ESSILOR INTERNATIONAL Société Anonyme Head office: 147, rue de Paris 94227 CHARENTON LE PONT CEDEX 712 049 618 RCS CRETEIL RULES OF PROCEDURE* OF THE BOARD OF DIRECTORS (Established by the Board of Directors at its meeting of 18 November 2003 and amended by the Board of Directors at its meetings of 18 November 2004, 24 January 2007, 26 November 2009, 25 November 2010, 24 November 2011, 27 February and 25 November 2013, 25 November 2014, 2 December 2015, and 6 December 2016) * This document is not part of the articles of Essilor International and is not binding on third parties. It cannot be invoked by third parties or shareholders against Essilor International or its executive officers.
TABLE OF CONTENTS PREAMBLE... 3 1. COMPOSITION OF THE BOARD OF DIRECTORS... 3 2. THE CHAIRMAN AND CHIEF EXECUTIVE DIRECTOR... 4 3. COMPETENCY OF THE BOARD OF DIRECTORS... 4 4. MODE OF OPERATION OF THE BOARD OF DIRECTORS... 5 5. SPECIAL COMMITTEES... 7 5.1 AUDIT AND RISK MANAGEMENT COMMITTEE... 7 5.1.1 Composition... 7 5.1.2 Duties... 8 5.1.3 Responsibilities... 8 5.1.4 Work organisation... 9 5.1.5 Activity reporting... 10 5.2 COMMITTEE FOR EXECUTIVE OFFICERS AND REMUNERATION... 10 5.2.1 Composition... 10 5.2.2 Duties... 11 5.2.3 Work organisation... 11 5.2.4 Activity reporting... 11 5.3 NOMINATIONS COMMITTEE... 11 5.3.1 Composition... 11 5.3.2 Duties... 12 5.3.3 Work organisation... 12 5.3.4 Activity reporting... 12 5.4 COMMITTEE FOR STRATEGIC ISSUES... 12 5..4.1 Composition... 12 5.4.2 Duties... 13 5.5 CORPORATE SOCIAL RESPONSIBILITY (CRS) COMMITTEE... 13 5.5.1 Composition... 13 5.5.2 Duties... 13 6. DIRECTORS' REMUNERATION... 14 7. ANNUAL EVALUATION OF THE BOARD'S OPERATION... 15 8. AMENDMENTS TO THE RULES OF PROCEDURE... 15 APPENDIX: Director's Charter setting out rights and obligations 2
PREAMBLE The Board of Directors is mandated by all the shareholders and acts in the interests of the Company. The role and powers of the Board of Directors are defined in Article 18 of the Company's Articles of Association. These Rules of Procedure apply to all current and future Directors and are intended to supplement the legal, regulatory and statutory provisions in order to outline the precise rules of operation of the Board and its special committees in the interests of the Company and its shareholders. It also sets out the missions and powers of the Chairman of the Board of Directors (Chairman and Chief Executive officer when these positions are combined). It includes an annex of the Director's Charter setting out the rights and obligations of a Director. By extension, these rules apply to representatives of the Work Council who attend the Board meetings and more globally to any person who may attend permanently or punctually the meetings. At its meeting on 4 March 2009 the Board decided to comply with the "Code of Management for listed Companies" (Code de gouvernement d entreprise des sociétés cotées) of the AFEP/MEDEF, which is available on the MEDEF website at: http://www.medef.fr The present rules, which are subject to regular review by the Board in particular after its selfassessment, is published in whole or partly on the corporate website or reproduced in the registration document. 1. COMPOSITION OF THE BOARD OF DIRECTORS The composition of the Board is organised to as to enable it to fully perform its duties independently and objectively. The Board Directors with expertise and complementary professional experiences have a duty to be vigilant and exercise complete freedom of judgment. This freedom of judgment allows them to participate independently, in the decisions and work of the Board and, where applicable, its specialised committees. At least half the members of the Board of Directors must be independent Directors. Directors representing the employed shareholders as well as the Director representing employees are not taken into account when calculating this percentage. The Board of Directors decides whether or not a Director is independent, based on a proposal from the Nominations Committee. DEFINITION OF AN "INDEPENDENT DIRECTOR" A Director is considered independent, if he or she has no relationship with the Company, its Group or its Management, which might compromise the Director's freedom of judgement. A Director cannot be considered independent, if the Director: - is an employee or executive officer of the Company or a company in the Group (or has held such a position in the last five years); - is an executive officer of a company in which the Company is directly or indirectly in the position of a Director or in which an employee appointed as a director or an executive officer of the Company currently holds a Director's position or has held such a position less than five years ago; - is a significant customer, supplier, business or financial banker of the Company or its Group, or for whom the Company or its Group represents a significant part of their business; - has a close family relationship with an executive officer; 3
