented; with regard to:
• setting of the • possible changes.
level of variable • evaluation and
remuneration for setting of the
2014, the nature 2014 variable
and weight of the remuneration after a
evaluation criteria review of the annual
for the variable results for 2014
remuneration and and assessment of
the objectives to be the extra-financial
met. aspects;
Assessment of the
performance levels
achieved for the ACAs
and SO plans which
terminate
/ FINANCIAL OBJECTIVES SHOWING THE COMPANY’S PERFORMANCE, MEASURED USING THE FOLLOWING INDICATORS,
TAKEN INTO ACCOUNT FOR 60% OF THE TOTAL ANNUAL VARIABLE REMUNERATION:
After looking at the results for 2014, the Committee assessed the performance of Mr. Jean-Paul AGON with regard to these different
quantitative criteria, in light of the targets for increases set at the beginning of the year. The assessment is carried out on a
criterion-by-criterion basis without offsetting among the criteria.
/ EXTRA-FINANCIAL OBJECTIVES TAKEN INTO ACCOUNT FOR 40% OF THE TOTAL ANNUAL VARIABLE REMUNERATION
Qualitative criteria
s Handling of the s Conduct of the strategic transaction with Nestlé
priorities for the year s Acquisitions in 2014: Magic Holdings, NYX, Niely Cosmeticos(2) which strengthen L’Oréal’s positions both
geographically and in terms of brand positioning.
s Company’s s Acceleration of the Digital transition: creation of the Digital Division, within the Executive Committee.
image/reputation/dialogue s Strong personal involvement in the implementation of the "Sharing Beauty With All" and L’Oréal Share & Care
with stakeholders programmes, internally and vis-à-vis international experts asked to participate in these projects.
s L’Oréal Disability Initiatives Trophy: 65 countries taking part with 80 initiatives.
s Ethical Commitment: L’Oréal was once again recognised by Ethisphere as one of the World’s Most Ethical
Companies, and has been part of the United Nations Global Compact 100 stock index since its creation.
s Quality of external communication.
(1) Strategic suppliers are those who bring significant value added to the Group by contributing, through their importance, their innovations, their strategic alignment and
their geographic deployment, to accompanying L’Oréal’s strategy on a durable basis.
(2) Acquisition under completion
The assessment is carried out on a criterion-by-criterion basis The estimated fair value according to the IFRS applied for the
without offsetting among the criteria. preparation of the consolidated financial statements of one
performance share (ACAs) under the April 17th, 2014 plan is
On the basis of the studies and analyses conducted by the €104.58 for French tax and/or social security residents, which is
Human Resources and Remuneration Committee, the Board of the case for Mr. Jean-Paul Agon. This fair value was €112.37 on
Directors decided, at its meeting on February 12th, 2015, to April 26th, 2013.
allocate €1,760,000 to Mr. Jean-Paul Agon in respect of the
annual variable remuneration, representing 80% of the The estimated fair value according to the IFRS of the
maximum amount of variable remuneration that could be 40,000 performance shares (ACAs) granted in 2014 to
paid to him. Mr. Jean-Paul Agon is therefore €4,183,200.
ATTENDANCE FEES These shares will only finally vest, in full or in part, after
th
satisfaction of the performance conditions described below.
At the Board meeting on November 28 , 2014,
Mr. Jean-Paul Agon informed the members of the Board of Performance conditions
Directors that he no longer wished, in his capacity as
Chairman and executive officer, to receive attendance fees. The final vesting of these shares is subject to fulfilment of
performance conditions which will be recorded at the end of a
The Board of Directors took due note of the decision made by vesting period of 4 years as from the date of grant.
Mr. Jean-Paul Agon for 2014 and the following years.
Half of the number of shares that finally vests will depend on
AWARD OF PERFORMANCE SHARES (ACAS) growth in comparable cosmetics sales as compared to those
of a panel of competitors, such panel consisting in 2014 of
Within the scope of Articles L. 225-197-1 et seq. of the French
Procter & Gamble, Unilever, Estée Lauder, Shiseido, Beiersdorf,
Commercial Code and the authorisation of the Annual General
Johnson & Johnson, Henkel, LVMH, Kao, Revlon and Elizabeth
Meeting of April 26th, 2013, the Board of Directors decided, at its
Arden; the other half will depend on the growth in L’Oréal’s
meeting on April 17th, 2014, taking into account the
consolidated operating profit.
performances of Mr. Jean-Paul Agon, to grant him
40,000 performance shares (ACAs – Conditional grant of shares).
The calculation will be based on the arithmetic average for the has decided not to require Mr. Jean-Paul Agon to purchase an
three full financial years of the vesting period. The first full year additional quantity of shares of the Company when the shares
taken into account for evaluation of the performance granted become available, as recommended by the
conditions relating to this grant is 2015. AFEP-MEDEF Code.
In order for all the free shares granted to finally vest at the end Furthermore, as for previous grants, Mr. Jean-Paul Agon has
of the vesting period pursuant to the criterion related to sales, undertaken not to enter into any risk hedging instruments.
L’Oréal’s performance must be at least as good as the
average growth in sales of the panel of competitors. Below It is to be noted that no stock options to purchase or subscribe
that level, the grant decreases. The Board defines a threshold, for shares, and no other long-term incentives, were granted to
which is not made public for reasons of confidentiality, below Mr. Jean-Paul Agon in 2014.
which no share will finally vest pursuant to this criterion.
2.3.2.2.2. Components of remuneration
In order for all the free shares granted to finally vest at the end for 2015
of the vesting period pursuant to the criterion related to
FIXED REMUNERATION
operating profit, a level of growth defined by the Board, but
not made public for reasons of confidentiality, must be met or The Board of Directors on February 12th, 2015, on the proposal
exceeded. Below that level, the grant decreases. If the of the Human Resources and Remuneration Committee,
operating profit does not increase in absolute value over the decided to maintain the amount of Mr. Jean-Paul Agon’s fixed
period, no share will finally vest pursuant to this criterion. remuneration at a gross amount of €2,200,000 on an annual
basis.
The figures recorded each year to determine the levels of
performance achieved are published in the Annual Financial ANNUAL VARIABLE REMUNERATION
Report.
Concerning Mr. Jean-Paul Agon’s annual variable
Main characteristics of the grant remuneration, this may represent a maximum of 100% of the
fixed remuneration, namely €2,200,000; the financial part is set
This plan made it possible to grant 1,068,565 performance
at 60% of the total amount of the annual variable
shares (ACAs) to 1,978 beneficiaries.
remuneration (namely a maximum of €1,320,000). The
The grant of performance shares (ACAs) which extra-financial portion represents 40% of the total amount
Mr. Jean-Paul Agon received in 2014 represents 3.74% of the (namely a maximum of €880,000).
total number of performance shares (ACAs) granted and
For 2015, the performance assessment criteria were reapplied
3.65% of their estimated value according to the IFRS.
for the financial criteria and re-defined by the Board of
At the end of the 4-year vesting period, Mr. Jean-Paul Agon, as Directors for part of the extra-financial criteria.
a French resident on the date of granting of the shares, is
The criteria defined for the extra-financial part are based on
required to hold the shares definitively vested for him for an
measurable indicators adapted to the Group’s Human
additional 2-year period during which the shares cannot be
Resources and CSR strategy. The CSR criteria should make it
disposed of.
possible, in particular, to measure, year after year, the
Mr. Jean-Paul Agon shall retain 50% of the shares which will be progress made with regard to the main commitments,
finally granted to him at the end of the vesting period in “Innovating sustainably”, “Producing sustainably”, “Consuming
registered form, until the termination of his duties as L’Oréal’s sustainably” and “Sharing our growth”, made within the
Chairman and Chief Executive Officer. framework of the "Sharing Beauty With" All programme to be
implemented by 2020.
In light of the significant level of the holding obligations
imposed on L’Oréal’s Chairman and Chief Executive Officer at A “Digital Development” criterion has been added, which
the time of the exercise of stock options for the subscription of highlights the Group's ambition to accelerate its digital
shares and the final vesting of shares, the Board of Directors transformation.
Financial criteria (60%) reflecting the Company’s performance measured on the basis of growth in the following indicators:
s Comparable sales as compared to the budget,
2
s Market share as compared to the main competitors,
s Operating profit as compared to 2014,
s Net earnings per share as compared to 2014,
s Cash flow as compared to 2014.
AWARD OF PERFORMANCE SHARES executive officers ad nutum. The Board of Directors has
formally provided for the methods of application of the
Concerning the award of performance shares in 2015, the
objectives of the recommendation, as adapted to the
Board of Directors reserves the possibility to decide on the
professional context in the L’Oréal Group.
implementation of a new plan within the scope of the
authorisation requested from the Annual General Meeting on The Board’s intention is to use the treatment set out below for
April 22nd, 2015. Mr. Jean-Paul Agon and, in future, for any new corporate
officer appointed who has over 15 years’ length of service in
The grant which would be decided in favour of Mr. Jean-Paul
the Group at the time of appointment.
Agon would comply with the recommendations of the
June 2013 AFEP-MEDEF Code of Corporate Governance and L’Oréal’s ongoing policy has been to appoint employees who
particularly that relating to the value of the shares granted have completely succeeded in the various stages of their
which must not differ from L’Oréal’s previous practices. careers in the Group as executive officers. This is how
Mr. Jean-Paul Agon, then Deputy Chief Executive Officer, was
2.3.2.2.3. Termination indemnities, pension appointed as Chief Executive Officer of L’Oréal in April 2006,
scheme, additional social protection following a brilliant career spanning 27 years within the Group.
These components of remuneration are not linked to The Board of Directors noted that if, in accordance with the
performance of the corporate office, but they may be due AFEP-MEDEF recommendation, Mr. Jean-Paul Agon’s
pursuant to the suspended employment contract. employment contract with L’Oréal was to be terminated,
Mr. Agon would lose the status he acquired as a result of the
The AFEP-MEDEF Code, to which L’Oréal refers, recommends
27 years he spent working for the Group as an employee.
that companies should put an end to the practice of
combining an employment contract with a corporate office The Board did not want Mr. Jean-Paul Agon, who accepted
although it does not impose this as a mandatory requirement the office of Chief Executive Officer after 27 years working with
(point 22). L’Oréal, to be deprived of the benefits to which he would have
continued to be entitled had he remained an employee:
As a reminder, L’Oréal’s Board of Directors shares the
objectives of this recommendation which aims at avoiding the s Maintenance of the employment contract and separation
possibility of concurrently obtaining benefits both from the of the benefits attached to the employment contract on
employment contract and the corporate office and at the one hand and to the corporate office on the other.
prohibiting any interference with the possibility of removing
The Board of Directors considered that the objective pursued the Chemical Industries, in the event of termination of the
by the AFEP-MEDEF recommendation can be fully achieved by employment contract, the indemnity due in consideration of
maintaining the suspension of the employment contract and the non-competition clause would be payable every month for
clearly separating out the benefits related to the employment two years on the basis of two-thirds of the monthly fixed
contract on the one hand from those relating to his corporate remuneration attached to the suspended employment
office on the other. contract unless Mr. Jean-Paul Agon were to be released from
application of the clause.
In this manner, remuneration in respect of the corporate office
will in no event be taken into consideration for calculation of For information purposes, the cumulative amount of the
the indemnities due pursuant to the collective bargaining indemnity provided for under the collective bargaining
agreement and the Company-level agreements applicable to agreement and the indemnity in consideration of the
all L’Oréal senior managers. non-competition clause which would have been due to
Mr. Jean-Paul Agon had his employment contract been
The remuneration under the suspended employment contract terminated on December 31st, 2014 through dismissal, except
to be taken into account for all the rights attached thereto, in the event of gross misconduct or gross negligence, would
and in particular for the calculation of the defined benefit have represented an amount of less than 24 months of the
pension referred to below, is based on the amount of fixed and variable remuneration which he received in 2014 as
remuneration at the date of suspension of the employment a corporate officer.
contract in 2006, namely fixed remuneration of €1,500,000 and
variable remuneration of €1,250,000. s Maintenance of entitlement to the defined benefit pension
scheme for the Group’s senior managers.
This reference remuneration is revised every year by applying
the revaluation coefficient in respect of salaries and pension Mr. Jean-Paul Agon benefits, under his suspended
contributions published by the French State pension fund. employment contract, from the Garantie de Retraite des
As of January 1st, 2015 the fixed remuneration amounts to Membres du Comité de Conjoncture (Pension Cover of the
€1,671,000 and variable remuneration to €1,392,500. Members of the Comité de Conjoncture) scheme closed on
December 31st, 2000, as described in chapter 6 of this
The length of service applied will take into consideration his document “Employee benefit and pension schemes and other
entire career, including the years during which he was Chief benefits”.
Executive Officer and Chairman and Chief Executive Officer.
The main features of this scheme, which falls under
s Payment solely of the termination indemnities due Article L. 137-11 of the French Social Security Code, are as
pursuant to the employment contract to the exclusion of follows:
any indemnity in the event of termination of the corporate
office. • around 120 senior managers, active or retired, are
concerned;
In the event of departure, and depending on the reasons,
Mr. Jean-Paul Agon would only be paid the dismissal • the length of service requirement was 10 years at the
indemnities, except in the event of gross misconduct or gross time of closure of the scheme on December 31st, 2000;
negligence, or retirement indemnities due in the event of
voluntary retirement or compulsory retirement on the • the cover may not exceed 40% of the calculation basis
Company’s initiative pursuant to the employment contract for the Pension Cover plus 0.5% per year for the first
that has been suspended. twenty years, then 1% per year for the following twenty
years;
These indemnities, which are attached solely to termination of
the employment contract and in strict application of the • the cover may not exceed the average of the fixed part
National Collective Bargaining Agreement for the Chemical of the remuneration for the three years used for the
Industries and the Company-level agreements applicable to calculation basis out of the seven prior to the end of the
all L’Oréal senior managers, are due in any event pursuant to beneficiary’s career in the Company.
public policy rules of French labour law. They are not subject For information purposes, it can be estimated that the amount
to any condition other than those provided for by the National of the pension that would be paid to Mr. Jean-Paul Agon,
Collective Bargaining Agreement for the Chemical Industries or under L’Oréal’s Garantie de Retraite des Membres du Comité
the above-mentioned Company-level agreements. The same de Conjoncture scheme, had he been able to apply for a
applies to the non-competition clause and the related full-rate pension from the French social security scheme on
financial consideration. December 31st, 2014, after more than 35 years’ length of
Pursuant to the schedule of indemnities under the National service at L’Oréal, would represent around 40% of the fixed
Collective Bargaining Agreement for the Chemical Industries, and variable remuneration he received as an executive
in the event of dismissal, except in the event of gross officer in 2014.
misconduct or gross negligence, the indemnity would be This information is given as an indication after estimating the
capped, in light of Mr. Jean-Paul Agon’s length of service, at main pension entitlements accrued by Mr. Jean-Paul Agon, at
20 months’ remuneration under the suspended employment 65 years of age, as a result of his professional activities,
contract. according to the rules regarding the application for payment
In respect of the employment contract, pursuant to the of such pensions in force at December 31st, 2014 and which
provisions of the National Collective Bargaining Agreement for may be subject to change.
The amount of the pension paid to Mr. Jean-Paul Agon, under calculation of the life annuity that may be due within the
2
L’Oréal’s Garantie de Retraite des Membres du Comité de scope of this scheme so that these benefits are not combined.
Conjoncture scheme will in fact only be calculated on the
date when he applies for all his pensions. The above provisions are subject to the regulated agreements
and commitments procedure. The corresponding agreement
As a reminder, the rights to the defined benefit pension are was approved by the Annual General Meeting on April 27th, 2010
uncertain and conditional on the beneficiary ending his making a decision with regard to the Special Report prepared by
career in the Company. The funding of this scheme by L’Oréal the Statutory Auditors. The provisions of this agreement remained
cannot be broken down individually by employee. unchanged within the scope of the appointment of
Mr. Jean-Paul Agon as Chairman and Chief Executive Officer as
s Maintenance of the benefit of the additional social from March 18th, 2011 and the renewal of his term of office on
protection schemes applicable to the Company’s April 17th, 2014. This is the only agreement entered into and
employees. authorised in previous years for which performance continued
Mr. Jean-Paul Agon will continue to be entitled to benefit from during the 2014 financial year. Pursuant to new Article L. 225-40-1
the additional social protection schemes and in particular the of the French Commercial Code, this agreement was examined
employee benefit and healthcare scheme applicable to the by the Board of Directors on February 12th, 2015, which confirmed
Company’s employees due to the fact that he will be treated the relevance and terms thereof.
as a senior manager throughout the entire length of his The table set out below, presented in the form recommended
corporate office. by the AMF, clearly shows that there are no concurrent
For information purposes, the amount of the employer’s benefits under the suspended employment contract and the
contributions to these schemes totalled €5,892 in 2014. corporate office.
Like for all the other senior managers of the Group, the It is moreover stated that the AMF considers that a company
lump-sum amount resulting from the employer’s contributions complies with the AFEP-MEDEF Code when it explains the
under the defined contribution pension scheme will be maintenance of the employment contract of a senior
deducted from the amount of the Pension Cover for the manager as being due to his length of service as an employee
in the Company and his personal situation and provides
detailed substantiation in this respect.
/ SUMMARY TABLE OF THE REMUNERATION OF MR. JEAN-PAUL AGON, CHAIRMAN AND CHIEF EXECUTIVE OFFICER
2014 2013
In € Amounts due Amounts paid Amounts due Amounts paid
Fixed remuneration 2,200, 000 2,100,000 2,100,000 2,100,000
Annual variable remuneration(1) 1,760,000 1,837,500 1,837,500 1,785,000
Exceptional remuneration - - - -
Attendance fees (2) 0 85,000 85,000 85,000
Benefits in kind - - - -
TOTAL 3,960,000 4,022,500 4,022,500 3,970,000
(1) Variable remuneration due in respect of year N is paid in year N+1.
(2) The attendance fees for year N are paid in year N+1.
/ TABLE SHOWING THE STOCK OPTIONS GRANTED TO MR. JEAN-PAUL AGON SINCE HIS APPOINTMENT AS AN EXECUTIVE
OFFICER THAT CAN STILL BE EXERCISED AT DECEMBER 31ST, 2014
Number of Number of options 1st possible Subscription price
Date of grant options granted not yet exercised date of exercise Date of expiry (euros)
12.01.2006 500,000 500,000 12.02.2011 12.01.2016 78.06 (S)
11.30.2007 350,000 350,000 12.01.2012 11.30.2017 91.66 (S)
03.25.2009 (1) - - - - -
04.27.2010 400,000 400,000 04.28.2015 04.27.2020 80.03 (S)
04.22.2011 (2) 200,000 200,000 04.23.2016 04.22.2021 83.19 (S)
(1) As Mr. Jean-Paul Agon informed the Board of Directors that he did not wish to be granted any subscription option with respect to 2009, he did not receive any
subcription option under the Plan dated March 25th, 2009
(2) The Board of Directors allocated 400,000 stock options to Mr. Jean-Paul Agon on April 22nd, 2011. Mr. Jean-Paul Agon waived 200,000 of these stock options.
He therefore benefits from 200,000 stock options under the plan decided by the Board of Directors on April 22nd, 2011.
Mr. Jean-Paul Agon, as an executive officer, will retain a applicable, the payment of any immediate or deferred taxes,
number of shares corresponding to 50% of the “balance of the social levies and costs relating to the exercise of these stock
shares resulting from the exercise of the stock options”, in options as applicable at the date of exercise of the options. If
registered form, until the termination of his duties as Chairman the number of shares thus determined that must be retained
and Chief Executive Officer of L’Oréal. until the termination of Mr. Jean-Paul Agon’s duties as
Chairman and Chief Executive Officer is not a whole number
The “balance of the shares resulting from the exercise of the of shares, this number of shares would be rounded down to
stock options” should be understood to mean the total the nearest lower whole number of shares.
number of shares resulting from the exercise of stock options
minus the number of shares that have to be sold to finance Mr. Jean-Paul Agon has undertaken not to enter into any risk
the exercise of the stock options in question and, where hedging transactions.
/ TABLE OF THE STOCK OPTIONS TO PURCHASE OR SUBSCRIBE FOR SHARES EXERCISED BY MR. JEAN-PAUL AGON DURING
THE 2014 FINANCIAL YEAR
Stock options for the purchase
or subscription of shares
Date of grant exercised Exercise price
Stock options granted during performance of the corporate office None --
Stock options granted prior to the corporate office(1)
December 1st, 2004 85,000 55.54
June 29th, 2005 100,000 60.17
(1) These stock options, granted prior to the appointment of Mr. Jean-Paul Agon as an executive officer and expiring 10 years after their grant, were not subject to any
retention obligation. Nevertheless, Mr. Jean-Paul Agon decided to retain some of the shares resulting from the exercise of these stock options, bringing the total number
of shares held by him at December 31st, 2014 to 145,500 shares.
/ TABLE OF CONDITIONAL GRANTS OF SHARES TO MR. JEAN-PAUL AGON SINCE HIS APPOINTMENT AS AN EXECUTIVE
OFFICER
Number of conditional Date of final vesting of
Number of conditional shares that have not all or part of the 1st possible date of sale
Date of grant shares granted yet finally vested conditional shares of some of them (1)
April 17th, 2012 50,000 50,000 April 18th, 2016 April 18th, 2018
April 26th, 2013 40,000 40,000 April 27th, 2017 April 27th, 2019
April 17th, 2014 40,000 40,000 April 18th, 2018 April 18th, 2020
(1) At the end of the vesting period, Mr. Jean-Paul Agon, as a French resident on the date of granting of the shares, is required to hold the shares definitively vested for him
for an additional 2-year period during which the shares cannot be disposed of. At the end of this additional 2-year period, Mr. Jean-Paul Agon as an executive officer,
will hold 50% of the shares that finally vest as registered shares until the end of his term of office as Chairman and Chief Executive Officer of L’Oréal. Mr. Agon has
undertaken not to enter into any risk hedging transactions.
/ SUMMARY TABLE OF THE RECOMMENDATIONS OF THE AFEP-MEDEF CODE WHICH HAVE NOT BEEN APPLIED
Composition of Committees The Audit Committee consists of 60% of independent Directors (i.e., 3 out of 5). The Board
Proportion of independent members on the of Directors considers this composition satisfactory in light of the necessary presence of two
committees (points 16.1, 17.1 and 18.1 of the Directors from L’Oréal’s main shareholders and its choice of maintaining a limited number
code): of members in order to ensure the efficiency of the work of this Committee which requires a
certain level of expertise in finance or accounting.
The proportion of independent Directors on the Audit
Committee must be at least two-thirds. The Appointments and Governance Committee currently consists of 50% of independent
Directors. Indeed, the Board of Directors decided to change the composition of this
The Selection or Appointments Committee and the Committee by appointing to it an additional independent Director in April 2014.
Remuneration Committee must be composed of
a majority of independent Directors. The Human Resources and Remuneration Committee currently consists of 50% of
independent Directors. The Board of Directors decided to change the composition of this
committee by appointing an additional independent Director in 2015, thus increasing the
proportion of independent Directors to 60% (see on page 62 the composition of the Human
Resources and Remunerations Committee)
These Committees are all chaired by an independent Director.
Furthermore, the High Committee on Corporate Governance has specified in its 2014
annual report that "an Audit Committee that consists, for example, of three independent
members out of five, or a Remuneration Committee comprising two out of four, remain in
keeping with the spirit of the code as long as they are chaired by an independent Director".
Period for review of the accounts by the Audit Within the scope of the publication of the annual and interim results, the Audit Committee’s
Committee (point 16.2.1 of the code): meeting relating to the review of the financial statements is held on a date close to that of
The time periods for review of the accounts by the their presentation to the Board of Directors. But it should be noted that the Board and its
Audit Committee must be sufficient (at least two Committees are regularly given the appropriate information to carry out their supervisory
days before their review by the Board). assignment, in this field in particular. Furthermore, the corresponding documents are
systematically sent to them prior to the meetings.
The executive officer’s employment contract The Board of Directors considered that the objective pursued by this recommendation can
(point 22 of the code): be fully achieved by maintaining the suspension of the employment contract and clearly
It is recommended, though not mandatorily separating out the benefits related to the employment contract on the one hand from those
required, that when a senior manager or executive relating to his corporate office on the other. Furthermore, the Board of Directors has decided
becomes a corporate officer of the Company, to eliminate all right to any indemnity in the event of termination of the corporate office. This
his/her employment contract with the Company or position of the Board applies to the current office of Mr. Jean-Paul Agon and, in future, to
another company of the Group should be any new corporate officer appointed who has over 15 years’ length of service in the Group
terminated by agreed termination or by resignation. at the time of appointment. L’Oréal’s ongoing policy has been to appoint employees who
have completely succeeded in the various stages of their careers in the Group as executive
officers. This is how Mr. Jean-Paul Agon, then Deputy Chief Executive Officer, was appointed
as Chief Executive Officer of L’Oréal in April 2006, following a brilliant career spanning 27
years with the Group. The Board of Directors noted that if, in accordance with the
AFEP-MEDEF recommendation, Mr. Jean-Paul Agon’s employment contract with L’Oréal was
to be terminated, Mr. Agon would lose the status he acquired as a result of the twenty-seven
years he spent working for the Group as an employee. (See the AMF’s position.*).
Performance shares (point 23.2.4 of the code) In light of the significant level of the holding obligations imposed on L’Oréal’s Chairman and
In accordance with the terms and conditions set by Chief Executive Officer at the time of the exercise of stock options for the subscription of
the Board and made public at the time of the grant shares and the final vesting of shares, the Board of Directors decided not to require
thereof, make the performance shares granted Mr. Agon to purchase an additional quantity of shares of the Company when the shares
to the executive officers conditional on the purchase granted become available, as recommended by the AFEP-MEDEF Code.
of a defined quantity of shares when the shares The number of shares directly held by Mr. Agon was 145,500 at December 31st, 2014 as
granted become available. against 76,500 at December 31st, 2013.
* Extract from the 2014 AMF Report on corporate governance and executive compensation considering that in this case this requirement was met: “The AMF states that it
considers that a company complies with the AFEP-MEDEF Code when it explains the maintenance of a senior executive’s employment contract in light of his length
of service as an employee in the Company and his personal situation”.
Description of the
Person concerned financial instrument Nature of the transaction Number of transactions Total amount
Jean-Paul AGON, Exercise of
Chairman & CEO Shares Stock Options 7 €10,737,900.00
Shares Sale 3 €7,224,883.60
Individuals related to Mr. Jean-Paul AGON,
Chairman and CEO Shares Sale 4 €5,388,241.15
At the request of the Chairman and Chief Executive Officer, s the Group’s financial and accounting information is reliable
the Administration and Finance Division compiled the and provides true and fair statements.
information contained in this report based on the different
types of work carried out by departments working on Internal By contributing to preventing and managing the risks to which
Control and management of the Group’s risks and which aims the Group is exposed, the purpose of the Internal Control
at covering the main operational, legal, industrial, system is to enable the Group’s industrial and economic
environmental, economic and financial risks described in development to take place in a steady and sustainable
chapter 1 (page 25). manner in a control environment appropriate for the Group’s
businesses. However, no absolute guarantee can be given
For the preparation and drafting of this report and the that these objectives will be met.
definition of Internal Control, L’Oréal used the Reference
Framework recommended by the French financial markets With the aim of continually improving the system of Internal
authority (the Autorité des Marchés Financiers) on July 22nd, Control, the Group continued with its efforts in 2014 by notably
2010. taking the following actions:
s the orientations set by General Management are followed; • distribution of an “Employee Guide to gifts/invitations”
which adds to the system to fight against corruption;
s the Group’s assets are valued and protected;
s the network of Internal Control managers was reinforced to the Chairman and Chief Executive Officer and informs the
worldwide; Board of Directors and the Executive Committee. The Chief
Ethics Officer has a dedicated budget and team, has access
• a specific training course was developed, to all the information and documents concerning the Group’s
activities and can call upon all the Group’s teams and
• coordination of the community of Internal Controllers is
based, in particular, on a dedicated social network; resources to carry out his mission. Employees have a
dedicated intranet site which provides additional information
s the Group’s risk mapping analysis was updated in 2014 on ethics. Employee awareness is raised in particular during
and presented to the members of the Executive Committee an annual Ethics Day. The central event in 2014 was a live
and the Audit Committee. webchat with the Chairman and Chief Executive Officer, which
enabled all the Group’s employees to ask questions and
discuss the everyday application of L’Oréal’s Ethical Principles.
2.5.2. Components of the system Dialogues on ethics were also organised locally with each
Country Manager. More than 50% of the employees took part
in this dialogue and over 4,000 questions were asked
2.5.2.1. THE INTERNAL CONTROL ORGANISATION worldwide. Furthermore, employees are now able to refer
AND ENVIRONMENT matters to the Chief Ethics Officer through the L’Oréal Ethics
Open Talk site which offers a secure reporting mechanism.
The control environment, which is critical to the Internal
Control system, good risk management and the application of The Ethics Correspondents’ role is to assist the Country
procedures, is based on people, behaviour and the Managers in implementing the ethics programme and enable
organisational structure. In L’Oréal, it forms part of a culture of employees in 64 countries to have a local point of contact.
rigour and commitment communicated by senior The Ethics Correspondents benefit every year from specific
management and is also in line with the Group’s strategic coordinating and training programme. The ethics training
choices. campaign is on-going. A specific e-learning course on ethics is
currently being rolled out in all countries. As of
The Group’s Ethical Principle December 31st, 2014, more than 43,000 employees had
completed this course. There are also six specific modules
L’Oréal has built up its business on the basis of strong Ethical
designed in particular for Country Managers, Purchasers and
Principles that have guided its development and contributed
Human Resources.
to establishing its reputation: Integrity, Respect, Courage and
Transparency. L’Oréal’s commitment to acting ethically and L’Oréal’s “Open Talk” policy enables employees to raise any
responsibly is summarised in a document called “The L’Oréal concerns they may have directly with the Group’s Chief Ethics
Spirit” accessible to everyone. Officer including via a secure website. All allegations are
examined in detail and appropriate measures are taken,
L’Oréal’s Code of Ethics was updated in 2014. Available in 45
where applicable.
languages and in Braille, in French and English, it is distributed
to all employees worldwide. It enables employees to Finally, a practical tool for ethics risk assessment and analysis
understand how these Ethical Principles need to be reflected has been made available to the Group’s entities. An annual
in the behaviour and actions by providing simple rules and reporting system makes it possible to monitor implementation
description of concrete situations they may encounter. The of the ethics programme.
Code of Ethics applies to all employees, corporate officers and
members of the Executive and Management Committees of The Chief Ethics Officer regularly visits the Group’s entities all
the Group and its subsidiaries worldwide. Six supplements to over the world (head offices, factories, distribution centres and
the Code of Ethics have, since 2010, covered certain aspects research centres) to meet employees at all levels of the
of the Code in more detail. Country Managers (or for Company and visit the various sites. In 2014, within this
Corporate or Zone staff, the members of the Group Executive framework, he visited 21 countries and was in contact with
Committee to whom they report) are responsible for ensuring over 7,000 employees.
the respect of the Code of Ethical in their Country.
The inclusion of ethical questions in Internal Audit missions
Respect of these Ethical Principles is integrated in the appraisal completes the programme.
system for all the employees through two ethical
competencies: “Acts/Leads with Human Sensitivity” and Responsibilities with regard to Internal Control
“Obtains Results with Integrity”. The Group is organised into worldwide divisions and
geographical zones, which are fully responsible, with the
The Senior Vice-President and Chief Ethics Officer, who reports
management of each country, business unit or industrial
directly to the Chairman and Chief Executive Officer, is in
entity, for the achievement of the objectives defined by the
charge of ensuring the promotion and integration of best
General Management with regard to Internal Control. The
practices within the Group, providing guidance in ethical
Functional Divisions bring their expertise to all operational
decision-making. He ensures employees are trained and
employees.
oversees the handling of concerns, if any. He reports regularly
Worldwide responsibilities for Internal Control of the activities of A management standard with regard to segregation of duties
2
their division or department are entrusted to each of the was distributed to all entities in 2010. It defines the main rules
members of the Management Committee. A system of to be observed in the fields of sales, purchasing, logistics,
delegation of authority is in place and continues to strengthen. finance, Human Resources and information systems
The powers of the legal representatives of Group companies management. The application of these rules is aimed at better
and of their delegates are limited and controlled in prevention of the risks of fraud and reducing the probability
accordance with the provisions of the Legal Charter. that errors (whether intentional or not) may remain
undetected.
Specialists in financial control, information systems, Human
Resources or industrial and logistics techniques provide
support to operational employees at all levels of the 2.5.2.2. COMMUNICATION OF INFORMATION
organisation, which makes it easier to diffuse best practices of INSIDE THE GROUP
Internal Control.
Sharing of information
Human Resources policy The “Fundamentals of Internal Control” brochure is circulated
The quality and skills of male and female employees are key individually to the Managing Directors and Finance Directors of
components of the Internal Control system. Human Resources all the consolidated subsidiaries, including the industrial
policy within L’Oréal is defined by the constant search for entities. Furthermore, the Fundamentals, codes, charters and
excellence in recruitment and by the development of talent standards, together with the information related to the
within the Group, so as to ensure that it has the required level organisation, changes and instructions from the Functional
of skills in all areas. These activities also form part of the Divisions are made permanently available to the subsidiaries
Group’s diversity policy, which seeks to value and respect on the Group’s intranet sites.
difference throughout the organisation. Management
Development Centres offer technical training and personal The other means of internal communication
development programmes, including helping employees with
Meetings are regularly organised aimed at passing on
integration or management; such programmes are tailored to
information about orientations of the General Management to
different job profiles and aimed at providing mastery of
managers of the subsidiaries. The Functional Divisions also
different skills in all areas of activity.
coordinate their networks of experts through seminars and
training sessions. A newsletter gives managers regular news
Information systems and passes on strong messages with regard to Internal
Strategic choices in terms of systems are determined by the Control. Finally, through the Internal Control Awards, which
Group Information Systems Division, which is responsible in were organised for the first time in 2012, good practices are
particular for implementation of a single ERP (Enterprise identified and shared between the Group’s subsidiaries.
Resource Planning), management software application used
by the great majority of commercial subsidiaries, and which
issues instructions regarding systems security. The worldwide 2.5.2.3. RISK MANAGEMENT
roll-out of this integrated software package also contributes to In L’Oréal, the system of management of risks (events or
strengthening the reliability and the security of the process of situations of which the realisation, which is uncertain, has a
production of information, notably accounting and financial positive or negative impact) applies to the Company and its
information. In pursuit of the same objective, the deployment consolidated subsidiaries (“the Group”).
of an integrated production and management solution in the
Group’s industrial entities is continuing. Risk management consists in identifying, managing and
controlling risks that may affect the smooth running of the
The procedures and standards governing Company. It also participates in value creation by promoting
the activities the good use of the resources to minimise the impact of the
negative events and maximise the realisation of opportunities.
Each Functional Division has responsibility, in its own specific
Risk management therefore goes beyond a strictly financial
field, for defining the principles and standards applicable to all
framework.
the entities. In order to make it easier for employees to take on
board all these principles and standards, the key points have In order to ensure the sustainability of its development and the
been summarised in the “Fundamentals of Internal Control” achievement of its objectives, the Group strives to anticipate
which were updated in 2013. and manage the risks to which it is exposed in its different
areas of activity. These risks have been identified in chapter 1
This guide is a reference framework for the Group’s operational
on page 25, and the systems put in place to better anticipate
activities, and is presented in the form of an information sheet
and handle risks are mentioned. In addition, the Internal Rules
for each area. Each information sheet refers to the detailed
of the Board of Directors specify the role played by the Audit
charters, codes and standards of the Group. The information
Committee which “must make sure that the General
sheets are regularly updated, supplemented, validated by the
Management has at its disposal the means to enable it to
experts in each area of expertise and presented to the Group
identify and manage the economic, financial and legal risks
Management Committee.
facing the Group inside and outside France in carrying out its
routine and exceptional operations”.
On the basis of the work by the Internal Audit Department, the customer demand management, development processes
analysis of major accounting and financial risks, in and control of customer service, particularly through
conjunction with the processes used by subsidiaries, makes it management of physical order fulfilment, application of the
possible to identify Internal Control improvements and update general terms of sale, the follow-up of orders, management
the Group’s standards. of customer returns and customer disputes as well as
accounts receivable collection procedures. Measures are
Risk mapping also recommended for the management of distribution
centres and inventories, subcontracting, product
The risk mapping concerning all L’Oréal’s activities was
traceability, business continuity plans and transportation.
updated in 2014. This process of identification and analysis of
the significant risks and processes enhances the knowledge of s In the field of Information Systems, the Group has an
the Group’s risks by formalising and consolidating the work Information Systems Security Policy. Based on the
already achieved to date. The results of this work were international ISO 27001 standard, this policy covers the
presented to the Audit Committee. It is the responsibility of the main topics of Information Systems security, describing the
Risk Management and Compliance Department, created in general principles to be applied for each of them. It
2012, to lead this process which makes it possible to prepare enables all the Group’s Information Systems teams, and by
the appropriate action plans. The main risks to which the extension all the employees, to share clear objectives,
Group is exposed are described in chapter 1 on pages 25 et good practices and levels of control adapted to the risks
seq. incurred. This policy is accompanied by an information
systems security audit programme conducted by an
outside firm. It is also supplemented by an Information and
2.5.2.4. CONTROL ACTIVITIES
Communication Technologies Code of Conduct, and a
Code of Conduct for the correct use of social media.
The measures recommended by the Group
In each area of activity, the recommended measures with s In the Legal area, the Legal Charter reaffirms the obligation
regard to the key control points are determined by the to comply with local legislation and notably sets out the
Functional Divisions. internal principles for signature on behalf of the Company,
the general and specific rules relating to contracts,
s In the area of Human Resources, the requirements related trademark law, intellectual property law, company law and
to personnel management specify the documents to be competition law. A training tool and practical guides
provided to employees, the way to book and report concerning the issues related to competition law and
headcount and personnel charges, the procedures for participation in professional associations define the
recruitment, training and appraisal and the rules to be principles to be complied with and provide answers to any
observed in the field of payroll management. questions which employees may have in this area.
s In the area of purchasing, the Purchasing Code of Ethics s In the Insurance field, the Group’s choice is to only have
was updated in 2011: “The way we buy” is the practical and recourse to first-rate insurers. The Insurance Charter issues a
ethical guide providing guidelines for each employee in reminder that the Group mainly uses integrated worldwide
relationships with the Group’s suppliers. The standard for programmes to cover all its entities notably against third
“Management of suppliers” and tender procedures specify party liability, damage to property and operating losses
the conditions for competitive tendering and for the resulting from an insured event. With regard to insurance of
registration of the main suppliers. The general terms of its customer risk, coverage is put in place inasmuch as this
purchase are used as the framework for transactions with is permitted by local conditions. The results of audits
suppliers. The “Purchase Commitments and Order performed by insurance companies in factories and
Management” standard is aimed at facilitating and distribution centres are used to improve the Internal Control
strengthening control of the spending and investments of of these entities.
Group entities.
s In the area of finance and treasury, the Financial Charter
s In the area of safety and quality, procedures relating to the and the exchange risk management standard specify, in
protection of persons, property and data set out the particular, the principles to be applied by Group entities to
principles for covering industrial and logistical risks relating ensure that management of currency risk is both prudent
to organisation and safety. Production quality standards and centralised. The standard with regard to bank powers
define rules governing the quality of products, for all stages defines the process for designating the persons
from creation to production and distribution. Almost all the empowered to sign to make payments and the rules for
factories are ISO 9001-certified as far as their production is implementation of those powers. In addition, the Stock
concerned, ISO 14001-certified for their environmental Market Code of Ethics, described (page 55) in the
policy and OHSAS 18001-certified (or equivalent Chairman’s Report concerning the way in which the
certification) for their safety policy. Board’s work is prepared and organised, is applicable to all
employees.
s In the area of the Supply Chain, the main assignments
consist in defining and applying the sales planning,
s In the area of consolidation and financial control, the real-time the progress made in the action plans of the audited
2
control activities are described below in the section on entities.
“Monitoring process for the organisation of the accounting
and finance functions”. The action plans decided on further to the audits are followed
up regularly by the Internal Audit Department, which measures
the rate of progress made in the implementation of the
2.5.2.5. ONGOING SUPERVISION OF THE INTERNAL recommendations, weighted by the risk levels applied. The
CONTROL summary of performance and results of the assignments and
the progress of the action plans are presented to the General
The supervision carried out by the Functional Management and the Audit Committee every year.
Divisions
The Internal Audit Department shares the results of its audits
Through their network of specialists or via regular audits, the with the Group’s Statutory Auditors. The remarks made by the
Functional Divisions review the functioning of their respective external auditors within the scope of their annual audit, are
areas of responsibility: in this way, the Purchasing Divisions are also taken into consideration by the Internal Audit Department
responsible for the oversight with regard to suppliers and their when it carries out its assignments.
working conditions, the Environment, Health & Safety Division is
responsible for checks related to site safety and environmental
compliance while the Quality Department measures
performance and the progress made by industrial entities with
2.5.3. The players
regard to the quality of production and finally the Information The main players involved in monitoring Internal Control and
Systems Division assesses compliance with the Security Policy. risk management are:
Indicators and reporting procedures enable the regular
monitoring of the local activities of most of these Functional s the General Management and its Management Committee
Divisions. (Executive Committee);
Internal Audit is carried out by a central team that reports s the Functional Departments and Divisions, including the Risk
directly to the Executive Vice-President, Administration and Management and Compliance Department, the Internal
Finance. This department carries out regular assignments to Control Department and the Internal Audit Department .
audit major processes and check on the application of Group
principles and standards.
GENERAL MANAGEMENT AND THE MANAGEMENT
Internal Audit assignments are submitted to the General COMMITTEE (EXECUTIVE COMMITTEE)
Management and the Audit Committee for their approval and,
The role of the General Management is to define the general
with their agreement, are included in an annual audit plan.
principles regarding Internal Control and to ensure that they
The choice of assignments notably takes into account the
are correctly put in place.
assessment of the risks identified.
Within the scope of their worldwide Internal Control
The size, the contribution to key economic indicators, the
responsibilities, the members of the Management Committee
history of the entities together with the pattern of their
rely on operational and functional managers, according to
development, are factors that are also taken into
their respective areas of expertise. These managers must
consideration for the preparation of the annual audit plan.
ensure implementation of these general principles and ensure
The Internal Audit Department carried out 45 assignments in the correct functioning of procedures enabling the level of
2014. These audits concerned 29 commercial entities Internal Control required by General Management to be
representing approximately 27% of the Group’s sales and attained.
7 factories; the audited factories represent 17% of worldwide
production in units. Furthermore, 9 other assignments were
carried out with regard to specific topics. Internal Audit
THE AUDIT COMMITTEE
assignments systematically lead to the preparation of a report The Board of Directors has always asserted the importance
comprising a presentation of the findings and related risks and that it attributes, together with General Management, to
making recommendations regarding the action plan to be put Internal Control and to its main areas of application. Since its
in place by the audited entity. creation, the Audit Committee has been responsible for
monitoring actions undertaken in the area of Internal Control
The Internal Audit Department relies on the support of the
and it reports thereon to the Board of Directors. Its remits are
Group’s integrated ERP software package for the performance
defined in the Internal Rules of the Board of Directors.
of its work and has developed a certain number of specific
transactions that contribute to increasing the efficiency of its Each year, the Committee performs a review of the Internal
work. Since 2007, complementary assignments aimed at Audit plan, its objectives and the general conclusions of
verifying certain key Internal Control points in the configuration Internal Audit assignments. Major Internal Control projects and
of the ERP software have been performed. In addition, in 2014, initiatives are also presented to it. The Committee then
the Internal Audit Department finalized the GRC (Governance, prepares a report with its own remarks for the Board of
Risk, Compliance) tool, which now enables it to carry out its Directors.
assignments using an integrated tool and to consolidate in
THE FUNCTIONAL DIVISIONS In addition, the Internal Control Department ensures that an
assessment of the Internal Control system is carried out and
The Functional Divisions each define guidance and
also monitors compliance with regulatory Internal Control
procedures for their own areas, which they communicate to
obligations on an ongoing basis.
the different countries and entities.
THE INTERNAL AUDIT DEPARTMENT
THE ADMINISTRATION AND FINANCE DIVISION
In addition to its role of supervision of application of the
This Division’s main role is to assist and control the operational
Internal Control system, the Internal Audit Department carries
employees in their administrative, financial and legal activities.
out cross-functional analyses with regard to possible Internal
In order to do so, it sets the operating rules that apply to all
Control weaknesses based on findings noted during their
entities in these areas and is responsible for the definition and
assignments. These analyses make it possible to orient the
deployment of tools, procedures and best practices,
work of the Internal Control Committee and to identify the
particularly in the following areas: financial control,
priority areas for improvement and strengthening of
accounting and consolidation, financing and treasury, tax,
procedures.
legal affairs, financial communication, information systems,
and insurance. An Internal Control Committee has the task of THE OPERATIONS DIVISION
taking all measures to promote the proper understanding and
This Division comprises the Quality, EHS (Environment, Health
the proper application of the Group’s Internal Control rules
and Safety), Purchasing, Information Systems (production),
and also to monitor progress on important Internal Control
Human Resources (production), Supply Chain, Production
projects.
Organisation, Industrial Management and Real Estate
THE RISK MANAGEMENT AND COMPLIANCE DEPARTMENT Departments. It defines standards and methods applicable in
the areas of production quality, safety and the environment. It
The objective of this department, which was created in 2012, is
assists operational employees in the definition and
to identify, assess and prioritise risks with all those concerned,
implementation of their manufacturing and logistics policies.
and keep the risk mapping analysis up-to-date. Its aim is to
promote optimal use of resources to minimise and control the THE OTHER FUNCTIONAL DIVISIONS
impact of negative events and maximise the realisation of
The following Divisions are also involved in Internal Control:
opportunities.
The Internal Control Department leads the Internal Control s the Research and Innovation Division which is responsible in
Committee which consists of managers from the particular for cosmetovigilance and the quality of the
Administration and Finance Division and the Risk Management formulas used in product composition;
and Compliance, Economic Affairs, Internal Audit and
s the Communications, Sustainable Development and Public
Organisation and Information Systems Departments. The
Affairs Division which co-ordinates communications
Internal Control Department coordinates the implementation
initiatives, prepares crisis management principles and
of the projects and work decided by the Internal Control
ensures that they are applied;
Committee with the experts in each area of expertise. The
updating of the standards mentioned in this document and s the Security Division which has defined a security policy for
the revamping of the “Fundamentals of Internal Control” are people, travel, property, information and data
some examples of this work. confidentiality.
2.5.4.1. DEFINITION, SCOPE AND OBJECTIVES These accounting policies are regularly updated, taking into
2
account the changes in regulations and accounting
Internal Control of accounting and financial fields covers the
principles:
processes that contribute to accounting data: i.e. the process
of production of financial information, the process of accounts s accounting standards set out the principles required for
closings and actions of financial communication. harmonised accounting treatment of transactions. They
specify in particular the methods of recording balance
The Internal Control system with regard to accounting and
sheet items and of identification and valuation of
financial aspects aims to ensure :
off-balance sheet commitments. They are in accordance
s compliance with accounting regulations and the correct with IFRS, the accounting standards used to prepare the
application of the principles on which the financial consolidated financial statements. The Group’s Accounting
statements are based; Department monitors, on an ongoing basis, new
accounting standards currently under preparation, with a
s application of the guidelines set by the General view to alerting the General Management and anticipating
Management with regard to financial information; their effects on the Group’s financial statements;
the operating profit and loss account by destination, which is s inter-company transactions are correctly adjusted and
common to both management and general accounting, eliminated (these are reported on a monthly basis);
contributes to strengthening the control of accounts in the
financial statements through the use of a single reference s consolidation operations are checked;
framework. s accounting standards are correctly applied;
In addition, the Group’s organisation, which is based on s the consolidated published accounting and financial data
reporting from each subsidiary that is provided directly by the are harmonised and properly determined and general
countries to the parent company, without any intermediate accounting data and Management reporting figures used
aggregates for the vast majority of the subsidiaries, enables in the preparation of the financial information are
optimisation of the data transfer and the completeness of the consistent.
information, and in particular enables the checking of the
accuracy of the exchange conversion rates.
Financial communication
The Managing Director and the Finance Director of each Managers in charge of financial communication prepare a
subsidiary make a joint commitment with regard to the quality, precise timetable for publication of up-to-date information on
reliability and completeness of the accounting and financial the Group to the financial markets. This timetable complies
information they have prepared and sent to the Group’s with the requirements of market authorities. These managers
Economic Affairs Department, through a representation letter ensure, with the assistance of the Legal Department, that
that they jointly sign. communications are made within the required deadlines and
in accordance with laws and regulations, which they
The Audit Committee constantly monitor.