- has been an auditor of the Company during previous five years; - has been a Director for more than twelve years. INDEPENDENCE AND CAPITAL SHAREHOLDING: Independent Directors are directors representing shareholders who do not hold a controlling interest in the Company. However, if a Director represents a shareholder holding more than 10% of the capital or voting rights, the Board of Directors will make a decision on his or her independence, having first obtained the written opinion of the Nominations committee. This opinion will take into account in particular: - the spread of the Company's shareholding; - the existence of any potential conflicts of interest. Each Board should consider what would be the desirable balance within its membership and within that of the committees of Board members which it has established, in particular as regards the representation of men and women, nationalities and the diversity of skills, and take appropriate action to assure the shareholders and the market that its duties will be performed with the necessary independence and objectivity. It should publish in the registration document the objectives, methods and results of its policy in these matters. The Chairman, appointed from amongst the Board members, is also the Chief executive Director as the Board of Directors in 2011 decided to combine these two positions. 2. THE CHAIRMAN AND CHIEF EXECUTIVE DIRECTOR The Chairman of the Board of Directors organizes and directs the work of the latter, which he reports to the Shareholder s General meeting. He ensures the smooth functioning of the Board of Directors and, in particular, that the Directors are able to fulfill their missions. He shall have the broadest powers to act in all circumstances on behalf of the Company. He implements the decisions taken by the Board of Directors and has authority over the entire Group to manage operational activities. He represents the Company in its relations with third parties. He exercises these powers within the limits of the corporate purpose, subject to those powers expressly granted by law to shareholders' and the Board meetings. The Chairman and chief executive officer may be assisted by a Chairman and Chief Operating Officer. 3. COMPETENCY OF THE BOARD OF DIRECTORS The Board of Directors determines the Company's business and oversees its implementation. Subject to the powers expressly granted to the Shareholders General Meetings and within the limits of the corporate purpose, it deals with all matters concerning the proper running of the Company and by its decisions matters that concern it. 4
The Board of Directors as a collective organ, in addition to its legal or regulatory competencies, is responsible in particular for: - defining the notion of an "independent Director" and deliberating this matter each year; - identifying the independent Directors; - setting the mode of exercise and organisation of the General Management; - being informed about and, if applicable, approving major strategic decisions; - being informed about (i) any acquisitions or divestments within the Company strategy for new industries or new countries of a value of more than 100 million Euro and (ii) for any other acquisitions or divestments of a value of more than 150 million Euro. These operations give rise to a formal Board approval; - approving any restructuring and significant investments outside the published strategy; - monitoring the implementation of decisions taken; - examining and approving the financial statements; - evaluating its own performance (collective and individual) and the performance of Management; - ensuring continued excellence of the company management team; - debating and, if applicable, approving the decisions of the executive officers and any remuneration proposed by the Committee for Executive Officers and Remuneration; - debating and, if applicable, approving the appointment of the special committee members, as proposed by the Nominations Committee; - debating and, if applicable, approving the succession plans for the Group's Management and major developments in the organisation; - examining the procedures for the identification, evaluation, control and monitoring of the Group's commitments and risk management; - making sure that investors are receiving pertinent, balanced and meaningful information on the Company s long-term strategy through the financial statements, in the course of major operations and development, and outlook as part of the Group s financial communications. 4. MODE OF OPERATION OF THE BOARD OF DIRECTORS 4.1 CONVENING A BOARD MEETING A notice of meeting can be in any form, even verbal, and will be given at least 7 days before the relevant meeting. It can be sent out by the Board Secretary and will state the place of the meeting, which may be the Company headquarters or any other place. 4.2 INFORMATION FOR DIRECTORS Any documentation required to ensure that the Directors are informed about the agenda and any questions to be discussed by the Board will either be enclosed with the notice of meeting or sent or delivered at least 5 days before the meeting. To be prepared for decisions to be made, Directors must check that the information they deem necessary for the proper flow of the Board's or special committee's work has been made available to them. If any information has not been made available, or has not been made available in a Director's opinion, that Director must request it. Such requests should be addressed to the Chairman (or Chief Executive Officer, in case of a separation of offices) who must satisfy himself/herself that the Directors are in a position to fulfil their duties. In addition, Directors will receive between meetings any useful or critical information on significant events or operations relating to the Company, in particular, press communications released by the Company. Any Director may avail him or herself of supplementary training on the specific concerns of the Company, its industry or business sectors, if he or she deems this necessary. From the time of their appointment, members of the Audit and Risk Management Committee will receive information on the Company s accounting, financial and operational affairs. 5