The role and tasks of the Audit Committee are described Their role is also to publish, precisely and accurately, the
above. These tasks are in compliance with the French information provided by the Economic Affairs Department and
ordinance of December 2008 on the conditions of application the Legal Department. All material information provided to the
of the 8th European Directive on statutory audits and are based financial community reflects with truth and transparency the
on the report by the working group on the Audit Committee situation and activity of the Group and is carried out in
published by the AMF on July 22nd, 2010. accordance with the principle of equal provision of
information to all shareholders.
2.5.4.3. PROCESSES USED TO PREPARE
ACCOUNTING AND FINANCIAL The Statutory Auditors
INFORMATION All accounting and financial information prepared by
consolidated subsidiaries is, at a minimum, subjected to a
Operational processes contributing to accounting limited review at the time of the half-year closing process and
figures to a full audit at year-end, by the external auditors. Twice a
All of the processes that contribute to accounting figures, year, the Managing Director and the Finance Director of each
particularly sales and purchases, and inventory, fixed asset, consolidated subsidiary make a joint commitment as to the
payroll and treasury management are covered by specific true and fair view, reliability and completeness of the financial
procedures, follow-up checks and rules for validation, information by jointly signing a representation letter.
authorisation and booking operations. Audit assignments in the countries in which the Group
operates are almost all entrusted to members of the networks
Closing of the accounts, consolidation of the two Statutory Auditors who, after having jointly
and Management reporting information performed the review of all the Group’s accounts and the
The accounts closing process is governed by precise manner in which they were prepared, are responsible for
instructions and is based on a detailed time schedule issuing an opinion on the Group’s consolidated financial
circulated to all the subsidiaries to make sure that deadlines statements. The Statutory Auditors issue an opinion as to
are met and the financial statements are prepared in a whether the consolidated financial statements and parent
consistent manner. For the preparation of the consolidated company financial statements give a true and fair view. They
financial statements, validation procedures apply to each are kept informed from the early stages of preparation of the
stage of the process of reporting and processing information. financial statements and present an overview of their work to
Their purpose is to verify in particular that: the Group’s accounting and finance managers and to the
Audit Committee at the time of the half-year and annual
closing.
This is a free translation into English of the Statutory Auditors’ Report issued in French and is provided solely for the convenience of
English speaking readers. This report should be read in conjunction with, and construed in accordance with, French law and
professional auditing standards applicable in France.
To the Shareholders,
In our capacity as Statutory Auditors of L’Oréal and in accordance with Article L. 225-235 of the French Commercial Code (Code de
commerce), we hereby report to you on the report prepared by the Chairman of your Company in accordance with
Article L. 225-37 of the French Commercial Code for the year ended December 31st, 2014.
It is the Chairman’s responsibility to prepare and submit to the Board of Directors for approval, a report describing the Internal
Control and risk management procedures implemented by the Company and providing the other information required by
Article L. 225-37 of the French Commercial Code in particular relating to corporate governance.
It is our responsibility:
s to report to you our observations on the information set out in the Chairman’s Report on Internal Control and risk management
procedures relating to the preparation and processing of financial and accounting information; and
s to attest that the report sets out the other information required by Article L. 225-37 of the French Commercial Code, it being
specified that it is not our responsibility to assess the fairness of this information.
Information concerning the Internal Control and risk management procedures relating to the
preparation and processing of financial and accounting information
The professional standards require that we perform procedures to assess the fairness of the information on Internal Control and risk
management procedures relating to the preparation and processing of financial and accounting information set out in the
Chairman’s Report. These procedures mainly consisted of:
s obtaining an understanding of the Internal Control and risk management procedures relating to the preparation and processing
of financial and accounting information on which the information presented in the Chairman’s Report is based and of the
existing documentation;
s obtaining an understanding of the work performed to support the information given in the report and of the existing
documentation;
s determining if any material weaknesses in the Internal Control procedures relating to the preparation and processing of the
financial and accounting information that we may have identified in the course of our work are properly described in the
Chairman’s Report.
On the basis of our work, we have no matters to report on the information given on Internal Control and risk management
procedures relating to the preparation and processing of financial and accounting information, set out in the Chairman of the
Board’s Report, prepared in accordance with Article L. 225-37 of the French Commercial Code.
Other information
We attest that the Chairman’s Report sets out the other information required by Article L. 225-37 of the French Commercial Code.
This is a free translation into English of the Statutory Auditors’ special report issued in French and is provided solely for the
convenience of English speaking readers. This report should be read in conjunction and construed in accordance with French law
and professional auditing standards applicable in France. It should be understood that the agreements reported on are only those
provided by the French Commercial Code and the report does not apply to those related party agreements described in IAS 24 or
other equivalent accounting standards.
To the Shareholders,
In our capacity as Statutory Auditors of your Company, we hereby present our report on regulated agreements and commitments
with third parties.
It is our responsibility to communicate to you, based on information provided to us, the principal terms and conditions of these
agreements and commitments brought to our attention or which we may have identified as part of our engagement, without
expressing an opinion on their usefulness or their merit or identifying such other agreements or commitments, if any. Under the
provisions of article R.225-31 of the French Commercial Code (Code de commerce), it is the responsibility of the shareholders to
determine whether the agreements and commitments are appropriate and should be approved.
Where applicable, it is our responsibility to communicate to you the information pursuant to article L.225-31 of the French
Commercial Code relating to agreements and commitments previously approved by the Annual General Meeting during the year.
We performed the procedures that we deemed necessary in accordance with professional standards applicable in France. These
procedures consisted in verifying that the information provided to us is consistent with the underlying documents.
AGREEMENTS AND COMMITMENTS SUBJECT TO THE APPROVAL OF THE ANNUAL GENERAL MEETING
Pursuant to article L.225-38 of the French Commercial Code, we hereby advise you that we have not been informed of any
agreements or commitments authorized during the year to be approved by the Annual General Meeting.
In the event of departure, and depending on the reasons, Mr Jean-Paul Agon would only be paid the dismissal indemnities, except
in the event of gross misconduct or gross negligence, or retirement indemnities in the event of voluntary retirement or retirement at
the Company’s request due pursuant to the employment contract that has been suspended. 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 and the company-level agreements applicable to all L’Oréal executives, are due in any event 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-competition clause and the related financial consideration.
Remuneration in respect of the corporate office will in no event be taken into consideration for calculation of the indemnities due
pursuant to the collective bargaining agreement and the company-level agreements applicable to all L’Oréal executives.
Mr Jean-Paul Agon will continue to benefit from the defined benefit pension scheme currently applicable to the Group’s senior
managers.
s Terms and conditions relating to the suspension of Mr Jean-Paul Agon’s employment contract:
• The reference remuneration to be used to calculate all the rights attached to the employment contract and in particular to
compute the pension under the defined benefit scheme will be based on the amount of remuneration under the employment
contract when it was suspended in 2006, namely fixed remuneration of €1,500,000 and variable remuneration of €1,250,000.
2
This reference remuneration is reviewed every year by applying the revaluation coefficient in respect of salaries and pension
contributions published by the French State pension fund. As of January 1, 2015, the fixed remuneration amounts to
€1,671,000 and the variable remuneration to €1,392,500.
• The length of service applied will take into consideration his entire career, including the years during which he was Chairman
and Chief Executive Officer.
s Mr Jean-Paul Agon will maintain the status of senior manager throughout the period of his corporate office, so that he may
continue to benefit from the additional social protection schemes and in particular the employee benefit and healthcare
schemes available to the Company’s employees.
Agreements with Nestlé, shareholder of more than 10% of L’Oréal and sharing common members of the Boards of Directors
s Buy-back agreement for the purchase by L’Oréal of 48.5 million of its own shares from Nestlé, representing 8% of its share capital
for a total amount of €6,037,280,000.
s Selling agreement for the disposal by L’Oréal to Nestlé of its 50% investment in the Galderma group subsidiaries for an amount of
€2,632,800,00.
This buy-back and this disposal have been completed on July 8th, 2014.
* This information forms an integral part of the Annual Financial report as provided in the Article L. 451-1-2 of the French Monetary and Financial Code.
L’Oréal Luxe and Active Cosmetics achieved very good growth and
outperformed their market significantly. The Professional Products
Division continued to improve. Meanwhile, in a slowing market, the
Consumer Products Division saw a temporary sag in its growth,
particularly in the United States.
2013/2014 progression
€ million 2012 2013 2014 Like-for-like Reported figures
BY OPERATIONAL DIVISION
Professional Products 3,002.6 2,973.8 3,032.4 2.6% 2.0%
Consumer Products 10,713.2 10,873.2 10,767.5 1.6% -1.0%
L’Oréal Luxe 5,568.1 5,865.2 6,197.9 7.1% 5.7%
Active Cosmetics 1,499.2 1,576.3 1,660.4 8.7% 5.3%
Cosmetics Total 20,783.1 21,288.5 21,658.2 3.8% 1.7%
BY GEOGRAPHICAL ZONE
Western Europe
North America
7,382.6
5,210.7
7,467.6
5,356.1
7,697.7
5,389.4
2.4%
1.1%
3.1%
0.6%
3
New Markets. of which: 8,189.8 8,464.7 8,571.1 6.9% 1.3%
s Asia. Pacific 4,287.1 4,382.2 4,563.6 5.3% 4.1%
s Latin America 1,816.9 1,886.2 1,853.7 10.0% -1.7%
s Eastern Europe (1) 1,622.4 1,691.3 1,585.4 6.0% -6.3%
s Africa, Middle-East (1) 463.4 505.1 568.4 13.5% 12.5%
Cosmetics Total 20,783.1 21,288.5 21,658.2 3.8% 1.7%
s The Body Shop 855.3 835.8 873. 8 1.6% 4.6%
GROUP TOTAL 21,638.4 22,124.2 22,532.0 3.7% 1.8%
(1) As of July 1st, 2013, Turkey and Israel, which were previously included in the Africa, Middle East zone, were transferred to the Eastern Europe zone. All figures for earlier
periods have been restated to allow for this change.
PROFESSIONAL PRODUCTS L’Oréal Paris is proving very dynamic in haircare with its
Extraordinary Oils range, and is increasing make-up sales
The Professional Products Division recorded sales growth of
with the launch of its new “Makeup Designer” platform and
+2.6% like-for-like and +2.0% based on reported figures in a
Miss Manga mascara. Ultra Doux by Garnier is continuing to
market that remains difficult. The Division is strengthening
expand thanks to its Honey Treasures range and the
its positions in Western Europe and continues to develop in
brand’s successful United Kingdom launch. In Southern
the New Markets.
Asia, Garnier is maintaining its facial skincare momentum
s Haircare, the number 1 contributor to sales growth, is with the success of Sakura White and Garnier Men.
continuing to expand, boosted by the success of Densifique Maybelline is rolling out its eyebrow make-up innovations
and Discipline at Kérastase, Absolut Repair Lipidium and worldwide, and is now growing again in the United States
Serioxyl at L’Oréal Professionnel, and Biolage and Oil with the launch of the Nudes Palette.
Wonders at Matrix. Hair colour – a category in which all the
s In a flat European market, the Division is increasing its sales
brands are growing – benefits from the dynamism of Majirel
and strengthening its number 1 position. In North America,
and Inoa at L’Oréal Professionnel, Color Graphics at Matrix
the Consumer Products Division gained market share in
and Chromatics at Redken. Styling has returned to a good
haircare and make-up. In the New Markets, the Division is
growth level, thanks to L’Oréal Professionnel and Redken
outperforming the overall market trend, and winning market
which have renewed their product line-ups.
share in Eastern Europe and the Africa, Middle East Zone.
s In geographic terms, the United States and Western Europe
have confirmed their return to growth. The Division is
L’ORÉAL LUXE
growing across all the New Markets excluding Japan. The
United States, Brazil, India and Russia are the largest Following accelerating sales in the final quarter, L’Oréal
contributors to growth. Luxe recorded growth of +7.1% like-for-like and +5.7%
based on reported figures. The Division is continuing to
clearly outperform the selective market. The make-up and
CONSUMER PRODUCTS women’s fragrance categories are particularly dynamic.
In a market that slowed in 2014, the Consumer Products
s Yves Saint Laurent is continuing to grow with a double-digit
Division posted +1.6% like-for-like and -1.0% based on
increase in 2014, thanks to the women’s fragrance Black
reported figures, with an improvement at the end of the
Opium, make-up and Asia. Giorgio Armani also had a very
year.
good year with its successful fragrance Sì and its make-up
s The Division’s three major global brands are progressing. products. Lancôme delivered a solid performance in
The two 2014 acquisitions, NYX and Magic, are growing fragrances with La vie est belle, the number 1 selling
strongly. fragrance in France, and number 2 in Europe. The brand is
currently revamping its point-of-sales identity, advertising
campaigns and ambassadors. The skincare cream
Visionnaire and Grandiôse mascara, winner of the Prix Urban Decay and Kiehl’s. In a market that improved in the
d’Excellence Marie Claire, are very successful. The second half, the Consumer Products Division increased its
alternative lifestyle brands Urban Decay, Kiehl’s, Clarisonic sales, in particular from the contribution of L’Oréal Paris. The
and Shu Uemura are also boosting the Division’s growth. recent acquisitions of the very fast-growing brands NYX and
Amongst the designer fragrance brands, Midnight Carol’s Daughter complement the Consumer Products
Romance by Ralph Lauren and Bonbon, the new women’s Division, and boost its product offering.
perfume from Viktor&Rolf, are proving to be clear winners.
New Markets
s In 2014, L’Oréal Luxe outperformed the market in all its main
Zones, particularly in Europe, China, the Middle East and s Asia, Pacific: L’Oréal recorded annual growth of +5.3%
the United States. E-commerce sales are growing very like-for-like and +4.1% based on reported figures. Excluding
strongly. Japan, like-for-like growth came out at +5.8%. The Group is
strengthening its positions further with very good
performances from Kiehl’s, Yves Saint Laurent, Giorgio
ACTIVE COSMETICS Armani, La Roche-Posay and Clarisonic. By country, India,
Indonesia, Hong Kong and Australia are all recording high
In 2014, the Division accelerated its growth, with sales
growth. Magic, acquired in China in the first half, is growing
advancing by +8.7% like-for-like and +5.3% based on
solidly in the beauty mask market.
reported figures, outperforming a healthy market.
Like-for-like growth rates were higher than in 2013 on every s Latin America: L’Oréal recorded +10.0% like-for-like and
continent. -1.7% based on reported figures. The Professional Products
Division, Active Cosmetics and L’Oréal Luxe recorded
s The Vichy brand is continuing to expand particularly in
double-digit growth, underpinned by their major brands
skincare, underpinned by the growth of its major franchises,
L’Oréal Professionnel, Lancôme, Giorgio Armani, La
particularly Liftactiv Supreme and Neovadiol in the
Roche-Posay and Vichy. Consumer Products Division growth
anti-ageing segment. With another year of double-digit
is being driven by L’Oréal Paris with its Elsève brand and
growth, La Roche-Posay is maintaining its growth in all
Maybelline, thanks in particular to the kiosks initiative in
regions and across its product range, with outstanding
Brazil.
performances from its two pillar ranges, Anthelios and
Effaclar. SkinCeuticals is confirming its success both in its s Eastern Europe: The Zone recorded +6.0% like-for-like and
original market, the United States, and in the new -6.3% based on reported figures, and is growing significantly
geographies where it is expanding. faster than the market, thanks to the good momentum of
L’Oréal Luxe and the Professional Products Division. The
s All the regions are contributing to the Division’s dynamism.
Consumer Products Division is winning total Zone market
The significant scores in France, the world’s largest
share with a very good performance in hair colour, driven
dermocosmetics market, Brazil, where the Division is
by the launch of Prodigy by L’Oréal Paris, and in deodorants
contributing to the development of the market, and China
thanks to Néo by Garnier. Active Cosmetics is
are particularly worth noting.
outperforming the market in Russia and Turkey.
3.1.3. Results
/ OPERATING PROFITABILITY AND CONSOLIDATED INCOME STATEMENT
Figures for 2012 and 2013 have been restated to reflect the impacts of IFRS 5 concerning discontinued operations along with the
impact of applying IFRS 11.
3
Advertising and promotion expenses -6,531.6 30.2% -6,621.7 29.9% -6,558.9 29.1%
Selling. general and administrative expenses -4,479.7 20.7% -4,614.4 20.9% -4,821.1 21.4%
OPERATING PROFIT 3,558.4 16.4% 3,760.4 17.0% 3,890.7 17.3%
Gross profit, at €16,031 million, came out at 71.1% of sales, Advertising and promotion expenses, as announced one year
compared with 71.2% in 2013, that is a decrease of 10 basis ago, came out as a lower percentage of sales compared with
points. Foreign exchange effects had a negative impact of 30 2013. At 29.1% of sales, that is a decrease of 80 basis points.
basis points: the other factors represented a positive impact of
20 basis points. Selling, general and administrative expenses, at 21.4% of
sales, have come out at a higher level, by 50 basis points
Research and Development expenses remained stable as a compared with 2013, as they did in the first half of 2014.
percentage of sales at 3.4%.
Overall, the operating profit, at €3,890 million, has grown by
3.5% and amounts to 17.3% of sales. At constant exchange
rates, operating profit growth would have been +5.5%.
The profitability of the Professional Products Division at 20.1% is L’Oréal Luxe grew by 50 basis points, at 20.5% in 2014. At
down by 40 basis points, due mainly to the dilutive effect of the Active Cosmetics, there was a further increase in profitability at
consolidation of Decléor and Carita. The profitability of the 22.7%. That is a 100 basis point improvement. The profitability
Consumer Products Division once again improved very of The Body Shop weakened in 2014, to 7.5%.
significantly at 20.3%, up by 40 basis points. The profitability of
Profitability in Western Europe improved by 40 basis points to reach 22.7%. In North America, profitability remains stable at 18.7%.
And in the New Markets, profitability again increased this year, by 40 basis points, to reach 19.6%.
Finance expenses amounted to €24 million. Net profit excluding non-recurring items amounted to
€3,125 million.
Sanofi dividends amounted to €331 million.
Net Earnings per Share, at €5.34, is up by 7.1%, compared to
Income tax excluding non-recurring items amounted to Net Earnings per Share for 2013 restated from discontinued
€1,069 million. This represents a tax rate of 25.5%, slightly higher operations.
than that of 2013 which came out at 25.1%.
Non-recurring items amounted to a charge net of tax of €357 Finally, after payment of the dividend, acquisitions, and the
million, due in part to the decision by the French Competition purchase of shares from Nestlé, the net debt came out, at
Authority. December 31st, 2014, at €671 million.
After the capital gain on the disposal of Galderma, €2.1 billion, With a shareholders’ equity amounting to €20 billion, the
net profit came out at €4,910 million , which represents a large balance sheet remains particularly solid, after the purchase of
increase of 66%. 8% of the capital from Nestlé for €6 billion.
CASH FLOW STATEMENT, BALANCE SHEET AND NET PROPOSED DIVIDEND AT THE ANNUAL GENERAL
FINANCIAL SITUATION MEETING OF APRIL 22ND, 2015
Gross cash flow amounted to €3,808 million. The Board of Directors has decided to propose that the
Shareholders’ Annual General Meeting of April 22nd, 2015
The working capital requirement in 2014 was reduced by should approve a dividend of €2.70 per share, an increase of
€55 million. 8% compared with the dividend paid in 2014. The dividend will
Investments, amounted to €1,008 million, representing 4.5% of be paid on May 7th, 2015 (ex-dividend date May 5th, 2015 at
sales, slightly less than in 2013, when it represented 4.6% of 0:00 a.m., Paris time).
sales.
27.4% Euro
21,638 22,124 22,532 23.3% US dollar
7.8% Chinese yuan
6.7% Pound sterling
4.1% Hong Kong dollar
3.4% Brazilian real
3
2.9% Canadian dollar
2.8% Russian rouble
1.7% Japanese yen
1.7% Mexican peso
(1) Breakdown of consolidated sales in the main currencies in 2014, i.e. 81.8% of consolidated sales.
(2) Non-recurring items include mainly capital gains and losses on long-term asset disposals, impairment of long-term assets, restructuring costs and
elements relating to identified operational incomes and expenses, non-recurring and significant regarding the consolidated performance. See note 11
of the Consolidated Financial Statement on pages 141 et seq.
49.7% Consumer Products 30.0% Skincare and Sun Protection 35.5% Western Europe
7.7% Active Cosmetics 21.9% Make-up 24.9% North America
28.6% L'Oréal Luxe 20.5% Haircare 39.6% New Markets
14.0% Professional Products 13.2% Hair Colourants Of which: 21.1% Asia, Pacific
9.8% Perfumes 8.6% Latin America
4.6% Other (1) 7.3% Eastern Europe
(1) "Other" includes hygiene products and sales made by American distributors with non-Groups brands. 2.6% Africa, Middle East
ASSETS LIABILITIES
32,063.0 32,063.0
30,878.9 30,878.9
Total assets and liabilities 29,234.1 29,234.1 Total assets and liabilities
Non-current assets 20,902.7 21,489.3 23,288.4 20,925.5 22,642.8 20,188.7 Shareholders’ equity
Including cash and cash equivalents 2,235.2 2,659.3 1,917.0 5,954.1 6,052.3 6,757.5 Current liabilities
2012 2013 2014 2012 2013 2014
(2) The balance sheet at 12.31.2012 has been restatedto allow for the change in accounting method relating to revised IAS 19.
74,978 78,611
70,394
63.86
12.31.2012
608,810,827
77.37
12.31.2013
605,901,887
Consolidated sales
2013/2014 progression
€ millions 2012 2013 2014 Like-for-like Reported figures
Cosmetics 20,783.1 21,288.5 21,658.2 3.8% 1.7%
The Body Shop 855.3 835.8 873. 8 1.6% 4.6%
GROUP TOTAL 21,638.4 22,124.2 22,532.0 3.7% 1.8%
Operating profit
Consolidated sales
2013/2014 progression
€ millions 2012 2013 2014 2014 Weight Like-for-like Reported figures
Professional Products 3,002.6 2,973.8 3,032.4 14.0% 2.6% 2.0%
Consumer Products 10,713.2 10,873.2 10,767.5 49.7% 1.6% -1.0%
L’Oréal Luxe 5,568.1 5,865.2 6,197.9 28.6% 7.1% 5.7%
Active Cosmetics 1,499.2 1,576.3 1,660.4 7.7% 8.7% 5.3%
TOTAL COSMETICS DIVISIONS 20,783.1 21,288.5 21,658.2 100% 3.8% 1.7%
Operating profit
2012 2013 2014
€ millions % CA 2012 € millions % CA 2013 € millions % CA 2014
Professional Products 615 20.5% 609 20.5% 609 20.1%
Consumer Products 2,051 19.1% 2,167 19.9% 2,186 20.3%
L’Oréal Luxe 1,077 19.3% 1,174 20.0% 1,269 20.5%
Consumer Products 315 21% 343 21.7% 376 22.7%
TOTAL COSMETICS DIVISION 4,058 19.5% 4,293 20.2% 4,440 20.5%
Non-allocated (1) -577 -2.8% -605 -2.8% -615 -2.8%
TOTAL DIVISIONS AFTER NON-ALLOCATED 3,481 16.7% 3,688 17.3% 3,825 17.7%
(1) Non-allocated” items consist of the expenses of Functional Divisions and fundamental research, stock option and free grant of shares costs, which are
not allocated to the Cosmetics Divisions. This item also includes non-core activities, such as insurance, reinsurance and banking.
Consolidated sales
2013/2014 progression
€ millions 2012 2013 2014 Like-for-like Reported figures
Western Europe 7,382.6 7,467.6 7,697.7 2.4% 3.1%
North America 5,210.7 5,356.1 5,389.4 1.1% 0.6%
New Markets, of which: 8,189.8 8,464.7 8,571.1 6.9% 1.3%
s Asia, Pacific 4,287.1 4,382.2 4,563.6 5.3% 4.1%
s Latin America 1,816.9, 1,886.2 1,853.7 10.0% -1.7%
s Eastern Europe (1) 1,622.4 1,691.3 1,585.4 6.0% -6.3,%
s Africa, Middle East (1) 463.4 505.1 568.4 13.5% 12.5%
TOTAL COSMETICS SALES 20,783.1 21,288.5 21,658.2 3.8% 1.7%
(1) As of July 1st, 2013, Turkey and Israel, which were previously included in the Africa, Middle East zone, were transferred to the Eastern Europe zone. All figures for earlier
periods have been restated to allow for this change.
Operating profit
2012 2013 2014
€ millions % CA 2012 € millions % CA 2013 € millions % CA 2014
Western Europe 1,580 21.4% 1,662 22.3% 1,746 22.7%
North America 960 18.4% 1,003 18.7% 1,010 18.7%
New Markets 1,518 18.5% 1,628 19.2% 1,684 19.6%
TOTAL GEOGRAPHIC ZONES 4,058 19.5% 4,293 20.2% 4,440 20.5%
Non-allocated (1) -577 -2.8% -605 -2.8% -615 -2.8%
TOTAL ZONES AFTER NON-ALLOCATED 3,481 16.7% 3,686 17.3% 3,825 17.7%
Consolidated sales
2013/2014 progression
€ millions 2012 2013 2014 Like-for-like Reported figures
Skincare 6,039 6,303 6,489 3.1% 3.0%
Make-up 4,468 4,616 4,751 5.6% 2.9%
Haircare 4,356 4,422 4,449 3.2% 0.6%
Hair colourants 2,943 2,931 2,860 0.9% -2.4%
Perfumes 2,010 2,029 2,123 6.7% 4.6%
Other (2) 968 987 986 5.2% -0.1%
TOTAL COSMETICS SALES 20,783 21,288 21,658 3.8% 1.7%
(1) “Non-allocated” items consist of the expenses of Functional Divisions and fundamental research, stock option and free grant of shares costs, which are
not allocated to the Cosmetics Divisions. This item also includes non-core activities, such as insurance, reinsurance and banking.
(2) “Other” includes hygiene products, sales made by American distributors with non-Group brands.
L’ORÉAL LUXE
Retail sales (1)
2013/2014 progression
€ millions 2012 2013 2014 2014 Weight Like-for-like Reported figures
Western Europe 548.1 544.8 562.0 38.1% 3.2% 4.9%
North America 184.8 168.6 179.1 12.1% 6.2% 3.4%
New Markets 737.6 685.5 734.3 49.8% 7.1% 6.5%
TOTAL 1,470.5 1,398.9 1,475.4 100% 5.5% 5.5%
Sales
2013/2014 Evolution
€ millions 2012 2013 2014 Like-for-like
Retail sales (1) 1,470.5 1,398.9 1,475.3 5.5%
Retail sales with a comparable store base(2) 1,316.2 1,306.6 1,319.8 1.0%
CONSOLIDATED SALES 855.3 835.8 873.8 1.6%
Number of stores
Au 12.31.2013 Au 12.31.2014 Variation en 2014
Company owned stores 1,114 1,120 +6
Franchisees 1,930 1,999 +69
TOTAL NUMBER OF STORES 3,044 3,119 +75
(1) Total sales to consumers through all channels, including franchisees and e-commerce.
(2) Total consumer sales made by stores and e-commerce websites that were continuously present between January 1st and December 31st, 2014 and the
same stores and websites present in 2012 and 2013, and for the same periods for 2012 and 2013, including franchisees.
3
Operating profit 3,558.4 3,760.4 3,890.7 17.3%
Operational profit 3,437.3 3,631.8 3,583.5
Finance costs excluding dividends received +1.7 -31.4 -24.1
Sanofi dividends 313.4 327.5 331.0
Income tax -985.4 -1,043.6 -1,111.0
Non-controlling interests -2.7 -3.2 -1.6
Net profit attributable to owners of the company 2,867.7 2,958.2 4,910.2 21.8%
Non-recurring items (expense +/income -) -101.81 -154.1 -348.7
Net profit excluding non-recurring items after non-controlling interests * 2,861.5 3,032.4 3,125.3 13.9%
Diluted earnings per share attributable to owners of the company (euros) 4.74 4.87 8.39
Diluted earnings per share attributable to owners of the company excluding
non-recurring items (euros) 4.73 4.99 5.34
* Net profit excluding non recurring items excludes asset depreciations, restructuring costs, tax effects and minority interests of continuing activities.
Sources Applications
3
United States. towards its ambition of winning one billion new consumers.
s On November 27th, L’Oréal and Nestlé announced their In an economic environment that is uncertain, but more
project to end the operations of their joint venture Innéov in favourable on the monetary front, all its teams are focused to
the first quarter 2015. ensure L’Oréal outperforms the market in 2015, and to deliver
sales and profit growth.
s On December 18th, L’Oréal stated that it had been informed
of the French Competition Authority’s decision to rule
against manufacturers of household and hygiene products
concerning events which took place in the early 2000s.
L’Oréal has appealed this decision.
* This information forms an integral part of the Annual Financial Report as provided for in the article L. 451-1-2 of the French Monetary and Financial Code.
REGISTRATION DOCUMENT / L’ORÉAL 2014 117
4 2014 CONSOLIDATED FINANCIAL STATEMENTS*
The L’Oréal Group wholly owns the vast majority of its subsidiaries. It
also holds 50% of the share capital of Galderma and Innéov
developed in a joint venture with Nestlé.
The financial statements set out in this chapter present the results of
the L’Oréal Group as a whole, including all subsidiaries. The Statutory
Auditors’ Report on the consolidated financial statements has been
included at the end of this chapter.
Assets
€ millions Notes 12.31.2014 12.31.2013 (1) 12.31.2012 (1)
Non-current assets 23,288.4 21,489.3 20,902.7
Goodwill 12 7,525.5 6,206.0 6,270.1
Other intangible assets 13 2,714.6 2,105.4 2,164.0
Property, plant and equipment 15 3,141.1 2,891.2 2,832.4
Non-current financial assets 16 9,069.0 9,204.0 8,526.2
Investments in associates 17 - 435.2 414.8
Deferred tax assets 10 838.2 647.5 695.2
Current assets 8,774.6 9,389.6 8,331.4
Inventories 18 2,262.9 2,085.2 1,971.1
Trade accounts receivable 19 3,297.8 3,022.8 3,051.7
Other current assets 20 1,199.3 1,500.3 969.4
4
Current tax assets 97.6 122.1 104.0
Cash and cash equivalents 21 1,917.0 2,659.3 2,235.2
TOTAL 32,063.0 30,878.9 29,234.1
(1) Includes the impact of applying IFRS 11 (see note 1).
Equity
Retained Other Cumulative attributable Non-
Common Additional earnings compre- translation to owners control-
shares Share paid-in and net hensive Treasury adjust- of the ling Total
€ millions outstanding capital capital profit income stock ments company interests equity
At 12.31.2012 598,356,662 121.8 1,679.0 16,547.4 3,586.4 -904.5 -109.4 20,920.7 4.8 20,925.5
Consolidated net profit for the period 2,958.2 2,958.2 3.2 2,961.4
Financial assets available-for-sale 649.5 649.5 649.5
Cash flow hedges 9.1 9.1 -0.1 9.0
Cumulative translation adjustments -457.0 -457.0 -457.0
Other comprehensive income that may
be reclassified to profit and loss 658.6 -457.0 201.6 -0.1 201.5
Actuarial gains and losses 125.1 125.1 125.1
Other comprehensive income that may
not be reclassified to profit and loss 125.1 125.1 125.1
Consolidated comprehensive income 2,958.2 783.7 -457.0 3,284.9 3.0 3,288.0
Capital increase 6,199,701 1.2 422.2 423.4 423.4
Cancellation of Treasury stock -1.8 -996.7 998.5 - -
Dividends paid (not paid on Treasury
stock) -1,380.6 -1,380.6 -2.5 -1,383.1
Share-based payment 97.2 97.2 97.2
Net changes in Treasury stock -4,762,333 1.4 -662.1 -660.7 -660.7
Purchase commitments for minority
interests -48.3 -48.3 -0.9 -49.2
Changes in scope of consolidation - 1.4 1.4
Other movements 0.4 0.4 0.4
At 12.31.2013 599,794,030 121.2 2,101.2 17,179.0 4,370.1 -568.1 -566.4 22,637.0 5.8 22,642.8
Consolidated net profit for the period 4,910.2 4,910.2 -1.6 4,908.6
Financial assets available-for-sale -165.5 -165.5 -165.5
Cash flow hedges -17.0 -17.0 -0.1 -17.1
Cumulative translation adjustments 584.2 584.2 -0.2 584.0
Other comprehensive income that may
be reclassified to profit and loss -182.5 584.2 401.7 -0.3 401.4
Actuarial gains and losses -447.6 -447.6 -447.6
Other comprehensive income that may
not be reclassified to profit and loss -447.6 -447.6 -447.6
Consolidated comprehensive income 4,910.2 -630.1 584.2 4,864.3 -1.9 4,862.4
Capital increase 3,828,502 0.8 215.6 -0.1 216.3 2.3 218.6
Cancellation of Treasury stock -9.7 -6,035.9 6,045.6 - -
Dividends paid (not paid on Treasury
stock) -1,507.3 -1,507.3 -2.8 -1,510.1
Share-based payment 113.5 113.5 113.5
Net changes in Treasury stock -49,380,654 0.2 -6,160.5 -6,160.3 -6,160.3
Purchase commitments for minority
interests 21.0 21.0 -2.3 18.7
Changes in scope of consolidation - 2.5 2.5
Other movements -5.3 5.9 0.6 0.6
AT 12.31.2014 554,241,878 112.3 2,316.8 14,675.3 3,745.9 -683.0 17.8 20,185.1 3.6 20,188.7
Income taxes paid amount to €1,060.3 million, €970.6 million Dividends received excluding dividends received from
and €1,067.4 million respectively for the years 2014, 2013 and discontinued operations amount to €331.0 million,
2012. €327.5 million and €313.4 million respectively for the years
2014, 2013 and 2012, and are included within gross cash flow.
Interests paid amount to €31.2 million, €24.9 million and
€27.0 million respectively for the years 2014, 2013 and 2012.
The consolidated financial statements of L’Oréal and its These estimates and assumptions mainly concern the
subsidiaries (“the Group”) published for 2014, have been measurement of goodwill and other intangible assets,
prepared in accordance with International Financial Reporting provisions, pension obligations, deferred taxes and
Standards (IFRS), as adopted in the European Union as of share-based payment. Estimates used by the Group in relation
December 31st, 2014. to these different areas are made on the basis of information
available at the date the accounts are prepared and
On February 12th, 2015, the Board of Directors closed the described in detail in each specific associated note.
consolidated financial statements at December 31st, 2014. The
financial statements will not become final until they have been
approved by the Annual General Meeting of shareholders to
be held on April 22nd, 2015. 1.2. Scope and methods
The Group did not early adopt any standards or interpretations
of consolidation
not mandatorily applicable in 2014. All companies included in the scope of consolidation have a
fiscal year ending December 31st or close their accounts on
The Group is concerned by interpretation IFRIC 21, “Levies”,
that date.
which is mandatorily applicable as of January 1st, 2015. This
interpretation provides guidance on when to recognise a All companies directly or indirectly controlled by the parent
liability for a levy imposed by a government. IFRIC 21 does not company L’Oréal have been fully consolidated.
have a material impact on the consolidated financial
statements. Group companies that are jointly controlled by the parent
company and a limited number of other shareholders under a
contractual agreement have been accounted for by the
Change in accounting policies applicable as from equity method in accordance with IFRS 11.
January 1st, 2014: IFRS 10 “Consolidated
Financial Statements”, IFRS 11 “Joint Associates over which the Group has a significant influence
Arrangements” and IFRS 12 “Disclosure of have been accounted for by the equity method.
Interests in Other Entities”
These standards redefine the notion of control over another
entity and also require jointly controlled entities to be 1.3. Foreign currency translation
accounted for using the equity method, since proportionate
consolidation is no longer permitted.
1.3.1. ACCOUNTING FOR FOREIGN CURRENCY
Consequently Innéov and Galderma, which were TRANSACTIONS IN CONSOLIDATED
proportionately consolidated up to December 31st, 2013, have COMPANIES
been equity-accounted.
Foreign currency transactions are translated at the exchange
The income statements for 2013 and 2012 have been restated rate effective at the transaction date.
accordingly. The balance sheets at December 30th, 2013 and
December 31st, 2012 have also been restated. Assets and liabilities denominated in foreign currencies have
been translated using exchange rates effective at the closing
Since the Boards of Directors of Nestlé and L’Oréal date. Unrealised exchange gains and losses impact the
unanimously approved the sale of L’Oréal’s interest in income statement.
Galderma to Nestlé on February 10th, 2014, Galderma has
been classified as held for sale for accounting purposes as Forward foreign exchange contracts and options are put in
from January 1st, 2014 in accordance with IFRS 5 (note 3). place in order to hedge items recorded in the balance sheet
(fair value hedges) and cash flows on highly probable future
commercial transactions (cash flow hedges).
1.1. Use of estimates
All foreign exchange hedging instruments are recorded on the
The preparation of the consolidated financial statements in
balance sheet at their market value, including those which
accordance with international accounting standards requires
relate to purchases and sales in the next accounting period.
that the Group make a certain number of estimates and
Hence changes in the fair value of these hedging instruments
assumptions that may affect the value of the Group’s assets,
is recorded as follows:
liabilities, equity and net profit (loss).
s changes in the market value linked to variations in the time
value of forwards used as hedges are recognised in equity
and the amount accumulated in equity impacts the or consumers resulting in a cash outflow, such as commercial
income statement at the date on which the hedged cooperation, coupons, discounts and loyalty programmes.
transactions are completed;
Sales incentives, cash discounts, provisions for returns and
s changes in the market value linked to variations in the time incentives granted to customers are recorded simultaneously
value of options are recognised in the income statement; to the recognition of the sales if they can be estimated in a
reasonably reliable manner, based mainly on statistics
s changes in the market value linked to variations in the spot compiled from past experience and contractual conditions.
rate between the inception of the hedge and the closing
date are charged to equity, and the amount accumulated
in equity impacts income statements at the date on which
the transactions hedged are completed. 1.5. Cost of sales
Any remaining hedge ineffectiveness is recognised directly in The cost of goods sold consists mainly of the industrial
the income statement. production cost of products sold, the cost of distributing
products to customers including freight and delivery costs,
In application of hedge accounting, unrealised exchange either directly or indirectly through depots, inventory
gains and losses relating to unsold inventories are deferred in impairment costs, and royalties paid to third parties.
the inventories item in the balance sheet. Similarly, if a
currency hedge has been taken out in respect of fixed assets
purchased with foreign currency, these assets are valued in
1.6. Research and development
the balance sheet on the basis of the hedging rate.
The assets and liabilities of foreign subsidiaries are translated s the project is clearly defined and the related costs are
at closing exchange rates. Income statement items are separately identified and reliably measured;
translated at average exchange rates for the year.
s the technical feasibility of the project has been
The resulting translation difference attributable to the Group is demonstrated;
entered directly under equity under the item Cumulative
s the intention and ability to complete the project and to use
translation adjustments, while the translation difference
or sell the products resulting from the project have been
attributable to non-controlling interests is recognised under the
demonstrated;
Non-controlling interests item. The translation difference does
not impact the income statement other than at the time the s the resources necessary to complete the project and to use
Company is sold. or sell it are available;
Goodwill is not amortised. It is tested for impairment at least expenses in the income statement and no longer treated
once a year during the fourth quarter or whenever an adverse as an adjustment to goodwill;
event occurs. Adverse events may result among other things
from an increase in market interest rates or from a decrease in s any previous interest held in the acquiree prior to the date
actual sales or operational profit compared to forecasts. control was obtained is now remeasured at its
acquisition-date fair value, with the corresponding gain or
Impairment tests consist of comparing the carrying amount of loss on remeasurement taken to the income;
assets including goodwill with the recoverable amount of each
Cash Generating Unit. A Cash Generating Unit corresponds to s purchase commitments for minority interests are recognised
one or more worldwide brands. A Cash Generating Unit can in financial debt at the acquisition-date fair value.
contain several brands depending on organisational criteria Subsequent changes in fair value of the commitment are
and particularly when distribution circuits and recognised by adjusting equity.
commercial/management structures are pooled. Recoverable
values are determined on the basis of discounted operating
1.15.2. OTHER INTANGIBLE ASSETS
cash flow forecasts covering a period of 10 years (the period
considered necessary for the strategic positioning of an Intangible assets are recorded on the balance sheet at cost.
acquisition) and a terminal value. The cash flows are Intangible assets identified following an acquisition as well as
determined in the currencies of the countries in question and internally generated intangible assets are also included in this
are translated, in the same way as the net carrying amounts to item.
which they are compared, at the estimated exchange rate for
the following year. The discount rate used for these
calculations is based on the weighted average cost of capital
(WACC), which amounts to 7.9% in 2014, 2013 and 2012 for
A) INTANGIBLE ASSETS ACQUIRED THROUGH BUSINESS
COMBINATIONS 4
amounts in euro, adjusted where appropriate by a country risk They mainly consist of trademarks, customer relationships and
premium according to the geographic zones concerned. The formulas and patents.
discount rates are post-tax rates applied to post-tax cash flows,
and result in recoverable amounts identical to those obtained With regard to trademarks, the use of the discounted cash flow
by applying pre-tax rates to pre-tax cash flows. The method is preferred to enable the value in use to be monitored
assumptions adopted in terms of sales growth and terminal more easily following the acquisition. Two approaches have
values are reasonable and consistent with the available been adopted to date:
market data (generally around 3% for terminal values except s premium-based approach: this method involves estimating
in specific cases). the portion of future cash flows that could be generated by
The use of discounted cash flow forecasts is preferred in order the trademark, compared with the future cash flows that
to determine recoverable amounts, unless details of similar the activity could generate without the trademark;
recent transactions are readily available. s royalty-based approach: this involves estimating the value
Impairment charged against goodwill cannot be reversed. of the trademark by reference to the levels of royalties
demanded for the use of similar trademarks, based on
For business combinations carried out after January 1st, 2010, sales forecasts drawn up by the Group.
the main changes with regard to previously applicable
accounting principles are set out below: These approaches are based on a qualitative analysis of the
trademark in order to ensure that the assumptions selected
s for each acquisition, the Group chooses whether to are relevant. The discount rate used is based on the weighted
recognise the full amount of goodwill regardless of the average cost of capital (WACC) for the target acquired.
ownership interest acquired, or an amount of goodwill Terminal growth rates are consistent with available market
corresponding to its interest in the acquired company data (generally around 3%, except in specific cases).
(previously the only method allowed);
A trademark may have a finite or an indefinite useful life span.
s deferred tax assets recognised after the initial accounting is
complete are included in profit or loss, and in contrast to Local trademarks which are to be gradually replaced by an
previous practices, the amount of goodwill that would have international trademark already existing within the Group have
been recorded had the deferred tax asset been recognised a finite useful life span.
as an identifiable asset at the acquisition date is not They are amortised over their useful lives as estimated at the
deducted; date of acquisition.
s costs incurred in respect of a business combination are International trademarks are trademarks which have an
now expensed and no longer included in the cost of the indefinite life span. They are tested for impairment at least
acquisition; once a year during the fourth quarter, and whenever an
s the cost of the acquisition, which includes contingent adverse event occurs. Adverse events may result among other
consideration, is recognised and measured at its things from an increase in market interest rates or from a
acquisition-date fair value. Subsequent changes in fair decrease in actual sales or operational profit compared to
value, affecting in particular the contingent consideration forecasts.
recorded in liabilities, are taken to Other income and
The impairment test consists of calculating the recoverable Property, plant and equipment are depreciated using the
amount of the trademark based on the model adopted when straight-line method, over the following useful lives:
the acquisition took place.
Buildings 10-40 years
Customer relationships refer to relations developed with Industrial machinery and equipment 5-15 years
customers either through contractual arrangements or by
Point-of-sales advertising: stands and displays 3-5 years
non-contractual means through constant revenue streams
Other 3-10 years
resulting from the target’s competitive position or reputation in
its market.
Depreciation and impairment losses are recorded in the
The useful life of a customer relationship is limited and varies
income statement according to the use of the asset.
depending on the estimated attrition rate of existing customers
at the time of the acquisition. In view of their nature, property, plant and equipment are
considered to have a value of zero at the end of the useful
The Group may decide to identify and value patents and
lives indicated above.
formulas that it intends to develop.
The development costs of software for internal use are The fair value of listed securities is determined on the basis of
capitalised for the programming, coding and testing phases. the share price at the closing date. If the fair value of unlisted
The costs of substantial updates and upgrades resulting in securities cannot be reliably determined, these securities are
additional functions are also capitalised. valued at cost.
Capitalised development costs are amortised from the date If the unrealised loss accounted for through equity is
on which the software is made available in the entity representative of significant or prolonged impairment, this loss
concerned over its probable useful life, which in most cases is is recorded in the income statement.
between 5 and 8 years.
Long-term loans and receivables are considered to be assets
generated by the business. As such, they are valued at
amortised cost. If there is an indication of a loss in value, a
1.16. Property, plant and equipment provision for impairment is recorded.
4
set up. In some Group companies there are also measures
approximation of their fair value. providing for the payment of certain healthcare costs for
retired employees.
1.21. Treasury stock These obligations are partially funded by an external fund,
except those relating to healthcare costs for retired
Treasury stock is recorded at acquisition cost and deducted employees;
from equity. Capital gains/losses on disposal of Treasury stock
s for foreign subsidiaries with employee pension schemes or
net of tax are charged directly to equity and do not contribute
other specific obligations relating to defined benefit plans,
to profit for the financial year.
the excess of the projected benefit obligation over the
scheme’s assets is recognised by setting up a provision for
charges on the basis of the actuarial value of employees’
1.22. Share-based payment: Share vested rights.
subscription or purchase The charges recorded in the income statement during the
options – Free shares year include:
In accordance with the requirements of IFRS 2 “Share-based s service cost, i.e. additional rights vested by employees
payment”, the value of options or free shares granted as during the accounting period;
calculated at the grant date is expensed in the income
statement over the vesting period, which is generally 5 years s the impact of any change to existing schemes on previous
for purchase options and 4 years for free shares. years or of any new schemes;
The fair value of stock options is determined using the Black & s interest cost, i.e. change in the value of the discounted
Scholes model. This model takes into account the rights over the past year;
characteristics of the plan such as the exercise price and
s income on external funds calculated on the basis of the
exercise period, and market data at the grant date such as
discount rate applied to the benefit obligation.
the risk-free rate, share price, volatility, expected dividends and
behavioural assumptions regarding beneficiaries. The latter two items represent the interest component of the
pension expense. The interest component is shown within
The fair value of free shares corresponds to the value of the
“Finance Result” on the “Other financial income and
share at the grant date, less dividends expected to be paid
expenses” line.
during the vesting period. The cost of the additional 2-year
holding period applicable to French residents is determined To determine the discounted value of the obligation for each
based on the interest rate granted to the employee, scheme, the Group applies an actuarial valuation method
considered equivalent to the rate which would be granted by based on the final salary (projected unit credit method).
a bank to a private individual customer with an average The obligations and the fair value of plan assets are assessed
financial profile. each year using length-of-service, life expectancy, staff
turnover by category and economic assumptions (such as
The impact of IFRS 2 on profit for the period is booked on the
inflation rate and discount rate).
Selling, general and administrative expenses line of the
income statement at Group level, and is not allocated to the
Divisions or geographic zones.
Actuarial gains and losses arising on post-employment defined closing date, allowing for the spread corresponding to the
benefit obligations are recognised in equity. Group’s risk class to be taken into account.
Actuarial gains and losses in relation to other benefits such as The carrying amount of floating-rate debt is a reasonable
jubilee awards and long-serve bonuses are immediately approximation of its fair value.
charged to the income statement.
Medium- and long-term borrowings and debt are recorded
The liability corresponding to the Company’s net defined under Non-current liabilities. Short-term borrowings and debt
benefit obligation regarding its employees is recorded in the and the current portion of medium- and long-term borrowings
balance sheet on the Provisions for employee retirement and debt are presented under Current liabilities.
obligation and related benefits line.
This acquisition has been fully consolidated since May 1st, The allocation of the purchase price to the identifiable
2014. intangible assets of these five acquisitions had not been
finalised at December 31st, 2014. Regarding Coloright, the full
On August 15th, 2013, L’Oréal and Magic Holdings International amount of the difference between the purchase price and the
4
Limited have announced L’Oréal’s proposal to acquire all of net assets acquired is temporarily shown in Goodwill.
the shares of Magic Holdings International Limited, a company
listed in the Hong Kong Stock Exchange. The proposed price is These acquisitions represent around €366.2 million in full-year
HK $6.30 per share. net sales and €29.9 million in full-year operating profit.