The Directors representing employees or representative of employee shareholders can be given appropriate training in the exercise of their mandate in accordance with regulations. As part of the process for making information available to Directors, members of special committees can be put in contact with members of special committees of other listed companies. Site visits will also be arranged for Directors, and members of the Executive Committee will make special presentations to them. Information for new Directors On the appointment of a new Director, he or she will be provided with a dossier including the Articles of association, the Board procedural rules, the Directors Charter and this memorandum on stock trading restrictions. Any Director ensures that He or She is aware of and complies with the obligations imposed upon him or her by the legal, regulatory, statutory and internal regulations of the Company. 4.3 BOARD MEETINGS The Board will meet as often as necessary in the interests of the Company, but at least 5 times per year. The Board meeting dates for the following year will be fixed at least by August 31st, with the exception of extraordinary meetings. 4.4 ATTENDANCE BY VIDEOCONFERENCE OR TELECOMMUNICATION The Chairman of the Board may decide that for a particular Board meeting session, the Directors may attend by means of videoconference or telecommunication, in accordance with Article R. 225-21 of the French commercial Code. The technical properties of the means used for the videoconferencing or telecommunication must permit the continuous and simultaneous retransmission of the discussions. As provided under the law and regulations and Article 16-2 para. 3 of the Articles of Association, Directors attending Board meetings by means of videoconference or telecommunication will be listed as present for the purpose of establishing a quorum or majority. However, these forms of attendance are not permissible when the Board intends to deliberate on one of the following issues: the appointment or removal of the Chairman, Chief Executive Officer, Chief Operating Officers, and their respective remuneration; the approval of the Company's financial statements and consolidated financial statements; the approval of the annual management report, including the Group's annual management report. Before the start of the discussions, the absence of third parties, microphones or any other factor that would compromise the confidential nature of the discussions must be established. 4.5 MINUTES The draft minutes of the previous Board meeting will be sent or delivered to all Directors at the latest on the day of the notice of the next meeting. 6
The minutes of the Board are approved and duly signed by the Chairperson and at least one Director. The minutes of the meeting should summarize the discussions and specify the decisions made. They should mention briefly questions raised or reservations stated. The minutes of the discussion will also mention the attendance of Directors by videoconferencing or telecommunication means. They will also record the occurrence of any technical incidents in the videoconference or telecommunication, if they disrupted the session. The attendance register mentions the Board of Directors attending the Board meetings by videoconference or telecommunication. This information should be mentioned in the attendance register which will be then duly signed by the Director at the following meeting during which the draft minutes, stating this information, are approved. 5. SPECIAL COMMITTEES When proposed by the Nominations Committee, the Board may create special Committees and decide on their composition and functions. These committees act within the framework delegated to them by the Board and submit their opinions and proposals to the Board. The Committees do not act in the place of the Board, but rather as an extension of the Board, facilitating its work. The four permanent Director committees are: - Audit and Risk Management Committee - Committee for Executive Officers and Remuneration - Nominations Committee - Committee for Strategic Issues - Corporate Social Responsibility (CRS) Committee. Each Committee has a secretary appointed by the Chairman of the Committee. 5.1 AUDIT AND RISK MANAGEMENT COMMITTEE The Audit and Risk Management Committee is tasked with monitoring issues relating to the compilation and audit of accounts and financial information. 5.1.1 Composition The Audit and Risk Management Committee consists of at least three members, appointed by the Board from amongst Essilor International Board Directors, at least two thirds of whom must be independent Directors. The Committee shall not include any executive Directors. The members of the Audit and Risk Management Committee must have special competency in financial or accounting matters. The chair of the Audit and Risk Management Committee will be assumed by an independent Director, proposed by the Nominations Committee and appointed by the Board of Directors. The appointment or extension of the term of office of the audit committee's Chairman is proposed by the Nominations Committee, and should be specially reviewed by the Board. 7