A specialist in cosmetic facial masks, Magic’s turnover in 2013 s the acquisition of 48,500,000 L’Oréal shares (8% of its share
was approximately €166 million. Facial masks are one of capital) owned by Nestlé; and
China’s beauty market’s fastest growing areas with very
promising development prospects. Magic’s MG brand is one s the disposal of its 50% ownership in Galderma to Nestlé
of China’s leading brands in this category. (note 3).
This acquisition was finalised on April 8th, 2014, following the The L’Oréal shares acquired have been immediately
approval of the Shareholders’ Meeting of Magic Holdings cancelled.
International Limited.
The sale of Galderma led to a pre-tax capital gain of
This acquisition has been fully consolidated since April 1st, €2.2 billion and a post-tax capital gain of €2.1 billion.
2014.
On December 13th, 2013, following the approval of the Brazilian This business had net sales of €17 million in 2011, two thirds of
Anti-Trust Authority CADE, The Body Shop finalised the which were made in France.
acquisition of 51% of Emporio Body Store in Brazil with the
option of increasing its shareholding to 80% by 2019. The sale of the home care business resulted in the
derecognition of IBA’s entire assets and liabilities, with no
Founded in 1997 in Porto Alegre by Tobias Chanan, Emporio impact on the Group’s consolidated net profit.
Body Store offers a complete range of beauty products sold
through a franchise network. On October 21st, 2012, L’Oréal USA announced that it had
signed a contract to acquire the professional distribution
Emporio Body Store achieved in 2012 a consolidated turnover business of the New Jersey-based company Emiliani
of 20 million Reals (approximately €7 million). Since 2011, the Enterprises.
business has grown strongly and increased from 36 points of
sale in 2010 to 84 in 2012, to reach an estimated 130 points of Well-established in the New York area, New Jersey and
sale end of 2013. Connecticut, Emiliani Enterprises supplies hair salons through a
network of representatives and sales outlets open only to
This acquisition has been fully consolidated since professionals, and in 2011 had net sales of approximately
December 31st, 2013. $73 million. This acquisition was finalised on December 18th,
2012 and was fully consolidated as from that date.
The cost of these new acquisitions (excluding Galderma
operations) amounts to €123.8 million. The total amount of On November 26th, 2012, L’Oréal signed an agreement to
goodwill and other intangible assets resulting from the acquire Urban Decay, America’s expert make-up brand. This
acquisitions was estimated at €84.7 million and €32.7 million, brand fully complements L’Oréal Luxe’s portfolio of brands and
respectively. strengthens the Group’s position in two very dynamic
distribution channels in the USA: assisted self-service and
These acquisitions (excluding Galderma operations) represent e-commerce.
around €60 million in full-year net sales and €8 million in
full-year operating profit. Urban Decay had net sales of $130 million in the last fiscal year
ended June 30th, 2012.
Nestlé and L’Oréal announced that their respective Boards of Galderma (a 50/50 joint venture between L’Oréal and
Directors, in meetings held on February 10th, 2014, have Nestlé) for an enterprise value of €3.1 billion (€2.6 billion of
approved by unanimous decision of their voting members a equity value), paid by Nestlé in L’Oréal shares (21.2 million
strategic transaction for both companies under which L’Oréal shares). This transaction is expected to result in a pre-tax
will buy 48.5 million of its own shares (8% of its share capital) capital gain of around €2.2 billion for accounting purposes;
from Nestlé. This buyback will be financed:
s for the remainder, corresponding to 27.3 million L’Oréal
s partially through the disposal by L’Oréal to Nestlé of its 50% shares held by Nestlé, in cash for an amount of €3.4 billion.
stake in Swiss dermatology pharmaceuticals company
The price per L’Oréal share retained for this transaction is the This operation was completed on July 8th, 2014 (note 2.1).
average of its closing prices between Monday November 11th,
2013 and Monday February 10th, 2014: €124.48. For simplicity, Galderma has been classified within Assets held
for sale for accounting purposes since January 1st, 2014.
All the shares bought back by L’Oréal have been cancelled.
Consequently, Galderma is shown within Discontinued
The transaction was subject to customary conditions, operations in the consolidated income statements and
including the prior consultation of Galderma’s and L’Oréal’s consolidated statements of cash flows for all periods
works councils. Clearance of relevant antitrust authorities has presented. Galderma is shown in the balance sheet within
been obtained. Investments in associates at December 31st, 2013 and
December 31st, 2012.
4
(1) Includes in 2014, €41.7 million of Galderma dividends.
Data for 2013 and 2012 has been adjusted to reflect these changes.
Investments in
property, plant
and equipment Depreciation,
€ millions Operational and intangible amortisation and
2014 Sales Operating profit assets (1) assets provisions
Professional Products 3,032.4 608.8 3,089.5 75.4 120.1
Consumer Products 10,767.5 2,186.2 8,217.4 459.7 450.4
L’Oréal Luxe 6,197.9 1,269.2 4,870.3 246.8 223.8
Active Cosmetics 1,660.4 376.4 914.8 39.1 41.8
COSMETICS DIVISIONS TOTAL 21,658.2 4,440.6 17,092.0 821.0 836.1
Non-allocated -615.2 740.6 152.8 114.2
Cosmetics Branch 21,658.2 3,825.4 17,832.6 973.8 950.3
The Body Shop Branch 873.8 65.3 1,268.6 33.5 46.7
GROUP 22,532.0 3,890.7 19,101.2 1,007.3 997.0
(1) Operational assets mainly include goodwill, intangible assets and property, plant and equipment, trade accounts receivable and inventories.
Investments in
property, plant
and equipment Depreciation,
€ millions Operational and intangible amortisation and
2013 Sales Operating profit assets (1) assets provisions
Professional Products 2,973.8 609.5 3,013.9 73.7 126.7
Consumer Products 10,873.2 2,166.7 6,450.0 531.6 494.3
L’Oréal Luxe 5,865.2 1,174.2 4,382.5 222.8 239.2
Active Cosmetics 1,576.3 342.6 828.6 34.0 45.9
COSMETICS DIVISIONS TOTAL 21,288.5 4,293.0 14,675.0 862.1 906.1
Non-allocated -604.5 600.4 128.3 115.8
Cosmetics Branch 21,288.5 3,688.5 15,275.4 990.4 1,021.9
The Body Shop Branch 835.8 71.9 1,196.7 40.0 39.9
GROUP 22,124.2 3,760.4 16,472.1 1,030.4 1,061.8
(1) Operational assets mainly include goodwill, intangible assets and property, plant and equipment, trade accounts receivable and inventories.
Investments in
property, plant
and equipment Depreciation,
€ millions Operational and intangible amortisation and
2012 Sales Operating profit assets (1) assets provisions
Professional Products 3,002.6 615.2 2,707.4 67.2 103.9
Consumer Products 10,713.2 2,050.8 6,564.8 483.1 402.0
L’Oréal Luxe 5,568.1 1,077.0 4,592.2 199.9 197.2
Active Cosmetics 1,499.2 315.0 846.1 29.7 41.2
COSMETICS DIVISIONS TOTAL 20,783.1 4,058.1 14,710.5 779.9 744.3
Non-allocated -577.2 556.5 122.4 117.6
Cosmetics Branch 20,783.1 3,480.9 15,267.0 902.3 861.9
The Body Shop Branch 855.3 77.5 1,169.8 34.8 40.2
GROUP 21,638.4 3,558.4 16,436.8 937.1 902.1
(1) Operational assets mainly include goodwill, intangible assets and property, plant and equipment, trade accounts receivable and inventories.
Operational assets can be reconciled to the 2014, 2013 and 2012 balance sheets as follows:
Published
Excluding
exchange
2013 2012
4
€ millions % of total data effect € millions % of total € millions % of total
Western Europe 7,697.7 35.5% 3.1% 2.5% 7,467.6 35.1% 7,382.6 35.5%
of which France 2,579.5 11.9% 1.3% 1.3% 2,546.8 12.0% 2,468.3 11.9%
North America 5,389.4 24.9% 0.6% 1.4% 5,356.1 25.2% 5,210.7 25.1%
New Markets 8,571.1 39.6% 1.3% 7.7% 8,464.7 39.8% 8,189.8 39.4%
Asia, Pacific 4,563.6 21.1% 4.1% 6.4% 4,382.2 20.6% 4,287.1 20.6%
Latin America 1,853.7 8.6% -1.7% 10.1% 1,886.2 8.9% 1,816.9 8.7%
Eastern Europe 1,585.4 7.3% -6.3% 5.8% 1,691.3 7.9% 1,622.4 7.8%
Africa, Middle East 568.4 2.6% 12.5% 15.3% 505.1 2.4% 463.4 2.2%
COSMETICS BRANCH 21,658.2 100.0% 1.7% 4.2% 21,288.4 100.0% 20,783.1 100.0%
Personnel costs include the pension expense (excluding the interest component), the cost of any share-based payments (stock
options and free shares), and payroll taxes. The exceptional “solidarity” tax on high salaries amounting to €17.4 million is shown in
“Other operational income and expenses” (see note 8) and is not included in personnel costs.
The number of executives who were members of the Management Committee was 16 at December 31st, 2014 compared with 15 at
December 31st, 2013 and at December 31st, 2012.
Depreciation and amortisation of property, plant and equipment and intangible assets included in operating expenses amount to
€871.2 million, €838.3 million and €780.8 million, respectively, for 2014, 2013 and 2012.
Foreign currency transactions are translated at the spot rate at s changes in market value linked to variations in the spot rate
the transaction date. between the inception of the hedge and the date on which
the hedged transactions are completed;
Assets and liabilities denominated in foreign currencies have
been translated using the exchange rates effective at the s residual ineffectiveness linked to excess hedges and
closing date. Foreign exchange gains and losses also include recognised directly in the income statement under other
the following items relating to derivative instruments: foreign exchange gains and losses for a positive €0.4 million
in 2014, for a positive €0.5 million in 2013 and for a negative
4
s changes in market value linked to variations in the time €0.5 million in 2012.
value;
These amounts are allocated to the appropriate operating expense items as follows:
4
Profit from continuing operations before tax and associates 3,890.4 3,928.0 3,752.3
Theoretical tax rate 29.83% 30.35% 29.98%
Expected tax charge 1,160.5 1,192.0 1,124.8
Impact of permanent differences (1) 106.5 41.6 5.3
Impact of tax rate differences (2) -116.2 -142.4 -99.2
Change in unrecognised deferred taxes 10.1 -5.2 3.9
Other (3) -49.9 -42.6 -49.4
GROUP TAX CHARGE 1,111.0 1,043.6 985.4
(1) In 2014, this amount includes €72 million relating to the fine levied by the competition authority.
(2) In 2012, this amount included +€25 million relating to the revaluation of the tax on fair value of Sanofi shares.
(3) Including tax credits, withholding taxes on distributions, tax reassessments and provisions for tax liabilities. This amount includes €45 million in 2014 and €41 million in
2013 relating to the 3% additional levy on dividends paid as well as a tax reimbursement in China relating to fiscal years 2008 to 2011 following a change in tax
legislation of €24 million in 2013 compared with €35 million in 2012.
The expected tax charge reflects the sum of pre-tax profit for each country, multiplied by the normal taxation rate. The theoretical
tax rate reflects the total expected tax charge as a percentage of pre-tax profit. The impact of any reduced tax rates existing in
certain countries in addition to the normal tax rates is included on the line “Impact of tax rate differences”.
€ millions
Balance of deferred tax assets at December 31st, 2011 642.3
Balance of deferred tax liabilities at December 31st, 2011 -586.6
Income statement impact -34.8
Translation differences -6.4
Other effects (1) -13.8
Balance of deferred tax assets at December 31st, 2012 695.2
Balance of deferred tax liabilities at December 31st, 2012 -694.3
Income statement impact -15.9
Translation differences -12.0
Other effects (1) -55.9
Balance of deferred tax assets at December 31st, 2013 647.5
Balance of deferred tax liabilities at December 31st, 2013 -730.6
Income statement impact -60.0
Translation differences -21.2
Other effects (1) 147.3
Balance of deferred tax assets at December 31st, 2014 838.2
Balance of deferred tax liabilities at December 31st, 2014 -855.2
(1) Including mainly the tax effect on actuarial gains and losses recognised in equity and in 2014 on newly consolidated companies for €115.7 million.
Deferred tax assets and liabilities recorded in the balance sheet may be broken as follows:
Deferred tax assets on temporary differences mainly relate to Deferred tax liabilities on temporary differences mainly relate to
provisions for pensions and early retirement (€440.7 million, intangible assets acquired in the context of business
€263.6 million and €356.5 million respectively at the end of combinations other than non tax-deductible goodwill.
2014, 2013 and 2012) and provisions for liabilities and charges
(€167.2 million, €171.2 millions and €189.5 million respectively Deferred tax assets whose recovery is not considered probable
at the end of 2014, 2013 and 2012). are not recorded in the financial statements; such assets
amount to €55.3 million at December 31st, 2014 compared with
€41.3 million at December 31st, 2013 and €53.7 million at
December 31st, 2012.
4
Tax effect on non-recurring items -23.2 -15.9 -44.3
Non-controlling interests on non-recurring items -1.6 - -
Effect of changes in tax rates on the deferred tax liability arising on the revaluation of
Sanofi - - 25.0
Tax effect on the acquisition of Nyx Cosmetics 21.1 - -
3% additional levy on paid dividends (2) 45.2 41.4 -
Costs net of tax of the discontinuation of the Innéov operation (note 17) 9.0 - -
NET PROFIT OF CONTINUING OPERATIONS ATTRIBUTABLE TO OWNERS OF
THE COMPANY EXCLUDING NON-RECURRING ITEMS 3,125.3 3,032.4 2,861.5
(1) Including €189.5 million relating to the fine handed levied against L’Oréal S.A. by the competition authority.
(2) The 3% additional levy on the amount of dividends paid by L’Oréal represents an additional tax payment on past profit distributions and depending on decisions made
at the Annual General Meeting. So as not to distort the presentation of the Group’s operational performance in the period, this surtax is recognised on the “income tax”
line of the income statement as a non-recurring item.
11.5. Diluted earnings per share including the impact of shares carrying
preferential dividend rights
The table below shows the calculation of diluted earnings per share taking into account the 10% preferential dividend payable for
2014 on shares held continuously in registered form between December 31st, 2012 and the 2015 dividend payment date. The
number of shares eligible for the preferential dividend cannot exceed 0.5% of the share capital for any one shareholder.
2012
Shares carrying ordinary dividend rights
Number of shares
572,786,868
Diluted earnings per
share
4.71
Diluted earnings per
share of continuing
operations
4.53
4
Shares carrying preferential dividend rights 32,518,590 5.18 4.99
NOTE 12 Goodwill
Goodwill is allocated by Cash Generating Unit or by groups of Cash Generating Units. A Cash Generating Unit consists of one or
more worldwide trademarks. The methodology used to carry out impairment tests is described in note 1.
2014 acquisitions mainly relate to Decléor & Carita, Magic The accumulated impairment losses relating to
Holdings, Nyx, Carol’s daughter and Coloright for Softsheen-Carson, Yue-Sai and Sanoflore amount to
€936.9 million. No significant disposals took place during 2014. €140.4 million, €32.2 million and €35.7 million respectively, at
December 31st, 2014.
Other movements mainly reflect the positive impact of
changes in exchange rates for €377.7 million.
4
Other 63.8 -0.3 63.5
L’Oréal Luxe total 2,238.0 -37.7 2,200.3
Vichy/Dermablend 268.9 -1.8 267.1
Other 110.2 -2.2 108.0
Active Cosmetics total 379.1 -4.1 375.1
Other - -
The Body Shop 340.1 40.0 -8.3 371.8
GROUP TOTAL 6,270.1 106.8 -170.8 6,206.0
2013 acquisitions mainly relate to Interbeauty and Emporio The accumulated impairment losses relating to
Body Store. No significant disposals took place during 2013. SoftSheen-Carson, Yue-Sai, Sanoflore and Club des Créateurs
de Beauté amount to €125.2 million, €29.1 million, €35.7 million
Other movements mainly reflect the negative impact of and €34.7 million respectively, at December 31st, 2013.
changes in exchange rates for €141.5 million and total
impairment loss taken against the full amount of Club des
Créateurs de Beauté goodwill for €35.3 million.
2012 acquisitions mainly relate to Cadum, Urban Decay and No impairment loss has been recorded on 2012.
Emiliani Entreprises for €306.4 million. No significant disposals
took place during 2012. The accumulated impairment losses relating to
SoftSheen-Carson, Yue-Sai and Sanoflore amount to
Other movements mainly reflect the negative impact of €133.4 million, €29.5 million and €35.7 million respectively, at
changes in exchange rates for €52.8 million, partly offset by the December 31st, 2012.
allocation of the purchase price of Clarisonic for €10.6.million.
Change in the
€ millions Acquisitions/ Disposals/ scope of Other
2014 12.31.2013 Amortisation Reversals consolidation (1) movements 12.31.2014
Brands with indefinite useful life (2) 1,447.2 7.2 283.7 137.5 1,875.6
Amortisable brands and product ranges 91.9 0.1 9.2 9.5 110.7
Licences and patents 285.3 0.3 0.7 1.7 288.0
Software 788.4 57.7 -44.0 2.3 102.1 906.5
Other (3) 530.9 94.0 -14.1 111.6 15.6 738.0
Gross value 3,143.7 159.3 -58.1 407.5 266.4 3,918.8
Brands with indefinite useful life 101.4 - - - 8.5 109.9
Amortisable brands and product ranges 60.6 4.7 4.0 69.3
Licences and patents 108.9 13.1 1.1 123.1
Software 558.1 98.2 -43.9 1.7 26.5 640.6
Other 209.4 42.9 -14.0 0.1 23.0 261.4
4
Amortisation and provisions 1,038.3 158.9 -57.9 1.8 63.1 1,204.2
Other intangible assets – net 2,105.4 0.4 -0.2 405.7 203.3 2,714.6
(1) This item consists mainly of changes in the scope of consolidation resulting from Decléor & Carita, Nyx, Magic Holdings and Carol’s daughter.
(2) At December 31st, 2014, brands with an indefinite useful life consist mainly of The Body Shop (€532.3 million), Matrix (€295.5 million), Kiehl’s (€131.3 million),
Shu Uemura (€98.6 million), Clarisonic (€91.2 million), Decléor & Carita (€81.4 million), Nyx (€94.0 million) and Magic (€131.5 million).
(3) Including €295.0 million in customer relationships at December 31st, 2014.
Other movements mainly consisted of the positive change in Accumulated impairment losses amount to €14.0 million on
exchange rates over the period as well as the allocation of the Biomedic, €44.2 million on Yue-Sai and €51.7 million on
purchase price of Cheryl’s Cosmeceuticals, Emporio Body Softsheen-Carson at December 31st, 2014.
Store and Nickel acquired in 2013 (shown on the “Other” line
for €11.7 million and on “Amortisable brands”line for
€4.7 million).
Change in the
€ millions Acquisitions/ Disposals/ scope of Other
2013 12.31.2012 Amortisation Reversals consolidation (1) movements 12.31.2013
Brands with indefinite useful life (2) 1,501.1 -53.9 1,447.2
Amortisable brands and product ranges 74.3 1.0 -1.7 19.0 -0.7 91.9
Licences and patents 277.2 9.6 -0.2 -1.2 285.3
Software 756.7 59.1 -25.0 0.1 -2.4 788.4
Other 493.8 69.0 -5.9 -26.0 530.9
Gross value 3,103.1 138.6 -32.8 19.1 -84.2 3,143.7
Brands with indefinite useful life 103.2 -1.9 101.4
Amortisable brands and product ranges 56.6 6.6 -1.7 -1.0 60.6
Licences and patents 96.4 12.6 -0.2 0.1 108.9
Software 503.9 97.5 -24.9 -18.4 558.1
Other 179.0 39.8 -3.7 -5.7 209.4
Amortisation and provisions 939.0 156.5 -30.5 - -26.8 1,038.3
Other intangible assets – net 2,164.0 -18.0 -2.3 19.1 -57.4 2,105.4
(1) This item consists mainly of changes in the scope of consolidation resulting from Vogue and Interbeauty.
(2) At December 31st, 2013, brands with an indefinite useful life consist mainly of The Body Shop (€497.3 million), Matrix (€268.1 million), Kiehl’s (€120.4 million),
Shu Uemura (€98.8 million) and Clarisonic (€82.3 million).
Other movements mainly consisted of the negative change in exchange rates over the period.
Accumulated impairment losses amount to €14.0 million on Biomedic, €39.9 million on Yue-Sai and €47.5 million on
Softsheen-Carson at December 31st, 2013.
Change in the
€ millions Acquisitions/ Disposals/ scope of Other
2012 12.31.2011 Amortisation Reversals consolidation (1) movements 12.31.2012
Brands with indefinite useful life (2) 1,417.5 95.3 -11.7 1,501.1
Amortisable brands and product ranges 69.5 2.8 2.2 -0.2 74.3
Licences and patents 276.7 10.2 -10.2 0.5 277.2
Software 507.8 60.1 -9.8 0.3 198.3 756.7
Other 455.2 31.2 -0.9 40.1 -31.8 493.8
Gross value 2,726.7 104.3 -20.9 137.9 155.1 3,103.1
Brands with indefinite useful life 104.3 -1.1 103.2
Amortisable brands and product ranges 54.2 2.8 -0.4 56.6
Licences and patents 93.8 12.3 -10.2 0.4 96.4
Software 332.2 90.0 -10.3 0.1 91.9 503.9
Other 151.1 28.9 -0.4 -0.6 179.0
Amortisation and provisions 735.6 134.0 -20.9 0.1 90.2 939.0
Other intangible assets – net 1,991.1 -29.7 - 137.8 64.9 2,164.0
(1) This item consists mainly of changes in the scope of consolidation resulting from Cadum, Urban Decay and Emiliani Entreprises.
(2) At December 31st, 2012, brands with an indefinite useful life consist mainly of The Body Shop (€507.8 million), Matrix (€276.8 million), Kiehl’s (€123.8 million),
Shu Uemura (€117.2 million) and Clarisonic (€85.1 million).
Other movements mainly consisted of the reclassification of Accumulated impairment losses amount to €14.0 million on
software from property, plant and equipment to intangible Biomedic, €40.4 million on Yue-Sai and €48.9 million on
assets for €81.9 million offset by changes in exchange rates Softsheen-Carson at December 31st, 2012.
with a negative €17.1 million.
Impairment tests of Cash Generating Units for which the carrying amount of goodwill and intangible assets with indefinite useful lives
is significant, are carried out based on the following data and assumptions:
4
L’Oréal Professionnel/Kérastase 364.6 7.9 8.9
Clarisonic 376.4 7.9 8.9
Vichy/Dermablend 309.7 7.9 (1)
2013 TEST
Maybelline/Garnier 1,053.4 7.9 8.9
The Body Shop 869.1 8.5 (1)
Lancôme 779.0 7.9 8.9
L’Oréal Paris 770.6 7.9 8.9
Matrix 623.6 7.9 8.9
Redken/PureOlogy 528.3 7.9 8.9
YSL Beauté 519.8 7.9 (1)
L’Oréal Professionnel/Kérastase 344.6 7.9 8.9
Clarisonic 339.8 7.9 8.9
Vichy/Dermablend 302.3 7.9 (1)
2012 TEST
Maybelline/Garnier 1,087.9 7.9 8.9
The Body Shop 847.9 7.9 (1)
Lancôme 780.8 7.9 8.9
L’Oréal Paris 775.5 7.9 8.9
Matrix 633.1 7.9 8.9
Redken/PureOlogy 546.9 7.9 8.9
YSL Beauté 519.8 7.9 (1)
L’Oréal Professionnel/Kérastase 351.6 7.9 8.9
Clarisonic 351.4 7.9 8.9
Vichy/Dermablend 304.7 7.9 (1)
(1) Since the USD amounts for the YSL Beauté, The Body Shop and Vichy/Dermablend CGUs are not material, no specific discount rate has been used in this respect.
At December 31st, 2014, a 1-point increase in the discount rate A 1-point decrease in the terminal growth rate on all Cash
on all Cash Generating Units would not lead to an impairment Generating Units would not lead to an impairment loss.
loss.
A 1-point decrease in the margin rate over the business plan
The terminal growth rate is consistent in accordance with period on all Cash Generating Units would not lead to an
market data, i.e. 3%. impairment loss.
Property, plant and equipment include capital lease contracts for the following amounts:
4
12.31.2014 12.31.2013 12.31.2012
€ millions Carrying amount Acquisition cost Carrying amount Acquisition cost Carrying amount Acquisition cost
Financial assets available-for-sale
s Sanofi (1) 8,945.1 4,033.5 9,117.7 4,033.5 8,440.2 4,033.5
s Unlisted securities (2) 5.1 5.6 4.7 5.3 2.9 3.9
Financial assets at amortised cost
s Non-current loans and receivables 118.9 123.2 81.6 86.5 83.1 87.8
TOTAL 9,069.0 4,162.3 9,204.0 4,125.3 8,526.2 4,125.2
(1) L’Oréal’s stake in Sanofi was 8.96% at December 31st, 2014. The carrying amount at December 31st, 2014, December 31st, 2013 and December 31st, 2012
(€8,945.1 million, €9,117.7 million and €8,440.2 million respectively) corresponds to the market value of the shares based on the closing price at each of these dates
(€75.66, €77.12 and €71.39 respectively). The acquisition cost of €4,033.5 million corresponds to an entry cost of €34.12.
(2) As the fair value of unlisted securities cannot be reliably determined, they are stated at cost less any impairment losses.
The key figures for Galderma (based on an interest of 100%) for 2013 and 2012 can be summarized as follows:
2013/ 2012/
€ millions 12.31.2013 12.31.2012
Net sales 1,652.6 1,590.9
Net profit 159.9 216.1
Balance sheets total 2,704.4 2,418.5
Net debt 999.5 769.0
NOTE 18 Inventories
Trade accounts receivable are due within one year. Group The non-collection risk on trade receivables is therefore
policy is to recommend credit insurance coverage as far as minimised, and this is reflected in the level of the allowance,
local conditions allow. which is less than 2% of gross receivables at the end of 2014.
Marketable securities consist mainly of SICAV money-market Unrealised gains amount to €0.1 million in 2014 compared with
funds and unit trusts (on which the return is based on EONIA). €0.3 million and -€0.1 million respectively in 2013 and in 2012.
Marketable securities are considered as Financial assets
available-for-sale. Term accounts with a maturity of less than 3 months at
inception are shown on the “Bank accounts and other cash
and cash equivalents” line.
4
NOTE 22 Equity
A) 2014
The change in the number of shares in 2014 is as follows:
Common shares
In shares Share capital Treasury stock outstanding
AT 01.01.2014 605,901,887 -6,107,857 599,794,030
Shares cancelled -48,500,000 48,500,000 -
Options and free shares exercised 3,828,502 69,346 3,897,848
Treasury stock purchased (1) -49,450,000 -49,450,000
AT 12.31.2014 561,230,389 -6,988,511 554,241,878
(1) The strategic transaction with Nestlé led to the cancellation of 48,500,000 shares at July 8th, 2014 (note 3).
Allocated to stock
In shares Buyback programme options/free shares plans Total € millions
AT 01.01.2014 1,955,000 4,152,857 6,107,857 568.1
Shares cancelled -48,500,000 -48,500,000 -6,045.6
Options and free shares exercised -69,346 -69,346 -4.0
Treasury stock purchased 49,450,000 49,450,000 6,164.5
AT 12.31.2014 2,905,000 4,083,511 6,988,511 683.0
€ millions 363.4 319.6 683.0
B) 2013
The change in the number of shares in 2013 was as follows:
Allocated to stock
options/free shares
In shares Buyback programme plans Total € millions
AT 01.01.2013 5,077,250 5,376,915 10,454,165 904.5
Shares cancelled -9,108,641 -9,108,641 -998.5
Options and free shares exercised -1,224,058 -1,224,058 -81.7
Treasury stock purchased 5,986,391 5,986,391 743.8
AT 12.31.2013 1,955,000 4,152,857 6,107,857 568.1
€ millions 244.5 323.6 568.1
C) 2012
The change in the number of shares in 2012 was as follows:
The fair value of options is determined using the Black & Scholes method based on the following assumptions:
Purchase
options Subscription options
November 2005 June 2005 November 2005 April 2006 December 2006 November 2007 March 2009 April 2010 April 2011
Risk-free rate of return 3.16% 2.63% 3.16% 3.80% 3.62% 4.01% 3.15% 2.83% 3.42%
Expected life span 6 years 6 years 6 years 6 years 7 years 7 years 7 years 7 years 8 years
Expected volatility 21.00% 17.00% 21.00% 20.50% 22.52% 23.00% 31.95% 23.53% 22.60%
Expected dividends 1.35% 1.38% 1.35% 1.35% 1.35% 1.24% 2.83% 1.86% 2.10%
Share price €61.30 €59.40 €61.30 €74.10 €74.60 €94.93 €50.94 €80.50 €85.68
Exercise price €62.94 €60.17 €61.37 €72.60 €78.06 €91.66 €50.11 €80,03 €83.19
Fair value €12.30 €9.45 €12.88 €17.48 €17.19 €25.88 €12.16 €17,17 €18.58
Expected volatility is equal to the implied volatility of the volatility at the grant date and historic volatility over the
options listed on MONEP at the grant dates. As from 2007, in expected life span of the option. The expected life span has
order to mitigate the effects of atypical phenomena, the been adjusted to take account of behavioural assumptions
volatility used corresponds to the average between implied relating to the beneficiaries.
Data concerning all share option plans during fiscal years 2012, 2013 and 2014 are set out below:
The weighted average share price was €125.73, €123.64 and • for 50% of shares granted, the increase over the same
€93.60, respectively, for 2014, 2013 and 2012. period in Group consolidated operating profit.
The total charge recorded in 2014, 2013 and 2012 amounted The calculation will be based on the arithmetic average of the
to €20.4 million, €27.0 million and €41.2 million, respectively. performance in the 2015, 2016 and 2017 fiscal years under the
2014 plan, 2014, 2015 and 2016 fiscal years under the 2013
plan, in the 2013, 2014 and 2015 fiscal years under the 2012
2) FREE SHARES plan and in the 2012, 2013 and 2014 fiscal years under the
On April 17th, 2014, April 26th, 2013, April 17th, 2012, April 22nd, 2011 plan and will use a predefined allocation scale based on
2011, April 27th, 2010 and March 25th, 2009 the Board of the performance percentage achieved. No performance
Directors decided to grant respectively 1,068,565, 1,057,820, condition applies below a block of 200 shares.
1,325,050, 1,038,000, 450,000 and 270,000 free shares. At December 31st, 2014, the performance conditions were
deemed to have been met.
Vesting conditions
For the conditional grant of shares, the plan provides for a Fair value of free shares granted
4-year vesting period after which vesting is effective and final, The fair value corresponds to the value of the share at the
subject to meeting the conditions of the plan. After this vesting grant date, less dividends expected to be paid during the
period, a 2-year mandatory holding period applies for French vesting period. The cost of the additional 2-year holding period
residents, during which the shares cannot be sold. applicable to French residents is determined based on the
A total of 237,800 shares and 389,300 shares were definitively interest rate granted to the employee, considered equivalent
granted, respectively, on March 26th, 2013 under the to the rate which would be granted by a bank to a private
March 25th, 2009 plan and on April 28th, 2014 under the individual customer with an average financial profile. The cost
April 27th, 2010 plan. of the holding period amounts respectively to 4.46%, 5.75%,
8.06% and 8.54% of the share value at the grant date for the
The performance conditions concern: 2014, 2013, 2012 and 2011 plans.
s April 17th, 2014, April 26th, 2013, April 17th, 2012 and On the basis of these assumptions, the fair values for the 2014,
April 22nd, 2011 plans: 2013, 2012, 2011 and 2010 plans amount to €104.58, €112.37,
€77.07 and €70.36 respectively for French residents, and to
• for 50% of shares granted, the increase in comparable €109.99, €119.87, €84.62 and €77.67 respectively, for
Cosmetic revenues for the 2015, 2016 and 2017 fiscal non-residents, compared to a share price of €121.35, €130.45,
years under the 2014 plan, for the 2014, 2015 and 2016 €93.68 and €85.68, respectively.
fiscal years under the 2013 plan, for the 2013, 2014 and
2015 fiscal years under the 2012 plan and for the 2012, The expense recorded in 2014, 2013 and 2012 amounted to
2013 and 2014 fiscal years under the 2011 plan in €93.0 million, €70.2 million and €45.2 million, respectively.
relation to the growth in revenues for a panel of
competitors,
4
Deconsolidation -2.6 - -
Reserve at end of period 88.8 108.6 95.4
A 10% increase (decrease) in the euro against all Group A 10% increase (decrease) in the USD against the main Group
currencies would have had an impact of +€199.1 million currencies would have had an impact of -€38.9 million
(-€187.0 million) on the foreign exchange cash flow hedge (+€51.0 million) on the foreign exchange cash flow hedge
reserve and the market value of hedging instruments at reserve and the market value of hedging instruments at
December 31st, 2014. December 31st, 2014.
A 10% increase (decrease) in the euro against all Group A 10% increase (decrease) in the USD against the main Group
currencies would have had an impact of +€247.5 million currencies would have had an impact of -€44.5 million
(-€212.2 million) on the foreign exchange cash flow hedge (+€74.0 million) on the foreign exchange cash flow hedge
reserve and the market value of hedging instruments at reserve and the market value of hedging instruments at
December 31st, 2013. December 31st, 2013.
A 10% increase (decrease) in the euro against all Group A 10% increase (decrease) in the USD against the main Group
currencies would have had an impact of +€209.7 million currencies would have had an impact of -€55.1 million
(-€195.1 million) on the foreign exchange cash flow hedge (+€68.3 million) on the foreign exchange cash flow hedge
reserve and the market value of hedging instruments at reserve and the market value of hedging instruments at
December 31st, 2012. December 31st, 2012.
The Group operates pension, early retirement and other benefit These obligations are partially funded by an external fund:
schemes depending on local legislation and regulations.
s for foreign subsidiaries with employee pension schemes or
For obligatory state schemes and other defined-contribution other specific obligations relating to defined benefit plans,
schemes, the Group recognises in the income statement the excess of the projected benefit obligation over the
contributions payable when they are due. No provision has scheme’s assets is recognised by setting up a provision for
been set aside in this respect as the Group’s obligation does charges on the basis of the actuarial value of employees’
not exceed the amount of contributions paid. vested rights.
The characteristics of the defined benefit schemes in force Pension obligations are determined and recognised in
within the Group are as follows: accordance with the accounting principles presented in
note 1.23.
s French regulations provide for specific length-of-service
awards payable to employees on retirement. An early The actuarial assumptions used to calculate these obligations
retirement plan and a defined benefit plan have also been take into account the economic conditions specific to each
set up. In some Group companies there are also measures country or Group company. The weighted average
providing for the payment of certain healthcare costs for assumptions for the Group are as follows:
retired employees.
The discount rates are obtained by reference to market yields on high quality corporate bonds having maturity dates equivalent to
those of the obligations. Bond quality is assessed by reference to the AA-/Aa3 minimum rating provided by one of the three main
credit-rating agencies.
A 50 basis point decrease in the discount rates would increase the projected defined benefit obligation by €298.7 million for the
euro zone, €62.8 million for the United States and €69.1 million for the United Kingdom.
The expected returns on plan assets are based on the discount rates used.
A 50 basis point decrease in the expected return would decrease the assets as well as the expected return on plan assets by
-€8.6 million for the euro zone, -€3.8 million for the United States and -€2.9 million for the United Kingdom.
4
In %
Equity securities (1) 35.6% 37.7% 35.1%
Bonds 56.4% 52.8% 55.8%
Property assets (2) 3.7% 3.6% 3.4%
Monetary instruments 1.2% 1.0% 1.0%
Other 3.1% 4.9% 4.6%
TOTAL 100% 100% 100%
(1) Of which L’Oréal shares: nil.
(2) Of which property assets occupied by Group entities: nil.
The allocation of plan assets has to comply with specific investment limits for the different classes of assets and meet minimum
rating criteria for monetary instruments and bonds.
The variations during 2014, 2013 and 2012 are set out below:
Present value of
defined benefit
€ millions obligations Plan assets Net provisions
Balance at December 31st, 2011 3,205.6 -2,100.0 1,105.6
Service cost 117.7 - 117.7
Interest cost 140.4 - 140.4
Expected return on assets - -120.7 -120.7
Past service cost: new plans/plan amendments 0.9 - 0.9
Curtailments - - -
Settlements 0.1 - 0.1
Benefits paid -160.3 116.9 -43.5
Contributions paid 5.3 -271.7 -266.4
Actuarial gains and losses 402.3 -140.7 261.6
Translation differences -16.9 10.5 -6.3
Other movements -0.3 2.0 1.7
Balance at December 31st, 2012 3,694.8 -2,503.6 1,191.2
Service cost 134.5 - 134.5
Interest cost 137.1 - 137.1
Expected return on assets - -98.7 -98.7
Past service cost: new plans/plan amendments 0.2 - 0.2
Curtailments -0.2 - -0.2
Settlements - - -
Benefits paid -178.7 131.3 -47.4
Contributions paid 4.2 -247.9 -243.7
Actuarial gains and losses -128.7 -50.8 -179.4
Translation differences -72.9 52.6 -20.3
Other movements (1) 60.9 5.4 66.3
Balance at December 31st, 2013 3,651.4 -2,711.8 939.6
Service cost 141.4 - 141.4
Interest cost 144.2 - 144.2
Expected return on assets - -115.1 -115.1
Past service cost: new plans/plan amendments -5.1 - -5.1
Curtailments -33.2 - -33.2
Settlements 0.1 - 0.1
Benefits paid -174.5 130.7 -43.8
Contributions paid 4.1 -255.6 -251.5
Actuarial gains and losses 881.2 -208.6 672.6
Translation differences 155.8 -128.0 27.8
Other movements -5.1 7.8 2.7
BALANCE AT DECEMBER 31ST, 2014 4,760.3 -3,280.6 1,479.7
(1) Including for the projected benefit obligation in 2013 €67.6 million reclassified from employee-related liabilities to provisions for employee retirement obligations.
The total present value of defined benefit obligations breaks down as follows between wholly or partly funded plans and wholly
unfunded plans:
The retirement expense charged to the income statement is recorded within personnel expenses for the operating part and within
financial costs for the financial part and can be analysed as follows:
Contributions to defined contribution plans recognised as an expense in 2014, 2013 and 2012 amounted to €409.8, €388.4 and
€367.3 million, respectively.
A change of one percentage point in medical cost inflation would have the following impact:
Increase of 1% Decrease of 1%
Impact on projected benefit obligation 13.3 -10.8
Impact on current service cost and interest costs 7.6 -5.6
4
Actuarial gains and losses for the periods presented are as follows:
24.2. Changes in provisions for liabilities and charges during the period
Impact of
change in
Reversals Reversals scope/Exchange
€ millions 12.31.2012 12.31.2013 Charges (2) (used) (2) (not used) (2) rate/Other (1) 12.31.2014
Provisions for restructuring 129.4 98.2 31.0 -56.0 -12.4 4.7 65.5
Provisions for product returns 211.3 226.6 202.3 -159.7 -48.3 23.5 244.4
Other provisions for liabilities and charges 375.1 378.5 333.3 -89.0 -54.4 37.3 605.7
TOTAL 715.8 703.3 566.6 -304.7 -115.1 65.5 915.6
(1) Mainly resulting from translation differences.
(2) These figures can be analysed as follows:
Impact of
change in
Reversals Reversals scope/Exchange
€ millions 12.31.2011 12.31.2012 Charges (2) (used) (2) (not used) (2) rate/Other (1) 12.31.2013
Provisions for restructuring 93.4 129.4 30.7 -46.8 -12.5 -2.6 98.2
Provisions for product returns 208.2 211.3 187.3 -140.3 -26.7 -5.0 226.6
Other provisions for liabilities and charges 414.4 375.1 140.2 -74.1 -47.6 -15.1 378.5
TOTAL 716.0 715.8 358.2 -261.2 -86.8 -22.7 703.3
(1) Mainly resulting from translation differences.
(2) These figures can be analysed as follows:
The Group uses bank loans for its medium-term financing needs and commercial paper issues in France and in the US for its
short-term financing needs. None of these loans contain an early repayment clause linked to financial ratios (covenants).
At the end of 2014, estimated interest payments totalled which consisted of very short-term loans contracted locally by
around €1.2 million for 2015, €0 million for the period 2016-2019 subsidiaries, and payments outstanding under finance leases.
and €0 million after 2019.
These estimates are computed on the basis of the effective
At the end of 2013, estimated interest payments were not interest rate at the end of the financial year, after allowing for
material due to the debt outstanding at December 31st, 2013, hedging instruments and assuming that no debt is rolled over
which consisted of very short-term loans contracted locally by at maturity. Amounts payable under capital leases are not
subsidiaries, and payments outstanding under finance leases. taken into account as they are not material.
The Group did not hold bank loans at either December 31st, 2014 or December 31st, 2013 and December 31st, 2012.
To manage its exposure to currency and interest rate risks options in order to reduce as far as possible the currency
arising in the course of its normal operations, the Group uses exposure of each subsidiary. The term of the derivatives is
derivatives negotiated with counterparties rated investment aligned with the Group’s settlements. Exchange rate
grade. derivatives are negotiated by REGEFI (the Group’s bank) or, in
exceptional cases, directly by the Group’s subsidiaries when
In accordance with Group rules, currency and interest rate required by local regulations. Such operations are supervised
derivatives are set up exclusively for hedging purposes. by REGEFI.
All derivatives held for currency risk hedging purposes, including those intended to hedge the currency risk on Galderma and
Innéov, have a maturity of less than 18 months at inception, and can be analysed as follows:
The Group has no significant foreign currency exposures that are not hedged in the balance sheet.
The Group’s liquidity risk can be assessed on the basis of its s level 1: quoted prices on an active market;
outstanding short-term debt under its paper programme. If
these bank facilities were not renewed, the Group had s level 2: valuation techniques using observable inputs;
confirmed undrawn credit lines of €3,300.0 million at
s level 3: valuation techniques using unobservable inputs.
December 31st, 2014. The availability of these credit lines is not
dependent on financial covenants.
The following table provides an analysis of financial instruments recorded at fair value by level of the fair value hierarchy.
€ millions
December 31st, 2014 level 1 level 2 level 3 Total fair value
Assets at fair value
Foreign exchange derivatives 262.4 262.4
Sanofi shares 8,945.1 8,945.1
Marketable securities 666.5 666.5
TOTAL ASSETS AT FAIR VALUE 9,611.6 262.4 - 9,874.0
Liabilities at fair value
Foreign exchange derivatives 215.8 215.8
TOTAL LIABILITIES AT FAIR VALUE - 215.8 - 215.8
€ millions
December 31st, 2013 level 1 level 2 level 3 Total fair value
Assets at fair value
4
Foreign exchange derivatives 195.2 195.2
Sanofi shares 9,117.7 9,117.7
Marketable securities 1,024.2 1,024.2
TOTAL ASSETS AT FAIR VALUE 10,141.9 195.2 - 10,337.1
Liabilities at fair value
Foreign exchange derivatives 90.4 90.4
TOTAL LIABILITIES AT FAIR VALUE - 90.4 - 90.4
€ millions
December 31st, 2012 level 1 level 2 level 3 Total fair value
Assets at fair value
Foreign exchange derivatives 154.5 154.5
Sanofi shares 8,440.2 8,440.2
Marketable securities 150.1 150.1
TOTAL ASSETS AT FAIR VALUE 8,590.3 154.5 - 8,744.8
Liabilities at fair value
Foreign exchange derivatives 100.7 100.7
TOTAL LIABILITIES AT FAIR VALUE - 100.7 - 100.7
Financial assets and liabilities resulting from foreign exchange Had the agreements been offset at the level of each
and/or interest rate hedging transactions entered into with the counterparty bank, assets and liabilities would have
Group’s counterparty banks are not offset in the balance decreased by €116.4, €26.7 and €28.8 million respectively at
sheet since they are FBF (French Banking Federation) or ISDA December 31st, 2014, 2013 and 2012.
(International Swaps and Derivatives Association) agreements
Other significant off-balance sheet commitments have been identified and measured. They chiefly fall due within 1 year and are as
follows:
Besides certain disputes arising in the ordinary course of its Following the April 2012 appeal court ruling and the referral
operations and for which the provisions set aside are of the case to the Italian supreme administrative court, the
considered to be appropriate by the Group (see note 17), fine was reduced by 35%. These proceedings have now
L’Oréal is party to several material disputes, described below: ended;
29.1. Tax dispute in Brazil s in Germany, the proceedings launched in 2008 in the
household and personal care sector are still in progress: an
In terms of taxation, in early January 2013, L’Oréal Brasil appeal was filed against the decision handed down in first
received a tax reassessment notice regarding the indirect IPI instance on March 14th, 2013. The fine has not yet been
tax for fiscal year 2008. The reassessment concerned an paid but a provision has been recorded in this respect.
amount of BRL 360.3 million including BRL 207.7 million in
interest and penalties (€111.9 million). The Brazilian tax A provision of €49.9 million had been set aside for all disputes
authorities questioned the price used to calculate the IPI tax in progress at end-December 2014 (€43.0 million at
base. After consulting its tax advisors, L’Oréal Brasil considers December 31st, 2013 and €45.0 million at December 31st, 2012.
4
that the Brazilian tax authorities’ position is unfounded and has
challenged this notice. L’Oréal Brasil is awaiting a decision
from the Administrative Court of Appeal. Consequently, no B) FRANCE
provision has been recorded. th
On December 18 , 2014, the French competition authority
issued an appealable decision on the household and
personal care sector concerning events that took place in the
29.2. Investigations carried out by the early 2000’s, and fined L’Oréal S.A. an amount of
€189.5 L’Oréal refutes accusations of concerted practices with
competition authorities its competitors, and regrets that the French competition
The national competition authorities in several European authority did not take into account the highly competitive
countries have launched investigations targeting the French market in personal care products as illustrated by the
cosmetics industry in particular. number of manufacturers and retailers present on the market,
the large choice of products available to consumers, and the
high degree of innovation and number of product launches.
A) EUROPE (EXCLUDING FRANCE) L’Oréal is extremely surprised by this decision and by the
amount of the fine, which it considers totally out of proportion.
The proceedings are at different stages:
L’Oréal has filed an appeal against this decision. A provision
s in Spain, the decision in first instance was appealed against for the amount of the fine was booked at end-2014.
and an appeal for cassation has now been made in this
At the present time, no other exceptional events or disputes
case. The amount of the fine initially levied remains fully
are highly likely to have a material impact on the earnings,
provisioned by the Group;
financial position, assets, or operations of the Company or the
s in Italy, the case was heard in the lower courts and the fine L’Oréal Group.
was paid in order to avoid incurring late-payment penalties.
This caption amounts to a positive €55.9 million in 2014, a negative €67.6 million in 2013 and a negative €108.6 million in 2012
and can be analysed as follows:
In 2014, this item mainly related to the acquisitions Magic Holdings, Nyx Cosmetics, Decléor & Carita and Carol’s Daughter, and to
the sale of Galderma to Nestlé.
In 2013, this item mainly related to the acquisitions of Vogue, Emporio Body Store and Interconsumer Products Limited.
In 2012, this item mainly related to the acquisitions of Cadum, Urban Decay and Emiliani Entreprises.
The consolidated financial statements include transactions carried out between the Group and its equity-accounted companies,
considered to be related parties. The main transactions with these related parties and the associated outstanding balances are as
follows:
The following receivables and payables were recorded on the balance sheet for the related parties:
4
Other services (legal, tax, employee-related, other) 1.8 1.1 15% 12% 0.5 0.4 6% 5%
TOTAL 12.2 8.7 100% 100% 8.5 7.8 100% 100%
(1) Mainly concerning acquisition audits.
No events occurred between the balance sheet date and the date when the Board of Directors authorised the consolidated
financial statements for issue.
4
L’Oréal Canada, Inc. Canada 100.00
L’Oréal Central America Panama 100.00
L’Oréal Central West Africa Nigeria 100.00
L’Oréal Ceska Republika s.r.o Czech Republic 100.00
L’Oréal Chile S.A. Chile 100.00
L’Oréal (China) Co. Ltd China 100.00
L’Oréal Colombia S.A. Colombia 100.00
L’Oréal Cosmetics Industry SAE Egypt 100.00
L’Oréal Danmark A/S Denmark 100.00
L’Oréal Deutschland GmbH Germany 100.00
L’Oréal East Africa Ltd Kenya 100.00
L’Oréal Egypt LLC Egypt 100.00
L’Oréal España S.A. Spain 100.00
L’Oréal Finland Oy Finland 100.00
L’Oréal Guatemala S.A. Guatemala 100.00
L’Oréal Hellas S.A. Greece 100.00
L’Oréal Hong Kong Ltd Hong-Kong 100.00
L’Oréal India Pvt Ltd India 100.00
L’Oréal Investments B.V. The Netherlands 100.00
L’Oréal Israël Ltd Israel 92.97
L’Oréal Italia S.p.A Italy 100.00
L’Oréal Japan Ltd Japan 100.00
L’Oréal Kazakhstan LLP Kazakhstan 100.00
L’Oréal Korea Ltd Korea 100.00
L’Oréal Liban SAL Lebanon 99.88
L’Oréal Libramont Belgium 100.00
L’Oréal Magyarorszag Kozmetikai Kft Hungary 100.00
L’Oréal Malaysia SDN BHD Malaysia 100.00
L’Oréal Manufacturing Midrand Pty Ltd South Africa 100.00
L’Oréal Maroc Morocco 50.00 100.00
L’Oréal Mexico S.A. de C.V. Mexico 100.00
L’Oréal Mexico Servicios S.A. de C.V. Mexico 100.00
L’Oréal Middle East United Arab Emirates 100.00
L’Oréal Nederland B.V. The Netherlands 100.00
L’Oréal New Zealand Ltd New Zealand 100.00
L’Oréal Norge A/S Norway 100.00
L’Oréal Osterreich GmbH Austria 100.00
L’Oréal Pakistan Private Limited Pakistan 100.00
L’Oréal Panama S.A. Panama 100.00
L’Oréal Peru S.A. Peru 100.00
This is a free translation into English of the Statutory Auditors’ report issued in French and is provided solely for the convenience of English
speaking readers. The Statutory Auditors’ report includes information specifically required by French law in such reports, whether modified or
not. This information is presented below the opinion on the consolidated financial statements and includes explanatory paragraphs
discussing the Auditors’ assessments of certain significant accounting and auditing matters. These assessments were considered for the
purpose of issuing an audit opinion on the consolidated financial statements taken as a whole and not to provide separate assurance on
individual account captions or on information taken outside of the consolidated financial statements.
s This report also includes information relating to the specific verification of information given in the Group’s Management Report.
s This report should be read in conjunction with, and construed in accordance with, French law and professional auditing standards
applicable in France.
To The Shareholders,
In compliance with the assignment entrusted to us by your Annual General Meeting, we hereby report to you, for the year ended December
31, 2014, on:
s the audit of the accompanying consolidated financial statements of L’Oréal;
s the justification of our assessments;
s the specific verification required by law.
These consolidated financial statements have been approved by the Board of Directors. Our role is to express an opinion on these
consolidated financial statements, based on our audit.
* This information forms an integral part of the Annual Financial Report as provided for in the Article L. 451-1-2 of the French Monetary and Financial Code.
The individual financial statements set out in this chapter are those of
L’Oréal parent company. They show the financial position of the
parent company stricto sensu. Unlike the conso dated financial
statements, they do not include the results of the Group’s subsidiaries.
5
€ millions Notes 12.31.2014 12.31.2013 12.31.2012
Share capital 112.2 121.2 121.8
Additional paid-in capital 2,316.8 2,101.2 1,679.0
Reserves and retained earnings 2,389.7 7,560.3 7,527.8
Net profit 4,938.0 2,366.1 2,408.0
Regulated provisions 87.1 90.4 88.6
Shareholders’ equity 9,843.8 12,239.2 11,825.2
Provisions for liabilities and charges 18 485.0 234.9 238.2
Borrowings and debts 19 1,949.4 32.6 330.4
Trade accounts payable 20 459.2 454.6 414.0
Other current liabilities 20 392.8 347.0 304.7
Other liabilities 2,801.4 834.2 1,049.1
Unrealised exchange gains 21 6.4 6.9 4.7
TOTAL SHAREHOLDERS’ EQUITY AND LIABILITIES 13,136.6 13,315.2 13,117.2
s subscription to 3,439,202 shares following the exercise of options, and grant of 389,300 free shares,
Reserves
Additional 1976 and
Share paid-in revaluation retained Regulated
€ millions capital capital reserve earnings Net profit provisions Total
Balance at December 31st, 2011 before appropriation of net
profit 120.6 1,271.4 45.4 6,517.0 2,169.8 82.5 10,206.7
Changes in share capital 1.2 407.6 408.8
Appropriation of 2011 net profit 965.5 -965.5 -
Dividends paid for 2011 -1,204.3 -1,204.3
2012 net profit 2,408.0 2,408.0
Other movements during the period 6.0 6.0
Balance at December 31st, 2012 before appropriation of net
profit 121.8 1,679.0 45.4 7,482.5 2,408.0 88.5 11,825.2
Changes in share capital -0.6 422.2 -995.0 -593.4
Appropriation of 2012 net profit 1,027.4 -1,027.4 -
Dividends paid for 2012 -1,380.6 -1,380.6
2013 net profit 2,366.1 2,366.1
Other movements during the period 1.9 1.9
Balance at December 31st, 2013 before appropriation of net
profit 121.2 2,101.2 45.4 7,514.9 2,366.1 90.4 12,239.2
Changes in share capital 0.7 215.6 216.3
Cancellation of Treasury stock -9.7 -6,027.7 -6,037.4
Appropriation of 2013 net profit 858.8 -858.8 -
Dividends paid for 2013 -1,507.3 -1,507.3
2014 net profit 4,938.0 4,938.0
Other movements during the period -1.7 -3.3 -5.0
BALANCE AT DECEMBER 31ST, 2014 BEFORE
APPROPRIATION OF NET PROFIT 112.2 2,316.8 43.7 2,346.0 4,938.0 87.1 9,843.8
Reserves include an amount of €16 million in 2014 set aside by our subsidiaries under a Group agreement. In
corresponding to unpaid dividends on treasury shares, 2014, an amount of €5.3 millions set aside to the provision in
compared with €16.8 million in 2013 and €12.3 million in 2012. 2009 was reversed (compared with €3.8 million in 2013 and
€2.7 million in 2012).
Regulated provisions consist partially of the provision for
investments which amounted to €11.8 million at Accelerated tax-driven depreciation at December 31st, 2014
December 31st, 2014, compared with €17.2 million at amount to €75.1 million compared with €73.1 million at
December 31st, 2013 and €21million at December 31st, 2012. December 31st, 2013 and €67.3 million at December 31st, 2012.
In 2014, no charge was done to the provision for investments
consequently to the changes of law since 2012. This provision Details of option plans and free share plans are provided in
includes the transfer to L’Oréal S.A. of some of the provisions note 17.
5
Net cash from (used in) financing activities 523.5 -992.1 -1,137.5
Cash acquired or sold in the period (complete transfer of assets and liabilities) 17.8 0.4
Change in cash and cash equivalents -914.0 144.3 682.8
Net Cash and cash equivalents at beginning of year 974.0 829.7 146.9
NET CASH AND CASH EQUIVALENTS AT END OF YEAR 27 60.0 974.0 829.7
2014 highlights
STRATEGIC TRANSACTION BETWEEN NESTLÉ This transaction was subject to the prior consultation of
AND L’ORÉAL Galderma and L’Oréal works councils, and was approved by
the relevant competition authorities.
In meetings held on February 10th, 2014, the Boards of Directors
of Nestlé and L’Oréal respectively approved by unanimous The transaction was carried out on July 8th, 2014.
decision of their voting members a strategic transaction for
both companies, under which L’Oréal agreed to buy back
from Nestlé 48.5 million of its own shares (representing 8% of its INVESTIGATIONS CARRIED OUT BY THE COMPETITION
share capital). This buyback was financed: AUTHORITY
s partly through the sale by L’Oréal to Nestlé of its 50% stake in On December 18th, 2014, the French competition authority
Swiss dermatology pharmaceuticals company Galderma (a issued an appealable decision on the household and personal
50/50 joint venture between L’Oréal and Nestlé) for an care sector concerning events that took place in the early
enterprise value of €3.1 billion (equity value of €2.6 billion), 2000s, and fined L’Oréal S.A. an amount of €189.5 million.
paid by Nestlé in L’Oréal shares (21.2 million shares). This L’Oréal refutes accusations of concerted practices with its
transaction gave rise to a pre-tax capital gain of €2.6 billion competitors, and regrets that the French competition authority
for accounting purposes; did not take into account the highly competitive French market
in personal care products as illustrated by the number of
s in cash for the remainder, corresponding to 27.3 million manufacturers and retailers present on the market, the large
L’Oréal shares held by Nestlé, for an amount of €3.4 billion. choice of products available to consumers, the high degree of
innovation and the number of product launches. L’Oréal is
The price per L’Oréal share used for this transaction was the extremely surprised by this decision and by the amount of the
average of its closing prices between Monday November 11th, fine, which it considers totally out of proportion. L’Oréal has
2013 and Monday February 10th, 2014, i.e. €124.48. All shares filed an appeal against this decision. A provision for the
bought back by L’Oréal were cancelled. amount of the fine was booked at end-2014.
1.1. Sales
These are comprised of sales of goods (net of rebates and 1.4. Income tax
discounts) and services (including technological assistance
The Company has opted for the French tax group regime.
fees).
French companies included in the scope of tax consolidation
recognise an income tax charge in their own accounts on the
basis of their own taxable profits and losses.
1.2. Advertising and promotion
L’Oréal, as the parent company of the tax group, recognises
expenses as tax income the difference between the aggregate tax
Expenses relating to the advertisement and promotion of charges recognised by the subsidiaries and the tax due on the
products to customers and consumers are recognised as basis of consolidated taxable profit or loss of the tax group.
expenses for the year in which the advertisement or
promotional initiative takes place.
equity owned. If the value in use falls below the net book
1.5. Intangible assets value, an impairment is recognised.
Intangible assets are recorded in the balance sheet at
purchase cost, including acquisition costs.
1.7.2. OTHER FINANCIAL ASSETS
The value of newly acquired trademarks is calculated based
Loans and other receivables are valued at their nominal
on a multi-criteria approach taking into consideration their
amount. Loans and other receivables denominated in foreign
reputation and their future contribution to profits.
currencies are translated at the exchange rate prevailing at
In accordance with regulation no. 2004-06 on assets, certain the end of the financial year. If necessary, impairments are
trademarks have been identified as amortisable in recognised against these items to reflect their value in use at
accordance with their estimated useful life. the end of the financial year.
Non-amortisable trademarks are tested for impairment at least Treasury stock acquired in connection with buyback
once a year on the basis of the valuation model used at the programmes to be cancelled is recognised in other long-term
time of their acquisition. An impairment is recorded where investments.
appropriate. Initial trademark registration costs are recorded
At the end of the financial year, other long-term investments
as expenses.
are compared with their probable sale price and a provision
Patents are amortised over a period ranging from two to ten for impairment recognised where appropriate.
years.
5
method over its probable useful life, generally between five An impairment is made for obsolete and slow-moving
and seven years. It is also subject to accelerated tax-driven inventories on the basis of their probable net realisable value,
amortisation, which is recognised over a 12-month period. estimated on the basis of historic and projected data.
Other intangible assets are usually amortised over periods not
exceeding 20 years.
1.9. Trade accounts receivable
and other receivables
1.6. Tangible assets Trade accounts receivable and other receivables are
Tangible assets are recognised at purchase cost, including recorded at their nominal value. Where appropriate, an
acquisition expenses. impairment is recognised based on an assessment of the risk
of non-recovery.
The useful lives of tangible assets are as follows:
Useful lives
Buildings 20-50 years
Fixtures and fittings 5-10 years
1.10. Marketable securities
Industrial machinery and equipment 10 years Marketable securities are recognised at purchase cost and
Other tangible assets 3-10 year are valued at the end of the financial year at their probable
sale price.
Both straight-line and declining-balance depreciation is Treasury stock held that is specifically allocated to employee
calculated over the actual useful lives of the assets stock option plans is recognised in marketable securities.
concerned. Exceptionally, industrial machinery and
equipment is depreciated using the straight-line method over No discount is granted on the exercise price of the options.
a period of ten years, with all additional depreciation classified Provided that the shares are purchased at a lower price than
as accelerated tax-driven depreciation. the exercise price, no impairment is required. However, an
impairment is recognised in the event of a decline in the
market price, representing the difference between the book
value of the Treasury stock and the average share price in the
1.7. Financial assets month preceding the reporting date.
These provisions are estimated on the basis of the most likely 1.14. Employee retirement
assumptions or by using statistical methods, depending on obligations and related benefits
their type.
L’Oréal S.A. operates pension, early retirement and other
benefit schemes for employees and retired employees in
accordance with local legislation and regulations. Corporate
1.12. Accounting for foreign officers are regarded as employees for all additional benefits
currency transactions and relating to their remuneration, and are therefore covered by
exchange rate hedges the same employee benefit schemes.
All receivables and payables denominated in foreign These obligations are partially funded by an external scheme
currencies are translated at the exchange rates prevailing at where the funds are gradually built up through contributions
the end of the financial year. paid. The contributions are expensed as incurred under the
Other purchases and external charges caption.
Exchange rate hedging instruments are contracted to hedge
commercial transactions recognised in the balance sheet or The related obligations are measured using an actuarial
future transactions that are considered to be highly probable. valuation method based on final salaries. The method takes
Gains and losses generated by these instruments are account of length of service, life expectancy, turnover by
recognised symmetrically with the gains and losses arising on category of personnel and economic assumptions such as
the hedged items. inflation and discount rates.
Translation differences on operating assets and liabilities and No provision is recognised in the balance sheet for net
related hedging instruments are recognised in the balance unfunded obligations, which are shown in off-balance sheet
sheet as Unrealised exchange losses or Unrealised exchange commitments.
gains. A provision is recognised if the sum of these unrealised Since 2004, the obligation in respect of long-service awards is
exchange gains and losses shows a potential exchange loss no longer recognised as an off-balance sheet commitment;
based on the overall exchange position of all currencies taken instead, a provision is recognised in the balance sheet based
together. on an actuarial valuation of the obligation.
Hedges have already been taken out in respect of forecasted
operating transactions for the next financial year. The impact
of such hedges on profit or loss will be recorded during the
same accounting period as the transactions hedged.
NOTE 2 Sales
The Company generated €1,397.4 million of its sales in France in 2014, compared with €1,372.9 million in 2013 and €1,289.2 million
in 2012.
5
NOTE 5 Depreciation, amortisation and charges to provisions
Exceptional items represented €2 431.3 million in 2014, compared to €8.1 million in 2013 and €43.1 million in 2012.
In 2014, changes in exceptional items chiefly reflect the €2 601.7 million capital gain on the disposal of Galderma shares and the
€189.5 million fine handed down against L’Oréal S.A. by the competition authority ruling in the first instance on December 18th, 2014.
A provision was set aside for the full amount of this fine.
In 2014, the income tax charge recognised by L’Oréal includes dividends (€45.2 million) and a tax consolidation deficit
the tax on the capital gain arising on the disposal of the (€26.5 million).
Galderma shares (€118.1 million), the additional 3% tax on
In 2013, the income tax gain booked reflects the expense charge to regulated provisions along with research and
relating to the additionnal 3% levy on the amount of dividends corporate sponsorship tax credits among others.
paid (€41.4 million) and saving of €79.3 million resulting from
tax consolidation. Income tax are calculated taking account of the exceptional
temporary 10.7% contribution for 2014 and 2013.
In 2012, the income tax expense includes a saving of
€77.9 million resulting from tax consolidation and the impact of As in 2013, the CICE (Crédit d’Impôt Compétitivité Emploi) tax
tax audits. credit was recognised as a deduction from personnel costs in
an amount of €4.7 million in 2014 (€3.3 million in 2013). The
The application of tax legislation led to an increase of CICE tax credit represents 6% of salaries paid in respect of 2014
€47.7 million in net profit for 2014, chiefly reflecting the net versus 4% in 2013, and was allocated to investments in real
estate projects, mainly regarding the Clichy and Aulnay sites.
5
Charges deducted (or revenue taxed) for tax
purposes but not yet recognised - 1.9 - 3.2 3.2 3.7 - 3.7
Temporarily non-taxable revenue - - - - - - - -
Deductible items
Tax losses, deferred items - - - - - - - -
Potentially taxable items
Special reserve for long-term capital gains - 188.6 - 188.6 - - - 188.6
Expenses booked in Research activities in 2014 totalled €761.4 million compared with €738.6 million in 2013 and €695.4 million
in 2012.
In 2014, the increase in business goodwill comes from the In 2012, changes in assets in progress mainly came from the
complete transfer of assets and liabilities of Fipal (Decléor) and acquisition of Urban Decay trademark.
Roger&Gallet.
Depreciation and amortisation recognised in 2014 against tangible and intangible assets included:
The detailing subsidiaries and affiliates is presented at the end of the present notes.
L’Oréal shares of Treasury stock acquired in connection with Stock purchase options expiring in 2014 represent a total of
employee stock purchase option plans and free share plans 689,670 shares, for a gross value (equal to the net value) of
had a net value of €171.3 million at December 31st, 2014 €50.1 million.
against €169.4 million at December 31st, 2013 and
€296.0 million at December 31st, 2012. In 2014, the total market value of Treasury stock amounted to
€558.4 million based on the average share price in December
During 2014, stock options were exercised on 66,791 shares, and to €568.8 million based on the closing share price on
and 2,555 free shares were granted. December 31st.
In 2013, the total market value of Treasury stock amounted to In 2012, the total market value of Treasury stock amounted to
€519.8 million based on the average share price in €563.8 million based on the average share price in December
December and to €530.3 million based on the closing share and to €564.0 million based on the closing share price on
price on December 31st. December 31st.
€ millions Less than 1 year More than 1 year Gross Impairment Net
Loans and other receivables 76.5 69.9 146.4 40.7 105.7
Other financial assets 10.5 - 10.5 - 10.5
Trade accounts receivable 431.0 133.3 564.3 2.6 561.7
Other current assets, of which 190.8 - 190.8 1.6 189.2
Tax and employee-related receivables 119.8 - 119.8 - 119.8
Receivable from Group and shareholders 8.4 - 8.4 - 8.4
Other receivables 62.6 - 62.6 1.6 61.0
Prepaid expenses 43.1 43.1 - 43.1
Accrual accounts included in receivables amounted to €163.6 million at December 31st, 2014 compared with €155.6 million
5
at December 31st, 2013 and €113.8 million at December 31st, 2012.
Exercise period
Number of options
Grant date Number of options not yet exercised From To Exercise price
06.29.2005 400,000 - 06.30.2010 06.29.2015 60.17
11.30.2005 4,200,000 297,551 12.01.2010 11.30.2015 61.37
11.30.2005 1,800,000 158,361 12.01.2010 11.30.2015 62.94
04.25.2006 2,000,000 1,000,000 04.26.2011 04.25.2016 72.60
12.01.2006 5,500,000 1,156,005 12.02.2011 12.01.2016 78.06
11.30.2007 4,000,000 1,231,633 12.01.2012 11.30.2017 91.66
03.25.2009 3,650,000 1,717,439 03.26.2014 03.25.2019 50.11
04.27.2010 4,200,000 3,976,500 04.28.2015 04.27.2020 80.03
04.22.2011 1,470,000 1,233,500 04.23.2016 04.22.2021 83.19
All plans have a 5-year exercise period and no s April 22nd, 2011 plan:
performance-related conditions, except the April 22nd, 2011
plan (for all participants) and the April 27th, 2010 and • for 50% of options granted, the increase in comparable
March 25th, 2009 plans (for members of the Management Cosmetics revenues for the 2012, 2013, 2014 and 2015
Committee). The performance conditions associated with fiscal years in relation to the growth in revenues for a
these plans concern: panel of competitors;
• for 50% of options granted, the increase over the same Shares were definitively granted under the March 25th, 2009
period in the Group’s consolidated operating profit. and April 27th, 2010 free share plans, resulting in the issue of
237,800 shares on March 26th, 2013 and 389,300 shares on
The calculation will be based on the arithmetic average of the April 28th, 2014, respectively.
performance in 2012, 2013, 2014 and 2015 fiscal years and will
use a predefined allocation scale based on the performance The performance conditions concern:
percentage reached.
s April 17th, 2014, April 26th, 2013, April 17th, 2012 and
s April 27th, 2010 and March 25th, 2009 plans: April 22nd, 2011 plans:
• for 50% of options granted, the increase in comparable • for 50% of shares granted, the increase in comparable
Cosmetics revenues for the 2011, 2012, 2013 and 2014 Cosmetics revenues for the 2015, 2016 and 2017 fiscal
fiscal years for the 2010 plan and for the 2010, 2011, years under the 2014 plan ; for the 2014, 2015 and 2016
2012 and 2013 fiscal years for the 2009 plan compared fiscal years under the 2013 plan ; and the 2013, 2014 et
to the growth of the cosmetics market, 2015, fiscal years under the 2012 plan, in relation to the
growth in revenues for a panel of competitors,
• for 50% of shares granted, the percentage, over the
same period, resulting from the ratio between the • for 50% of shares granted, the increase over the same
contribution before advertising and promotion expenses, period in the Group’s consolidated operating profit.
i.e. the sum of operating profit and advertising and
promotion expenses, and published Cosmetics The calculation will be based on the arithmetic average of the
revenues. performance in the 2015, 2016 and 2017 fiscal years under the
2014 plan, in the 2014, 2015 and 2016 fiscal years under the
The calculation will be based on the arithmetic average of 2013 plan, and 2013, 2014 and 2015 fiscal years under the
performance in the 2011, 2012, 2013 and 2014 fiscal years for 2012 plan, and will use a predefined allocation scale based
the 2010 plan and in the 2010, 2011, 2012 and 2013 fiscal on the performance percentage achieved.
years for the 2009 plan, and will use a predefined allocation
scale based on the performance percentage achieved. No performance condition applies below a block of 200
shares.
At December 31st, 2014, the performance conditions were
deemed to have been met. At December 31st, 2014, the performance conditions were
deemed to have been met.
The share price used as the basis for calculating the 10%
social contribution for the April 22nd, 2011 plan was €18.58. A rebilling agreement concerning the cost of free shares has
been set up between L’Oréal S.A. and the subsidiaries
concerned for the plans 2011, 2012, 2013.
17.2. Free shares The share price used as the basis for calculating the social
contribution is €104.58 for the April 17th, 2014 plan, €112.37 for
On April 17th, 2014, April 26th, 2013, April 17th, 2012, April 22nd, free shares for the April 26th, 2013 plan and €77.07 for the
2011, April 27th, 2010 and March 25th, 2009, the Board of April 17nd, 2012 plan, and €70.36 for the April 22nd, 2011 plan.
Directors decided to grant respectively 1,068,565, 1,057,820,
1,325,050, 1,038,000, 450,000 and 270,000 free shares.
Reversals
Reversals
€ millions 12.31.2012 12.31.2013 Charges (used) (not used) Other 12.31.2014
Provisions for litigation (1) 7.9 10.8 196.5 -1.1 -1.5 204.7
Provisions for foreing exchange losses 5.7 9.3 10.8 -9.3 10.8
Provisions for expenses 87.3 94.6 75.7 -36.1 -1.3 0.4 133.3
Other provisions for liabilities (2) 137.3 120.2 37.9 -16.3 -5.6 136.2
TOTAL 238.2 234.9 320.9 -62.8 -8.4 0.4 485.0
(1) L’Oréal S.A. was fined an amount of €189.5 million further to the appealable decision issued by the French competition authority on December 18th, 2014. L’Oréal has
appealed this decision. A provision was booked for the amount of the fine at December 31st, 2014.
(2) This item mainly includes provisions set aside to cover tax risks and other risks related to government bodies, commercial and financial risks, and personnel-related
costs.
The changes in provisions for liabilities and charges impact the income statement as follow:
5
NOTE 19 Borrowings and debt
L’Oréal obtains financing through medium-term bank loans Liquidity on the commercial paper issues is provided by
and from short-term commercial paper issued in France. confirmed short-term credit facilities with banks, which
The amount of the programme is €4,000 million. None of the amounted to €3,300 million at December 31st, 2014
Group’s borrowings or debt contains an early repayment (€3,200 million at December 31st, 2013 and €2,550 million at
clause linked to financial ratios (covenants). December 31st, 2012).
All borrowings and debt are denominated in euros and can be broken down as follows:
Effective interest rate and average interest rate on borrowings and debt
The effective interest rate on commercial papers was 0.35% at the end of 2014.
The average interest rate on commercial papers was 0.37% in 2014, 0.10% in 2013 and 0.35% in 2012.
The average interest rate increased in 2014 as L’Oréal extended the average maturity of its commercial paper drawdowns.
Accrual accounts included in trade accounts payable and other current liabilities are as follows:
The revaluation of foreign currency receivables and payables at the exchange rates prevailing at December 31st, taking account of
the related hedging instruments, led to the recognition of the following unrealised exchange gains and losses:
In accordance with the accounting principles described recognised through profit and loss. At December 31st, 2013, the
above, the overall foreign exchange position at overall foreign exchange position was an unrealised loss of
December 31st, 2014 is an unrealised loss of €10.8 millions €9.3 millions compared with an unrealised loss of €5.7 millions
arising mainly on the Venezuelan bolivar. This loss is at December 31st, 2012.
All material related-party transactions were entered into on an arm’s length basis.
provision when a risk is found to exist and the related cost can
24.3. Contingent liabilities be reliably estimated.
In the ordinary course of its operations, L’Oréal is involved in
No exceptional event or dispute is highly likely to have a
legal actions and is subject to tax assessments, customs
material impact on the earnings, financial position, assets or
controls and administrative audits. The Company sets aside a
operations of the Company.
This caption mainly includes flows related to Treasury stock, classified within marketable securities, as well as flows related to
cash-collateral agreements granted to the bank of the Group, classified within financial assets.
Statutory audit fees are presented in the note 33 to the Consolidated financial statements.
No event occurred between the end of the financial year and the date the Board of Directors authorised the financial statements for
issue.
BOOK VALUE of
investment DIVIDENDS (1)
Share PROFIT or LOSS booked during
capital Other equity % holding Gross Net in last year the year
B. Main French investments (Holdings of less than 50%)
Innéov France 130 -1,128 0.00 n/s n/s -1,494
La Roche-Posay Dermato-Cosmétique 2 0 1.00 0 0 -39
(2) (2)
Sanofi 8.96 423,887 423,887 331,036
(1) The SNCs (general partnership), and Sociétés civiles (non trading companies), that are not tax consolidated, distribute all their profit.
(2) Sanofi : this information is not available.
At the end of 2014 L’Oréal owns 118, 227, 307 shares. The market value amounts to €8, 945, 078 thousand on the basis of the closing price.
BOOK VALUE of
investment DIVIDENDS (1)
Share PROFIT or LOSS booked during
capital Other equity % holding Gross Net in last year the year
A. Main foreign subsidiaries (Holdings of over 50%)
Beautycos International Co. Ltd (China) 52,482 77,273 73.46 46,195 46,195 5,314
Beautylux International Cosmetics
(Shanghai) Co.Ltd (China) 5,629 -1,201 100.00 16,871 3,822 97
Biotherm (Monaco) 152 16 99.80 3,545 3,545 5,461 5,462
Canan Kozmetik Sanayi Ve Ticaret A.S.
(Turkey) 6,451 19,663 100.00 30,290 30,290 6,608
Cosmelor Ltd (Japan) 3,554 7,436 100.00 35,810 19,810 455
Cosmephil Holdings Corporation (Philippines) 171 -137 100.00 400 14 0
Egyptelor LLC (Egypt) 6 177 99.80 7 7 53
Elebelle (Proprietary) Ltd (South Africa) 806 30,025 100.00 61,123 46,783 2,521 2,360
Erwiton S.A. (Uruguay) 739 2,128 100.00 17 17 7,469 6,584
Galderma Pharma S.A. (Switzerland) 0.00 0 0 41,744
Kosmepol Sp. z.o.o. (Poland) 38,844 43,167 99.73 48,965 48,965 6,141
L’Oréal Adria d.o.o. (Croatia) 131 1,078 100.00 1,503 1,503 7,595 6,445
L’Oréal Argentina S.A. (Argentina) 18,937 89,028 94.90 123,735 77,820 37,562
L’Oréal Australia Pty Ltd 2,711 18,097 100.00 33,867 33,867 38,581 36,500
L’Oréal Balkan d.o.o. (Serbia) 1,283 -466 100.00 1,285 1,285 865 1,097
L’Oréal Baltic SIA (Latvia) 387 2,173 100.00 529 529 2,416 3,482
L’Oréal Belgilux S.A. (Belgium) 16,124 18,177 98.93 77,150 77,150 19,066 26,848
L’Oréal Brasil Pesquisas 7,583 154 99.96 7,583 7,583 807
L’Oréal Bulgaria EOOD 102 700 100.00 102 102 2,838 2,473
L’Oréal Canada Inc. 3,979 8,428 100.00 146,517 146,517 70,554 77,211
L’Oréal Central America (Panama) 8 -200 100.00 8 8 -221
L’Oréal Central West Africa (Nigeria) 220 -2,397 99.91 2,748 48 -3,264
L’Oréal Ceska Republika s.r.o (Czech
Republic) 5,939 1,465 100.00 8,678 8,678 5,815 6,123
L’Oréal Chile S.A. (Chile) 20,888 9,745 100.00 43,784 43,784 30,253 23,306
L’Oréal China Co Ltd (China) 43,498 92,523 100.00 345,733 345,733 209,447 188,635
L’Oréal Colombia S.A. (Colombia) 10,688 47,248 96.57 72,547 72,547 1,142
L’Oréal Cosmetics Industry S.A.E (Egypt) 48,082 -12,176 100.00 48,063 32,263 -2,639
L’Oréal Danmark A/S (Denmark) 270 5,307 100.00 8,336 8,336 14,179 11,226
L’Oréal Deutschland Gmbh (Germany) 12,647 275,804 100.00 76,855 76,855 169,043 217,424
L’Oréal East Africa Ltd (Kenya) 191 -3,336 99.90 191 191 -4,010
L’Oréal Espana S.A. (Spain) 59,911 20,173 63.86 299,154 299,154 48,076 25,081
L’Oréal Finland Oy (Finland) 673 17 100.00 1,280 1,280 10,853 12,431
L’Oréal Guatemala S.A. 1,044 916 100.00 2,162 2,162 529 1,467
L’Oréal Hellas S.A. (Greece) 9,736 2,119 100.00 35,307 35,307 6,386 4,391
L’Oréal Hong-Kong Ltd 3 7,957 99.97 604 604 82,330 191,792
L’Oréal India Private Ltd (India) 60,050 -151 100.00 78,598 57,416 5,439
L’Oréal Investments B.V. (The Netherlands) 18 0 100.00 18 18 -1
L’Oréal Israel Ltd 4,137 11,186 92.97 38,497 36,097 7,157 5,419
L’Oréal Italia Spa 1,680 56,065 100.00 226,469 226,469 54,559 51,060
L’Oréal Japan Ltd (Japan) 370 -1,986 100.00 275 0 -717
BOOK VALUE of
investment DIVIDENDS (1)
Share PROFIT or LOSS booked during
capital Other equity % holding Gross Net in last year the year
L’Oréal Kazakhstan Llp (Kazakhstan) 422 1,924 100.00 422 422 6,709 7,015
L’Oréal Korea Ltd (Korea) 1,991 1,575 100.00 20,794 20,794 7,210 4,643
L’Oréal Liban SAL 3,139 974 99.88 7,693 7,693 15,588 12,641
L’Oréal Magyarorszag Kosmetikai Kft
(Hungary) 428 -75 100.00 787 787 2,759 2,307
L’Oréal Malaysia SDN BHD (Malaysia) 3,268 2,919 100.00 6,762 6,762 11,049 8,520
L’Oréal Mexico S.A de C.V (Mexico) 2,349 102,481 100.00 8,443 8,443 35,870 35,194
L’Oréal Middle East (United Arab Emirates) 7,761 2,172 100.00 54,379 54,379 56,083 40,769
L’Oréal Nederland B.V. (The Netherlands) 1,178 95 100.00 22,014 22,014 22,030 24,562
L’Oréal New Zealand Ltd (New Zealand) 44 2,831 100.00 6,110 6,110 7,030 6,407
L’Oréal Norge A/S (Norway) 1,384 1,934 100.00 4,050 4,050 17,472 16,468
L’Oréal Osterreich Gmbh (Austria) 2,915 1,366 100.00 3,818 3,818 14,762 14,162
L’Oréal Pakistan Private Ltd 15,563 -13,216 100.00 15,582 4,582 -3,044
L’Oréal Panama S.A. 159 2,955 100.00 168 168 10,481 9,103
L’Oréal Peru S.A.(Peru) 2,322 493 100.00 3,739 3,739 -1,880 858
L’Oréal Philippines Inc. 12,344 -13,798 99.46 27,241 41 -2,662
L’Oréal Polska Sp. Z.O.O. (Poland) 405 -168 100.00 707 707 31,859 25,392
L’Oréal Portugal Lda 495 961 100.00 6,459 6,459 11,263 8,862
L’Oréal Romania SRL (Romania) 2,187 431 100.00 5,883 5,883 5,203 4,540
L’Oréal Saudi Arabia (Saudi Arabia) 5,682 442 74.63 4,260 4,260 919 441
5
L’Oréal Singapore Pte Ltd (Singapore) 1,165 4,634 100.00 18,991 18,991 4,469 6,333
L’Oréal Slovenija kosmetika d.o.o.(Slovenia) 465 432 100.00 856 856 642 578
L’Oréal Slovensko s.r.o. (Slovakia) 1,598 770 100.00 1,673 1,673 4,516 3,130
L’Oréal Suisse S.A. 346 6,032 100.00 160,311 160,311 34,395 29,089
L’Oréal Sverige AB (Sweden) 2,038 584 100.00 2,247 2,247 17,796 22,881
L’Oréal Taiwan Co Ltd (Taiwan) 187 1,511 100.00 17,881 17,881 22,016 19,187
L’Oréal Thailand Ltd 3,992 2,973 100.00 5,238 5,238 21,014 16,320
L’Oréal Turkiye Kozmetik Sanayi Ve Ticaret
Anonim Sirketi 39,142 -23,267 100.00 55,093 36,203 8,710
L’Oréal UK Ltd (United Kingdom) 121,150 -133,108 100.00 145,573 145,573 136,967 121,373
L’Oréal Ukraine 3,033 -1,627 100.00 2,990 2,990 11,054 9,580
L’Oréal Uruguay S.A. 485 7,888 100.00 5,435 5,435 5,092
L’Oréal USA Inc. (4) 4,402 3,040,947 100.00 3,797,447 3,797,447 433,853 408,470
L’Oréal Venezuela C.A. 12,765 32,562 100.00 26,953 13,667 29,010
L’Oréal Vietnam Co Ltd 9,645 -14,111 100.00 9,754 2,354 -1,640
Magic Holdings Internatinal Limited 9,765 66,823 100.00 615,198 615,198 -5
Masrelor LLC (Egypt) 15,644 -958 100.00 15,531 31 -15
Nihon L’Oréal KK (Japan) 138,845 16,794 100.00 415,182 396,441 18,001
Parbel of Florida Inc. (USA) 40 -5,269 100.00 100,317 100,317 25,908 24,950
Procosa Productos de Beleza Ltda (Brazil) 100,647 140,046 100.00 170,243 170,243 46,758
P.T. L’Oréal Indonesia 1,510 -2,282 99.00 2,305 2,305 4,926
P.T. Yasulor Indonesia 73,931 -7,626 99.99 110,022 65,522 2,224
Scental Limited (Hong Kong) 5 182 100.00 8 8 0
Sofamo (Monaco) 160 -41,160 99.99 1,852 0 504
The Body Shop International PLC
(United Kingdom) (3) 14,553 937,549 100.00 992,445 992,445 41,199 26,114
Venprobel (Venezuela) 20 -69 100.00 2,722 0 0
B. Main foreign subsidiaries
(Holding of less than 50%) n/s n/s n/s n/s n/s n/s n/s
For foreign subsidiaries and investments, the capital reserves and retained earnings have been translated into thousands of euros on the basis of year-end exchanges
rates, while profits and losses have been translated at average rate. It is specified that the list above is not exclusive.
(3) The Body Shop: Consolidated figures for the sub-group.
(4) Figures from the sub-consolidation of L’Oréal USA Inc.
N.B: These net sales figures include sales of goods and finished products, accessories, waste and services, less reductions in respect
of sales. These sales include, in particular, supplies of goods to various subsidiaries which are recorded as intercompany sales from
a consolidated accounts standpoint.
/ INVESTMENTS
(main changes including shareholding threshold changes > 5%)
Situation at 12.31.2013
Including revaluation Acquisitions Subscriptions Others Situation at 12.31.2014
Headings (€ millions) Amount % Amount % Amount % Amount % Amount %
L’Oréal India PVT Ltd 68.5 99.99 10.1 99.99 78.6 99.99
Magic holdings international Ltd 615.2 100.00 615.2 100.00
L’Oréal Argentina S.A 103.4 94.90 20.3 94.90 123.7 94.90
YSL Beauté Holding 299.6 89.80 13.2 10.20 (1) 312.8 100.00
Roger&Gallet 109.7 100.00 -109.7 100.00 (1) 0.0
L’Oréal Central West Africa 1.2 99.91 1.6 99.91 2.7 99.91
Galderma pharma 10.1 50.00 -10.1 50.00 (3) 0.0
Galderma international 0.0 26.44 -0.0 26.44 (3) 0.0
Lai Mei 11.2 100.00 -11.2 100.00 (2) 0.0
YSL Beauté Vostok 5.5 99.97 -5.5 99.97 (2) 0.0
L’Oréal Colombia 6.4 94.00 66.2 100.00 72.5 96.57
Centrex 1.8 99.99 -1.8 100.00 (1) 0.0
Fipal 154.5 100.00 -154.5 100.00 (1) 0.0
Laboratoires Decleor 58.3 100.00 (1) 58.3 100.00
Carita International 58.3 100.00 -0.0 100.00 (3) 58.3 99.99
Club Créateurs de Beauté Belgique 3.8 100.00 -3.8 100.00 (2) 0.0
L’Oréal Vietnam Co Ltd 7.4 100.00 2.3 100.00 9.8 100.00
L’Oréal Pakistan Private Ltd 11.0 99.99 4.5 99.99 15.6 99.99
Masrelor 13.7 99.99 1.8 99.99 15.5 99.99
L’Oréal Cosmetics Industry 42.3 99.99 5.8 99.99 48.1 99.99
L’Oréal Brasil Pesquisas 7.6 99.96 7.6 99.96
L’Oréal Philippines 22.2 99.45 5.0 100.00 27.2 99.46
(4)
Beauté Recherche & Industrie 20.3 100.00 -1.2 19.1 100.00
Laboratoire Inneov 30.9 50.00 0.8 50.00 31.7 50.00
This is a free translation into English of the Statutory Auditors’ report issued in French and is provided solely for the convenience of English
speaking readers. The Statutory Auditors’ report includes information specifically required by French law in such reports, whether modified or
not. This information is presented below the opinion on the financial statements and includes an explanatory paragraph discussing the
Auditors’ assessments of certain significant accounting and auditing matters. These assessments were considered for the purpose of issuing
an audit opinion on the financial statements taken as a whole and not to provide separate assurance on individual account captions or on
information taken outside of the financial statements.
This report also includes information relating to the specific verification of information given in the Management Report.
This report should be read in conjunction with, and construed in accordance with, French law and professional auditing standards
applicable in France.
To the Shareholders,
In compliance with the assignment entrusted to us by your Annual General Meeting, we hereby report to you, for the year ended
December 31, 2014, on:
s the audit of the accompanying financial statements of L’Oréal;
s the justification of our assessments;
s the specific verifications and information required by law.
These financial statements have been approved by the Board of Directors. Our role is to express an opinion on these financial statements
based on our audit.
* This information forms an integral part of the Annual financial Report as provided for an article L451-1-2 of the French Monetary and Financial Code.
; The Statutory Auditors have expressed a reasonable assurance on this selected information.
At the end of 2013, the Group presented its commitments with regard
to Sustainable Development by 2020 through the "Sharing Beauty With
All" programme. This public announcement testifies to L’Oréal’s
ambition, and the strong commitment of its management and all its
teams to building and ensuring sustainable growth.
L’Oréal now has a solid Sustainable Development legacy and has set
itself big ambitions for the future with commitments integrated into its
growth model.
Innovating sustainably;
Producing sustainably;
Living sustainably;
Developing sustainably.
The Group describes each year the progress made and its
achievements in the various areas concerned (Human Rights, labour
standards, environmental standards and anti-corruption measures),
namely through its Sustainable Development Report, the Global
Reporting Initiative (GRI) indicators and those of the United Nations
Global Compact.
Signature of the mandatory profit sharing agreement L’Oréal receives the Anti-Defamation League’s International
1968 for French employees Leadership Award
Signature of the incentive profit sharing agreement L’Oréal’s Professional Products Division and UNESCO sign
1988 for French employees 2005 a cooperation agreement for education in AIDS prevention
1989 End of animal testing for finished products 2006 L’Oréal receives the Global Business Coalition against HIV award
1993 Creation of the annual EHS Awards Creation of the “Citizen day”
Creation of the Instance Européenne de Dialogue
1996 Social / European Works Council Creation of the L’Oréal Corporate Foundation
Launch of the international “L’Oréal – UNESCO For Women
1998 in Science” programme 2007 Publication of the Group's 2nd edition of the Code of Ethics
L’Oréal pledges, for the first time, to reduce CO2 emissions,
Publication of the Group’s 1st Code water consumption and waste generation by 50% at all its factories
2000 of Ethics and logistics centres
Implementation of the Worldwide Profit Sharing Program – WPS 2009 First participation in the CDP supply chain project for 2008
L’Oréal joins the World Business Council
2001 for Sustainable Development Creation of a “Solidarity Sourcing” global programme
L’Oréal confirms its commitment to corporate citizenship
2002 by signing the United Nations Global Compact Creation of the “Ergonomic Attitude” programme
1st European gender equality label, the “Gender Equality European
Signature of the United Nations Anti-Corruption Convention 2010 Standard” (GEES) for 8 of its entities in Europe
6
Launch of the “Sharing Beauty With All” programme
Launch of the ISO 14001 certification programme 2013 Launch of the "Share & Care " programme
L’Oréal obtained from the CDP
a score of A for performance and 98 for transparency
L’Oréal received a Best performer in Climate Change Leadership
2003 First participation in the CDP (Carbon Disclosure Project) award
L’Oréal wins the Diversity Leadership Award presented by Diversity
2004 Best Practices 2014 Publication of the Group's 3rd edition of the Code of Ethics
the different beauty needs of men and women all over the
6.1.2. A commitment for the future: world. The Group’s growth strategy is partly based on its
"Sharing Beauty With All" commitment to produce more, with less impact, and to involve
programme consumers, who are at the heart of its business activities, by
offering them products which are both sustainable and
THE L’ORÉAL GROUP’S SUSTAINABLE aspirational, thus inciting them to make sustainable choices. For
DEVELOPMENT COMMITMENTS FOR 2020: “SHARING this purpose, L’Oréal has undertaken to improve its practices
BEAUTY WITH ALL”. throughout its value chain, from research to production, while
sharing its growth with the surrounding communities.
On October 23rd, 2013, Jean-Paul Agon, Chairman and Chief
Executive Officer of L’Oréal, announced the commitments that These commitments are the fruit of two years of consultation
L’Oréal has set itself by 2020, to reduce its impact while with various stakeholders throughout the world. L’Oréal will
achieving its growth ambition. regularly communicate on its progress with regard to each of
the objectives with the assistance of a panel of independent
international experts(1), chaired by José Maria Figueres(2),
SUSTAINABILITY AT THE SERVICE OF GROWTH
recognised throughout the world for his commitment to
L’Oréal’s ambition is to reach one billion new consumers Sustainable Development.
through its universalisation strategy which aims to respond to
(1) The panel of international experts: • Sze Ping, Chinese environmentalist, former Greenpeace activist, Executive Director of Greenovation Hub
• Mehjabeen Abidi-Habib, Pakistani researcher in human ecology, specialist of natural resources management • HRH Celenhle Dlamini, South African,
one of the Directors of Ubuntu Institute working on the achievement of the UN Millenium Development objectives; • Analisa Balares, American, Founder
and CEO of WomensphereTM, developing media tools, online communities, and an award to inspire and support women willing to make a difference
in the world • Christian de Boisredon, French, promoting the concept of “impact journalism” through Sparknews, in order to give visibility to positive
initiatives throughout the world.
(2) Former President of Costa Rica and strongly committed to environmental issues.
/ INNOVATING SUSTAINABLY
“By 2020, we will innovate so that 100% of products have an environmental or social benefit.”
2020 Targets 2014 Results
100% of our products will have a positive environmental or social benefit. 67% of new products that have been screened have an improved
Every time we invent or update a product, we will improve its environmental or social profile(1).
environmental or societal profile against at least one of the following
criteria:
s the new formula uses renewable raw materials that are sustainably 46% of new renovated products have an improved social / environmental
sourced or raw materials derived from green chemistry; profile due to a new formula including sustainably sourced renewable raw
materials or raw materials respecting the principles of green chemistry
s the new formula reduces the environmental footprint; 54% of new or renovated products have an improved environmental
profile due to a new formula with a reduced environmental footprint.
s the new packaging has an improved environmental profile; Indicator not available for 2014.
Baseline currently being calculated. A strict eco-design policy is developed
at all the Group’s Packaging Design centres. For example, one of L’Oréal’s
objectives is for all paper and cardboard packaging to be sourced from
sustainably managed forests. In 2014, more than 97.9% of paper and
cardboard packaging supplies were certified sustainable in accordance
with FSC or PEFC standards.
s the new product has a positive social impact. 17% of new or renovated products have an improved social profile thank
to a positive social impact.
(1) The analysis of new products in 2014 does not include make-up or fine fragrances. All other categories (shampoos, hair care, shower gels, skin care, cleansers, hair
colouring, styling, permanents, deodorants, sun care) have been analysed, as they are all formulas produced in the Group’s plants in 2014.
/ PRODUCING SUSTAINABLY
“By 2020, we will reduce our environmental footprint by 60% whilst bringing beauty to one billion new
consumers.”
2020 Targets 2014 Results
We will reduce CO2 emissions at our plants and distribution centres CO2 emissions have been reduced by 50.2% from a 2005 baseline(1).
by 60% in absolute terms, from a 2005 baseline.
We will reduce our water consumption by 60% per finished product unit,
from a 2005 baseline.
We will reduce waste by 60% per finished product unit,
Water consumption was reduced by 36% from a 2005 baseline(2).
/ LIVING SUSTAINABLY
"By 2020, the Group wants to empower all L'Oréal consumers to make sustainable consumption
choices."
2020 Targets 2014 Results
We will use a product assesment tool to evaluate the environmental and The percentage of brands that provide the consumer with information
social profile of 100%l new products and all brands will make this obtained from the Product Assessment Tool in order to allow them to make
information available to allow consumers to make sustainable lifestyle well-informed consumption choices, and the percentage of new products
choices. assessed using the Product Assesment Tool are not available this year.
At the beginning of 2014, L'Oréal began to develop a prototype assesment
tool for the social and environmental impacts of a cosmetic product. The
tool will make it possible to evaluate and improve the (new or renovated)
products on the basis of 11 relevant criteria (7 environmental criteria
relating to packaging and formula and 4 social criteria). It is tested on 4
pilot brands: Biotherm, Redken USA, La Roche-Posay and Garnier. Within
the scope of this process, baselines have been constituted both for
formulas and for packaging. Thus, more than 28,000 Formulas and
12,000 packaging have been assessed using the tool's criteria.
All L'Oréal brands wil assess where they have the biggest environmental 22% of the brands have evaluated where they had the biggest social or
and socal impact and make commitments to improve their footprint. environmental impact (1).
The Biotherm brand has implemented the "Sharing Beauty With All"
programme in its entirety, evaluating its impact, and building its brand
platform around water under the umbrella of the Water Lovers programme.
Working groups to conduct a diagnostic review of packaging and formula
have been set up withKérastase, Garnier, The Body Shop, La Roche-Posay
and at the level of Professional Products Division.
Every brand will report on its progress and raise awareness among 25.4% of the brands have carried out an action to raise awareness
consumers about sustainable lifestyle choices. among consumers(1).
The Biotherm, Garnier, La Roche-Posay, The Body Shop, Kiehl’s, Armani
brands are already raising awareness among consumers about
responsible lifestyle choices through various programs.
Our consumers will be able to influence our sustainability actions through Indicator not available this year.
a consumer sustainability panel. The consumer consultation group for the purpose of influencing our
Sustainable Development actions will be set up in 2016.
(1) The percentage of brands in 2014 is calculated based on their share of 2013 consolidated turnover.
6.2.1. The L’Oréal Group’s Human • The ambition of putting each employee in a position to
develop their career.
Resources policy
Individual performance monitoring and a large number
L’Oréal has built its human and social project around two of career development opportunities and training
priorities: individual performance and social performance, two programmes that are accessible to everyone, in addition
key factors in the success of the world leader in beauty. to class-room based training, are aimed at allowing
each and every employee to develop. The programmes
While accelerating the recruitment and development of talents
may be rolled out throughout the world, thanks to the
all over the world, in order to ensure sustainable growth,
international locations of training structures and the use
L’Oréal is keen to offer all its employees an environment in
of digital technologies with the “My learning” portal
which everyone can reveal their talents, improve and thrive
which offers all employees opportunities for online
and where they all feel that their contributions are recognised
training. The large-scale mobility between jobs and
and that they receive support.
between countries and the many individual promotions
L’Oréal’s Human Resources policy is founded on: made each year attest to the vitality of career
management. This management is based on a network
s A vision focusing on performance and individual talent. of Human Resources professionals, who are both in tune
with employee expectations and aware of the
L’Oréal has always put the human dimension at the centre
requirements of our business. The close cooperation
of the Company by projecting a long-term vision for its
between these Human Resources professionals and the
talents. The mission of the Human Resources Department is
operational managers makes it possible to have a
currently to develop the talent of every employee and
two-way perspective with regard to talents and to define
prepare tomorrow’s leaders, by favouring, in particular, the
the most suitable development opportunities for each of
emergence of local talents, to support the Group’s
them.
ambition to win a billion new consumers.
s Offering a solidarity-based, fulfilling working environment.
• Ongoing recruitment of talented individuals.
L’Oréal pays particular attention to the level of its social
The Group constantly strives to enhance its pool of
performance. The Group has set itself the target of promoting
talents, in all countries. Recognised as one of the most
its values by creating a pleasant and conducive working
attractive companies in the world for young graduates
environment, marked by solidarity and respect, and where all
and one of the companies that provide the most training
employees can fulfil personal development with:
with regard to leadership, the Group conducts a
diversified recruitment policy, which is based both on • the desire to recognise the effective contribution made
partnerships with the best educational institutions in the by everyone through a dynamic remuneration policy
world and the use of corporate gaming attracting tens and short-, medium- and long-term global incentive and
of thousands of students from all over the world and a profit sharing systems among others ;
proactive strategy of looking for candidates via digital
technologies. L’Oréal also develops its own selection • a regular evaluation of the expectations of employees
methods to recruit the best talents and those which best throughout the world through large-scale opinion polls
represent the diversity of its consumers from among leading to the implementation of action plans ;
the million spontaneous applications received every
• the search for a work environment and working
year.
conditions that will help everyone to achieve personal
satisfaction ;
s CARE (health cover), to provide employees and their This programme, which will make it possible to respond to the
families with access to a high-quality healthcare system essential needs of each and every one of our employees and
which is among the top performers on the local market. This anchor their commitment, will make L’Oréal one of the
involves, for example: companies with the best practices in terms of social
performance and well-being at work.
• offering employees medical cover providing for
reimbursement of at least 75% of healthcare costs related to The launch and implementation of this programme
the main medical risks: hospital stays, surgery, maternity, demonstrate a strong conviction, whereby social performance
drugs for chronic and serious conditions; and economic performance are not only intimately linked but
they also serve to reinforce each another.
• within the framework of prevention, each subsidiary will be
required to implement, at least once a year, a health
prevention action of a collective nature (concerning
melanoma, HIV, diabetes, obesity, etc.), as well as an
6
individual action (medical check-up, online risk
assessment, etc.);
All the other social indicators set out in this chapter relate to “Cosmetics” and “The Body Shop”(2).
If an indicator relates to a scope different from that of “Cosmetics” and “The Body Shop”, the scope of consolidation is indicated in a
note.
Western
L’Oréal is pursuing its active recruitment policy for all its
Europe
27% 73% businesses and all categories of staff in the Company.
The principle of this policy is to reward all its employees PERSONNEL COSTS (INCLUDING PAYROLL COSTS)
everywhere in the world fairly by recognising the individual
€ millions 2012 2013 2014
contribution made by each of them and by proposing
diversified remuneration intended to fulfil the different Total 4,227.9 4,390.3 4,623.4
expectations of its employees. The comparison between the three years takes into account the foreign exchange
impacts and is not representative of the real evolution in personnel costs.
Its purpose is to reward the commitment made by each of
them and encourage individual and collective performances.
For this purpose, it is based on an annual performance Profit Sharing, Incentive and Mandatory Profit
assessment system (MAP) for employees applied in all the Sharing schemes
Group’s subsidiaries. This performance assessment system
makes it possible to revise the various fixed and variable For many years, L’Oréal’s policy has been to associate
components of remuneration regularly depending on the employees with the results of the Company aimed at making
position held, the skills used, the performances and the employees feel that they are part of the Company and
potential of each and every employee. It also makes it possible enhancing their motivation. This led to a redistribution of
to communicate clearly and transparently on the rules for €244 million in 2014 at the scale of the Group, on the basis of
determining remuneration, the process and the decisions the income for 2013.
made. L’Oréal has implemented a Worldwide Profit Sharing Program –
In most countries, the minimum salaries paid are much higher WPS since 2001 in all the Group’s subsidiaries in which the
than the statutory minimum wage (at a national or regional employees do not benefit from profit sharing arrangements
level or according to the collective bargaining agreement). provided for by law. This programme is not applied in the
countries which already have a similar system provided for by
As L’Oréal wants to be one of the most attractive companies law, particularly France (see box below).
wherever it has subsidiaries, surveys aimed at positioning
remuneration as compared to the market are conducted by The amounts paid are calculated locally on the basis of sales
specialist firms every year. Furthermore, internal opinion polls, and profits generated by each subsidiary as compared to
carried out periodically, make it possible in particular to budgeted targets. Implementation of the programme takes
evaluate the perceptions and expectations of employees with place locally and compliance with the principles and rules of
regard to remuneration and adapt the Group’s action plans the programme is coordinated, at Corporate level, by the
accordingly. International Labour Relations Department.
6
with the Group’s results through global incentive profit sharing PROFIT SHARING, INCENTIVE AND MANDATORY PROFIT
systems and thus strike a balance between social SHARING SCHEMES
performance and economic performance. 2012 2013 2014
€ millions
TOTAL 210 236 244
Mandatory profit sharing for 2013 paid in 2014 represented the equivalent of 0.5 month’s salary.
For an annual gross salary of The gross Incentive amount for 2013 paid in 2014 and the additional amount represented
€25,000 €7,757 i.e. 3.72 months
€35,000 €8,880 i.e. 3.04 months
€45,000 €10,003 i.e. 2.67 months
€65,000 €12,249 i.e. 2.26 months
For employees who so wish, the amounts paid in respect of In 2014, the following amount net of CSG, CRDS and the forfait
incentive and mandatory profit sharing may be invested for a social levy was invested by the employees of L’Oréal and its
minimum period of 5 years in the Company savings plan subsidiaries in France in the fund which is 100% composed of
which proposes, in particular, an employee investment fund L’Oréal shares, L’Oréal Intéressement: €60,864,905, plus the net
invested in L’Oréal Shares, on which an additional employer additional incentive amount to “share in profits for 2014” of
contribution of 25% is paid for incentive profit sharing €5,592,482.
payments.
At December 31st, 2014, 52% of the savings of L’Oréal employees were invested in L’Oréal shares, and 10,442 Group employees in
France were shareholders of L’Oréal through the savings plan.
At worldwide level, in addition to the mandatory profit sharing, with employees, financing and cost of the schemes, and
incentive profit sharing or Worldwide Profit Sharing management of the schemes. Approval must first be obtained
programmes for its employees, the Group has for several years from the Supervisory Committee prior to the introduction of any
granted stock option plans and made conditional grants new scheme or the modification of any existing scheme. The
of shares (ACAs) in an international context, in order to Supervisory Committee works closely with the operational
associate those who have made big contributions with the management of the Divisions and Zones.
future evolution of the Group’s results and help to instil a
Group spirit. The characteristics of the pension schemes and other
pre-retirement benefits offered by the subsidiaries outside
In 2009, L’Oréal enlarged its policy by introducing a France vary depending on the applicable laws and
mechanism for the conditional grant of shares, in order to regulations as well as the practices of the companies in each
reach out to a broader population of potential beneficiaries country.
thanks to a long-term incentive tool.
In 80% of the countries in which L’Oréal is established, L’Oréal
The final vesting of these shares is conditional on the participates in establishing additional retirement benefits that
achievement of performance criteria. exceed the minimum benefits provided for by social security
for its employees (e.g.: United States, the Netherlands,
In 2014, the Group continued its policy for conditional grants Belgium, Canada, South American countries). It does so
of shares; through a whole series of defined benefit and/or defined
s 1,978 employees were thus beneficiaries of the contribution schemes. In some cases, the defined benefit
April 17th, 2014 plan (2,092 in 2013); schemes have been closed to new recruits who are offered
defined contribution schemes (Germany, Belgium and the
s 83% of the beneficiaries are outside France (61% in 2013); United Kingdom). This series of defined benefit and defined
contribution schemes makes it possible to share the financial
s 47% of the beneficiaries are women (46% in 2013). risks and ensure improved cost stability. In defined contribution
In total, more than 3,000 employees, i.e. over 12% of the schemes, the Company’s commitment mainly consists in
managers worldwide, benefit from at least one stock option paying a percentage of the employee’s annual salary into a
plan or plan for the conditional grant of shares. pension plan each year.
6
Depending on the legislation and practices in each country,
L’Oréal adheres to pension schemes, pre-retirement as well as the financial stability rating of the custodians, are
arrangements and Employee Benefit schemes offering a regularly reviewed by the Supervisory Committee.
variety of additional coverage for its employees.
L’Oréal does not propose company pension schemes in
In 2002, L’Oréal set up a Supervisory Committee for pension countries which do not have an appropriate legal framework
and Employee Benefit schemes offered by its subsidiaries. This or a long-term investment instrument and in countries where
committee ensures the implementation and the monitoring of there is satisfactory public social security coverage. The
L’Oréal’s pension and Employee Benefits policy as defined by Supervisory Committee continues to be attentive to changes in
the L’Oréal Executive Committee. local situations and, when required, additional Employee
Benefit schemes are put in place.
This policy provides for general principles in the following
areas: definition and implementation of schemes, relations
This scheme grants entitlement to the payment to the The Life Annuity is calculated on the basis of the capital
beneficiary retiree, after he/she has applied for his/her formed by the contributions made and the financial income
pension entitlement from the French Social Security on such contributions at the end of the employee’s career. The
compulsory pension scheme, of a Life Annuity as well as, after employer’s commitment is limited to the payment of the
his/her death, the payment to the spouse and/or ex-spouse(s) contributions stipulated.
of a surviving Spouse Pension.
Pre-retirement arrangements saved 3 days’ leave per year under the CET since 2001, to
benefit from the possibility to terminate his/her activities at
L’Oréal pays close attention to the retirement conditions of its
least 3 months earlier than scheduled (6 months for sales
employees and pre-retirement arrangements that have been
representatives), and this possibility can be combined with
in force for a number of years were confirmed and improved
the early retirement leave;
within the scope of the agreement on the employment of older
workers, signed on December 3rd, 2009. s retirement indemnities: a new scale of indemnities at
L’Oréal was implemented by a collective Company-level
The existing arrangements are, in particular:
agreement as from 2011, which is more favourable than the
s the early retirement leave (CFC): this pre-retirement French National Collective Bargaining Agreement for the
arrangement consists of exempting employees from the Chemical Industries.
requirement to perform their activities. However, during this
Thus, when he/she retires, an employee may benefit from
period, they remain employees of L’Oréal and continue to
retirement indemnities ranging from 2 months’ salary for
receive their remuneration (within the limit of €9,280
5 years’ service, to 8 months’ salary for 40 years’ service.
gross/month) as well as mandatory profit sharing, incentive
payments and paid leave; In order to increase the special leave prior to retirement, the
employee may opt to convert his/her retirement
s early retirement leave under the time savings account: this
indemnities into time, or he/she may choose to receive
arrangement, linked to the 35-hour working week
6
payment of the retirement indemnities which will be made
agreement and the Time Savings Account (Compte
at the time when he/she leaves the Company.
Épargne Temps – CET), enables an employee who has
These commitments are guaranteed partly by external The evaluation method adopted to calculate the retirement
financial cover aimed at gradually building up funds resulting and pre-retirement benefit commitments is the retrospective
from premiums paid to external organisations. method based on estimated calculations of the final salary.
The commitments net of funds invested and the actuarial These commitments take into account the employer’s
differences are booked as a provision in consolidated balance contribution to the healthcare schemes for retirees.
sheet liabilities.
6.2.2.2. WORK ORGANISATION time depends on the local environment and the business
activities carried out.
Organisation of working time
Employees who have chosen to work part-time come from all
L’Oréal complies with the statutory and contractual obligations categories. The number of part-time employees worldwide is
with regard to working time in each of its subsidiaries. Working 10,611, of whom 9,929 are women and 682 men.
FOCUS ON FLEXIBILITY IN EUROPE AND THE USA managing working time, within a limit of 2 days a month, or 24
days a year.
Within the framework of the L’Oréal Share & Care programme,
the Group has made a commitment to promoting initiatives for GERMANY
flexible work arrangements everywhere in the world. This
involves setting up flexible systems of work according to the In 2014, L’Oréal Germany launched a new programme called
different local and business requirements. The most innovative the “flexi work program”, in line with their vision “Unser Leben
examples of such systems are in Europe with “smart work”, schöner machen” (“Making life more beautiful”).
following the example that already exists in the United States, The FWP consists of a whole set of initiatives aimed at offering
after making the necessary local adaptations. greater flexibility in working time. Some of them are new and
UNITED KINGDOM others have been enhanced to make them more accessible to
all the employees.
In 2014 L’Oréal UK launched a new initiative, called ”work
smart”, which is aimed at giving employees more flexibility in s Home office: this is one of the main innovations made by
order to enable them to work to their full potential. In concrete the FWP: this initiative already existed in the past but it is
terms, this means that employees are free to adapt their now open to all office employees. Clear rules have been
working hours and work remotely as long as their work is done drawn up and distributed to employees in this connection.
and their objectives achieved.
s Summer working hours: after a pilot phase, the period of
s This means that they have flexibility to work outside usual “summer working hours” was entered on the annual
working hours and outside the usual place of work. calendar. During this period, employees are able to leave
their place of work at 1 p.m. on Fridays.
s Unlike working-time adjustments which are generally fixed,
permanent arrangements, the goal of the scheme is to give s Flex-time: several reduced working time arrangements are
employees more flexibility without any formal changes to proposed to employees.
the employment contract and working conditions.
ITALY
UNITED STATES
Company saving plans and frozen current In the few cases where there is no employee representative
institution (essentially in subsidiaries with a small workforce),
account
the dialogue is conducted directly with the employees, in
The quality of the social climate at L’Oréal is the fruit of an complete compliance with the principles of transparency and
ongoing dialogue between Management, employees and trust that are applied uniformly throughout the Group.
their representatives, in accordance with trade union rights in
each country and with a neutral attitude with regard to the Since 2003, L’Oréal has carried out a global employee opinion
various trade union organisations. poll with the assistance of the international firm of Towers
Watson, a survey that was repeated in 2011-2012. The results
Employee representative institutions have been set up in most are shared with the employees and employee representatives.
of the European subsidiaries, the Asian subsidiaries (China, They are the subject of actions plans implemented in a
Indonesia, India, South Korea…), Africa (South Africa, Kenya..), decentralised manner, as closely as possible to the
and in North and South America (the United States, Canada, expectations expressed.
Mexico, Brazil and Argentina…), and also in Australia and New
Zealand.
It has 30 members, who receive regular training on economic and social issues.
Today, the IEDS/EWC represents approximately 30,000 employees in 26 countries which are
part of the European Economic Area; among whom the 16 countries with more than 150
employees are represented directly.
6.2.2.4. HEALTH AND SAFETY This approach is part of an overall environmental, health and
safety (EHS) policy described in the Environmental information
General policy section.
For several years, L’Oréal has applied a well-established policy L’Oréal is eager to provide a safe and healthy work
in the field of health (H) and safety (S). This defines the environment for its employees. Health and safety are of
Company’s commitment to developing, producing, paramount importance and L’Oréal’s ultimate goal is a zero
distributing and selling innovative products of the highest accident rate.
quality, while having an ethical conduct and guaranteeing
the health and safety of employees, customers and the Comprehensive programmes have been adopted that focus
communities in which L’Oréal performs its activities. on risk reduction and continuous improvement. A safety
culture has been instilled, setting high standards and involving
employees at all levels of the Company.
Keen to increase safety in the workplace, the General 1.1 ;, in particular Operations which, with a TFc = 0.65, were
Management has set an ambitious objective to improve the close to the target for 2015. In addition, there was an
results obtained. improvement of 31.4% for the sales forces and shops.
(1) TFc = Number of lost-time accidents per million hours worked by L’Oréal staff.
; The Statutory Auditors have expressed a reasonable assurance on this selected information.
s Group EHS audits:“Combined Risk and Culture Audits” were EHS priority area
implemented in 2014, in order to simplify the audit process.
The priority areas and EHS focuses for 2015 can be classified in
These audits incorporate in full the evaluation of the EHS
the 8 following areas:
culture and risk management, the assessment of the visible
commitment by managers and employees and the process 1. Updating of strategy and action plans to achieve the
of ongoing improvement through the action plans. The target for 2020 (TFc < 0.5 for all the Group’s sites);
teams of auditors are composed of employees of L’Oréal
including senior EHS managers, as well as outside experts 2. Commitment and visible participation by management;
trained in the Group’s Internal Rules, local legislation and
3. Targeted initiatives to deal with the most frequent
safety, fire prevention and related processes.
accidents, including a global ergonomic programme and
a programme to prevent falls and hand injuries;
SAFETY TARGET FOR FACTORIES AND DISTRIBUTION CENTRES TARGET: ZERO ACCIDENT IN 2014 (1)
The initial target for 2015 was to reach a TFc of less than 0.6, Out of 99 factories and distribution centres, 86 recorded a zero
namely a 81% improvement in the score with regard to safety lost-time accident rate.
by 2015 (2005 baseline: TFc = 3.09),the results for 2014 are
A DECREASING ACCIDENT SEVERITY RATE
close to this figure with TFc = 0.65.
As well as a reduction in the number of accidents, it is also
PERFORMANCE SUMMARY FOR FACTORIES AND DISTRIBUTION
CENTRES SINCE 2005 important to note that the accident severity rate has fallen by
50% versus 2013 for Operations and 40% for the Group. It
TFc (conventional frequency rate) – Factories and distribution amounts to 0.03 ; in 2014 for Operations and also for the
centres Group.
0.50
0.00
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Status report on collective agreements with development opportunities throughout their working life: this is
regard to health and safety L’Oréal’s vision of “Learning for All”.
s L’Oréal’s health and safety standards are very strict and The training offering is structured into “practices”, or fields of
often exceed the legal obligations in the different countries. expertise (marketing, commerce, research, operations,
The Health and Safety Committees and their activities do management, personal development…). Responsibility for
not necessarily lead to the signature of specific each “practice” is entrusted internally to professionals in this
agreements, but rather to joint monitoring of this subject area, whose role is to identify the Group’s current and future
(application of L’Oréal’s standards and the legal needs in terms of skills and to design appropriate training
obligations, analysis of situations, etc.) according to the solutions.
principle of continuous improvement.
Employees benefit from 2 individual interviews per year with
s 84 agreements have nevertheless been identified as being their manager, one of them being dedicated to identifying
in force at December 31st, 2014, which deal, totally or development needs. Personal training paths are built on the
partially, with health and safety. basis of these exchanges, with the help of Training managers.
6
which make it possible to unite employees from all over the
Training has always been at the heart of the Human Resources world and thus profit from enriching multicultural exchanges
strategy: this enables L’Oréal to attract the best talents, and experience sharing. These moments are essential to
prepare the leaders of the future, but also provide all the understand the Group’s culture and its strategy, meet the
employees throughout the world with the best possible senior managers and share their challenges, instil a Group
response in terms of training. The Group’s ambition is to spirit and develop an internal international network, which are
enable the largest possible number of employees, whatever all key factors for the success of each and every one of them,
their profession, country or position to have access to as well as also being factors for Sustainable Development and
long-term success for the Group.
6.2.2.6. DIVERSITY AND EQUAL OPPORTUNITIES At December 31st, 2014, with a network of more than 96
Diversity coordinators ; all over the world, the initiatives
For over 10 years, L’Oréal has been engaged in an innovative,
conducted by all the Group’s subsidiaries make L’Oréal a
ambitious policy in favour of Diversity. The Group has set itself
pioneer and one of the recognised major players in the area
three priorities:
of diversity at worldwide level.
1. gender;
In 2004, L’Oréal was a founding member of the first Diversity
2. disability; and Charter in France. The Group has now signed 9 charters in all
(Germany, Austria, Belgium, Italy, Poland, Spain, Finland,
3. socio-cultural and ethnic origin. France and Sweden), 5 of which were created on the initiative
of L’Oréal. The most recent initiative was at L’Oréal Finland
The Group focuses more particularly on the areas of Human
which was a founding member of the Finnish Diversity Charter
Resources, solidarity sourcing and marketing.
in 2012.
; The Statutory Auditors have expressed a reasonable assurance on this selected information.
L’Oréal has been awarded since 2010 the first European 5. maintenance in employment.
gender equality label, the “Gender Equality European
Standard” (GEES), for its entities in Europe. s To accelerate the mobilisation of its subsidiaries, L’Oréal has
put in place since 2008 awards known as “Initiatives for the
Summary of GEES certifications: Disabled” which reward operational entities for their
concrete actions in favour of the disabled. These awards,
s 2010 (initial audit): Germany, France, Spain, Italy, Belgium,
which are presented every two years, make it possible to
United Kingdom, Ireland and L’Oréal S.A.
showcase and share the best practices of the various
s 2012 (initial audit): Baltic countries (Estonia, Latvia, L’Oréal entities both in France and in Europe. In 2012, this
Lithuania), Portugal, Czech Republic, Hungary, Slovakia initiative was made international, which enabled 14
and Poland countries from four geographic zones to participate. Finally
in 2014, 65 countries in the Group showed their
s 2013 (mid-term audit): Germany, France, Spain, Italy, commitment to this initiative by submitting 80 projects.
Belgium, United Kingdom, Ireland and L’Oréal S.A.
s In 2013, L’Oréal Chile received the “Sello Inclusivo” seal
s 2014 (initial audit): Austria, Finland, Sweden, The which rewards efforts made with regard to accessibility.
Netherlands, Croatia, Bulgaria, Slovenia and Romania L’Oréal also signed the agreement with the International
Labour Organisation to become part of this organisation’s
s 2014 (mid-term audit): Baltic countries (Estonia, Latvia, Disability Network, in order to share its best practices and
Lithuania), Portugal, Czech Republic, Hungary, Slovakia
interact with stakeholders, such as Non-Governmental
and Poland.
Organisations, civil associations and other businesses on
In total, 24 entities ; of the L’Oréal Group have obtained the the organisation Committee.
label and are regularly audited to measure their progress.
s In 2009 L’Oréal created the CSR+Disability network together
These efforts have been recognised by the Arborus Fund, the with the Italian Ministry of Labour, Telefonica and the ONCE
founding organisation for the GEES label. In November 2014, Foundation in Spain. The purpose of this tri-national network
L’Oréal received a special award for the most extensive which consists of players from the private and public sphere
certification network in Europe. and from associations, is to promote access to work for
disabled people throughout Europe. In 2013, as a result of
L’Oréal France has also received the Professional Equality this partnership, the “1st European Award for Social
label. Entrepreneurship and Disability: Promoting Social
Investment” was jointly created. This award aims at
Also in the field of gender equality, L’Oréal Mexico received
identifying and rewarding projects from European social
the World Bank’s “Gender Equity Model” certification in entrepreneurs in the field of inclusion of the disabled or
October 2012.
innovative projects promoted by disabled entrepreneurs.
Finally, 7 countries (Australia, Brazil, Canada, the United States, The first award-winner, Gregor Demblin, has been working
India, Philippines and Russia) started the Economic Dividend in close collaboration with L’Oréal Austria since 2014. In
for Gender Equality (EDGE) process to obtain certification with 2014, L’Oréal actively supported the launching of the
regard to social and professional equality of men and women second edition of the award that will be presented in
in the world in 2014. March 2015.
L’Oréal USA ; obtained the EDGE label in summer 2014. The s December 3rd is the International Day of persons with
other 6 countries ; are finalising the evaluation stage in order disabilities declared by the United Nations. A
to receive the certification. communication kit was sent to all the Group’s subsidiaries
in November 2014 in order to help them to organise a day
In addition, L’Oréal obtained the Vigeo prize for its actions in or a whole week to raise awareness with regard to
favour of women and L’Oréal USA was recognised as one of disability. To date, 5 Group subsidiaries ; have gone into
the “Top 10 Champions of Global Diversity”. action and created events to raise awareness among their
employees: Brazil, United States, Mexico, China and
With regard to disability Uruguay. France also mobilised the head office teams to
raise awareness on this topic.
L’Oréal has been developing a global policy since 2008 in
favour of professional insertion of the disabled in the
Company. This policy focuses on five priorities: Social and Ethnic origins
s Finally, 28 countries focused part of their diversity strategy
1. raising awareness; on social and ethnic origins. With regard to recruitment , 59
2. accessibility to information and infrastructures; countries in which the Group is established have
implemented actions to diversify the origin of their
3. partnerships; recruitments with one objective: enable all talented
individuals to assume high-level responsibilities within the
Company, whatever their differences or their origins.
; The Statutory Auditors have expressed a reasonable assurance on this selected information.
s L’Oréal hosted the European Origins conference at its head L’Oréal follows, inter alia, the Global Reporting Initiative
office in partnership with the ENAR (European Network indicators HR3, HR4, HR5 and HR6 which correspond to the four
Against Racism) in October 2013. In 2014, L’Oréal once fundamental conventions.
again hosted the ENAR conference in order to explore best
corporate practices to address the question of ethnic and This means namely respecting :
cultural origin in the workplace. s Freedom of association and recognition of the right to
s L’Oréal has moreover developed a diversity assessment in collective bargaining : the measures taken are described
France with a hundred or so indicators that together cover in the paragraph on “Labour Relations”. In countries where
the 6 dimensions of Diversity policy. For the same purpose, freedom of association and the right to collective
an automatic Diversity Reporting tool with 30 indicators bargaining are limited or prohibited, L’Oréal ensures that
(recruitment, training, remuneration…) has been made other modes of dialogue with employees exist enabling
available to all the subsidiaries. them to report any concerns they may have.
s In order to support these initiatives, L’Oréal has undertaken s Elimination of all forms of discrimination in respect of
to train its employees in diversity by organising “Diversity employment and occupation : the measures taken are
Workshops”. This one-day training session made it possible described in the paragraph on “Diversity and Equal
to raise awareness among over 15,000 employees in more Opportunities”.
than 20 countries. s Elimination of all forms of forced or compulsory labour :
recourse to prison labour is possible when it is voluntary,
within the scope of a professional reinsertion programme,
6.2.2.7. PROMOTION AND COMPLIANCE WITH THE
and paid at market price. Suppliers or subcontractors must
PROVISIONS OF THE FUNDAMENTAL
request L’Oréal's authorisation before they have recourse to
CONVENTIONS OF THE INTERNATIONAL
this form of labour. Furthermore, all Group entities are
LABOUR ORGANISATION
required to ensure that none of their employees are subject
L’Oréal became a signatory of the United Nations Global to the retention of identity papers or travel documents, or
Compact in 2003 and is committed to respecting and are obliged to pay recruitment fees or to deposit money.
promoting the Fundamental Conventions of the International
Labour Organisation even though not all these conventions s Abolition of child labour : all L’Oréal entities are required to
have been ratified by all the countries in which L’Oréal is verify the age of new employees when they are hired.
present.
L’Oréal has chosen to set a compulsory minimum age of 16
for its entire staff, a minimum age which is higher than that
6
This means in particular respecting freedom of association
and the recognition of the right to collective bargaining, required by the International Labour Organisation.
contributing to the elimination of all forms of forced or
In light of their young age, employees who are between 16
compulsory labour, contributing to the effective abolition of
and 18 years old are subject to specific measures and in
child labour and eliminating all forms of discrimination in
particular: no night work, no overtime, no work involving the
respect of employment and occupation.
use of hazardous substances or tools, no carrying of heavy
L’Oréal ensures that these conventions are observed with loads, the implementation of a reinforced training
regard to its employees thanks to the actions taken by Human programme, appointment of an internal “tutor” and
Resources and at its suppliers and subcontractors through the inclusion on a special register. In 2014, 408 employees
initiatives taken by the Purchasing function (see the section on aged between 16 and 18 worked within the Group’s
Societal Information, paragraph on Subcontracting with entities.
suppliers for further details).
Methodological note The monitoring of training at Group level does not take into
account all the hours of training in 2014 such that the number
SOCIAL, HEALTH AND SAFETY DATA SCOPE, INDICATORS, of hours of training and the number of employees trained are
REPORTING METHOD AND SYSTEMS APPLIED
higher than the figures published in this report. An action plan
Social data is currently under way in order to cover all employees and in
particular those who hold certain external or travelling
SCOPE OF CONSOLIDATION positions.
The workforce indicated in the “Total Workforce” and
A process of continuous improvement of these systems is in
“Geographic distribution of workforce” charts is the total
place. The systems are reviewed each year, taking into account
workforce present at December 31st of the year concerned (1).
the Statutory Auditors’ recommendations and monitoring
All the other social indicators set out in the Social information objectives for subsequent years: updating the indicators to be
section relate to “Cosmetics” and “The Body Shop”. monitored, improving their definition, and enhancing the
communication, monitoring and control process.
If an indicator relates to a scope different from that of
“Cosmetics” and “The Body Shop”, the scope of consolidation Health and safety data
is indicated in a note.
SCOPE OF CONSOLIDATION
INDICATORS
The safety indicators set out relate to the “Cosmetics”,
The indicators chosen are those used in the management of “Dermatology” and “The Body Shop” sites: factories and
employees and of the social aspects of the Company. They distribution centres but also the administrative sites and
reflect the results of the Human Resources policy. research centres.
s when the data are compiled, each country must validate a INDICATORS
charter committing to the accuracy of all the data
The indicators applied are those used in the management of
provided;
the Company’s sites. They reflect the results of the Group’s
s other data are collected by each Corporate Department Environmental, Health and Safety (EHS) policy.
concerned (i.e. Training, Recruitment) using dedicated
DATA
systems which follow the same operational and
dissemination approach; The following method is used to collect data for the defined
scope:
s if information is not consolidated for the entire Cosmetics
scope, it is recognised that it can be extrapolated from the The health and safety data are collected using the dedicated
available results for the entities connected to the local site reporting “QIS” intranet system, available in all countries in
Information Systems (IS), provided that the scope covered which there is a L’Oréal subsidiary. The required data are
by such entities is representative; reported every month by the local managers.
s lastly, the specific data relating to “executives” are When the data are compiled, each site must validate the
gathered from the “CAROL” online career monitoring accuracy of all the data provided.
system, deployed in all “Cosmetics” subsidiaries.
A process of continuous improvement of these systems is in
The improvement of the information collection process at place. The systems are reviewed each year, taking into account
consolidated level has made it possible to identify agreements the Statutory Auditors’ recommendations and monitoring
that are in force that have not been taken into account up to objectives for subsequent year: updating the indicators to be
the present. The work need to progress in this field is monitored, improving their definition, and enhancing the
continuing in all the companies of the L’Oréal Group. communication, monitoring and control process.
6
the research centres and administrative sites.
are triggered by a site’s performance and conducted by
The Group’s EHS system consists of a large number of internal EHS specialists through group interviews with 20-30% of
procedures that make it possible for the sites to control the the site’s employees. In 2014, EHS Culture Audits were carried
facilities and business activities, leading, in particular, to out at 2 factories, 3 distribution centres and 2 research
reducing the risks of fire, explosion and environmental centres.
incidents and all forms of risks to people to a minimum.
COMBINED RISK AND CULTURE AUDITS
Organisation of EHS A new type of combined risk and culture audit was carried out
Accountabilities for EHS are defined at all levels of the in 2013 at 6 pilot sites. In 2014, this type of audit was carried
organisation. L’Oréal’s Executive Vice-President Operations, out at nearly 42% of the Group’s audited sites (namely 20 sites
who reports to the Group’s Chairman & CEO, is responsible for out of the 47 audited).
health, safety and environmental issues. EHS managers ensure LOSS PREVENTION AUDITS
the deployment of the Group’s rules and procedures and the
associated performance objectives in each entity. Furthermore, within the scope of the Group’s Fire and
Environment insurance policies, loss prevention visits are
The remuneration of factory managers and distribution centre conducted regularly by experts and insurers. In 2014,
managers is partly linked to their performances in the field of 11 factories and a R&I site were visited in 5 countries with
health, safety and the environment. regard to environmental risks (France, Indonesia, Japan,
China, South Africa) and 17 sites with regard to fire risks.
Worldwide audit programme
REAL ESTATE AUDITS
Internal and external experts regularly visit L’Oréal’s production
and distribution sites to assess the compliance of their The Real Estate Department carries out audits of the
operations with the Group’s rules, the progress made and the Company’s real estate assets every year on a rotating basis
risks they present. Third-party audits are also carried out at with the assistance of an outside firm. The purpose of the real
supplier sites in accordance with the same criteria as those estate audit is to check that the buildings have been brought
used for Group entities. into compliance with the Group’s real estate procedures, and
on the due and proper completion of extension or renovation
L’Oréal has a comprehensive programme of EHS audits, which operations and preservation of the assets. Since 2009, these
includes in particular risk audits, culture udits, combined Risks audits have included aspects concerning “Quality of interior
and Culture audits, loss prevention audits by insurance air” and Energy Performance. In 2014, 13 sites were audited in
companies, real estate audits and subcontractor audits. various countries.
SUBCONTRACTOR AUDITS
Industrial subcontractors are subject to specific external EHS Deployment of the EHS training course launched in 2013
audits, if they manufacture families of products such as specifically for the EHS teams continued in 2014. 37 people
aerosols or inflammable products. As necessary, action plans have already been trained in Europe, representing
validated by an external expert company are required and a 11 nationalities. Managers continue to receive training in
follow-up audit is scheduled. environment, health and safety culture all over the world:
161 managers and supervisors took part in EHS Operations, 69
EHS policy training top managers in Safety & Leadership.
A targeted training programme is provided on L’Oréal’s EHS In addition, within the scope of deployment of the Ergonomic
policy and practices for managers and EHS professionals Attitude programme throughout the Group, 149 people
across the Group. The objectives are as follows: received training including experts, managers and employees.
This training was developed and tested in 2012 with global
s identify and share EHS vision, challenges and values across
deployment in 2013. In 2014, 88 experts and 500 employees
the Group;
(managers, technicians and others) were trained.
s identify the risks inherent in a role, task, behaviour or use of
In 2014, an Ergonomic Attitude Governance Committee was
equipment and implement appropriate preventive and
launched with senior representatives of the Group (from
corrective solutions;
Operations, R&I, Marketing, IT, HR and EHS teams). This
s enable managers to implement EHS policy effectively. Committee’s role is to determine the vision, objectives and
actions to be deployed within the Group and to ensure that the
actions under this programme duly support the “Sharing Beauty
With All” programme. The Committee meets twice a year and
has already initiated the Vision Statement, the 2020 roadmap,
the deployment of which on a worldwide basis will begin in 2015.
Global industrial policy also demands all sites to: Furthermore, all L’Oréal’s factories must be ISO-14001 certified.
At the end of 2014, 4 plants remained to be certified [Kaluga
s ensure compliance with the regulations; (Russia), Cairo (Egypt), San Luis Potosi (Mexico)] because of
s apply best practices in energy efficiency or efficient the recent start-up of operations, and Rio for which certification
consumption of resources, waste reduction and the best will be renewed in 2015. An ISO 50 001 (Energy management)
possible waste treatment; certification programme was launched in 2014, and the first
factory (SICOS France) was certified in December. This
s roll out breakthrough projects in a permanent search for programme will gradually be extended to the Group’s other
operational performance allied with environmental factories.
performance.
+21.2% -23.1%
In volumes produced In the generation of transportable waste
(Excluding raw material factories) (Grams per finished product, excluding rotation of shuttle packaging,
including the recording of shuttle packaging at source
2005 – 2014 at the factories and distribution centres)
2005 – 2014
C02
C02 C02 C02
89.0% 91%
-50.2%
2005 2014
Greenhouse gas emissions In the waste recycling
(Tonnes of CO2, direct and indirect on a like-for-like (With 16 factories at 100% in 2014)
basis according to the GHG Protocol(1))
2005 – 2014
(1) Greenhouse Gas Protocol:
international method of carbon accounting.
+38.0%*
-36.0%
In the wastewater quality index
(Tonnes of COD)
2005 – 2014
6
In water consumption
* Two industrial sites in North America
(Litres per finished product) (which contribute 6% of the Group’s FP units) are excluded
from the scope of consolidation of the indicator; action plans
2005 – 2014 to improve reliability are currently being deployed.
All the possible methods of waste recovery are systematically Improved recording in respect of shuttle
explored – reuse, recycling, composting, energy recovery – in packaging used for transportation in 2014:
order to avoid waste to landfill as far as possible.
In order to improve the system of waste performance
In 2014, efforts continued and new initiatives were taken in the monitoring and exhaustively record the waste generated by
Group within the scope of the Commitments for 2020. the use of shuttle packaging, a new system of recording
Cross-functional working groups have been set up, making it shuttle packing at source was put in place in 2014. L’Oréal
possible to increase the involvement of all businesses and jobs thus records at source the weight of its shuttle packaging in
and all divisions. All the initiatives aimed at reducing the waste transportable waste, with each of the sites being responsible
at each of the sites are currently being consolidated within the for maximising the rotation rates. The recording of the weight
framework of a roadmap: of the shuttle packaging at source is a measure intended to
encourage rotation of this shuttle packaging and contributes,
s in 2014, 91% of waste was reused, recycled or recovered, through its reuse, to increasing the useful life of the packaging.
including 65% through materials recovery (reuse ‘as is’ or
recycling) and 26% through energy recovery; L'Oréal continues to record the shuttle packaging rotation
which is necessary to calculate the recovery index.
s 5,088 tonnes of waste (transportable waste with shuttle
packaging) were sent to landfill, i.e. 3.8% and 6,180 tonnes
of waste were destroyed without recovery, representing
4.6%; 2013 2014
Transportable waste excluding shuttle packaging
subject to rotation, with shuttle packaging being
recorded at source (tonnes) 106,080 97,817
Shuttle packaging subject to rotation 35,584 36,698
(59 sites) Total recovered (tonnes) 128,708 121,615
55%
Recovery index (%) 90.9 91
Of the sites send
zero waste
to landfill
The low emissions of sulphur dioxide (SO2) come from the fuel oil used (3% of fossil energy consumed).
The volatile organic compounds (VOCs) emitted in small quantities result essentially from the alcohol used in our production
processes.
78,522
Indirect CO2
related to
energy used (t)
Direct
CO2 (t)
C02
C02
2012 2013 2014 2012 2013 2014
6
(tonnes) 2013 2014
Direct CO2 (t) 67,331 58,453
Indirect CO2 related to energy used (t) 68,070 60,457
SO2 (t) 3.7 1.8
VOCs (t) 139 139
Ozone depleting substances Negligible * Negligible *
* These emissions come from the refrigeration units used in our sites.
6.3.2.3 WATER EMISSIONS: WASTEWATER In 2014, total chemical oxygen demand (COD) for the
wastewater after on-site treatment has fallen by 3.1% ** in
On production sites tonnes. It amounts to 0.9 g ** of COD per finished product.
Approximately half of L’Oréal’s factories have on-site L’Oréal is continuing to install on-site wastewater treatment
wastewater treatment plants. These use a range of methods, facilities. Thus, the factory in South Africa now has its own
including physical, chemical and biological processes, equipment.
adapted to the characteristics of the wastewater and local
discharge conditions.
2013 2014
Accidental spills (m3) 0 0
Wastewater discharge (m3) 1,781,730 1,463,152
Tonnes of COD ** 4,647 4,503
** Two industrial sites in North America (which contribute 6% of the Group’s FP units) are excluded from the scope of consolidation of the indicator; action plans to
improve reliability are currently being deployed.
; The Statutory Auditors have expressed a reasonable assurance on this selected information.
On the sites of end customers In 2014, 67% of the new products have an environmental or
social benefit (in 10 product categories and excluding
“Sharing Beauty With All” programme subcontracting and acquisitions).
Within the scope of its commitments under "the Sharing Beauty
With All" programme, L’Oréal has undertaken to innovate such
6.3.2.4 NOISE POLLUTION
that in 2020 all of its new products have an environmental or
social benefit. L’Oréal’s industrial activities are not particularly noisy. The sites
comply with the noise standards to which they are subject.
Beyond wastewater management on its production sites, Every month, the internal environmental reporting system
L’Oréal pays close attention to the impact of its products on informs L’Oréal of any instances of non-compliance on this
aquatic environments after use by consumers. topic. In 2014, only one site exceeded the standard, but does
not generate noise pollution as there are no close neighbour.
Since 1995, the date of creation of its ecotoxicology
This non-compliance was removed in the course of the year.
laboratory, L’Oréal has developed expertise with regard to the
potential impacts of its cosmetic products on aquatic
environments.
6.3.3. Sustainable use of resources
In 2013, L’Oréal moreover developed an ecological
performance index for a cosmetic formula. A calculation L’Oréal’s strategy for raw materials is a fundamental
method for the Water Footprint specific to cosmetic products, component of Sustainable Development vision. The impact of
particularly rinsed products, was applied (performance index the raw materials used is measured with the help of the
for a formula based on the environmental profile of its environmental evaluation guide. L’Oréal encourages the use
ingredients in terms of biodegradability and aquatic of raw materials having a favourable social impact, evaluates
ecotoxicity). those raw materials having an unfavourable profile and gives
priority to those which are renewable and plant-based, with
Improvement in the percentage of biodegradability and/or of respect for biodiversity.
the Water Footprint of a formula is an essential factor for
reducing the impacts. Water is first on the list of resources to be preserved, and
L’Oréal endeavours to control the use made of water
Thus, following on from the work carried out to get to know
throughout the entire production cycle.
and improve the environmental profile of ingredients which
began in 1995, the Research & Innovation teams are currently
working on improving the biodegradability and the Water 6.3.3.1 WATER
Footprint of formulas.
"Sharing Beauty With All" programme
The average biodegradability in 2013 is 88% for shampoos
and 89% for shower gels. Within the scope of the "Sharing Beauty With All" programme
by 2020, The Group has pledged to reduce its water
Certain shampoos and conditioners with highly consumption in litres per finished product by 50%, now
biodegradable formulas have been launched on the market. increased to 60% (2005-2020).
For example, among the products launched in 2014, the L’Oréal has had a global water conservation programme in
Redken Thinning Retaliate Shampoo, L’Oréal Professionnel place since 2003, which has made it possible to make
Clarifying, Serioxyl Shampoo Coloured Thinning Hair Kit, the significant progress in reducing total water use and increasing
MIXA soothing shower oil and or CADUM – soap-free shower eco-efficiency.
gel for softened skin have biodegradability levels of between
95% and 99%. In 2014, water consumption per finished product in factories
and distribution centres was reduced by 12.8% as compared
The improvement in biodegradability and of the Water to 2013. Total consumption for 2014 was 2,495 thousand m3.
Footprint of the formulas for which production was launched
as from 2014 will be assessed by taking as a baseline: Over the past 10 years (2005-2014), water use per finished
product has been reduced by 36% and absolute consumption
(1) for creations, the average values for the formulas on the has fallen by 22.4%, while production (excluding raw materials
market in 2013 with the same cosmetic properties; and plants) has increased by 21.2%.
(2) for renovations, the previous formula. A lot of the water consumed in L’Oréal factories is used for
cleaning production equipment and packaging lines to
These actions are part of the process adopted by the Group
maintain very strict hygiene standards. This represents 34% of
aimed at reducing the environmental impact of products and
all water consumption in the industrial sites.
in particular the “Innovating sustainably” pillar of the ”Sharing
Beauty With All” programme, whereby the Group has
undertaken that by 2020, 100% of its products will have an
environmental or social benefit.
To meet the targets set, L’Oréal’s teams aim to reduce the This policy is accompanied by a whole set of ecodesign tools
amount of water used for cleaning operations as far as developed and deployed in all the Group’s Packaging Design
possible without affecting product quality. This optimisation is centres. The ecodesign process for finished products is now
very complex, as each cleaning process depends on the robust, which enables us to move into new areas in terms of
formula of the manufactured product and the specific Responsible Packaging. In 2014, an ecodesign process for POS
equipment used. (point-of-sale) advertising was defined, and is currently being
tested with various suppliers. The ecodesign process for POS
In line with the targets for 2020 under the “Producing advertising will be operational by mid-2015.
sustainably” pillar of the ”Sharing Beauty With All” programme,
a standard tool for analysis and exhaustive mapping of water RESPECT
consumption is now deployed in each of the Group’s
L’Oréal imposes the requirement that its paper and cardboard
factories – the “Waterscan tool”. This tool makes it possible to
packaging come from responsibly managed forests. To date,
categorise the different uses of water, and to identify
97.9% of paper and cardboard packaging fulfil this criteria.
consumptions in each of such categories. The best
performances for a given use are established as a group Furthermore the only label claimed on packaging is that of the
standard, and are then set as a target for each factory. The Forest Stewardship Council (FSC) of which L’Oréal is a member
projects making it possible to achieve these targets are in France.
identified and quantified for each site and the completion of
such projects scheduled over time. These planned reductions L’Oréal extends this approach to its supply chain, going
in consumption form the Group’s “Water roadmap”, beyond packaging materials. L’Oréal encourages its printers
performance on which is monitored on a monthly basis. to obtain FSC certification for their entire activity scope in order
to guarantee a certified product for the end consumer
Transparency in water reporting: through its traceability. At the end of 2014, 88% of paper
Carbon Disclosure Project water disclosure printers and 96% of cardboard box printers have obtained this
certification.
Since 2010, L’Oréal has been communicating water
information transparently via the CDP water reporting initiative, A materials vigilance programme, set up many years ago, is
of which the Group was one of the Founding Responders. The supported by a programme of audits in order to identify and
CDP is a leading, independent, not-for-profit organisation that correct any deviation far upstream through clear and
promotes transparency in environmental information reporting: well-controlled action plans. In 2014, the ecodesign process
with regard to global warming, water, deforestation, etc. was enriched with an evaluation tool with regard to
L’Oréal reports every year on its water management strategy, recyclability of our packaging making it possible to optimise
its performances and the Group’s initiatives within the right from the marketing brief.
framework of the Water Disclosure Project.
For instance, these initiatives have been taken in 2014: Among the products sold in 2014, certain contain a significant
percentage of renewable raw materials. This is the case for
s 19% reduction in the aluminium cans for the Graphic range Kérastase Elixir Ultime pre-shampoo, Kiehl’s Damage Reversing
(Garnier); shampoo, Mixa glossy shower oil and Ushuaia Bio Vanilla
s 8% reduction in the Ambre Solaire spray cap (Garnier); deodorant, in which the percentages of renewable raw
materials exceed 90%.
s 24% reduction in hair colour bottles in the “Americas” zone;
Out of the 300 plant species which are the source of the
s 26% reduction in the Vichy capsule for the “makeup renewable raw materials used by the Group, less than 10% in
remover” range; number involve significant Biodiversity issues (protection
measures, impact of production on natural environments)
s 67% reduction in weight of the transport crate for Lancôme depending on their geographic origin and their extraction or
mascaras. production method, and these are the subject of priority
action plans.
6.3.3.3 RAW MATERIALS In 2014, the Group redefined its evaluation criteria for the
The constant concern for the Group in the sourcing of its raw “sustainable sourcing” risk in respect of the renewable raw
materials is, over and above the desire for quality, to materials, in order to adapt them to the definition adopted
guarantee the sustainability of resources in the following within the scope of the “Sharing Beauty With All“ programme.
manner: In order to be recognised as being responsibly sourced, a
s by increasing the share of renewable raw materials; renewable raw material must:
s by ensuring responsible sourcing for such raw materials; s be traceable with an identified botanic and geographic
origin;
s by making the commitment by 2020 that none of the
commodities (palm oil, soya oil and paper and cardboard) s integrate the main Sustainable Development challenges all
will contribute to deforestation. Published in January 2014, across its supply chain (including respect for human rights
this commitment can be consulted on www.loreal.com in accordance with the ILO principles, preservation of
biodiversity and social development).
Renewable raw materials Thus, beyond the issues related to the territories from which the
renewable ingredients are sourced, the Group, through its
“Sharing Beauty With All” programme
“Buy & Care” programme, also integrates the environmental
Within the scope of the "Sharing Beauty With All" programme and social issues relating to the industrial operations of its
by 2020, L’Oréal has undertaken that 100% of its renewable suppliers (see § 6.4.4, page 250).
Raw Materials will come from sustainable sources.
The monitoring of this data is consolidated and managed
In 2014, 100% of the renewable raw materials used by the through:
Group were reassessed based on criteria such as respect for
biodiversity and contribution to the socio-economic s “sustainable sourcing risk” indicators (ecological, social &
development in the territories from which they originate. societal risk), established in particular using the “Plant
Information Sheets” that are prepared and are available for
Since 2013, L’Oréal has considered all raw materials of which all the plant species from which renewable raw materials
the carbon content is mostly of plant origin as being are sourced, and updated on a monthly basis for the most
plant-based. sensitive species;
To date, 46% of the raw materials used by the L’Oréal Group s A four-level process for making progress has been defined
are renewable. This represents more than a thousand and shared with certain suppliers of renewable raw
ingredients from nearly 300 species of plant from around sixty materials, including objectives of traceability, conformity,
countries. consideration of critical issues and acceptability, which will
replace the Raw material sustainability framework
In 2014, 32% of the Group’s newly registered raw materials are
questionnaire. An in-depth investigation into the supply
renewable and 22% of them respect Green Chemistry
chains has been initiated with certain suppliers for the most
principles.
sensitive raw materials, starting with a document analysis
and going as far as an on-site investigation conducted by
an independent third party, according to the nature and
criticality level of the environmental and social risks
identified. This method was subject to several critical
reviews by external stakeholders in 2014. Beyond the criteria
adopted, the objective is to validate the relevance of this
management system for the sustainable sourcing of
renewable raw materials.
Currently 94% of the raw materials representing the Group’s / TOTAL ENERGY CONSUMPTION
largest volumes of purchases, and derived from species
identified as sensitive have been the subject of improvement 1000 MWh kWh/1000 PF
plans or actions with the suppliers concerned in order to
ensure sustainable sourcing.
808 814 785 790 797 795
746 761
Fair Trade 719
;
Recognized by the L’Oréal Group as a powerful social
inclusion factor, Fair Trade via responsible sourcing of
renewable raw materials is a major pillar of the “Solidarity
Sourcing” programme launched in 2010 (see § 6.4.1.3, page
247). 176 169 169 173 157 144 145 142 133
In 2014, more than 50 fair trade-sourced raw materials were ;
included in 10.5% of the products manufactured (excluding
The Body Shop). 2006 2007 2008 2009 2010 2011 2012 2013 2014
For The Body Shop, over 90% of the products sold contain 6.3.3.5 TRANSPORT
ingredients from the “Community Fair Trade” (CFT)
programme. “Sharing Beauty With All” programme
In 2014, a total of 27,000 people therefore benefited from fair Within the scope of the "Sharing Beauty With All" programme
trade-sourced raw material purchases (excluding the CFT). by 2020, L’Oréal pledged in 2013 to reduce the CO2 emissions
of its downstream transportation, with regard to a scope
In 2014, for example: covering the transportation of its Finished Products, for
transportation under the control of L’Oréal. The ambition for
s 100% of the Group’s shea butter purchases were made 2020 is to reduce the CO2 emissions/FP/km by 20% with regard
through the “Solidarity Sourcing” programme, thanks to to this scope from a 2011 baseline.
which the women gathering shea nuts in Burkina Faso
receive in April-May, at the end of the dry season when The system of the monitoring of this target for 2020 is gradually
stocks of food have been almost used up, pre-financing for being put in place, and the Group has chosen to use the
their crops and a purchase price that is higher than the following methodology for the evaluation of CO2 emissions
market price; during transportation:
; The Statutory Auditors have expressed a reasonable assurance on this selected information.
In 2014, the current reporting overs approximately 80% of all During operation of the site, the Group’s policy is to take all the
the flows that the Group wants to include in the reporting: preventive measures described in internal documents in order
to avoid soil or rainwater pollution. These measures are verified
s complete information for Europe and Asia; at the time of audits and site visits made by insurers. Finally, at
s partial information for North America; the time of the sale of a site, a pollution assessment is
conducted according to an internal procedure.
s information which needs to be enhanced for Latin America
and the Africa, Middle East zone. Furthermore, at the time of a project for a new site,
preparation of an overall environmental impact study is
The target is to achieve coverage of 90% in 2015 and 100% required immediately during the design phase (with the
in 2016. objective of minimising the project’s negative impact on the
environment and health), and this study must then evolve to
A large number of action plans with regard to transportation adapt the project to the conditions imposed by the site and its
have already been deployed all over the world – The CPD environment. At the time of the acquisition of land or buildings,
Europe (Consumer Products Division), for example, has L’Oréal conducts a “due diligence” review which includes, in
increased its use of multimodal freight from 3% to 15% between particular, a review of the environmental aspects.
2009 and 2013, and achieved a fill rate for its delivery vehicles
of over 95% in 2013.
Beyond transportation, the global progress in the Supply 6.3.4. Contribution to adapting to
Chain, in partnership with our customers, has also led to an and combating global warming
improvement in its environmental footprint – optimising the
frequency of our deliveries, for example, or limiting the use of
“Sharing Beauty With All” programme
air transport make big contributions and are the subject of a
growing number of action plans. L’Oréal has now pledged to achieve an absolute reduction of
60% in the direct and indirect CO2 emissions of its Operations
(scope 1 and 2) between 2005 and 2020. The mid-way target
6.3.3.6 GROUND USE for 2015 was achieved at the end of 2014; there was a 50.2%
reduction as compared with 2005. The change in scope taken
L’Oréal has several requirements relating to ground use:
into account complies with the GHG Protocol’s rules (1).
s reducing the impact of construction on the environment,
for example by using a zone which is already industrially
developed, or an existing industrial site or industrial
6.3.4.1 ENERGY AND GREENHOUSE GASES
wasteland; IN MANUFACTURING
The cosmetics industry has a relatively low energy demand as
s if possible, the site will have to be on a plot of land located
compared with other sectors. Thus, L’Oréal is exempt from the
over 30 m away from any water body (sea, ponds, lakes,
European regulations on carbon emission quotas.
rivers, etc.);
However, the L’Oréal sites are committed to significantly
s the site will avoid land situated on natural spaces, public
reducing their greenhouse gas emissions and their energy
green spaces, land which is the habitat for endangered or
consumption.
disappearing species or any other undeveloped zone (for
example: farmland, etc.); Wherever possible, natural gas is preferred to fuel oil (which
has a higher sulphur content). Over the last few years, several
s rehabilitating polluted sites (industrial wasteland) where
large renewal energy production projects have been
development is more difficult due to environmental
deployed on the sites, making it possible to significantly
contamination (real contamination or contamination
reduce CO2 emissions (Biomass and cogeneration in Belgium,
perceived as such), thus avoiding construction on natural
Biomass in Rambouillet and Roye in France, Burgos in
or undeveloped land;
Spain, etc., Heat networks in Germany and Italy, Photovoltaic
s preventing soil erosion which may result from rainwater energy in China, the United States, Spain, etc., Geothermal
runoff or wind erosion during construction, inter alia by energy in Vichy, La Roche-Posay, etc.). In 2014, 2 important
protecting the arable soil layer which is stored to enable it projects supplemented those previously implemented: the
to be reused; Burgos biomass plant, inaugurated in September 2014, and
continued deployment of the photovoltaic installations on
s maintaining or restoring existing natural habitats and several sites in the USA.
biodiversity;
6.3.4.2 BUS PROJECT (BETTER UTILITIES FOR The environmental performance of suppliers and the reduction
SUSTAINABILITY) of greenhouse gas emissions have been integrated into the
supplier relationship are therefore discussed at strategic
The BUS project implemented in 2010 is a Group-wide project,
meetings (Business Reviews).
which draws on expertise of all its teams to identify methods,
technical solutions and good practices in cleaning, cooling, Between 2011 and 2013, the number of suppliers invited
air compression and other factory processes. increased from 55 to 173. In furtherance of this process, 215
suppliers were invited in 2014. These suppliers were selected in
To date, 11 good practices have been identified, in particular
6 fields of purchases (raw materials, packaging items,
to improve energy efficiency; they are accompanied by
production equipment, subcontracting, POS
technical recommendations and rolled out throughout the
advertising/Promotional items and materials, indirect
whole Group.
supplies), everywhere in the world. They consist of strategic
suppliers, suppliers in CO2-generating industries, major
METHODOLOGY FOR THE CALCULATION OF INDIRECT industrial groups but also small and medium-sized enterprises.
EMISSIONS (SCOPE 2) In order to assess suppliers’ environmental performance, a
The methodology used for calculation of the 2005 baseline is scorecard has been developed jointly with the CDP,
based on the 2003 emission factors of local electricity summarising suppliers’ answers to the CDP to make them
suppliers – when they are available. accessible to purchasing teams. Thus, in 2014, 192 suppliers
(as against 152 in 2013), out of the 215 suppliers who were
invited, responded positively to L’Oréal’s invitation to also join
6.3.4.3 ADAPTATION TO CLIMATE CHANGE the CDP. This number is higher than the average (3,395
participants for more than 6,505 suppliers invited) for members
6
L’Oréal has always considered climate change as one of the
of the CDP. The high response rate obtained due to the joint
priority challenges.
commitment of the purchasing and environmental teams has
led to the CDP recognising L’Oréal as one of the companies
By pledging to reduce the % of CO2 emissions that is the most committed to this area. L’Oréal sends results
The Group has made a significant pledge to this by setting with comments and opportunities for improvement to suppliers
ambitious targets, in particular an absolute reduction of 60% in who have participated. The average of supplier results for 2014
the CO2 emissions of its Operations (Scope 1 &2) between is stable as compared to 2013: 67 C (as against 63 C in 2013
2005 and 2020. In 2014, L’Oréal was once again rewarded by and 59 D in 2012)(1). This stagnation can be accounted for by
the CDP for its efforts (2014 score: performance A, the less good performances by companies participating for
transparency 98). the first year.
In addition, L’Oréal conducts actions to reduce the CO2 In 2013, the Group participated in the CDP Water Supply Chain
emissions of its enlarged activities. Indeed, L’Oréal considers Pilot Programme. 15 of the 17 suppliers invited by L’Oréal
that the CO2 emissions of its suppliers are part of its enlarged agreed to take part in this new programme aimed at
environmental footprint and that they must unite their efforts to measuring and reducing the water footprint. Following this
succeed in reducing it. pilot phase, 26 suppliers were invited in 2014, and 18 agreed
to take part.
Member of the Carbon Disclosure Project (“CDP”) since 2003
and the CDP Supply Chain since 2007, L’Oréal continues to
By engaging in the fight against deforestation
encourage its suppliers to measure and reduce their CO2
emissions. In 2012, L’Oréal stepped up its strategy with regard Because deforestation is a major cause of global warming,
to the CDP: it is no longer only the environmental experts who L’Oréal made a public commitment in 2014 to a “Zero
discuss these issues with suppliers, buyers trained in the CDP deforestation” policy with the aim that none of its products will
have now become ambassadors of this process. be associated with deforestation by 2020 at the latest.
(1) For further information on the CDP supply chain and the rating methodology, visit the following websites:
https://www.cdp.net/en-US/Programmes/Pages/CDP-Supply-Chain.aspx#members
Between now and 2020, L’Oréal continues to rely on and minimising the potential impact of the ingredients used in
internationally recognised certifications to guarantee its products on the natural environment and, in particular, on
sustainable sourcing. aquatic ecosystems, is of utmost importance to L’Oréal. From
the product-conception phase onwards, therefore, raw
In this manner, in 2014: materials undergo a robust selection process before entering
s 100% of purchases of palm oil and palm oil and palm a formulation.
kernel derivatives are certified as sustainable according to The Group has developed several tools and procedures to
the RSPO criteria (www.rspo.org ); determine the potential impact on biodiversity of the
s 100% of soya oil purchases in Brazil are certified as organic ingredients used:
and obtained from fair trade sources; s development in its ecotoxicology laboratory of innovative
s 97.9% of paper and cardboard suppliers are certified (in methods for early measurement of the aquatic ecotoxicity
particular by the FSC, PEFC). of raw materials and formulas (e.g. automatic use of the
growth inhibition test on microalgae, an alternative method
Concerning palm oil and its derivatives, conscious of the limits to the acute toxicity test on fish);
of the current certification model in the fight against
deforestation, L’Oréal has decided to go one step further with s launch in 2004 of the assessment of its entire raw materials
its suppliers: portfolio for persistence, bioaccumulation and toxicity
criteria.
s by asking them to specify the precise geographic origin of
the materials they supply; As of the end of 2008, 99% of raw materials were assessed in
this way. All new raw materials now systematically have to
s by providing the most strategic suppliers with support in undergo this assessment before they can be accepted into
mapping deforestation risks in their supply chain; and the ingredients portfolio.
s by stepping up its exploratory operations in Indonesia and In 2014, supplementary evaluations were also conducted on
Malaysia in order to identify the projects to be implemented over 100 raw materials, in order to precisely define and
with its partners to support small-scale independent consolidate the average biodegradability and Water Footprint
growers. values of the formulas on the market in 2013(1).
s ensuring responsible sourcing of renewable raw materials. In 2014, 100% of soya oil purchases in Brasil are certified as
sustainable.
6.3.5.1 REDUCTION OF THE IMPACT OF RAW Currently 94% of the renewable raw materials representing the
MATERIALS AND PRODUCTS Group’s largest volumes of purchases and derived from
ON THE ENVIRONMENT species identified as being the most sensitive have been the
AND ON ECOSYSTEMS subject of improvement plans or actions with the suppliers
concerned in order to ensure sustainable sourcing.
L’Oréal’s commitment to biodiversity goes back to 1995 with
the creation of its first ecotoxicology laboratory. Anticipating
(1) The baseline year for measurement of the improvement in the environmental footprint of our formulas put into production as from 2014.
Methodological note pallets, etc.). Transportable waste does not include waste from
work on an exceptional scale carried out at sites (for example,
rubble and other materials removed from a site when work is
ENVIRONMENTAL DATA SCOPE, INDICATORS, carried out).
REPORTING METHOD AND SYSTEMS
In order to improve the system of waste performance
Scope of consolidation monitoring and exhaustively record the waste generated by
the use of shuttle packaging, a new system of recording
The environmental indicators set out relate to the “Cosmetics”
shuttle packing at source was put in place in 2014. L’Oréal
and “The Body Shop” sites: factories and distribution centres.
thus records at source the weight of its shuttle packaging in
Following the sale of the Galderma laboratories in 2014, the transportable waste, with each of the sites being responsible
data relating to their business activities were excluded from the for maximising the rotation rates. The recording of the weight
2014 data published by the Group. of the shuttle packaging at source is a measure intended to
encourage rotation of this shuttle packaging and contributes,
The Safety reporting scope is defined in the methodological through its reuse, to increasing the useful life of the packaging.
note at the end of the Human Resources information chapter.
Specific attention is paid to the waste indicators in order to
The environmental indicators of the factories and distribution improve the classification in categories and subcategories
centres sold or closed during the financial year are reported in and to make better categorisations for complex waste. They
full up to the date of their exit from the scope. The factories or are also subject to increased monitoring (shuttle packaging
distribution centres that join the Group have a maximum subject to rotation, categorisation of wood waste,
period of 2 years to connect to the environmental reporting plastics, etc.).
systems: for the 2014 financial year, 93% of the factories and
distribution centres participated in the reporting system, data Data
pertaining to 6 sites, recently integrated into the Group, are
The following method is used to collect data for the defined
not yet included in the published data: (BADDI (India), KENYA,
scope:
VOGUE (Colombia), MAGIC HOLDING 1 (China), MAGIC
HOLDING 2 (China), DECLEOR (France)). The data are collected using the dedicated intranet-based site
reporting system, available in all countries in which there is a
Out of concern for comparability, data on CO2 emissions for
L’Oréal subsidiary. This system covers several topics: quality,
the 2005 baseline communicated have been updated in light
6
process performance and EHS data.
of the GHG protocol’s rules (recalculated based on a constant
scope). The required data are reported every month by the local
managers.
Indicators
When the data are compiled, each site must validate the
The indicators chosen are those used in the management of
accuracy of all the data provided.
the Company’s site. They reflect the results of the Group’s
Environment, Health and Safety (EHS) policy. A process of continuous improvement of these systems is in
place. The systems are reviewed each year, taking into
Greenhouse gas: The methodology used for calculation of the
account the Statutory Auditors’ recommendations and
2005 baseline is based on the 2003 emission factors of local
monitoring objectives for subsequent years: updating the
electricity suppliers – when they are available. When these
indicators to be monitored, improving their definitions, and
emission factors are not available, IEA (International Energy
improving the communication, monitoring and control
Agency) and eGrid(1) emission factors, available in 2006,
process.
corresponding to IEA factors for 2003 and EPA(2)) (eGRID)
factors for 2000, are used. Average biodegradability is calculated on the basis of sales
volumes, which is why reporting is carried out on the basis of
Waste: L’Oréal includes in transportable waste everything that
2013, as the 2014 consolidated sales figures will be available in
comes out of a plant or a distribution centre and which is not
mid-February and the analysis of overall biodegradability of
a finished or semi-finished product (for example, the following
the products sold in 2014 will be completed by March 2015.
are concerned for a plant: raw material packaging or packing
items, wastewater treatment plant sludge, broken
6
and progress made in the programme were discussed. In
(excluding The Body Shop purchases). As far as The Body
France in 2014, L’Oréal replied favourably to the initiative by
Shop Community Fair Trade programme is concerned, it
Committee 21 which invited major players – companies,
offered access to work to 25,000 people. In total, more than
stakeholders, third-party facilitators, trade unions, researchers –
52,000 beneficiaries of the programme are spread over all
to undertake a collective reflection on stakeholder dialogue.
geographical zones.
L’Oréal participated in the various stages: working days, open
In 2014, deployment of the programme accelerated both on online consultation with practitioners, wider consultation for
the initiative of L’Oréal and on that of its suppliers. preparation of the text defining the main principles. A
signature of these principles by all players involved is
In addition to Purchasing, its initial scope of action, the scheduled for the beginning of 2015.
programme now relies on contacts in all the Group’s zones
and divisions who work in partnership with the Sharing Beauty
With All representatives in each country. The Asia, Pacific zone 6.4.2.1. RELATIONS WITH EDUCATIONAL
was a pioneer in this initiative to raise awareness and for ESTABLISHMENTS IN FRANCE AND
co-construction of Solidarity Sourcing projects, and it will soon ASSOCIATIONS
be extended to other zones.
Educational establishments
Since 2012, the internal auditors have included the Solidarity
L’Oréal has always built close partnerships with primary and
Sourcing programme in their audit scope with the aim of
secondary schools but also with universities, graduate
continuous improvement. Audits have thus been conducted in
engineering and business schools and research
China, Switzerland, South Africa, Benelux and for all indirect
establishments.
purchases in Europe.
L’Oréal offers students the possibility of discovering the
Company during their courses by offering them internships
every year and, for over 20 years, through apprenticeship
contracts and contracts offering work experience across all its
businesses.
At December 31st, 2014, 674 young people on work and a future thanks to beauty, all reflecting one ambition: to give
training contracts (338 apprenticeship contracts and 336 meaning to the beauty sector.
contracts offering work experience) were present in the Group
in France, 360 of which were at L’Oréal S.A. The L’Oréal Foundation
Over 85% of the apprentices are preparing for qualifications at The L'Oréal Foundation with Science and Beauty reveals and
“bac+2” level (equivalent to a 2-year course after “A levels”) or enhances the women that it supports in the worldwide,
higher. Their pass rate is approximately 80%. through missions centred around two strong thematics : For
Women in Science and the Beauty to feel better and to have a
A qualitative assessment of the apprentice training centres is better time.
carried out each year.
s Thanks to its "For Women in Science" action, the L'Oréal
In 2015, L’Oréal will have to pay an amount of €4,915,361 in Foundation raises young women students vocations from
apprenticeship tax for 2014. high school, encourages researchers and recognizes the
excellence in an area where women should be even more
L’Oréal also supports Capital Filles, an association created in
represented. Since 17 years, more than 2.250 women of
2010 in partnership with three French Ministries: the Ministry of
science from more than 110 countries have received a
Education, the Ministry of Higher Education and Research and
distinction award and have been rewarded;
the Ministry responsible for Apprenticeships. Capital Filles is a
programme for girls from secondary schools that come under s The beauty to feel better and have a better time, it is
city education programmes and priority education policies. dispensing care to women affected by the disease,
L’Oréal’s workforce includes 120 mentors who provide support insecurity or isolation, enjoying renewed self-confidence
to girls from secondary schools in the department of and find their mistreated feminity again. It is also a way to
Seine-Saint-Denis (93), in Orléans and in Cambrai (to boost their help people in a social vulnerability position to project its
self-confidence and their belief in their professional future, designs forward into the future thanks to a large education
helping them learn more about scientific and technological program and professional beauty training, Beauty for a
careers, assisting them in choosing their studies, encouraging better life, currently rolled out in 20 countries.
apprenticeships and opening them up to the world of Business).
Governance
Environmental defence associations Under the chairmanship of L’Oréal’s Chairman and CEO, the
Within the scope of its Commitments by 2020, L’Oréal has L’Oréal Foundation’s Board of Directors has 15 members,
undertaken to reduce its greenhouse gas emissions, its water including eight personalities from L’Oréal and seven from
consumption and its waste generation per unit produced by outside the Company, chosen for their expertise in the
60% by 2020. L’Oréal actively contributes to environmental Foundation’s areas of intervention.
protection through its commitments within associations or
organisations at national level (e.g. Eco-Emballages, the The main programmes supported
French eco-packaging organisation), European level (e.g. by the Foundation
Forest Footprint Disclosure project in the United Kingdom) and
“L’ORÉAL-UNESCO FOR WOMEN IN SCIENCE”
international level (e.g. the World Business Council for
Sustainable Development). The Group is also a member of the To fight against the under-representation of women in the
Consumer Good Forum in which the Company has scientific world, L’Oréal created the L’Oréal-UNESCO For
committed, alongside other companies, to fight against Women in Science programme with UNESCO in 1998 (known
deforestation. as L’Oréal-UNESCO Pour les Femmes et la Science in France).
L’Oréal is also involved in a large number of working groups, This programme is now international and is born of one
which play a crucial role in the exchange of expertise and conviction: the world needs science and science needs
advice. women. This is why it identifies, rewards, encourages and
showcases every year women from all continents who, through
their discoveries, contribute to advancing knowledge. Over
6.4.2.2. L’ORÉAL PHILANTHROPY IN 2014 2,000 women have thus been supported by the programme, in
L’Oréal has always been committed to worthy causes and over 110 countries. 82 Prize-winners have received the
taken an interest in its surrounding communities. Beginning in L’Oréal-UNESCO award, including Elisabeth Blackburn and Ada
1998, the Group created with UNESCO the first programme to Yonath, who have since become Nobel Prize winners in 2009.
support women in their scientific careers called “For Women in Research scholarships are thus awarded on a national, regional
Science”, an initiative that is now implemented throughout the and international scale to encourage women with promising
world. Since that time, L’Oréal has never stopped developing talent to pursue their scientific career. In 2014, over
philanthropy projects all over the world, through its 250 scholarships were awarded worldwide, including 20 in
subsidiaries, its brands and its Foundation, the creation of France.
which in 2007 showed the Group’s intention to go one step In October 2014, the L’Oréal For Girls in Science programme
further and make commitment to good corporate citizenship a
was launched in France, marking a new stage in the
real strategy in the Company. commitment by the Foundation: intended to encourage more
L’Oréal’s commitments are aimed at promoting scientific scientific vocations among girls at secondary schools and to
careers for women, restoring people’s physical appearance (a combat preconceived ideas relating to science and women in
major factor in establishing social relations) or giving everyone science, this programme will be gradually rolled out in the
Group’s subsidiaries.
“BEAUTY AND SELF-ESTEEM” “Beauty for a Better Life” develops a made-to-measure training
programme offering a high level of supervision by specialist
Canons of beauty and care taken with the appearance have
teachers with a limited number of pupils, and both theoretical
always reflected the identity of peoples and testified to the
and practical training in a real beauty salon specially adapted
changes in society; beauty rituals are part of the cultural
for the purpose.
heritage of every country. Thus, when someone’s appearance
is affected by illness or precarious living conditions, In each country in which the programme is developed, L’Oréal
relationships with others and with their own community are Foundation works with a local partner (NGO, association)
also impaired, and may even lead to exclusion. Beauty and which has perfect knowledge of the specific context in the
the image projected to others are essential aspects of the country concerned and is thus able to identify potential
social relationship. beneficiaries. These partners are recognised as experts in the
fields of social assistance and job training.
This is the reason for the commitment made by the L’Oréal
Foundation to the various hospital or welfare structures for The programme has now been rolled out in around 20
socio-aesthetic programmes intended for cancer patients, or countries all over the world: from Latin America to Asia, from
those suffering from anorexia or living in highly precarious Europe to the Middle East. Every year, the “Beauty for a Better
social conditions. In 2014, more than 4,500 beneficiaries Life” programme assists nearly 1,400 highly socially or
received socio-aesthetic care and social hairdressing, economically vulnerable people.
particularly women with cancer, people with precarious living
conditions or young people with serious psychological “HAIRDRESSERS AGAINST AIDS”
problems or eating disorders. For eleven years, L’Oréal and UNESCO have joined forces to
Furthermore, due to this constant desire to link beauty in its fight against HIV/AIDS. This programme for prevention of the
dimension of solidarity with professional insertion, the L’Oréal infection centres round the close relationship and trust
Foundation donated nearly 213,000 personal hygiene between these professional hairdressers and their customers,
products to beneficiaries of the Restos du cœur for the which makes them very effective in passing on information
2014/2015 winter campaign. and raising awareness. This global programme has been
rolled out in 37 countries over the 5 continents and involves
Finally, the L’Oréal Foundation also supports Médecins du more than 1.5 million hairdressers worldwide.
Monde association’s reconstructive surgery operations
(Opération Sourire). There are indeed dramatic cases where Local initiatives on all continents
children or women are outcast from society due to an
In addition to the major global programmes initiated by the
appearance disfigured by illness or accidents. Alongside
Foundation and rolled out across the world, each and every
6
Médecins du Monde, as its exclusive partner, the L’Oréal
L’Oréal entity is encouraged to take local actions in relation
Foundation helps to restore the lost dignity of these women
with the situations in their particular countries. In 2014, L’Oréal
and children so that they are accepted back into their
thus supported several hundreds of projects throughout the
communities. This year is the 25th anniversary of Opération
world, involving actions in the fields of solidarity, education,
Sourire. Since 2008, 5,500 patients have been operated on
culture or the environment.
thanks to 100 missions carried out in 13 countries across the
world.
They are also professions involving passion, creation and 6.4.3.1 POLICY
imagination, all assets for the people in these jobs, and help to
build a social relationship. Protection of consumer safety is one of L’Oréal’s absolute
priorities: Safety assessment is at the centre of development of
Within this framework, the L’Oréal Foundation has launched an new products and a prerequisite before any product is
education programme to enable the most vulnerable launched on the market.
populations to return to society: “Beauty for a Better Life”.
Initiated and deployed throughout the world by the L’Oréal The same safety requirements are applied throughout the
Foundation, the purpose of this programme is to assist socially world so that consumers from all over the world have access to
fragile people to recover their self-esteem and to bounce back the same quality of products.
through free high-quality training in the beauty professions The Group has set up an International Product Safety
(hairdressers, makeup specialists, aestheticians). Assessment Department (Worldwide Safety Evaluation)
The beneficiaries are mostly women from underprivileged consisting of a team of nearly 100 employees across 3
environments: some of them are unemployed or have continents.
precarious living conditions, others have dropped out of
school or left home and others again have been victims of
domestic violence, human trafficking or internal conflicts in
their country.
Furthermore, L’Oréal’s ethics principles, rooted in both This information is used to update the corresponding cosmetic
scientific rigour and responsiveness to societal concerns, lead product dossiers.
to a pre-emptive approach whereby formulations are evolved
by removing and/or replacing substances that are the subject
of concern. 6.4.4. Subcontracting with suppliers
L’Oréal’s added value, in terms of the safety assessment of its
ingredients and finished products, lies in its investment for over 6.4.4.1. GENERAL PURCHASING POLICY WITH
20 years in the development of predictive methods and tissue REGARD TO SUPPLIERS
engineering. For many years, L’Oréal has thus been investing
in science and technology to create new evaluation tools Involvement of the suppliers in the Sharing
which are used every day by safety assessors. Beauty With All programme
L’Oréal also works closely with all the international stakeholders "Sharing Beauty With All" programm
involved in relevant industries in order to progress the
development of alternative multidisciplinary solutions in the By 2020, within the Developing Sustainably pillar of Sharing
field of safety assessment. Beauty With All, 100% of the Group’s strategic suppliers will be
participating in its sustainability programme.
This longstanding commitment means that the Group no
longer carries out animal testing in laboratories for any of its L’Oréal works with thousands of suppliers throughout the world
products or ingredients, anywhere in the world. The Group to cover its needs in terms of packaging, raw materials,
also does not delegate responsibility for doing to anyone else. subcontracting, production equipment, promotional and
An exception could be tolerated if an authority so requires for advertising items, and non-production-related products and
safety or regulatory reasons. services (commonly referred to as indirect).
In fact, L’Oréal’s products continually evolve as and when The global volume of purchases directly related to production
technological innovations occur, but with the constant desire (packaging, raw materials and subcontracting) represented
to guarantee the highest level of safety for both consumers €3.64 billion in 2014 (Cosmetics scope, excluding The Body
and professionals. Shop).
Since 2002, all buyers have been implementing the In 2014, 43% of the Group’s strategic suppliers were thus
responsible purchasing policy known as the L’Oréal Buy & evaluated. They represent over 60% of the amount of direct
Care programme which contributes to sharing good purchases (raw materials, packaging items and
Responsible Purchasing practices and the Company’s values subcontracting).
and standards with its suppliers.
Within the framework of this programme, suppliers and
In order to maintain sustainable and value-creating subcontractors are asked to comply, to the ethical
relationships between L’Oréal and its suppliers worldwide, the commitment that refers to compliance with the Fundamental
Purchasing teams are widely mobilised around 5 pillars of Conventions of the International Labour Organisation as well
performance: as local legislation, in particular with regard to minimum
wages, working time, and health and safety.
1. Competitiveness;
L’Oréal actively seeks to work with suppliers who share its
2. Quality; ethical values and commitments and therefore attaches
3. Supply Chain & Service; importance to providing these suppliers with support during
the registration process. For industrial purchases, dedicated
4. Innovation; and purchasing teams have the task of identifying new suppliers
and integrating them in light of the Group’s expectations and
5. CSR. its strategy via the “welcome on board” (WOB) supplier
These pillars form the basis both for daily performance and for referencing process. This allows to make sure that the supplier
long-term strategies. is of real interest, to provide it with all the information,
documents and contacts required for it to understand the
For direct purchases (raw materials, packaging items and expectations and processes at L’Oréal, and finally to obtain
subcontracting), the Group wants 80% of the amount of the supplier’s commitment to L’Oréal’s values that are shared
purchases to be covered by this aspect of the programme. in this manner.
6
strategic suppliers (1) will be evaluated and selected on social and health and hygiene in the workplace is guaranteed.
and environmental performance and will have completed a
self-assessment of their sustainability policy with the support of Thus, subcontractors, wherever they are based in the world,
the Group. Furthermore, in 2020, all suppliers will have access and suppliers of raw materials, packaging, production
to L’Oréal’s training tools to enable them to improve their equipment and POS advertising/Promotional items and
sustainability policies. Finally, 20% of strategic suppliers will be materials located in countries where there is considered to be
associated with the “Solidarity Sourcing” programme. a risk are mandatorily subject to a social audit. To prepare the
risk map for the countries presenting risks, L’Oréal uses the
MaplecroftTM indexes.
L’Oréal has thus precisely re-defined the 5 pillars of The social audits are carried out on behalf of L’Oréal by
performance and developed a harmonised global scorecard independent external service providers.
for all purchasing fields. Each of these areas breaks down into
a series of formal indicators in order to make it easier to The initial audits are financed by L’Oréal and the follow-up
manage them within the scope of the “Sharing Beauty With All” audits are paid for by the suppliers.
programme. The CSR & Sustainability pillar – which represents The audits cover the following 10 chapters:
20% of the final scorecard – covers the environmental, social
and societal dimensions. s child labour;
The suppliers’ CSR results are the subject of exchanges of s forced labour;
views, action plans and ongoing support measures, where
applicable, like their performances with regard to the other 4 s the environment, health and hygiene and safety;
pillars.
s compliance with the laws relating to trade unions;
The CSR strategy and action plans of suppliers are fully
s non-discrimination;
integrated into the supplier relationship and are therefore
discussed at strategic meetings (Business Reviews). The s disciplinary practices;
evaluation of suppliers on the CSR pillar is based, in particular,
on their social commitment, their compliance with the social s sexual harassment or a hostile working environment;
audits, and on their participation in the CDP Supply Chain
s due payment of wages/compensation and benefits;
programme, the main components of which are described
below. s working time;
(1) Strategic suppliers are those who bring significant value added to the Group by contributing, through their importance, their innovations, their strategic
alignment and their geographic deployment, to accompanying L’Oréal’s strategy on a durable basis.
Since January 2013, the social audits include questions To ensure compliance with these commitments throughout the
concerning the environment and in particular compliance chain of responsibilities, L’Oréal has initiated a programme for
with regulations. the evaluation of strategic suppliers and their sustainability
policies. This evaluation, carried out in partnership with the
L’Oréal’s social audit is based to a great extent on the service provider ECOVADIS is also included in the CSR section
internationally recognised SA 8000 standard, but does of the scorecard.
comprise a few exceptions, particularly with regard to the
minimum age for child labour. In this respect, the Group has At the end of 2014, 92 suppliers had thus had their social,
chosen to set the compulsory minimum age at 16 for all environmental and ethical policies evaluated by Ecovadis as
employees working for its suppliers, a higher age limit than that well as the deployment of such policies at their own suppliers.
required by the Fundamental Conventions of the International This represents over 50% of the Group’s strategic suppliers.
Labour Organisation (ILO).
Access to training tools
With regard to the employment of young workers, suppliers
and subcontractors may request waivers from the Group "Sharing Beauty With All" programme
Purchasing Director for the use of employees under the age of
Within the scope of its commitments under the "Sharing Beauty
16 upon presentation of a complete file (schooling, type of
with All" programme, L'Oréal has pledged that all suppliers will
contract, working conditions, type of work). Pursuant to the
have access to L'Oréal training tools to improve their
“Suppliers/Subcontractors and Child Labour” policy, formally
sustainability policies.
laid down in 2011, waivers of this kind are only possible for
apprenticeship programmes or for children carrying out light This commitment was not covered in 2014. It will be the subject
work if this work does not affect their health and safety or their of priority actions in 2015.
regular attendance at school, where the local law allows it
and when the supplier/subcontractor has appointed an Association with the Solidarity Sourcing
internal “tutor” for the children. programmes
Since 2006, when L’Oréal set up a reporting tool, the Group
"Sharing Beauty With All" programme
has conducted social audits at over 4,200 supplier sites.
L’Oréal made the commitment that 20% of its strategic
In 2014, 834 audits ; were carried out, making a total of 6,129 suppliers would be associated with the Solidarity Sourcing
since 2006. programme by 2020.
; The Statutory Auditors have expressed a reasonable assurance on this selected information.
6
assessment: a tool enables Country Managers to assess their
approved by the Chairman and Chief Executive Officer and
possible local ethical risks (including corruption) and to take
the Executive Committee and presented to the Board of
the necessary corrective action.
Directors. This policy posted online on L’Oréal’s website
(www.loreal.com) restates the following principles: L’Oréal’s commitment is supported by Human Resources
procedures. Thus, an “Obtains results with integrity”
s the zero-tolerance policy on corruption;
competence is now included in the annual appraisal system
s the prohibition on facilitation payments; for all our employees.
s the prohibition on all contributions to political parties or Within the framework of L’Oréal’s “Open Talk” policy,
politicians with the aim of obtaining a commercial employees are encouraged to express any concerns they
advantage; have and a dedicated website provides a secure mechanism
for asking questions or raising concerns directly with the
s the prohibition on giving and accepting gifts and/or Group’s Senior Vice-President & Chief Ethics Officer who has
invitations that might influence or be perceived as access to all the documents and information concerning the
influencing a business relationship; Group’s activities and can rely on the Group’s teams and
resources to conduct his assignment successfully.
s communication of the commitment to preventing
corruption to our business partners; Any concerns raised in good faith are examined in detail and
appropriate measures are taken, where applicable. L’Oréal
s compliance with these commitments by intermediaries or
guarantees that no reprisals will be taken against employees
agents representing L’Oréal, particularly in countries where
who have reported their concerns in good faith.
there is a high corruption risk.
The Group’s Internal Control system provides for control
To complete the corruption prevention policy, an employee
procedures for operational activities and in particular with
guide was distributed in 2014 on a Groupwide basis to specify
regard to separation of tasks.
the rules with regard to gifts and invitations.
L’Oréal’s Internal Audit teams are particularly vigilant in this
Other policies such as “The Way We Buy”, a practical and
respect. Corruption risks are systematically reviewed during
ethical guide on the relationships between suppliers and all
Internal Audit assignments, through individual interviews with
employees involved in purchasing decisions, also address
regard to Ethics.
these issues. This document currently exists in 12 languages.
These interviews include questions specifically concerning and forced labour, respect of freedom of association), the
corruption and are conducted separately with the Country promotion of diversity, women’s rights, respect for the rights of
Manager and the Administrative and Financial Director. They peoples use their natural resources and the right to health.
give rise to an individual report reviewed and signed by these
latter persons. Furthermore, several chapters of the Code of Ethics are
devoted to the practical implementation of respect for Human
Within the scope of the legal due diligence reviews carried out Rights: health, safety and security, diversity, harassment and
prior to proposed acquisitions, the Group’s Legal Department bullying, sexual harassment, privacy, contribution to the
includes an “ethics questionnaire” prepared by the Ethics community, and supplier selection and fair treatment of
Department. The answers to this questionnaire are intended to suppliers.
identify, within the Internal Control system existing in the target
company, whether corruption risk prevention has been taken L’Oréal’s Code of Ethics was updated in 2014. Available in 45
into account. languages and in Braille, in French and English, it is distributed
to all employees worldwide. This Code of Ethics is available on:
L’Oréal wants to share its anti-corruption commitment with its www.loreal.com.
business partners and compliance with the law is included in
the Group’s general terms of purchase. Training sessions and communications on Ethics also cover
Human Rights issues.
L’Oréal reserves the right to put an end to any relationships
with business partners who fail to comply with anti-corruption Implementation
laws.
“ETHICS DAY”
DATA
Methodological note
The following methods are used to collect data for the defined
SOCIETAL COMMITMENT DATA SCOPE, scope:
INDICATORS, REPORTING METHOD AND SYSTEMS s the data relating to Ethics is collected by the Ethics
Department using the Annual Ethics Reporting platform. A
Scope of consolidation certain amount of data is collected by the “Country
The scope covers, depending on the indicators, L’Oréal parent reporting” intranet system for the collection of Human
company, France or the Group. The specific scope is specified Resources data (see the Human Resources data reporting
for each indicator. methodology described above);
INDICATORS s the other data are collected from the divisions and
departments concerned (Communications and
The indicators chosen are those within the scope of the
Sustainable Development Division, Human Resources
Grenelle II regulations, with the aim of data comparability.
Division, Purchasing Department, International Product
Safety Assessment Department and the Risk Management
and Compliance Department).
Global
Page Grenelle II – French Decree of April 24th, 2012 GRI Compact
PRINCIPLES
210 Scope of reporting G4-17 to 23
232 Comply or explain Principe
245 Data comparability G4-32
255 Reference to standards G4-32
258 Attestation with regard to the exhaustiveness of information G4-33
259 Opinion with regard to the true and fair view given by the information G4-33 #1 and 2
SOCIAL INFORMATION
218 Employment
s Total workforce G4-9 & G4-10
s Distribution of employees by gender, by age and by geographic zone G4-10 &
G4-LA12
s Recruitments G4- LA1
s Dismissals G4- LA1
s Remuneration and trends G4- LA13 #3 to 8
Work organisation
s Organisation of working time G4- LA
(managerial
approach)
s Absenteeism G4- LA6 #3 to 8
225 Labour relations
s Organisation of the dialogue between employees and management G4-LA4 &
G4-HR4’
s Situation with regard to collective agreements G4- LA4 #3 to 8
226 Health & Safety
s Health and safety conditions at work G4-LA5 to 8
s Status report on agreements signed with trade union organisations with regard to health and safety at work G4- LA8
s Frequency and severity of accidents at work G4- LA6
s Occupational diseases G4- LA7 # 3 to 8
229 Training
s Training policy implemented G4-LA9 to LA11
s Total number of hours of training G4-LA9 &
G4-HR2 #3 to 8
229 Equality of treatment
s Measures taken to promote gender equality G4-HR3
s Measures taken in favour of employment and professional insertion of the disabled G4-LA12 &
G4-HR3
s Policy to combat discrimination G4-LA12 &
G4-HR3 #3 to 8
231 Promotion & compliance with the provisions of the ILO conventions
s Compliance with freedom of association and the right to collective bargaining G4-HR4
s Elimination of discrimination in respect of employment and occupation G4-HR3 &
G4-LA13
s Elimination of forced or compulsory labour G4-HR6
s Effective abolition of child labour G4-HR5 #3 to 8
ENVIRONMENTAL INFORMATION
234 General environmental policy
s Organisation of the Company to take into account environmental issues and, where applicable, environmental G4-EN
evaluation or certification measures (managerial
approach)
s Training actions and provision of information to employees with regard to environmental protection G4-43
s The means devoted to prevention of environmental risks and pollution G4-EN31
s The amount of the provisions and cover with regard to environmental risks, on condition that this information is G4-EN31 &
not liable to cause serious harm to the Company in a lawsuit in process G4-EC2 #9 to 11
Global
Page Grenelle II – French Decree of April 24th, 2012 GRI Compact
235 Pollution and waste management
s Measures for prevention or reduction of, or to remedy, emissions into the air, water and soil seriously affecting
the environment G4-EN22 to 26 #9 to 11
s Waste prevention, recycling and elimination measures G4-EN23 to 27
s Taking into account noise pollution and any other form of pollution specific to an activity #9 to 11
238 Sustainable use of resources
s Water consumption and water supply depending on local constraints G4-EN8
s Raw material consumption and measures taken to improve efficiency in their use G4-EN1 to 2 &
G4-EN27
s Energy consumption, measures taken to improve energy efficiency and use of renewable energies G4-EN3 to EN7
s Soil use G4-EC2,
G4-EN11 to 14;
G4-EN27 #9 to 11
242 Climate change
s Greenhouse gas emissions G4-EN15 to
EN20
s Adaptation to the consequences of climate change G4-EN18 &
G4-EC2 #9 to 11
244 Protection of biodiversity
s Measures taken to preserve or develop biodiversity G4-EN11 to EN
14 & G4-EN26 #9 to 11
SOCIETAL INFORMATION
246 Territorial, economic and social impact of the Company’s activities
s On employment and regional development G4-EC7 &
G4-EC8
s On neighbouring or local populations G4-EC1,
G4-EC8; G4-EC #16 to 18
5&6 & 21
6
247 Relations maintained with people or organisations who are stakeholders of the Company’s activities
s Particularly, associations promoting professional insertion, educational establishments, environmental defence
associations, consumer associations and neighbouring populations
s The conditions for the dialogue with these people or organisations G4-24 to 27 #2 & 16
s Partnership or philanthropy actions G4-EC7 & 8 to 18
250 Subcontracting and suppliers
s Taking into account social and environmental issues in purchasing policy G4-EC9, G4-HR4
to 6, G4-HR 8 to
10
s The importance of subcontracting and taking their social and environmental responsibility into account in G4-EC9, G4-HR4
relations with suppliers and subcontractors to 6; G4-HR8 to
10 #2 to 11
252 Fair practices
s The actions taken to prevent corruption G4-56 to 58 &
G4-SO3 to 5
s The measures taken in favour of consumer health and safety G4-PR1 to 2 #12 to 14
254 Other actions taken in favour of Human Rights G4-HR1 to 12 #3 to 5
This is a free translation into English of the original report issued in French and is provided solely for the convenience of English
speaking readers. This report should be read in conjunction with, and construed in accordance with, French law and professional
auditing standards applicable in France.
To the shareholders,
In our capacity as one of the Statutory Auditors of L’Oréal, and appointed as independent third-party, for whom the certification
request has been approved by the French National Accreditation Body (COFRAC) under the number 3-1048 (1), we hereby provide
you with our report on the social, environmental and societal information presented in the Management Report for the year ended
December 31, 2014 (hereinafter the “EHS Management Reports” and the “Country Reporting Definitions”), pursuant to
Article L. 225-102-1 of the French Commercial Code (Code de commerce).
s to attest that the required CSR Information are presented in the Management Report or, in the event of omission, are explained
pursuant to the third paragraph of Article R. 225-105 of the French Commercial Code (Attestation of completeness of the CSR
information);
s to express limited assurance on the fact that, taken as a whole, the CSR Information is presented fairly, in all material aspects, in
accordance with the Reporting Guidelines (Formed opinion on the fair presentation of CSR Information).
Our work was carried out by a team of seven people between November 2014 and February 2015, i.e. a period of around thirteen
weeks. To assist us in conducting our work, we referred to our corporate responsibility experts.
We conducted the following procedures in accordance with professional auditing standards applicable in France, with the order of
May 13, 2013 determining the methodology according to which the independent third party conducts its assignment and, with
regard to the formed opinion on the fair presentation of CSR Information, with the international standard ISAE 3000(2).
We compared the CSR Information presented in the Management Report with the list set forth in Article R. 225-105-1 of the French
Commercial Code.
In the event of omission of certain consolidated information, we verified that explanations were provided in accordance with the
third paragraph of the Article R. 225-105 of the French Commercial Code.
We verified that the CSR Information covered the consolidated scope, i.e., the Company and its subsidiaries within the meaning of
Article L. 233-1 of the French Commercial Code and the companies that it controls within the meaning of Article L. 233-3 of the
French Commercial Code, subject to the limitations set forth in the methodological note presented in the corporate social
responsibility section of the Management Report.
Based on these procedures and considering the limitations mentioned above, we attest that the required CSR Information is
presented in the Management Report.
s assess the suitability of the Reporting Guidelines with respect to their relevance, completeness, reliability, neutrality and
understandability, taking into consideration, when relevant, the sector’s best practices;
s verify that a data-collection, compilation, processing and control procedure has been implemented to ensure the completeness
and consistency of the CSR information and review the Internal Control and risk management procedures used to prepare the
CSR Information.
We determined the nature and scope of our tests and controls according to the nature and significance of the CSR Information with
regard to the Company’s characteristics, the social and environmental challenges of its activities, its Sustainable Development
6
strategies and the sector’s best practices.
Concerning the CSR information that we have considered to be most important (see annex):
s for the consolidating entity, we consulted the documentary sources and conducted interviews to corroborate the qualitative
information (organization, policies, actions), we performed analytical procedures on the quantitative information and verified,
using sampling techniques, the calculations and the data consolidation, and we verified their consistency with the other
information presented in the Management Report;
s for a representative sample of entities and sites that we have selected (1) according to their activity, their contribution to the
consolidated indicators, their location and a risk analysis, we held interviews to verify the correct application of the procedures
and performed substantive tests using sampling techniques, consisting in verifying the calculations made and reconciling the
data with supporting evidence. The selected sample represented 24% of the headcount, between 12% and 42% of the
environmental quantitative information;
Regarding the other consolidated CSR Information, we have assessed its consistency in relation to our understanding of the Group.
Lastly, we assessed the relevance of the explanations relating to, where necessary, the total or partial omission of certain
information.
We believe that the sampling methods and sizes of the samples we have used in exercising our professional judgment enable us to
express limited assurance; a higher level of assurance would have required more in-depth verifications. Due to the use of sampling
techniques and the other limits inherent to the operations of any information and Internal Control system, the risk that a material
anomaly be identified in the CSR Information cannot be totally eliminated.
CONCLUSION
Based on our work, we did not identify any material anomaly likely to call into question the fact that the CSR Information, taken as a
whole, is presented fairly, in accordance with the Reporting Guidelines.
Annexes
The CSR Information that we considered to be the most s 2014 waste treatment
important, on which we conducted detailed tests, are the
following: s COD content before water treatment
In our capacity of Statutory Auditors of L’Oréal and on L’Oréal’s request, we carried out verification works aiming at giving a
reasonable assurance on selected environmental, social and societal information published in L’Oréal’s 2014 Annual Report.
s the number of entities having been awarded the European label “Gender Equality European Standard” – GEES;
s the number of entities having been awarded the European label “Economic Dividend for Gender Equality” – EDGE;
s the number of entities that have undertaken EDGE audits waiting to be awarded;
s the number and distribution of non-compliances detected during social audits of supplier sites.
The environmental, hygiene and safety information selected by L’Oréal is the following:
This information has been prepared under the responsibility of the Board of Directors of L’Oréal in accordance with the guidelines
used by the Company (hereinafter the “Guidelines”) of which a summary appears in the Annual Report and that are available
upon request from the Human Resources and EHS Departments.
Based on our work, it is our responsibility to express a conclusion of reasonable assurance on these selected informations.
We have conducted the following diligences giving a reasonable assurance on the fact that the environmental, social, societal,
hygiene and safety information selected by L’Oréal has been presented, in all material aspects, in compliance with the Guidelines
used by L’Oréal.
s We have examined, at group level, the reporting procedures set up by L’Oréal with regard to their relevance, completeness,
reliability, neutrality and clarity.
s We have verified the set-up a process to collect, compile, process and check the selected information with regard to its
completeness and consistency. We have also reviewed the internal control and risk management procedures used to prepare
the selected information.
(1) ISAE 3000 – Assurance engagements other than audits or reviews of historical information.
s We have conducted analytical procedures and verified calculations and data consolidation through various samplings. This
work has been completed with interviews with persons from L’Oréal’s Corporate Social and Environmental Responsibility
Department in charge of data collection and consolidation.
s We have selected a sample of entities for selected Environmental, Hygiene and Safety information:
• we have verified, through interviews with people in charge of data collection, the correct application of the Guidelines;
• we have conducted detailed test on representative samples consisting in calculation verification and corroboration of that
with supporting documents.
These selected entities represent 66% Finished Goods Units produced by the Group, and between 54 and 100% of the environmental
information reviewed.
6
Selected social and societal data has been audited in L’Oréal Headquarters.
CONCLUSION
Based on our work, the environmental, social, societal, hygiene and safety information selected by L’Oréal, presented hereinabove
and published in its Annual Report, have been presented, in all material aspects, in accordance with the Guidelines used by L’Oréal
in 2014.Based on our work, the environmental, social, societal, hygiene and safety information selected by L’Oréal, presented
hereinabove and published in its Annual Report, have been presented, in all material aspects, in accordance with the Guidelines
used by L’Oréal in 2014.
* This information forms an integral part of the Annual Financial Report as provided for in the Article L. 451-1-2 of the French Monetary and Financial Code.
The choice between these two modes of exercising accordance with calls for funds, provided however that
General Management is made by the Board of Directors (where the profits for a given year do not allow such
each time a Chairman of the Board of Directors or a Chief dividend to be paid) the shareholders shall not be entitled
Executive Officer is appointed or has his tenure renewed. to claim such dividend from out of the profits of
The Board of Directors must inform shareholders and third subsequent years.
parties of this choice in accordance with the statutory
provisions. 2. From the available remainder, the Ordinary General
Meeting, upon a proposal by the Board of Directors, shall
The choice of the Board of Directors concerning the mode have the authority to resolve to withhold the amounts that it
of exercise of the General Management is made on the deems appropriate (and even the entire amount of such
basis of a majority vote of the Directors present or available remainder), either to be carried forward to the
represented. next fiscal year, or to be paid into a “prudential fund” or into
one or more ordinary, extraordinary or special reserve funds.
Changing the mode of exercise of the General Such reserve fund(s), which shall not bear any interest, may
Management does not involve a modification of the be distributed to the shareholders, or allocated to complete
Articles of Association. the 5% primary dividend for the shareholders, in the event of
2. Depending on the choice made by the Board of Directors insufficient results during one or more fiscal years, or to
in accordance with the provisions of § 1 above, the acquire and to cancel shares in the Company, or to
General Management is carried out either by the redeem in whole or in part such shares.
Chairman, or by a natural person, appointed by the Board 3. The remaining balance (if any) shall be divided up among
of Directors and bearing the title of Chief Executive Officer. all the shareholders, without any discrimination, and
3. The Chief Executive Officer is granted the most extensive each share shall entitle its holder to receive the same
powers to act in all circumstances on behalf of the income.
Company. He exercises these powers within the limitations However, any shareholder who can prove at the end of a
of the object of the Company, and subject to the powers financial year, that shares have been registered in his
expressly granted by law to Shareholders’ Meetings. name for at least two years and that they continue to be
The Chief Executive Officer represents the Company in its registered in his name at the date of payment of the
relations with third parties. The Company is bound even dividend paid for such financial year, will be entitled to a
by actions of the Chief Executive Officer which are outside preferential dividend on the shares that are thus
the object of the Company, unless the Company can registered, equal to 10% of the dividend (initial dividend
prove that the third party was aware that the action was and additional dividend) paid on the other shares,
outside the object of the Company, or that the third party including in the event of payment of the dividend in
could not be unaware of this in view of the circumstances, new shares, the preferential dividend thus paid being
it being stated however that the mere publication of the rounded down to the nearest lower cent, if necessary.
Articles of Association does not constitute such proof. Similarly, any shareholder who can prove, at the end of a
4. On the proposal of the Chief Executive Officer, whether financial year, that shares have been registered in his
7
this office is assumed by the Chairman of the Board of name for at least two years and that they continue to be
Directors or by another person, the Board of Directors may registered in his name at the date of completion of an
appoint one or more natural persons in charge of increase in capital carried out through capitalisation of
assisting the Chief Executive Officer, with the title of reserves, profits or share premiums by the distribution of
Deputy Chief Executive Officer. bonus shares, shall be entitled to an increase in the
number of bonus shares to be distributed to him, equal to
In agreement with the Chief Executive Officer, the Board 10%, this number being rounded down to the nearest
of Directors determines the extent and duration of the lower unit in the event of fractional share rights.
powers granted to the Deputy Chief Executive Officers.”
The new shares created in this manner will be identical,
for the purposes of calculating the rights to the
7.1.9. Fiscal year (Article 14 of preferential dividend and to the increased share
the Articles of Association) allocations, to the old shares from which they result.
“Each fiscal year shall have a duration of twelve months, to The number of shares eligible for these preferential
begin on January 1st and to end on December 31st of each dividends may not exceed 0.5% of the share capital at the
year.” closing date of the past financial year, for the
same shareholder.
7.1.10. Statutory distribution of profits B. The losses (if any) shall be charged to the retained earnings
(Article 15 of the Articles of from preceding fiscal years or to the reserve funds, and the
Association) balance shall be booked into a special ‘carry forward’
account.”
“A. From the distributable profits, the following amounts shall
be withheld, in the following order: 7.1.11. Annual General Meetings
1. The amount required to pay the “primary dividend” to
Annual General Meetings are governed by all the legal
the shareholders equal to five percent (5%) of the
provisions and regulations laid down in this connection.
amounts paid up on the unredeemed securities in
Since the Annual General Meeting of April 29th, 2004, double “If not disclosed in accordance with the conditions stipulated
voting rights have been eliminated. by law or by the Articles of Association, shares exceeding the
fraction which should have been disclosed are deprived of
voting rights at Shareholders’ Meetings, in accordance with
7.1.12. Statutory share ownership the conditions stipulated in the French Commercial Code, if
during a meeting the failure to disclose is noted, and if one or
threshold more shareholders together holding at least 5% of the share
capital so request during the meeting” (Article 7, paragraph 3
“Any holder, whether direct or indirect, of a fraction of the
of the Articles of Association).
Company’s share capital equal to 1%, or a multiple of this
percentage lower than 5%, is required to inform the Company See also the complete text of the Company’s Articles of
within a period of fifteen days in the event that these Association on the www.loreal-finance.com website,Regulate
thresholds have been passed in either direction” (Article 7, information section.
paragraph 2 of the Articles of Association). This provision of the
Articles of Association supplements the legal requirements
covering disclosures concerning the crossing, upwards or
downwards, of thresholds relating to one-twentieth, one-tenth,
three-twentieths, one-fifth, one-quarter, three-tenths, one-third,
one-half, two-thirds, eighteen-twentieths or nineteen-twentieths
of share capital or of voting rights” (Article L. 233-7 of the
French Commercial Code).
* This information forms an integral part of the Annual Financial report as provided in the Article L. 451_1_2 of the French Monetary and Financial Code.
The table set out below which summarises (particularly in application of Articles L. 225-129-1 and L. 225-129-2 of the French
Commercial Code) the currently valid authorisations granted to the Board of Directors by the Annual General Meeting
of shareholders concerning the capital. It shows the use made of such authorisations over the financial year and presents the
authorisations which are to be put to the vote at the Annual General Meeting on April 22nd, 2015.
Since June 22nd, 2013, the Board of Directors no longer has an basis of one new share per option, and are therefore liable to
authorisation to allocate stock options to purchase or lead to the creation of the same number of shares.
subscribe for shares. Furthermore, 4,329,875 conditional shares had been granted
to Group employees. Out of these, 1,067,565 shares will be
At December 31st, 2014, 10,612,628 share subscription options created when necessary and, where applicable, by
had been allocated. All these options are exercisable on the capitalisation of reserves. Accordingly, the potential share
capital of the Company amounts to €114,582,116.40, divided February 10th, 2014 upon the authorisation of the Annual
into 572,910,582 shares with a par value of €0.20 each. General Meeting of April 26th, 2013 (8th resolution).
The Company has not issued any securities which grant The Chairman, on the delegation of the Board of Directors at
indirect entitlement to shares in the capital. its meeting on April 17th, 2014, recorded the amount of
the share capital at December 31st, 2014, which was
On July 8th, 2014, the Company cancelled 48,500,000 shares €112,246,077.80 divided into 561,230,389 shares.
purchased from Nestlé; these shares had been purchased
pursuant to the decision of the Board of Directors on
* This information forms an integral part of the Annual Financial report as provided in the Article L. 451-1-2 of the French Monetary and Financial Code.
7.3.2.
three years
(1) (2)
185,704,089 33.09 33.09 185,661,879 30.64 30.64 185,661,879 30.50 30.50
(2)
129,881,021 23.14 23.14 178,381,021 29.44 29.44 178,381,021 29.30 29.30
(2)
315,585,110 56.23 56.23 364,042,900 60.08 60.08 364,042,900 59.80 59.80
(3)
4,530,801 0.81 0.81 4,252,345 0.70 0.70 4,379,821 0.72 0.72
Public 234,125,967 41.71 41.71 231,498,785 38.21 38.21 229,933,941 37.76 37.76
Treasury stock 6,988,511 1.25 6,107,857 1.01 1.01 10,454,165 1.72
TOTAL 561,230,389 100.00 98.75 605,901,887 100.00 98.99 608,810,827 100.00 98.28
(1) ée” (simplified joint-stock company) of
.
(2) share capital).
(3) Of which 0.74% in the L'Oréal Company savings plan (PEE).
(4)
st
, 2014, the voting rights of the Company and that it individually held
Board of Directors is shown in the information sheets on the The crossing of these thresholds results from the buyback of
st
described below.
7.3.3. rd
,
The employees of the Company and its affiliates held Nestlé, providing for the merger of Gesparal into L’Oréal
st
, 2014. th
d) The parties are free to carry out transfers of L’Oréal shares, 7.3.5.4. CONCERTED ACTION BETWEEN THE PARTIES
in the case of individuals, in favour of an ascendant, The parties declared that they would act in concert for a
descendant or spouse in the form of a gift, and in the period of five years from April 29th, 2004. On April 9th, 2009, the
case of individuals or legal entities, in favour of any Bettencourt Meyers family and Nestlé published the following
company in which the individual or legal entity carrying press release:
out the transfer holds over 90% of the share capital and
voting rights. “On February 3rd, 2004, the Bettencourt family and Nestlé
signed an agreement organising their relationship and the
Pre-emption clause management of their stakes within the L’Oréal Company.
(expiring on April 29th, 2014)
The agreement is public and remains unchanged. It foresees
The parties have reciprocally granted each other a the non-transferability of their respective stakes in the capital of
pre-emption right concerning the L’Oréal shares they hold L’Oréal until April 29th, 2009, the other clauses (in particular,
since the date of the merger, and those they will hold after limitation on the shareholding, pre-emption, escrow,
such date. prohibition on constituting a concert party with any third party,
composition of the Board of Directors and of the Strategy and
This pre-emption right, that came into force on expiry of the
Implementation Committee) continue to be effective until the
lock-up clause for a period of five years, expired on
expiry date mentioned in the 2004 deed.
April 29th, 2014.
The Bettencourt family and Nestlé will continue to act in
“No concert party” provision concert with regard to the L’Oréal Company beyond April 29th,
(clause expiring on April 29th, 2014) 2009.”
The parties have agreed for a period of ten years from the
effective date of the merger not to conclude an agreement 7.3.5.5. AMENDMENT AGREEMENT SIGNED
with any third party and not to form a concert party relating to ON FEBRUARY 10TH, 2014
the shares making up the share capital of L’Oréal.
In meetings held on February 10th, 2014, the respective Boards
Breach of such undertaking entitles the other party to exercise of Directors of Nestlé and L’Oréal approved by unanimous
its pre-emption right with regard to the shareholding of the decision of their voting members a strategic transaction for
party having committed such breach, for a price per share both companies under which L’Oréal would buy 48.5 million of
equal to the average of the share prices for the last thirty its own shares (8% of its share capital) from Nestlé. L’Oréal and
trading sessions prior to notification of exercise of the Nestlé’s joint news release of February 11th, 2014 describes this
pre-emption right. transaction in detail.
The table set out below summarises the transactions carried out within this framework, and the use made of the shares bought
back:
April 26th, 2013
Date of authorisation of the Annual General Meeting (8th resolution)
Expiry date of the authorisation October 26th, 2014
Maximum amount of authorised buybacks 10% of capital on the date of the share buybacks (i.e., as an indication,
60,549,917 shares at April 26th, 2013), for a maximum amount
of €10,293.5 million
Maximum purchase price per share €170
Authorised purposes Cancellation
Share purchase options
Free grants of shares
Liquidity and market stabilisation
External growth
Board of Directors’ meetings that decided on the buybacks 11.29.2013 and 02.10.2014 and 04.17.2014
Purpose of buybacks Cancellation
Period of buybacks made From January 2nd to January 10th, 2014
and July 8th, 2014
Number of shares purchased €950,000 and €48,500,000 *
Average purchase price per share ** €124.93 ** and €124.48 **
Use of shares purchased Cancellation of 48,500,000
* Shares purchased from Nestlé at a price of €124.48 per share and cancelled on July 8th, 2014.
** Before costs.
7.3.6.2. TRANSACTIONS CARRIED OUT BY L’ORÉAL 7.3.6.3. RENEWAL BY THE ANNUAL GENERAL
WITH RESPECT TO ITS SHARES IN 2014 MEETING OF THE AUTHORISATION GIVEN
TO THE BOARD TO TRADE
Percentage of share capital held by the Company directly and IN THE COMPANY’S SHARES
indirectly of which: at December 31st, 2014 1.245%
s those intended to cover existing share purchase option plans 0.028% By voting a new resolution, the Annual General Meeting could
s those intended to cover conditional shares 0.581% give the Board of Directors the means to enable it to continue
with the buyback policy.
s those intended for cancellation 0.518%
Number of shares cancelled during the last 24 months 57,608,641 This authorisation would be given for a maximum period of
Number of shares held in the portfolio at 12.31.2014 6,988,511 18 months as from the date of the Annual General Meeting
Net book value of the portfolio at 12.31.2014 €682.4 million and the purchase price per share could not exceed €230
Market portfolio value at 12.31.2014 €973.5 million (excluding expenses).
56,123,038 shares for a maximum amount of €12,908,298,740, off the stock market, including in whole or in part, through the
it being stipulated that the Company may at no time hold over acquisition, sale, exchange or transfer of blocks of shares.
10% of its own share capital. These means include, where applicable, the use of all
financial instruments and derivatives.
The purchase, sale, exchange or transfer of these shares may
be carried out by any means on one or more occasions, on or
s increasing solidarity and helping to instil a group spirit The plans are proposed by General Management to the Board
among its managers by seeking to foster their loyalty over of Directors which decides, after receiving the opinion of the
time. Human Resources and Remuneration Committee, with regard
to the opening of these plans and the applicable conditions
Until 2009, L’Oréal’s Board of Directors exclusively granted stock and rules.
options to the senior managers and executive officers whom
L’Oréal wished to reward for their performance and their Since 2009, these grants are made after publication of the
important role in business development and in the Group’s financial statements for the previous financial year, in
accordance with the AFEP-MEDEF recommendation.
7
current and future projects, wherever they might be located.
In 2009, L’Oréal’s Board of Directors enlarged its policy by The decision with regard to each individual grant is, in every
introducing a mechanism for the conditional grant of shares to case, contingent on the quality of the performance rendered
employees (ACAs). at the time of implementation of the plan with particular
attention being paid to the main talents for the future.
The objective was: According to the eligibility criteria linked to the position held by
the beneficiary and the size of the entity or the country in
s to provide a long-term incentive offering greater motivation which the beneficiary works, in a concern for equity on an
to all those who only received stock options occasionally or international scale, these grants are made every year, every
in limited numbers; two years or every three years.
s to reach out to a broader population of potential The General Management and the Board of Directors stress
beneficiaries, particularly internationally, in a context of the importance that is given to bringing together the interests
increased competition with regard to talents. of the beneficiaries of stock options and conditional grants
In 2010, this policy remained unchanged, and was applied to of shares and those of the shareholders themselves.
an even larger number of beneficiaries. The employees and executive officers who are the
In 2011, L’Oréal’s Board of Directors decided to make plans for beneficiaries share with the shareholders the same confidence
the conditional grant of shares to employees the primary tool in the strong steady growth of the Company with a medium-
for its long-term incentive policy by extending the grant and long-term vision. This is why stock options were granted for
of shares to the main senior managers of the Group who up till a period of 10 years including a 5 year lock-up period, and
then had only received stock options: thus, except for the conditional grants of shares for a period of 4 years followed by
Chairman and Chief Executive Officer who received stock a 2 year waiting period for France during which these shares
options only, the main senior managers of L’Oréal, including cannot be sold.
the members of the Executive Committee, received a mix of In all, over 3,000 employees (i.e. over 12% of the senior
stock options and conditional grants of shares in order to managers throughout the world) benefit from at least one
encourage both their spirit of enterprise and to reward their
* This information forms an integral part of the Annual Financial report as provided in the Article L. 451_1_2 of the French Monetary and Financial Code.
195 381
7.4.2.1. CURRENTLY EXISTING L’ORÉAL PARENT COMPANY SHARE PURCHASE OR SUBSCRIPTION OPTION PLANS (1)
The main features of the plans that existed at December 31st, 2014 are included in the tables set out hereafter:
7
Total number of options for subscription or purchase of shares
that have been cancelled or lapsed 461,600 199,000 203,500 229,000
Number of option shares remaining to be subscribed
or purchased at year-end 1,231,633 1,717,439 3,976,500 1,233,500
(1) There are no share purchase or subscription option plans at subsidiaries of L’Oréal.
(2) This is the number of stock options granted to the executive officers during their terms of office within the scope of each of the above-mentioned plans.
Mr. Jean-Paul Agon has been an executive officer since April 2006.
(3) The stock option plan of November 30th, 2005 is composed, for 70%, of a share subscription option offer at a price of €61.37 (S) and for 30%, of a share purchase
option offer at a price of €62.94 (A). Each beneficiary received an offer comprising share subscription and purchase options, in the above proportions. There were no
fractional share rights.
(4) As Mr. Jean-Paul Agon informed the Board of Directors that he did not wish to be granted any subscription option with respect to 2009, he did not receive any
subcription option under the Plan dated March 25th, 2009
(5) The Board of Directors’ meeting of April 22nd, 2011 allocated 400,000 share subscription options to Mr. Jean-Paul Agon. Mr. Agon waived the right to 200,000 of such
options. He therefore benefits from 200,000 stock options under the plan decided by the Board of Directors at its meeting on April 22nd, 2011.
There were 10,770,989 outstanding options granted by the Board of Directors within the scope of the authorisations voted by the
Annual General Meetings and not yet exercised at December 31st, 2014, at an average price of €75.28, namely 1.92% of the
561,230,389 shares making up the share capital at such date.
7.4.2.2. STOCK OPTIONS TO PURCHASE OR SUBSCRIBE FOR SHARES GRANTED TO EMPLOYEES OTHER THAN
EXECUTIVE OFFICERS OF L’ORÉAL OR EXERCISED BY THEM DURING THE 2014 FINANCIAL YEAR
Total number of options granted Weighted average price
Options granted by L’Oréal parent company to the ten employees (1)
to whom the largest number of stock options was granted No stock options granted in 2014 NA
(1) Employees other than executive officers of L’Oréal parent company or employees of companies included in the scope of grant of the stock options.
Total number
of shares Weighted Plan of Plan of Plan of Plan of Plan of Plan of Plan of Plan of Plan of
subscribed average 03/24/04 12/01/04 06/29/05 11/30/05 11/30/05 04/25/06 12/01/06 11/30/07 03/25/09
or purchased price (S) (S) (S) (A) (S) (S) (S) (S) (S)
Options held with regard to L’Oréal parent
company exercised by the ten employees (1)
who have thus purchased or subscribed for
the largest number of options 495,123 €61.90 0 0 50,000 0 6,950 0 130,000 39,000 269,173
(1) Employees other than executive officers of L’Oréal parent company or employees of companies included in the scope of grant of the stock options.
7.4.2.4. TABLES MONITORING THE PERFORMANCE CONDITIONS UNDER THE STOCK OPTION PLANS IN PROCESS
Stock option plan of April 27th, 2010
Arithmetical average
Performance conditions related to the stock of the performances
options granted to the members of the Executive for financial years
Committee 2011/2012/2013 and
at the date of grant 2011 2012 2013 2014 2014
50% growth in comparable cosmetics sales
as compared to the increase in +0.4 point +0.9 point +1.4 point +0.2 point +0.7 point
the cosmetics market* (+5%/+4.6%) (+5.5%/+4.6%) (+5.2%/+3.8%) (+ 3.8 %/+ 3.6%)
50% operating profit + advertising and
promotional expenses as compared to 47.80% 47.20% 47.60% 47.10% 47.4%
cosmetic sales (9,017.9/18,870.8) (9,815.7/20,811.9) (10,146.6/21,341.5) (10,201/21,658)**
* Evolution of cosmetics market: source L’Oréal (see chapter 1).
** Data restated to reflect exclusion of Galderma and Inneov
* Panel of competitors: Procter & Gamble, Unilever, Estée Lauder, Shiseido, Beiersdorf, Johnson & Johnson, Henkel, LVMH, Kao, Revlon, Elizabeth Arden.
** Data has been restated to reflect exclusion of Galderma and Inneov
s at the end of a minimum vesting period of two years, it Since 1,057,820 shares were granted on April 26th, 2013,
being specified that the beneficiaries will then be required 2,582,186 shares remained to be granted. The Board of
to hold these shares for a minimum period of two years after Directors used this authorisation at its meeting of April 17th,
the date of the final award thereof. 2014, by granting 1,068,565 free shares to 1,978 beneficiaries.
The grant of these shares to their beneficiaries will become This is a free grant of shares to be issued.
final and binding prior to the expiry of the above-mentioned
Vesting of the shares is subject to a dual condition of: With respect to the criterion relating to operating profit, for all
the free shares granted to be finally acquired for the
s presence: the shares granted will only finally vest after a beneficiaries at the end at the vesting period, a growth level
period of 4 years at the end of which the beneficiary must defined by the Board (not disclosed for confidentiality reasons)
still be an employee of the Group (save the exceptions must be reached or surpassed.
provided for by law or the plan regulations);
Below this level, the acquisition is digressive.
s performance:
No share will finally vest with respect to the criterion relating to
• vesting of all or part of 50% of the shares granted will operating profit if it does not increase in absolute value over
depend on the growth in comparable cosmetics sales the period.
for financial years 2015, 2016 and 2017 as compared to
those of a panel of L’Oréal’s biggest direct competitors The Human Resources and Remuneration Committee is
consisting of Procter & Gamble, Unilever, Estée Lauder, responsible for communicating to the Board of Directors the
Shiseido, Beiersdorf, Johnson & Johnson, Henkel, LVMH, level of indicators recorded for the years to be used for the
Kao, Revlon, Elizabeth Arden, calculation of the performance conditions. The Board of
Directors records, at the appropriate time, the level of
• vesting of all or part of 50% of the shares granted will performance achieved on which the number of shares that
depend on growth in the Group’s consolidated finally vests depends.
operating profit, over the same period.
The data recorded year after year to determine the levels of
The calculation will be made on the basis of the arithmetic performance achieved are published in the Annual Financial
mean of the performances for the 2015, 2016 and 2017 Report (cf. 7.4.3.6. p 281)
financial years.
The vesting of the first 200 conditional shares (ACAs) is not
With respect to the criterion relating to sales, in order for all the subject to fulfilment of the performance conditions except for
free shares granted to finally vest for the beneficiaries at the the members of the Executive Committee including the
end of the vesting period, L’Oréal must achieve a performance Chairman and Chief Executive Officer.
which is at least as good as the average increase in sales of
the panel of competitors. At the end of the vesting period, beneficiaries who are French
residents at the date of grant of the shares will be obliged to
Below this level, the acquisition is digressive. retain the shares that have vested for an additional period of
The Board defines a minimum level (not disclosed for 2 years during which these shares are non-transferable.
confidentiality reasons) under which no share will finally vest
pursuant to this criterion.
7.4.3.4. SHARES GRANTED TO THE TEN EMPLOYEES OTHER THAN EXECUTIVE OFFICERS TO WHOM THE LARGEST
NUMBER OF SHARES HAVE BEEN GRANTED
The total number of shares granted in 2014 to the ten employees other than corporate officers who received the largest number
of shares amounts to 153,400 shares.
7.4.3.5. SHARES THAT HAVE FINALLY VESTED WITHIN THE SCOPE OF THE APRIL 27TH, 2010 PLAN
The Board of Directors recorded at its meeting on February 12th, 2015 that the performance levels achieved during the three years
taken into consideration within the scope of the April 22nd, 2011 plan, namely 2012, 2013, 2014, exceeded the levels set for the
conditional grant of all the shares (ACAs).
Accordingly, the beneficiaries who meet the conditions under the plan on April 22nd, 2015 and, in particular, the condition of
presence in the Company, will receive all the shares that were granted to them.
For information purposes, no conditional grant of shares (ACAs) was made to the executive officers under this plan.
7.4.3.6. TABLES MONITORING PERFORMANCE CONDITIONS FOR THE ACAS PLANS THAT ARE CURRENTLY
IN PROGRESS
The total number of free shares granted to the executive s partly the growth in L’Oréal’s comparable cosmetics sales
officers during a financial year may not represent more than as compared to that of a panel of L’Oréal’s biggest direct
10% of the total number of free shares granted during that competitors;
same financial year.
s partly the increase in L’Oréal’s consolidated operating
The free grant of shares to beneficiaries would only become profit.
final and binding, subject to satisfaction of the other
conditions set at the time of grant, including in particular the The figures recorded year after year to determine the
condition of presence in the Company, for all or part of performance levels achieved are published in the Annual
the shares granted: Financial Report.
s either at the end of a minimum vesting period of four years, The Board of Directors would once again apply the
in such case without any minimum holding period; performance criteria that it uses pursuant to the authorisation
in force which was voted by the Annual General Meeting on
s or at the end of a minimum vesting period of two years, it April 26th, 2013.
being specified that the beneficiaries will then be required
The Board of Directors indeed considers that these two criteria, These performance conditions will apply to all the individual
assessed over a long period of 3 financial years and applied grants of more than 200 free shares per plan, with the
to several plans, are complementary, in line with the Group’s exception of those for the executive officers and the Executive
objectives and suitable to its specificities and should make it Committee members, to which they will apply in full.
possible to promote balanced, continuing growth over the
long term. They are exacting but remain a source of The free grant of shares may be carried out without any
motivation for beneficiaries. performance conditions within the scope of grants made to all
the employees of the Group, or for shares granted in respect of
In order for all the free shares granted to finally vest for the cash subscriptions made within the scope of an increase in
beneficiaries at the end of the vesting period pursuant to the capital reserved for the Group’s employees pursuant to the
criterion related to sales, L’Oréal’s growth must be at least as tenth resolution.
good as the average growth in sales of the panel of
competitors. This panel consists of Unilever, Procter & Gamble, Any grants of shares to the executive officers will be decided
Estée Lauder, Shiseido, Beiersdorf, Johnson & Johnson, Kao, by the Board of Directors on the basis of the proposals of the
LVMH, Coty, Henkel. Below that level, the grant decreases. The Human Resources and Remuneration Committee after
Board defines a threshold, which is not made public for assessment of their performance.
reasons of confidentiality, below which no share will finally vest L’Oréal’s executive officers will be obliged to retain 50% of the
pursuant to this criterion. free shares that will be definitively granted to them at the end
In order for all the free shares granted to finally vest for the of the vesting period in registered form until the termination of
beneficiaries at the end of the vesting period pursuant to the their duties.
criterion related to operating profit, a level of growth defined An executive officer may not be granted free shares at the
by the Board, but not made public for reasons of time of termination of his duties.
confidentiality, must be met or exceeded. Below that level, the
grant decreases. If the operating profit does not increase in The authorisation requested from the Annual General Meeting
absolute value over the period, no share will finally vest would be granted for a period limited to 26 months as from the
pursuant to this criterion. decision by the Annual General Meeting.
Low
€140.40
December 30th, 2014
€114.55
7
FR0011149590; March 24th, 2014
Annual share price increase at December 31st, 2014
s Dividend +10% in 2015: FR0011356229;
s L’Oréal +9.08%
s Dividend +10% in 2016: FR0011636133; s CAC 40 -0.54%
s Euronext 100 +3.64%
s Dividend +10% in 2017: FR0012332245.
s DJ Euro Stoxx 50 +1.20%
Minimum lot: 1 share. s Stoxx Europe 600 Personal and Household Goods +9.21%
Market capitalisation at December 31st, 2014 €78.18 billion (1)
Par value: €0.20.
At December 31st 2014, the L’Oréal share weighed:
Trading on the spot market of the Paris Stock Exchange. s in the CAC 40 4.07%
s in the Euronext 100 (2) 3.82%
Eligible for the Deferred Settlement Service (SRD).
s in the DJ Euro Stoxx 50 1.71%
Unsponsored "American Depositary Receipts" are freely traded s in the Stoxx Europe 600 Personal
in the United States through certain banks operating in the and Household Goods 6.62%
United States.
(1) Out of the number of shares at December 31st, 2014, i.e. 561,230,389.
(2) Based on the total number of shares for the Euronext 100 index.
s A regular increase in the dividend per share (in euros): s Share of profits dedicated to dividends(3)(as %): 50.6%
2.70(2) 50.6%(4)
2.50 48.7%
x 3.3 46.3% 46.8%
2.30 43.9% 44.9%
IN 10 YEARS 41.1% 41.3%
2.00 39.6%
38.5%
1.80 36.6% 36.8%
1.50
1.44
1.38
1.18
1.00
0.82
0.73
(1) Diluted net profit excluding non-recurring items, group share, per share.
(2) Dividend proposed to the Annual General Meeting of April 17th, 2014.
(3) Dividend distribution rate based on diluted net profit excluding non-recurring items, group share, per share. Taking into account Sanofi not
consolidated in the period 2002-2003.
(4) On the basis of the dividend proposed to the Annual General Meeting of April 17th, 2014.
Average Average
daily daily
trading trading
volume volume
Price (€) (€ millions) Price (€) (€ millions)
Date High Low Average Date High Low Average
2012 2013
January 83.47 79.22 81.39 57.75 January 114.50 103.65 107.78 51.95
February 86.12 80.93 83.94 73.93 February 115.90 107.55 111.11 73.20
March 92.53 85.27 88.87 78.27 March 124.40 113.60 119.55 86.67
April 94.80 88.82 91.89 123.11 April 136.05 120.30 126.23 93.74
May 93.98 88.85 91.44 77.67 May 137.85 130.35 134.57 82.46
June 93.27 86.80 90.24 78.67 June 131.25 120.15 125.80 75.29
July 99.80 89.80 94.28 77.32 July 131.00 123.40 127.68 61.67
August 102.50 95.54 100.12 63.04 August 130.35 121.00 126.78 61.81
September 101.15 96.17 97.84 88.43 September 129.80 123.60 126.71 61.25
October 101.85 94.55 97.98 64.40 October 130.60 120.50 126.02 64.63
November 105.85 95.80 100.94 57.64 November 126.50 120.80 124.41 66.41
December 106.40 103.20 104.86 52.32 December 127.75 122.30 125.17 86.89
Average Average
daily daily
trading trading
volume volume
Price (€) (€ millions) Price (€) (€ millions)
Date High Low Average Date High Low Average
2014 2015
January 129.2 119.25 124.21 90.06 January 160.20 133.40 146.59 133.35
February 134.75 120,15 123.09 121.84 February 162.70 152.05 157.69 131.55
March 123.4 114.55 118.60 90.1
April
May
June
124.6
129.65
129.85
116.35
123.15
125.25
120.60
127.09
127.57
86.16
77.66
74.31
7
July 129.25 124.55 126.76 66.53
August 128.6 123.2 125.62 80.23
September 130.25 123.3 125.957 88.92
October 126.25 117.05 121.73 107.22
November 137.6 120.4 130.99 109.07
December 140.4 127.7 136.74 99.11
Change in the L’Oréal share price compared to the CAC 40 index from January 1st, 2009 to February 28th, 2015:
100
80
+53.87%
4,951.48
€62.30 — 60
3,217.97 —
40
20
0
03/31/2009
06/30/2009
09/30/2009
12/31/2009
03/31/2010
06/30/2010
09/30/2010
12/31/2010
03/31/2011
06/30/2011
09/30/2011
12/30/2011
03/30/2012
06/29/2012
09/28/2012
12/31/2012
03/29/2013
06/28/2013
09/30/2013
12/31/2013
03/29/2014
06/28/2014
09/30/2014
12/31/2014
01/14/2015
01/01/2009
Portfolio value at 12/31/2014 (215 shares at €139.30): The Total Shareholder Return of the investment is thus 14.53%
€29,949.50. per year (assuming that the shares are sold on December 31st,
2014, excluding tax on capital gains)
The initial capital has thus been multiplied by 2 over 5 years (5
year inflation rate = 6.48% – Source: INSEE) and the final capital NOTA: Any income tax that may be paid by the investor as a
is 1.96 times the total net investment. result of the successive dividend payments is not taken into
account.
Portfolio value at 12/31/2014 (323 shares at €139.30): The Total Shareholder Return of the investment is thus 11.44%
€44,993.90 per year (assuming that the shares are sold on
December 31st, 2014, excluding tax on capital gains).
The initial capital has thus been multiplied by 2.99 over 10
7
years (10-year inflation rate = 14.76% – Source: INSEE) and the NOTE: Any income tax that may be paid by the investor as a
final capital is 2.93 times the total net investment. result of the successive dividend payments is not taken into
account.
Portfolio value at 12/31/2014 (1,327 shares at €139.30): NOTE: Any income tax that may be paid by the investor as a
€184,851.10. result of the successive dividend payments is not taken into
account.
The initial capital has thus been multiplied by 12.37 over 20
years (20-year inflation rate = 34.31% – Source/INSEE) and the
final capital is 10.99 times the total net investment. 7.5.2.3. DIVIDENDS
The Total Shareholder Return of the investment is thus 13.04% The limitation period for dividends is five years. Any dividends
per year (assuming that the shares are sold on for which payment has not been requested are paid to the
December 31st, 2014, excluding tax on capital gains). Caisse des Dépôts et Consignations.
7
The www.loreal-finance.com website contains a complete set information presented is made available on this website, on
of all financial and extra-financial information. Its content and the same day as their publication, both for the annual
its ergonomics evolve regularly to provide ever quicker, easier results and the half-year results.
access to information. s Ten meetings with shareholders, organised in different forms
L’Oréal Finance Mag, the L’Oréal shareholders’ e-magazine, in several large provincial cities in France and also in
available at www.magazine.loreal-finance.com, is intended for foreign countries, in collaboration with the French Individual
the shareholders and all those who are looking for complete Investor and Investment Club Federation (Fédération des
information on the Group’s strategy and the life of the brands Investisseurs Individuels et des Clubs d’Investissement –
from a business angle, enriched with multimedia content. F2iC), the Society of Investor Relation Managers in France
(Cercle de Liaison des Informateurs Financiers en France –
The L’Oréal Finance mobile application is available in French CLIFF), shareholder associations and financial newspapers
and English versions on Apple Store and Google Play. Greatly brought together over 2.000 participants. In 2014, the
appreciated by professionals and individual shareholders, it Individual Shareholder Relations Department organised site
makes it possible to keep L’Oréal Finance news within easy visits (to plants) and shareholder meetings in the Group’s
reach. hair academies, which were a great success.
The shareholders’ newsletters and the digital version, the s Participation in the Actionaria Stock Market Fair for the
e-newsletters, make it possible to keep subscribers regularly eleventh year running offered an opportunity for over
informed of all major events in the life of the Group. 700 people to attend a presentation by Mr. Jean-Paul
Agon, Chairman and Chief Executive Officer.
L’Oréal continues to update its publications for Many shareholders were also able to meet representatives
individual shareholders such as the brochure giving the of the Group directly at the L’Oréal stand and obtain
“5 reasons to take part in the L’Oréal adventure” and the information on registering their shares.
Through all these events, the Individual Shareholder Relations Meeting, digital communication, Research and Innovation
Department team had the opportunity to meet nearly or overhaul of the www.lorealfinance.com website. In 2014,
6.000 individual shareholders in 2014. the Shareholder Consultation Committee met four times.
s Testimony to the loyalty of our shareholders who s The Investor Relations Department (IRD) organises
accompany the Group’s development over the long term is numerous meetings throughout the year with institutional
the fact that more and more shareholders are showing an investors of the main international financial marketplaces.
interest in becoming registered shareholders. Thanks to the Like it does every year, the IRD invited analysts and investors
preferential dividend and the numerous advantages to Brazil in September 2014 to discover the Brazilian beauty
offered by this method of shareholding, becoming a market and the formidable potential for development that
registered shareholder enables the Group’s shareholders to this country offers our brands. In all, in 2014, they thus met
be known to the Group, to have systematic, privileged nearly 650 investors.
access to information, and to be closely involved in the
Group’s development. s Finally, a freephone serviceis available to L’Oréal
shareholders calling from France (0 800 66 66 66) or other
s A real forum for consultation and dialogue with the countries (+33 1 40 14 80 50). An interactive vocal server
individual shareholders, the “Shareholder Consultation gives shareholders round-the-clock access to information
Committee” consisting of 18 shareholders appointed for on the share price and key dates or provides them with a
three years (both registered and bearer shareholders) who summary of the latest press release. The Shareholder
actively participate, through their reflections and their work, Services Department is also available on this number during
in developing and enriching the Group’s financial opening hours.
communication on themes such as: the Annual General
02.10.2014 Annual Results 2013: Further strengthening of worldwide positions, record operating margin
02.11.2014 Strategic Transaction Approved by Boards of Nestlé and L’Oréal
03.14.2014 Annual General Meeting on April 17th, 2014/2013 Reference Document
03.24.2014 Signing of the share purchase agreement for the sale to Nestlé of L’Oréal’s holding in Galderma
04.08.2014 L’Oréal’s acquisition of Magic Holdings marks firm’s biggest investment in Chinese beauty market
04.14.2014 First-Quarter 2014 Sales: An Encouraging and Contrasted First Quarter
04.17.2014 Annual General Meeting and Board of Directors’ meeting
04.30.2014 L’Oréal finalises the Acquisition of Decléor and Carita
06.18.2014 L’Oréal signs agreement to acquire NYX Cosmetics
07.08.2014 L’Oréal finalises the Strategic Transaction with Nestlé
07.31.2014 First-Half 2014 Results: A Solid First Half
08.01.2014 Posting online of 2014 Half-year Financial Report
09.08.2014 L’Oréal signs an agreement to acquire Niely Cosmeticos in Brazil
09.26.2014 PUMA and L’Oréal sign a license agreement
11.03.2014 Sales at September 30th, 2014
11.27.2014 L’Oréal and Nestlé announce the project to end the activity of their joint venture Innéov
12.18.2014 L’Oréal denies anticompetitive activity
This meeting will be held on April 22nd, 2015 at the Palais des Congrès,
in Paris.
ORDINARY PART
1. Approval of the 2014 parent company financial 5. Renewal of the tenure as Director of Mr. Charles-Henri
statements Filippi
2. Approval of the 2014 consolidated financial statements 6. Advisory vote by the shareholders on the components of
remuneration due or allocated to the Chairman and
3. Allocation of the Company’s net income for 2014 and Chief Executive Officer in respect of the 2014 financial
declaration of the dividend year
4. Appointment of Mrs. Sophie Bellon as Director 7. Authorisation for the Company to buy back its own shares
EXTRAORDINARY PART
8. Delegation of authority to the Board of Directors to 11. Amendment of Article 12 of the Articles of Association
increase the share capital either through the issue of related to the introduction of double voting rights by
ordinary shares with maintenance of preferential French Law No. 2014-384 of March 29th, 2014 in order to
subscription rights, or via the capitalisation of share continue to apply simple voting rights
premiums, reserves, profits or other amounts
12. Removal from the Articles of Association of the reference
9. Authorisation to the Board of Directors to make free grants to the time periods to be taken into account to
to employees and executive officers of existing shares participate in the Annual General Meeting
and/or of shares to be issued entailing waiver by
the shareholders of their preferential subscription right 13. Powers for formalities
RESOLUTIONS 1, 2 AND 3: APPROVAL OF THE ANNUAL PARENT COMPANY AND CONSOLIDATED FINANCIAL
STATEMENTS, ALLOCATION OF THE COMPANY’S NET INCOME FOR 2014 AND DECLARATION OF THE DIVIDEND
/ STATEMENT OF REASONS The details of these financial statements are set out in the 2014
Having reviewed the Reports of the Board of Directors and the Annual Financial Report and the main data included in the file
Statutory Auditors, the Annual General Meeting is called on to for calling this Annual General Meeting.
approve:
The Board of Directors proposes to the Annual General
s The parent company financial statements, with an income Meeting:
statement which shows net income of €4,937,957,395.33 for
2014, compared with €2,366,052,070.73 in 2013; s An ordinary dividend of €2.70 per share, representing an
increase of 8% compared with the dividend for the previous
s The 2014 consolidated financial statements. year.
The rate of distribution of the ordinary dividend (ordinary dividend paid/net income from continuing operations excluding
non-recurrent items, diluted, Group share, per share) would be 50.6% and would thus continue to rise:
s A preferential dividend of €2.97 per share. If the Annual General Meeting approves this proposal, the
ex-dividend date for the dividends (both ordinary and
The preferential dividend will be granted to the shares held in preferential) will be May 5th, 2015 at zero hour (Paris time) and
registered form since December 31st, 2012 at the latest, and they will be paid on May 7th, 2015.
which continuously remain in registered form until the dividend
payment date in 2015. The number of shares giving The amount of the ordinary dividend and the preferential
entitlement to such preferential dividend cannot exceed 0.5% dividend is eligible for the tax deduction provided for in
of share capital for any one shareholder. Article 158-3-2° of the French Tax Code.
/ FIRST RESOLUTION: APPROVAL OF THE 2014 PARENT / SECOND RESOLUTION: APPROVAL OF THE 2014
COMPANY FINANCIAL STATEMENTS CONSOLIDATED FINANCIAL STATEMENTS
The Annual General Meeting, deliberating in accordance with The Annual General Meeting, deliberating in accordance with
the quorum and majority requirements for Ordinary General the quorum and majority requirements for Ordinary General
Meetings, having reviewed the Reports of the Board of Meetings, having reviewed the Reports of the Board of
Directors and the Statutory Auditors, approves the Report of Directors and the Statutory Auditors, approves the 2014
the Board of Directors and the 2014, parent company financial consolidated financial statements and the transactions
statements, as presented and the transactions included in included in these financial statements and summarised in
these financial statements and summarised in these reports, these reports.
showing net income of €4,937,957,395.33, compared with
€2,366,052,070.73 for 2013. / THIRD RESOLUTION: ALLOCATION OF THE COMPANY’S
NET INCOME FOR 2014 AND DECLARATION OF THE
DIVIDEND
8
The Annual General Meeting, deliberating in accordance with
the quorum and majority requirements for Ordinary General
Meetings, on the proposal of the Board of Directors, decides to
allocate the net income for the 2014 financial year amounting
to €4,937,957,395.33 as follows:
No allocation to the legal reserve which already represents over one-tenth of the share capital –
Amount allocated to the shareholders as a dividend * (including preferential dividend) €1,524,207,527.28
Balance that will be allocated to the “Other reserves” item €3,413,749,868.05
* Including an initial dividend equal to 5% of the amounts paid up on the shares, i.e. on the total amount of the share capital.
This amount is calculated on the basis of the number of shares which continuously remain in registered form until the dividend
forming the capital at December 31st, 2014 and will be payment date, it being specified that the number of shares
adjusted to reflect: giving entitlement to such preferential dividend cannot
exceed 0.5% of share capital for any one shareholder. The
s the number of shares issued between January 1st, 2015 and ex-dividend date for the dividends (both ordinary and
the date of payment of this dividend following the exercise preferential) will be May 5th, 2015 at zero hour and they will be
of stock options or the final vesting of new free shares paid on May 7th, 2015.
granted and giving entitlement to such dividend;
In the event that, at the time of payment of the dividend, the
s the final number of shares eligible for the preferential Company holds treasury shares, the distributable profit
dividend, taking into account sales or transfer to a bearer corresponding to the unpaid dividend due to the holding of
account between January 1st, 2015 and the date of such shares, would be allocated to the “Other reserves” item. It
payment of the dividend. is specified that, as the law currently stands, for natural
The Annual General Meeting therefore declares an ordinary persons who have their tax residence in France, the dividend is
dividend to be paid of €2.70 per share, the preferential liable for personal income tax on the basis of the progressive
dividend entitling eligible holders to a total of €2.97 per share. scale of tax rates and is eligible for the tax deduction provided
The preferential dividend will be granted to the shares held in for in Article 158-3-2° of the French Tax Code.
registered form since December 31st, 2012 at the latest, and
The table set out below gives the amounts of the dividends distributed, that were fully eligible for the tax deduction provided for in
Article 158-3-2° of the French Tax Code, for the last three financial years:
Ana Sofia Amaral, age: 49, of Portuguese nationality, Scientific Directors until 2009. Louis Schweitzer has been a Director of
and Technical Affairs Director for L’Oréal Portugal, Ana Sofia L’Oréal since 2005, is a member of the Audit Committee and
Amaral was appointed in 2014 by L’Oréal’s Instance Chairman of that committee since February 2013, and a
Européenne de Dialogue Social/European Works Council as member of the Strategy and Sustainable Development
Director representing the employees in 2014. Committee. He is also General Commissioner for Investment.
Charles-Henri Filippi, age: 62, spent his career within the HSBC Within the scope of the buyback of 48,500,000 L’Oréal shares
group, in which he was notably Chairman and Chief Executive held by Nestlé and the sale of L’Oréal’s holding in Galderma to
Officer of HSBC France from 2004 to 2007 and Chairman of the Nestlé, which were finalised on July 8th, 2014, the number of
Board of Directors in 2007 and 2008. Charles-Henri Filippi has representatives of Nestlé on the Board of Directors of L’Oréal
been a Director of L’Oréal since 2007 and is a member of the was reduced from 3 to 2 following the resignation by Mr. Paul
Audit Committee and the Human Resources and Bulcke as of that date.
Remuneration Committee and of the Appointments and
Governance Committee since 2014. He is a Director of Orange Percentage of independence
and Chairman of Citigroup for France. As the two Directors representing the employees are not taken
Xavier Fontanet, age: 66, former Chairman and Chief into account pursuant to the AFEP-MEDEF Code, the number of
Executive Officer (1996-2009) and former Chairman of the independent Directors is 7 out of 13, representing a
Board of Directors of Essilor (2010-2012) and member of the percentage of independent Directors of 54%.
Supervisory Board of Schneider Electric. He has been a Director Balanced representation of men and women on the Board of
of L’Oréal since 2002 and is the Chairman of the Appointments Directors
and Governance Committee.
As the two Directors representing the employees are not taken
Belén Garijo, age: 54, of Spanish nationality, is Chief Executive into account pursuant to the AFEP-MEDEF Code, the number of
Officer of Merck Healthcare, a company bringing together the women on the Board of Directors is 5 out of 13 Directors
pharmaceutical business of German group Merck. She is also appointed by the Annual General Meeting, namely a
a member of the company's Executive Commitee. Belén Garijo percentage representation of women of 38.5%.
has been a Director of L’Oréal since April 2014. She is also a
Director of BBVA (Spain). It is pointed out that, pursuant to French law, the proportion of
Directors of each gender may not be lower than 40% at the
Bernard Kasriel, age: 68, a former Chief Executive Officer of end of the first Annual General Meeting after January 1st, 2017.
Lafarge, has been a Director of L’Oréal since 2004, Chairman The AFEP-MEDEF Code provides that, with regard to the
of the Human Resources and Remuneration Committee since representation of men and women, the objective is for each
2007 and is a member of the Strategy and Sustainable Board to reach, and maintain, a percentage of at least 40% of
Development Committee. He is also a Board member of women within a period of six years, as from the Annual
Arkema and Nucor (United States). General Meeting in 2010, namely by April 27th, 2016 at the
Christiane Kuehne, age: 59, of Swiss nationality, is the Head of latest.
the Food Strategic Business Unit at Nestlé which she joined in Length of tenure and minimum number of shares held
1977. Christiane Kuehne has been a member of L’Oréal’s
Board of Directors and a member of the Audit Committee The length of the terms of office of the Directors appointed by
since 2012. L’Oréal’s Annual General Meeting is set at four years in the
Articles of Association, or a shorter period in order to provide
Georges Liarokapis, age: 52, of French and Greek nationality, for staggered renewal of the Directors’ terms of office. The term
Coordinator of Sustainability for L’Oréal Western Europe, of office of a Director who is not appointed by the Annual
Georges Liarokapis was appointed in 2014 by the CFE-CGC as General Meeting is four years. The Directors appointed by the
8
a Director representing the employees in 2014. Annual General Meeting each hold a minimum of 1,000
Jean-Victor Meyers, age: 28, has been a member of the L’Oréal shares. The full list of the offices and directorships held
Supervisory Board of the family holding company Téthys since by the Directors is set out on page 40 et seq. of the Company’s
January 2011. He has been a Director of L’Oréal since Registration Document for the 2014 financial year.
February 2012 and a member of its Audit Committee since 2. Review of the independence of the Directors
April 2014.
The Appointments and Governance Committee proposes to
Virginie Morgon, age: 45, is the Chief Executive Officer of the Board of Directors every year to review on a case-by-case
Eurazeo which she joined in 2008 after working for 16 years at basis the situation of each of the Directors with regard to their
Lazard. She has been a Director of L’Oréal since, 2013 and is a independence according to the criteria set out in the
member of the Audit Committee. She is also a Board member AFEP-MEDEF Code.
of Accor and Vivendi.
The Board of Directors of L’Oréal is well-balanced. It comprises
Annette Roux, age: 72, Chairperson and Managing Director of 15 members at December 31st, 2014: Jean-Paul Agon,
Bénéteau from 1976 to 2005, then Vice-Chairperson of the Chairman and Chief Executive Officer, five Directors appointed
Supervisory Board, Annette Roux has been a member of by the largest shareholders, three from the Bettencourt Meyers
L’Oréal’s Board of Directors since 2007. She is also Chairperson family and two appointed by Nestlé (the two Vice-Chairmen of
of the Bénéteau Corporate Foundation. the Board being chosen from among these members), seven
Louis Schweitzer, age: 72, Chairman and Chief Executive independent Directors (Annette Roux, Virginie Morgon, Belén
Officer of Renault from 1992 to 2005, Chairman of the Board of Garijo, Charles-Henri Filippi, Xavier Fontanet, Bernard Kasriel,
and Louis Schweitzer) and two Directors representing the Mrs. Sophie Bellon will bring to the Board her multi-disciplinary
employees, (Ana Sofia Amaral and Georges Liarokapis). knowledge of companies at the highest level and her strategic
vision, her human values and strong convictions with regard to
The review of the independence of these Directors was carried societal responsibility, one of the L’Oréal Group’s priorities for
out by the Appointments and Governance Committee at the development within the scope of the Sharing Beauty With All
end of 2014 on the basis, in particular, of a study of the programme.
relations existing between the Company and the companies
in which the Directors hold offices. The Directors have no 4. Renewal of the tenure of a Director in 2015
conflicts of interest. The other corporate offices and
directorships held, their availability, their personal contributions Ms. Annette Roux, an independent Director, did not want her
and their participation in the work and discussions of the tenure to be renewed.
Board and its Committees in 2014 were taken into The representation of women and the number of independent
consideration by the Appointments and Governance directors would remain unchanged compared December 31st
Committee to evaluate the composition and modus operandi 2013 in the event that the Annual General Meeting approved
of the Board. the appointment of Mrs. Sophie Bellon as Director.
3. Appointment of a new Director in 2015 As the tenure of Mr. Charles-Henri Filippi as Director is due to
The Appointments and Governance Committee reviewed the expire in 2015, the renewal of such tenure for a term of four
candidacy of a new Director that was approved by the Board years is submitted to the Annual General Meeting.
of Directors. The proposed appointment of Mrs. Sophie Bellon is In 2014, Mr. Charles-Henri Filippi attended all the meetings of
submitted to the Annual General Meeting. the Board of Directors and all the meetings of the three
Mrs. Sophie Bellon, 53 years of age, who is French, is a Committees of the Board of Directors of which he is a member
graduate of the French graduate business school EDHEC and (Audit Committee, Human Resources and Remuneration
began her career in 1985 in the United States, in finance, as a Committee and Appointments and Governance Committee),
Mergers and Acquisitions Advisor, then in the fashion industry except for one meeting of the Appointments and Governance
as an agent for major international fashion brands. After this Committee.
experience working in the United States for nearly 10 years, A member of the Audit Committee since 2008, he smoothly
Mrs. Sophie Bellon returned to France and joined Sodexo in and efficiently rounds out the Board’s competencies in the
1994 where, for over 20 years, she has taken part, through financial field. Also a member of the Human Resources and
each of the positions she has held, in the major stages of Remuneration Committee and the Appointments and
growth of the Sodexo group: first of all in the Finance Governance Committee, Mr. Charles-Henri Filippi thus has
Department where she participated in important acquisition cross-functional expertise which is useful for the work of each
projects; she continued her career in the Sales and Marketing of these Committees.
Department and in 2008 she became the Managing Director
for Sodexo’s Corporate segment in France. Mr. Charles-Henri Filippi is an independent Director, with no
conflicts of interest, available and competent.
Sodexo is an international group, the world leader in quality of
life services, with 420,000 employees in 80 countries. The business relations between L’Oréal and Citigroup France,
of which he is the Chairman, are analysed in detail every year
Since January 2013, Mrs. Sophie Bellon has been responsible in relation with the assessment of the independence of the
for Research, Development and Innovation Strategy at Sodexo. Directors. The Board noted that they were not significant either
In November 2013, the Board of Directors of Sodexo appointed with regard to their nature or in terms of their volume, as they
Mrs. Sophie Bellon as Vice-Chairman of the Board of Directors, mainly involve foreign exchange commissions. The possibility
so that she succeeds Mr. Pierre Bellon, Chairman and Founder for L’Oréal to use a panel of banks, in a competitive context,
of Sodexo, as Chairman of the Board of Directors in January moreover rules out all relationship of dependence.
2016. Furthermore, Mr. Charles-Henri Filippi is aware that he is under
Strongly committed to diversity and gender mix, Mrs. the obligation of notifying the L’Oréal Board of Directors of all
Sophie Bellon is also Co-Chair of SWIFT (Sodexo Women’s situations constituting a conflict of interest, even if such conflict
International Forum for Talent), a programme aimed at is only potential, and that he must refrain from participating in
increasing the representation of women in Sodexo’s the corresponding decisions. Furthermore, at Citigroup, he will
decision-making bodies. not take part in the work that is liable to concern L’Oréal.
For information purposes, if the Annual General Meeting votes in favour of the appointment and renewal proposed to it in 2015, the
expiry dates of the terms of office of the 15 Directors of L’Oréal would be as follows:
Her tenure will expire at the end of the Annual General His tenure will expire at the end of the Annual General Meeting
Meeting to be held in 2019 to review the financial statements to be held in 2019 to review the financial statements for the
for the previous financial year. previous financial year.
/ STATEMENT OF REASONS
In accordance with the AFEP-MEDEF Code revised in June 2013 to which L’Oréal refers, the components of the remuneration due or
allocated by the Board of Directors on the proposal of the Human Resources and Remuneration Committee to the Chairman and
Chief Executive Officer, Mr. Jean-Paul Agon, with respect to the 2014 financial year are presented to the Annual General Meeting for
an advisory vote.
The assessment is carried out on a criterion-by-criterion basis without offsetting among the
criteria.
A summary of the results for 2014 on which the assessment of the objectives is based is
available on page 81 of the Registration Document.
s Extra-financial objectives (40% of the annual variable remuneration) :
► CSR criteria: “Sharing Beauty With All” programme, which defines 4 priority areas for
development:
s Innovating sustainably
s Producing sustainably
s Living sustainably
s Developing sustainably
► Qualitative criteria:
s Company’s image/Reputation/Dialogue with stakeholders
s Handling of the priorities for the year
The assessment is carried out on a criterion-by-criterion basis without offsetting among the
criteria. A summary of achievements in 2014 is available on page 81 of the Registration
Document.
Assessment for 2014 by the Board of Directors on February 12th, 2015:
On the basis of the above-mentioned assessment criteria, the Board of Directors decided, on the
proposal of the Human Resources and Remuneration Committee, to award gross variable
remuneration of €1,760,000,000 for 2014, namely 80% of the maximum objective.
For reasons of confidentiality, L’Oréal does not give details of the amounts paid per criterion; the
elements of assessment are set out in detail on pages 80 and 81 of the Registration Document.
Components of the
remuneration due or allocated Amounts or value
in respect of 2014 put to the vote Description
Multi-annual variable €0 Not applicable inasmuch as the Board of Directors has not allocated any multi-annual variable
remuneration remuneration.
Exceptional remuneration €0 Not applicable inasmuch as the Board of Directors has not allocated any exceptional
remuneration.
Attendance fees €0 At its meeting on November 28th, 2014, the Board of Directors took due note of the wish
expressed by Mr. Jean-Paul Agon to no longer receive attendance fees in his capacity as
Chairman and Chief Executive Officer.
Stock options, 40,000 Within the scope of the authorisation of the Ordinary and Extraordinary General Meeting of
performance shares performance shares April 26th, 2013 (resolution No. 10), the Board of Directors decided on April 17th, 2014, on the
(and any other component valued at €4,183,200 proposal of the Human Resources and Remuneration Committee, to make a conditional grant of
of long-term remuneration) (the estimated fair 40,000 shares (“ACAs”) to Mr. Jean-Paul Agon.
value according The estimated fair value according to the IFRS applied for the preparation of the consolidated
to the IFRS applied financial statements of one performance share (ACAs) under the April 17th, 2014 plan is €104.58
to prepare the for French tax and/or social security residents, which is the case for Mr. Jean-Paul Agon. This fair
consolidated financial value was €112.37 on April 26th, 2013.
statements)
The estimated fair value according to the IFRS of the 40,000 performance shares granted to
Mr. Jean-Paul Agon in 2014 is therefore €4,183,200.
Final vesting of these shares is subject to achievement of performance conditions which will be
recorded at the end of a 4-year vesting period as from the date of grant.
Half of the number of shares that finally vests will depend on growth in comparable cosmetics
sales as compared to those of a panel of competitors, such panel consisting of Procter &
Gamble, Unilever, Estée Lauder, Shiseido, Beiersdorf, Johnson & Johnson, Henkel, LVMH, Kao,
Revlon and Elizabeth Arden; the other half will depend on the growth in L’Oréal’s consolidated
operating profit.
The calculation will be based on the arithmetic average for the three full financial years of the
vesting period. The first full year taken into account for evaluation of the performance conditions
relating to this grant is 2015. Monitoring of the performance conditions year after year is
described in detail on page 282 of the Registration Document.
With respect to the criterion relating to sales, in order for all the free shares granted to finally vest
for the beneficiaries at the end the vesting period, the performance of l'Oréal must be at least as
good as the average performance of the competitor's panel. Below this level, attribution is
digressive. The Board defines a threshold, which remains undisclosed for confidentiality reasons,
below which no share is permanently vested pursuant to this criterion.
Concerning the criterion related to operating profit, a level of growth defined by the Board, but
not made public for reasons of confidentiality, must be met or exceeded in order for all the
free shares granted to finally vest for the beneficiaries at the end of the vesting period. Below that
level, the grant decreases. If the operating profit does not increase in absolute value over the
period, no share will finally vest pursuant to this criterion.
The grant of shares from which Mr. Jean-Paul Agon benefited in 2014 represents:
s 3.74% of the total number of ACAs granted to the 1,978 beneficiaries of this same plan
s 3.65% of their estimated fair value according to the IFRS.
In accordance with the authorization granted by the Annual General Meeting on April 26th, 2013,
the amount of shares granted does not exceed 0.6% of the share capital, it being understood
8
that the maximum amount granted to executive officers cannot exceed 10% of the maximum
number of free shares that may be granted. No purchase option or any other long-terme
incentive instrument was granted to Mr. Jean-Paul Agon in 2014.
Benefits in kind €0 Mr. Jean-Paul Agon benefits from the necessary material resources for performance of his term of
office such as, for example, the provision of a car with a chauffeur. These arrangements, which
are strictly limited to professional use, to the exclusion of all private use, cannot be considered as
benefits in kind.
Indemnity for entry into office €0 Not applicable in as much as Mr. Jean-Paul Agon has been Chief Executive Officer since 2006
and Chairman and Chief Executive Officer since 2011.
/ SIXTH RESOLUTION: ADVISORY VOTE BY to Article L. 225-37 of the French Commercial Code, voting in
THE SHAREHOLDERS ON THE COMPONENTS OF THE accordance with the quorum and majority requirements for
REMUNERATION DUE OR ALLOCATED TO
THE CHAIRMAN AND CHIEF EXECUTIVE OFFICER Ordinary General Meetings, casts a favourable advisory vote
IN RESPECT OF THE 2014 FINANCIAL YEAR on the components of remuneration due or allocated to
The Annual General Meeting, consulted pursuant to the Mr. Jean-Paul Agon in his capacity as Chairman and Chief
recommendation in § 24.3 of the AFEP-MEDEF Code of Executive Officer in respect of the 2014 financial year as set out
June 2013 which is the Company’s Reference Code pursuant in particular on the statement of reasons of this resolution.
/ SEVENTH RESOLUTION: AUTHORISATION FOR THE In the event of any transaction affecting the Company’s
COMPANY TO BUY BACK ITS OWN SHARES capital, the prices and numbers of shares indicated above will
The Annual General Meeting, deliberating in accordance with be adjusted where applicable.
the quorum and majority requirements for Ordinary General
Meetings, having reviewed the Report of the Board of Directors, The Company may buy its own shares for the following
authorises the Board of Directors, with the possibility for it to purposes:
delegate to the Chairman and Chief Executive Officer, to
s their cancellation by a reduction in capital;
purchase shares of the Company, in accordance with
Articles L. 225-209 et seq. of the French Commercial Code, and s their allocation or sale to employees and corporate officers
subject to the following conditions: of the Company and affiliates, under the terms and
s the purchase price per share may not be greater than €230
(excluding expenses);
conditions provided for by French or foreign law, and in
particular within the scope of employee profit sharing
schemes, free grants of shares or all employee share
8
s the number of shares that may be bought by the Company ownership programmes as well as for the purpose of
may not exceed 10% of the number of shares forming the carrying out any transaction to cover the above-mentioned
capital of the Company at the time the shares are bought employee share ownership programmes;
back, that is, for information purposes, at December 31st,
s liquidity provision through a liquidity agreement entered
2014, 56,123,038 shares for a maximum amount of
into with an investment services provider in accordance
€12,908,298,740, it being stipulated that the Company may
with the Code of Ethics recognised by the Autorité des
at no time hold over 10% of its own share capital.
Marchés Financiers;
The purchase, sale, exchange or transfer of these shares may The Annual General Meeting decides that this authorisation
be carried out by any means, on one or more occasions, in will expire at the end of a period of 18 months following this
particular on or off the stock market, including in whole or in Annual General Meeting and renders ineffective as from the
part, through the acquisition, sale, exchange or transfer of date hereof any prior authorisation for the same purpose.
blocks of shares. These means include, where applicable, the
use of all financial instruments and derivatives. The Board of Directors will have the possibility of allocating and
reassigning to any of these objectives all the treasury shares
These transactions may be carried out at any time, in currently held by the Company. Full powers are granted to the
accordance with the regulations in force at the time of the Board of Directors, with the possibility for it to delegate, for the
transactions concerned, it being specified that in the event of implementation of this resolution and more generally do
filing of a public offer by a third party with regard to the shares anything that may be necessary.
of the Company, the Board of Directors will not be able to use
this authorisation during the public offer period without the
prior authorisation of the Annual General Meeting.
/ STATEMENT OF REASONS does not take into account adjustments that may be made in
It is proposed that the Annual General Meeting delegate to accordance with the applicable provisions of the laws and
the Board of Directors its authority to increase the share capital regulations, and where applicable, the contractual provisions
either through the issue of ordinary shares with maintenance providing for other cases of adjustment, to preserve the rights
of preferential subscription rights, it being specified that in the of holders of free shares, stock options for the subscription and
event of filing of a public offer by a third party with regard to purchase of shares and other rights giving access to the share
the shares of the Company, the Board of Directors will not be capital. It corresponds to a maximum increase of 40% of the
able to use this delegation of authority during the public offer capital.
period without the prior authorisation of the Annual General
Meeting, or via the capitalisation of share premiums, reserves, In the event of a free share allotment, the allotment rights
profits or other amounts. forming fractional shares will not be negotiable or transferable.
The corresponding shares will be sold and the amounts
The total amount of the capital increases that may thus be resulting from the sale will be allocated to the holders of these
carried out may not lead to the share capital, which amounts rights.
to €112,246,077.80, as of December 31st, 2014, being increased
to over €157,144,508. The increases that may be carried out No overallocation option is provided for.
pursuant to Resolutions 9 and 10 will also be deducted from This delegation of authority would be valid for a period of
this ceiling, it being specified that this total nominal amount 26 months as from the date of the Annual General Meeting.
/ EIGHTH RESOLUTION: DELEGATION OF AUTHORITY TO THE increase in the par value of existing shares or by the
BOARD OF DIRECTORS TO INCREASE THE SHARE CAPITAL combined use of these two processes.
EITHER THROUGH THE ISSUE OF ORDINARY SHARES WITH
MAINTENANCE OF PREFERENTIAL SUBSCRIPTION RIGHTS,
OR VIA THE CAPITALISATION OF SHARE PREMIUMS, The delegation of authority thus granted to the Board of
RESERVES, PROFITS OR OTHER AMOUNTS Directors is valid for a period of 26 months as from the
The Annual General Meeting, deliberating in accordance with date of this Annual General Meeting;
the quorum and majority requirements for Extraordinary
2) decides that the total amount of the capital increases
General Meetings, having reviewed the Report of the Board of
that may thus be carried out may not lead to the share
Directors and in accordance with Articles L. 225-109 et seq. of
capital, which amounts to €112,246,077.80 as of
the French Commercial Code, and in particular
December 31st, 2014, being increased to over
Article L. 225-129-2 of the French Commercial Code:
€157,144,508. The increases that may be carried out
1) delegates to the Board of Directors the authority to decide pursuant to Resolutions 9 and 10 will also be deducted
on one or more increases in the share capital: from this ceiling, it being specified that this total nominal
amount does not take into account adjustments that may
a) through the issue of ordinary shares of the Company, be made in accordance with the applicable provisions of
and/or the laws and regulations, and where applicable, the
contractual provisions providing for other cases of
b) via the capitalisation of share premiums, reserves,
adjustment, to preserve the rights of holders of
profits or other amounts of which the capitalisation is
free shares, stock options for the subscription and
admissible in the form of the allotment of free shares or an
purchase of shares and other rights giving access to
the share capital. It corresponds to a maximum increase Transactions involving an increase in the share capital
of 40% of the capital. may be carried out any time, in compliance with the
regulations in force on the date of the transactions in
3) decides, if the Board of Directors uses this delegation of question. However, in the event of filing of a public offer by
authority within the scope of the share issues referred to in a third party with regard to the shares of the Company,
paragraph 1) a) that: the Board of Directors will not be able to use this
a) the shareholders will have a preferential subscription delegation of authority during the public offer period
right to the shares issued pursuant to this resolution, in without the prior authorisation of the Annual General
proportion to the amount of their shares; Meeting.
b) if subscriptions made by shareholders by way of right 4) decides that, if the Board of Directors uses this delegation
on the basis of the shares they hold and, where of authority within the scope of capitalisations of share
applicable, their subscriptions for excess shares, have not premiums, reserves, profits or other amounts referred to in
covered the full number of shares issued, the Board of paragraph 1) b), where applicable, in accordance with
Directors will be able to use, under the conditions set by the provisions of Article L. 225-130 of the French
law and in the order it determines, one and/or both of the Commercial Code, the fractional share rights will not be
possibilities set out below: negotiable or transferable and the corresponding shares
will be sold; the amounts derived from the sale will be
- limit the issue to the amount of the subscriptions on allocated to the holders of the rights under the conditions
condition that it reaches at least three-quarters of and within the time periods provided for by the applicable
the share issue decided; regulations;
- offer to the public all or some of the shares not
5) records that this delegation of authority renders ineffective
subscribed on the French or foreign market;
any prior delegation for the same purpose.
RESOLUTION 9: AUTHORISATION TO THE BOARD OF DIRECTORS TO MAKE FREE GRANTS OF SHARES TO EMPLOYEES
AND EXECUTIVE OFFICERS ENTAILING WAIVER BY THE SHAREHOLDERS OF THEIR PREFERENTIAL SUBSCRIPTION RIGHT
/ STATEMENT OF REASONS The Board of Directors will determine the identity of the
The authorisation granted by the Annual General Meeting on beneficiaries of the free grants of shares, the number of shares
April 26th, 2013 to the Board of Directors to make free grants granted to each of them and the performance conditions to
of shares to the Group’s employees and to certain of its be met for the final vesting of all or part of the shares.
corporate officers is due to expire in 2015.
These performance conditions would take into account:
Within the scope of the authorisation requested in this ninth
resolution, the number of free shares that may be granted may s partly, the growth in L’Oréal’s comparable cosmetics sales
not represent more than 0.6% of the share capital on the date as compared to those of a panel of L’Oréal’s biggest direct
of the Board of Directors’ decision. competitors;
The total number of free shares granted to the executive s partly, the growth in L’Oréal’s consolidated operating profit.
officers during a financial year may not represent more than The figures recorded year after year to determine the
10% of the total number of free shares granted during that performance levels achieved are published in the Annual
same financial year. Financial Report.
The free grant of shares to beneficiaries would only become
8
The Board of Directors would once again apply the
final and binding, subject to satisfaction of the other performance conditions that it uses in application of the
conditions set at the time of grant, including in particular the authorisation in force which was voted on by the Annual
condition of presence in the Company, for all or part of General Meeting of April 26th, 2013.
the shares granted:
The Board of Directors considers that these two criteria,
s either at the end of a minimum vesting period of four years, assessed over a long period of 3 financial years and applied
in such case without any minimum holding period; to several plans, are complementary, in line with the Group’s
s or at the end of a minimum vesting period of two years, it objectives and specificities and should make it possible to
being specified that the beneficiaries will then be required promote balanced, continuing growth over the long term.
to hold these shares for a minimum period of two years after They are exacting but remain a source of motivation for
the date of final award thereof. beneficiaries.
The Board of Directors will have the possibility, in any case, to In order for all the free shares granted to finally vest for the
set vesting or holding periods which are longer than the beneficiaries at the end of the vesting period pursuant to the
minimum periods set. criterion related to sales, L’Oréal’s growth must be at least as
good as average growth in sales of the panel of competitors.
If the Annual General Meeting votes in favour of this ninth This panel consists of Unilever, Procter & Gamble, Estée Lauder,
resolution, any free grants of shares will be decided by the Shiseido, Beiersdorf, Johnson & Johnson, Kao, LVMH, Coty,
Board of Directors on the basis of the proposals of the General Henkel. Below that level, the grant decreases. The Board
Management examined by the Human Resources and defines a threshold, which is not made public for reasons of
Remuneration Committee.
confidentiality, below which no share will finally vest pursuant in respect of cash subscriptions made within the scope of an
to this criterion. increase in capital reserved for the Group’s employees
pursuant to the tenth resolution.
In order for all the free shares granted to finally vest for the
beneficiaries at the end of the vesting period pursuant to the Any grants of shares to the executive officers will be decided
criterion related to operating profit, a level of growth defined by the Board of Directors on the basis of the proposals of the
by the Board, but not made public for reasons of Human Resources and Remuneration Committee, after
confidentiality, must be met or exceeded. Below that level, the assessment of their performance.
grant decreases. If the operating profit does not increase in
absolute value over the period, no share will finally vest L’Oréal’s executive officers will be required to retain 50% of the
pursuant to this criterion. free shares that will be definitively allocated to them at the end
of the vesting period in registered form until the termination of
These performance conditions will apply to all the individual their duties.
grants of more than 200 free shares per plan, with the
exception of those for the executive officers and the Executive An executive officer may not be granted free shares at the
Committee members, to which they will apply in full. time of termination of his duties.
The free grant of shares may be carried out without any The authorisation requested from the Annual General Meeting
performance condition within the scope of grants that are would be granted for a period limited to 26 months as from the
made to all the employees of the Group, or for shares granted decision by the Annual General Meeting.
/ NINTH RESOLUTION: AUTHORISATION TO THE BOARD OF s decides that the number of free shares granted to
DIRECTORS TO MAKE FREE GRANTS TO EMPLOYEES AND executive officers of the Company during a financial year
EXECUTIVE OFFICERS OF EXISTING SHARES AND/OR
OF SHARES TO BE ISSUED ENTAILING WAIVER BY pursuant to this resolution may not represent more than
THE SHAREHOLDERS OF THEIR PREFERENTIAL 10% of the total number of free shares granted during a
SUBSCRIPTION RIGHT financial year pursuant to this resolution;
The Annual General Meeting, deliberating in accordance with
the quorum and majority requirements for Extraordinary s decides that the Board of Directors will determine the
General Meetings, having reviewed the Report of the Board of identity of the beneficiaries of the grants, and the number
Directors and the Special Report of the Statutory Auditors, in of free shares granted to each of them as well as the
accordance with Articles L.225-197-1 et seq. of the French conditions to be met for the grant to finally vest, and in
Commercial Code: particular the performance conditions, it being stipulated
that the free grant of shares may be carried out without any
s authorises the Board of Directors to make, on one or more performance condition within the scope of a grant made
occasions, to employees and executive officers of the (i) to all the employees and executive officers of L’Oréal
Company and of French and foreign affiliates as defined by and, where applicable, of its affiliates as defined by
Article L. 225-197-2 of the French Commercial Code or Article L. 3332-14 of the French Labour Code or Article 217
certain categories of such employees or executive officers, quinquies of the French Tax Code, or (ii) to employees and
free grants of existing shares or shares to be issued of executive officers of foreign companies subscribing to an
L’Oréal; increase in capital carried out pursuant to the tenth
resolution of this Annual General Meeting or participating in
s sets at 26 months as from the date of this Annual General
an employee share ownership transaction through the sale
Meeting, the period of validity of this authorisation which
of existing shares or (iii) to employees who are not
may be used on one or more occasions;
members of the Executive Committee for at most 200 of the
s decides that the number of free shares thus granted may free shares that are granted to them within the scope of
not represent more than 0.6% of the share capital each of the plans decided by the Board of Directors;
determined at the date of the decision made by the Board
s decides that the grant of such shares to beneficiaries will
of Directors, it being specified that this maximum number
become final and binding, subject to satisfaction of the
of shares, either existing or to be issued, does not take into
other conditions set at the time of grant, for all or part of
account the number of additional shares that may be
the shares granted:
allocated due to an adjustment in the number of shares
granted initially as the result of a transaction affecting the
Company’s capital;
• either at the end of a minimum vesting period of four s authorises the Board of Directors to make, where
years, in such case without any minimum holding applicable, during the vesting period, adjustments to the
period, number of shares, related to any potential transactions with
regard to the Company’s share capital within the meaning
• or at the end of a minimum vesting period of two years, of Article L. 225-181 of the French Commercial Code, in
it being specified that the beneficiaries will then be order to preserve the rights of the beneficiaries;
required to hold these shares for a minimum period of
two years after the date of final award thereof; s records that this authorisation automatically entails, in
favour of the beneficiaries of free shares granted, the waiver
s decides that the grant of these shares to their beneficiaries by the shareholders of their preferential subscription right
will become final and binding prior to the expiry of the and the portion of the reserves which, where applicable,
above-mentioned vesting periods in the event of disability will be used in the event of the issue of new shares;
of the beneficiary corresponding to classification in the
second or third categories provided for in s delegates full powers to the Board, with the possibility to
Article L. 341-1 of the French Social Security Code (Code de delegate within the legal limits, to implement this
la sécurité sociale) and that such shares will be freely authorisation, it being specified that the Board of Directors
transferable in the event of disability of the beneficiary will be able to provide for vesting and holding periods
corresponding to classification in the above-mentioned which are longer than the minimum periods set above.
categories under the French Social Security Code;
RESOLUTION 10: DELEGATION OF AUTHORITY TO THE BOARD OF DIRECTORS FOR THE PURPOSE OF CARRYING OUT
A CAPITAL INCREASE RESERVED FOR EMPLOYEES WITH CANCELLATION OF THE SHAREHOLDERS' PREFERENTIAL
SUBSCRIPTION RIGHT
/ STATEMENT OF REASONS expressly authorised to reduce or eliminate the discount of
The delegation of authority granted to the Board of Directors to 20%, in particular to take into account legal and tax regimes
decide to increase the share capital, and the authorisations to applicable in the countries of residence of certain
make free grants of shares to be issued, give rise to a beneficiaries of the capital increase.
corresponding obligation to submit to the Annual General
Meeting a draft resolution enabling a potential capital The Annual General Meeting is therefore asked to delegate to
increase to be carried out reserved for employees who are the Board of Directors the authority to decide to carry out the
members of an employee savings scheme. increase in capital of the Company on one or more occasions,
for a period of 26 months and within the limit of 1% of the share
In accordance with the French Labour Code, the issue price capital, namely for information purposes at
may not be higher than the average of the trading prices on December 31st, 2014 through the issue of 5,612,388
the Euronext Paris market for the twenty trading days prior to new shares. The amount of the increase or increases in capital
the date of the decision setting the opening date of the that may be carried out in this respect would be deducted
subscription period. It also may not be over 20% lower than this from the overall ceiling for increases in capital provided for in
average, it being specified that the Board of Directors, or the the eighth resolution.
person to whom it delegates, if it deems it appropriate, is
/ TENTH RESOLUTION: DELEGATION OF AUTHORITY TO by Article L. 225-180 of the French Commercial Code and
THE BOARD OF DIRECTORS FOR THE PURPOSE OF Article L. 3344-1 of the French Labour Code, who are
CARRYING OUT A CAPITAL INCREASE RESERVED FOR
EMPLOYEES WITH CANCELLATION OF members of a company savings scheme;
8
THE SHAREHOLDERS’ PREFERENTIAL SUBSCRIPTION RIGHT
s decides to cancel, in favour of the employees, executive
The Annual General Meeting, deliberating in accordance with
officers and eligible former employees, of the Company
the quorum and majority requirements for Extraordinary
and of its French and foreign affiliates as defined by
General Meetings, having reviewed the Report of the Board of
Article L. 225-180 of the French Commercial Code and
Directors and the special Report of the Statutory Auditors, and
Article L. 3344-1 of the French Labour Code, who are
acting in accordance with the provisions of
members of a company savings scheme, the preferential
Articles L. 225-129-2, L. 225129-6 and L. 225-138-1 of the French
subscription right of shareholders for the shares or securities
Commercial Code and Articles L. 3332-18 et seq. of the French
giving access to the Company’s capital, it being specified
Labour Code:
that the subscription of the shares or securities giving
s delegates to the Board of Directors the authority to carry access to the Company’s capital issued in accordance
out, on one or more occasions, on its own decisions alone, with this resolution may be carried out through any
in the proportions and at the times it may consider employee investment fund, and in particular a “structured”
appropriate, the issue of shares or securities giving access employee investment fund within the meaning of the
to the Company’s capital reserved for employees, regulations of the Autorité des Marchés Financiers, or any
executive officers and eligible former employees, of the other collective body authorised by the regulations;
Company and of its French and foreign affiliates as defined
s sets the period of validity of this delegation at 26 months as s decides that the Board of Directors will have full powers,
from the date of this Annual General Meeting, and records with the possibility to delegate further under the conditions
that this delegation renders ineffective any prior delegation provided for by law, to implement this delegation of
for the same purpose, for the unused part thereof; authority within the limits and under the conditions
specified above in particular in order to:
s decides to set at 1% of the share capital existing at the date
of this Annual General Meeting, the capital increase that • set the conditions that must be met by the employees
could thus be carried out (namely, for information purposes and eligible former employees to be able to subscribe,
at December 31st, 2014, an increase in the share capital by individually or through an employee investment fund, for
a maximum nominal amount of €1,122,477 through the the shares issued pursuant to this delegation,
issue of 5,612,388 new shares);
• decide on the list of the companies whose employees
s decides that the amount of the increases in capital that may benefit from the issue,
may be carried out pursuant to this resolution will be
deducted from the overall ceiling for increases in capital • decide on the amount to be issued, the features, where
provided for in the eighth resolution offered to this Annual applicable, of the securities giving access to the
General Meeting for approval; Company’s capital, the issue price, the dates of the
subscription period and the terms and conditions of
s decides that the subscription price may include a discount each issue,
as compared with the average of the trading prices on the
Euronext Paris market for the twenty trading days prior to • set the time period allotted to the beneficiaries to pay up
the date of the decision setting the opening date of the their shares or securities and the payment terms,
subscription period. Such discount may not exceed 20% of
• set the date, even with retrospective effect, as of which
this average, it being specified that the Board of Directors, the new shares will carry dividend rights,
or the person to whom it delegates, if it deems it
appropriate, is expressly authorised to reduce or eliminate • deduct, where applicable, the costs, taxes and fees of
the discount, in particular to take into account legal and such issues from the amount of the share premiums and
tax regimes applicable in the countries of residence of the deduct, where applicable, from the amounts of
beneficiaries of the capital increase; the share premiums, the amounts required to increase
the legal reserve to the level required by the French
s decides, pursuant to Article L. 3332-21 of the French Labour legislation and regulations in force,
Code, that the Board of Directors may provide for the free
grant to the beneficiaries specified above of shares that • in general, carry out all acts and formalities, take all
have already been issued or are to be issued, as an decisions and enter into any agreements that may be
additional employer contribution that may be paid appropriate or necessary for the due and proper
pursuant to the employee savings scheme regulations, completion of the share issues made pursuant to this
and/or in respect of the discount, provided that, after delegation of authority and record the final completion
taking into account their equivalent monetary value, of the capital increase or capital increases made
assessed on the basis of the subscription price, this does pursuant to this delegation of authority and amend the
not lead to the limits provided for in Articles L. 3332-11 and Articles of Association accordingly.
L.3332-19 of the French Labour Code being exceeded;
Article L. 225-123 of the French Commercial Code, as At the time of the Annual General Meeting of April 29th, 2004,
amended by such law, provides in fact in its third and last on the proposal of the Board of Directors, the shareholders of
paragraph that: L'Oréal amended the Articles of Association in order to remove
the double voting right.
“In companies whose shares are admitted for trading on a
regulated market, the double voting rights provided for in The Board of Directors repeats its attachment to the principle
the first paragraph are automatic, unless there is a clause whereby each share gives a right to one vote by proposing to
in the Articles of Association providing to the contrary the Annual General Meeting to amend the Articles of
adopted after promulgation of Law No. 2014-384 of Association in order to continue to apply simple voting rights.
/ ELEVENTH RESOLUTION: AMENDMENT OF ARTICLE 12 OF THE ARTICLES OF ASSOCIATION RELATING TO THE INTRODUCTION
OF DOUBLE VOTING RIGHTS BY FRENCH LAW NO. 2014-384 OF MARCH 29TH, 2014 IN ORDER TO CONTINUE TO APPLY
SIMPLE VOTING RIGHTS
The Annual General Meeting, deliberating in accordance with the quorum and majority requirements for Extraordinary General
Meetings, having reviewed the Report of the Board of Directors, decides to amend the penultimate paragraph of Article 12 of the
Articles of Association as follows:
RESOLUTION 12: REMOVAL FROM THE ARTICLES OF ASSOCIATION OF THE REFERENCE TO THE TIME PERIODS TO BE
TAKEN INTO ACCOUNT TO PARTICIPATE IN THE ANNUAL GENERAL MEETING
/ STATEMENT OF REASONS These new provisions, like the previous provisions, are public
The new wording of Article R. 225-85 of the French Commercial policy provisions and are effective even in the absence of
Code, introduced by the French Decree of December 8th, 2014 provisions in the Articles of Association.
changes the date of preparation of the list of persons duly
empowered to participate in the Annual General Meeting. It is proposed to remove all reference concerning the time
periods to be taken into account. This modification would
Pursuant to this article, the list of persons duly empowered to make it possible to have a communication by the Company in
participate in the Annual General Meeting is prepared on the line with the latest progress in the regulations with regard to
second working day prior to the Annual General Meeting at participation in Annual General Meetings and to avoid all
zero hour, Paris time (instead of the third working day provided contradiction between the Articles of Association that can only
for previously by law and mentioned in the Articles of be amended at an Annual General Meeting and the
Association of L’Oréal). Company’s other communication materials that can be
updated immediately.
/ TWELFTH RESOLUTION: REMOVAL FROM THE ARTICLES OF Directors, decides to amend Article 12 of the Articles of
ASSOCIATION OF THE REFERENCE TO THE TIME PERIODS Association in order to remove the reference relating to the
TO BE TAKEN INTO ACCOUNT TO PARTICIPATE IN THE
ANNUAL GENERAL MEETING legal period to prepare the list of persons duly empowered to
The Annual General Meeting, deliberating in accordance with participate in the General Meeting of shareholders, in
the quorum and majority requirements for Extraordinary particular within the scope of exercise of voting rights by
General Meetings, having reviewed the Report of the Board of electronic means:
/ THIRTEENTH RESOLUTION: POWERS FOR FORMALITIES all legal and administrative formalities, and to make all filings
The Annual General Meeting grants full powers to the bearer and announcements prescribed by law.
of an original, copy or extract of these minutes to accomplish
This is a free translation into English of the Statutory Auditors’ Special Report issued in French and is provided solely for the
convenience of English speaking readers. This report should be read in conjunction with, and construed in accordance with,
French law and professional auditing standards applicable in France.
To the Shareholders,
In our capacity as Statutory Auditors of your Company and in accordance with Article L. 225-197-1 of the French Commercial Code
(Code de commerce), we have prepared this report on the proposed free granting of existing shares and/or shares to be issued to
employees and corporate officers of L’Oréal and affiliated companies within the meaning of Article L. 225-197-2 of the French
Commercial Code, or to certain categories of employees and corporate officers, a transaction on which you are asked to vote.
On the basis of its report, the Board of Directors asks you to authorize, for a period of twenty-six months commencing the day of this
Annual General Meeting, the free granting on one or more occasions of existing shares and/or shares to be issued. The total
number of shares likely to be granted could not exceed 0,6% of the Company’s share capital existing as of the date of decision of
the Board of Directors, it being specified that the total share capital increases likely to be carried out under this resolution shall be
allocated to the overall limit stipulated in the eight resolution.
It is the role of the Board of Directors to prepare a report on the transaction which it wishes to conduct. It is our role, where
necessary, to comment on the information which is communicated to you on the proposed transaction.
We performed the procedures that we deemed necessary in accordance with professional standards applicable in France. These
procedures consisted in verifying that the proposed terms and conditions presented in the Board of Directors’ Report comply with
the provisions provided for by law.
We have no comments to make on the information given in the Board of Directors’ Report relating to the proposed free granting
of shares.
This is a free translation into English of the Statutory Auditors’ Special Report issued in French and is provided solely for the
convenience of English speaking readers. This report should be read in conjunction with, and construed in accordance with, French
law and professional auditing standards applicable in France.
To the Shareholders,
In our capacity as Statutory Auditors of your Company and in accordance with Articles L.228-92 and L.225-135 et seq. of the French
Commercial Code (Code de commerce), we hereby present you with our report on the proposal to delegate to the Board of
Directors the authority to carry out, on one or more occasions, the issue of shares or securities giving access to the Company’s share
capital with cancellation of preferential subscription rights, such increase being reserved for employees, corporate officers and
eligible former employees of your Company and French or foreign affiliated companies, within the meaning of Article L. 225-180 of
the French Commercial Code and Article L. 3344-1 of the French Labor Code (Code du travail), who are members of a L’Oréal
Group corporate savings scheme, a transaction on which you are asked to vote.
This proposed share capital increase is submitted to you for approval pursuant to Articles L. 225-129-6 of the French Commercial
Code and Article L. 3332-18 et seq. of the French Labor Code.
The total number of shares likely to be issued, on one or more occasions, pursuant to this delegation, cannot exceed 1% of the
Company’s share capital existing as of the date of this Annual General Meeting, it being specified that the total share capital
increases likely to be carried out under this resolution shall be allocated to the overall limit stipulated in the eight resolution.
On the basis of its report, the Board of Directors asks you to delegate, for a period of twenty-six months commencing the day of this
Annual General Meeting, the authority to decide one or several share capital increases and to cancel your preferential share
subscription rights to the shares to be issued. Where appropriate, the Board of Directors shall set the final terms and conditions of
the share capital increases.
It is the role of the Board of Directors to prepare a report in accordance with Articles R. 225-113 et seq. of the French Commercial
Code. It is our role to comment on the fair presentation of financial data taken from the accounts, on the proposed cancellation of
your preferential subscription rights and on certain other information concerning the issue, presented in this report.
We performed the procedures that we deemed necessary in accordance with professional standards applicable in France. These
procedures consisted in verifying the content of the Board of Directors’ Report in respect of this transaction and the terms and
conditions for determining the share issue price.
Subject to the subsequent review of the terms and conditions of each share capital increase that the Board of Directors may
decide, we have no comment to make on the terms and conditions for determining the share issue price as set forth in the Board of
Directors’ Report.
As the final terms and conditions governing the share capital increase(s) have not been set, we do not express an opinion thereon
and consequently on the proposed cancellation of preferential share subscription rights.
8
In accordance with Article R. 225-116 of the French Commercial Code, we shall prepare an additional report for each share capital
increase that your Board of Directors may decide to perform.
9.1.1. Auditors
Current appointments
Date of first
2010, 2011, 2012, 2013 and 2014 appointment Date of appointment Term of office Expiry date
Auditors
PricewaterhouseCoopers Audit
Auditor, member of the Compagnie Régionale de Versailles, represented
by Gérard Morin
63 rue de Villiers
92200 Neuilly-sur-Seine (France) April 29th, 2004 April 27th, 2010 6 years
Deloitte & Associés
Auditor, member of the Compagnie Régionale de Versailles, represented
by David Dupont-Noel AGM reviewing the
185 avenue Charles de Gaulle financial
statements for
92200 Neuilly-sur-Seine (France) April 29th, 2004 April 27th, 2010 6 years 2015 to be held
Substitute auditors in 2016
Mr. Yves Nicolas
63 rue de Villiers
92200 Neuilly-sur-Seine (France) April 29th, 2004 April 27th, 2010 6 years
Société BEAS
195 avenue Charles de Gaulle
92200 Neuilly-sur-Seine (France) April 27th, 2010 April 27th, 2010 6 years
9
21.1.7 Historical information on share capital 270
21.2. Memorandum and Articles of Association 266-268
21.2.1 Business activity 266
21.2.2 Governance and management organs 38-52
21.2.3 Rights, privileges and restrictions applying to shares N/A
21.2.4. Changes in shareholders rights N/A
21.2.5 Convening of and admission to Annual General Meetings 72, 267
21.2.6. Provisions likely to differ, delay or prevent a change in control N/A
21.2.7. Statutory declarations of threshold crossing 268, 273
21.2.8.Conditions for change in share capital, when more restrictive than legal provisions N/A
22. Material contracts N/A
23. Third party information, statement by experts and declarations of any interest 31, 108
24. Documents on display 266, 289
25. Information on holdings 151, 174-177,
201-203
Schedule based on Article L. 451-1-2 of the French Monetary and Financial Code and on Article 222-3 of the General Regulation of the AMF Pages
1.2. Annual Statements 2014 180-204
2. Consolidated Financial Statements 2014 118-177
3. 2014 Management Report of the Board of Directors 317
4. Declaration by the person responsible for the 2014 Annual Financial Report 313
5. Statutory Auditors’ Report on the 2014 financial statements 207
6. Statutory Auditors’ Report on the 2014 consolidated financial statements 178
7. Fees of Auditors 312
8. Report of the Chairman of the Board of Directors On Internal Control 89-96
9. Statutory Auditors’ Report on the report prepared by the Chairman of the Board of Directors 97
Tables with regard to Remuneration provided for in the AMF’s recommendations Pages
Table No. 1 Summary of the remuneration, stock options and performance shares granted to each executive officer 86, 1st table
Table No. 2 Summary of the remuneration of each executive officer 85, 2nd table
Table No. 3 Attendance fees and other remuneration received by non-executive Directors 73
Table No. 4 Stock options for the subscription or purchase of shares granted during the financial year to each executive officer by the
issuer and by any Group company * 86, 2nd table
Table No. 5 Stock options for the subscription or purchase of shares exercised during the financial year by each executive officer * 86, 3rd table
Table No. 6 Performance shares granted to each executive officer * 86, 4th table
Table No. 7 Performance shares that have vested for each executive officer * 281-282
Table No. 8 History of grants of stock options for the subscription or purchase of shares 277
Table No. 9 Stock options for the subscription or purchase of shares granted to the ten employees who are not executive officers 278,
receiving the largest number of options and options exercised by them section 7.4.2.2.
Table No. 10 Historical data relating to free grants of shares 281
L’Oréal in 2014, with its Divisions, brands and countries, driven by its mission – Beauty for All –
and by its strategy – the Universalisation of beauty.
L’Oréal in 2014/ The world of brands / Expertise to drive growth
This document includes the 2014 financial statements, the Annual Financial Report, the Management Report of
the Board of directors including a section on Social and Environmental Responsibility.
Presentation of the Group / Corporate governance / Key figures and comments on the financial year / Consolidated financial
statements / Parent company financial statements / Corporate social, environmental and societal responsibility / Stock market
information and share capital / Annual General Meeting / Appendix
2014 Progress Report on the Group’s achievements with respect to the “Sharing Beauty with All” programme.
Innovating sustainably / Producing sustainably / Living sustainably / Developing sustainably
These documents can be downloaded at www.loreal.com and at www.loreal-finance.com, and are available on request
from the Image and Corporate Communication and the Financial Communications departments.
L’ORÉAL FINANCE AT YOUR FINGERTIPS ! DISCOVER THE DIGITAL ANNUAL REPORT ON LOREAL.FR
Download the L’Oréal Finance application on your Organised into four sections – Strategy, Performance, Brands and Expertise
smartphone or tablet to access the group’s latest financial – the digital Annual Report provides a comprehensive overview of L’Oréal
news: share price, strategic presentations, webcasts of in 2014. It features rich multimedia content such as interviews with senior
events and more. management, video reports and much more. Throughout this printed version,
you can access related topics directly, by scanning the pages with the
L’Oréal Finance application.
Photo credits / copyright : Cover and Annual Report © Mert Alas & Marcus Piggott for Lancôme.
Incorporated in France as a “Société Anonyme”
with registered capital of 112,246,077.80 euros
632 012 100 R.C.S. Paris
Headquarters:
41, rue Martre
92117 Clichy Cedex – France
Tel.: +33 1 47 56 70 00
Fax: +33 1 47 56 86 42
Registered office:
14, rue Royale
75008 Paris – France
www.loreal.com
www.loreal-finance.com