A Director cannot be appointed to the Committee if an Essilor International executive Director is a member of a similar Committee of company in which the Director acts itself as an executive Director. 5.1.2 Duties Pursuant to Article L. 823-19 of the Commercial Code, the Audit and Risk Management Committee, acting for the Board of Directors, monitors issues relating to the compilation and audit of accounts and financial information. Without prejudice to the competencies of the organs tasked with administration and management, this committee monitors the specific procedures to ensure: The integrity of the financial statements, in particular, the corporate and consolidated accounts, the scope of the consolidated accounts and the off-balance sheet commitments; The efficiency of the internal control and risk management systems; Compliance with legal requirements and regulations; The performance, qualification, independence and control of incompatibilities of the auditors; The performance of internal audit. It issues a recommendation to the Board of Directors on the auditors who have been proposed to be appointed by the General Meeting. 5.1.3 Responsibilities The committee will report regularly to the collective organ tasked with the management of the committee's tasks and notify it without delay of any material difficulties arising. In this context, the committee is responsible for analysing the procedures put in place within the group to ensure: The integrity of the financial statements: o The half-yearly and annual financial statements and any associated reference documents will be submitted to the Audit and Risk Management Committee; o Review of the underlying assumptions affecting the accounting and reporting, and any significant changes made to the accounting principles. The efficiency of the internal audit and major risk management systems: o An understanding of the methods of how the company identifies, evaluates, anticipates and manages its most important financial, operational, compliance and reporting risks. However, the Audit and Risk Management Committee is not tasked with appraising any issues relating to strategic risks and risks associated with governance unless specifically asked to do so by the Board; o The evaluation of the competency, availability and positioning of the organisation in charge of monitoring the Company's risk management; o Issuing recommendations, if necessary, on (i) the implementation of corrective measures to address significant weaknesses or anomalies, (ii) improvements to existing procedures or (iii) even the adoption of new procedures. The Audit and Risk Management Committee may also be consulted on the management procedures with regard to any unusual risks, whenever the Board or General Management deems this useful. Compliance with legal requirements and regulations: o Compliance with the accounting rules and the appropriate application of the principles on which the company accounts are based; o Taking note annually of the position of any major litigation; 8
o Review of risk prevention measures with regard to compliance with financial regulations; o Compliance with stock exchange regulations and, in particular, the appropriate application of the stock exchange code of ethics in force in the Company. The performance, qualification and independence of the auditors: o Monitoring the achievement by the auditors of their mission, review of their audit program and their findings; o During the appointment of auditors, conduct of the selection process by carrying out invitation-to-tender of various firms (except in the case of a reappointment) and issue of a recommendation to the Board of Directors on Auditors. The recommendation submitted to the Board of Directors must be based on an analysis of the past term (including a review of service quality provided and fees) and new proposals requested. If the auditor firms are reappointed, a certain rotation between geographical regions must be ensured and a relative balance sought between the two firms with regard to fees; o Resolution of any potential disagreements between the auditors and General Management; o Authorization, in respect of applicable legal or regulatory provisions, of services other than the certification of the annual accounts which might be entrusted to Auditors and their network; o Review and evaluation of the qualifications, performance, fees, and independence (in particular, by considering the annual statement of independence), as well as compliance with the professional incompatibility rules applying to the auditors, including the principal partner; o Review of rotation rules applying to the principal partner and evaluation of the rotation requirements as between auditors; o Review of auditors' reports, any information addressed to the Board pursuant to Article L. 823-16 of the Commerce Code, and responses from General Management, including on the quality of internal audit procedures and the processes for producing and dealing with financial information. The performance of internal audit: o Review of the internal audit charter, its tasks and its activity scope; o Review of the budget, resources and means available for the internal audit; o Review of the audit plan proposed by the internal audit director for the year; o Review of the most important results presented by the internal audit director; o Review of the internal audit department's efficiency; o Opinion on the appointment and replacement of the internal audit director. 5.1.4 Work organisation The Chairman of the Audit and Risk Management Committee organises the Committees work every year based on his/her assessment of the importance of certain types of risk, as agreed with General Management and the Board. The committee meets after receiving a notice of meeting from its chairman, whenever the chair or the Board deems a meeting useful, but at least three times per year. The meeting agenda is fixed by the committee chairman or agreed with the Board, if the Board has initiated the notice of meeting. The agenda is sent to the committee members before the meeting together with any information that is useful for the discussions. The Committee shall endeavor to meet at least two days before the Board meeting and in any event for meetings whose purpose is to examine the accounts (annual and interim). In order to perform its duties properly, the Audit and Risk Management Committee must be given a time frame of at least 5 days for considering in advance the documents on which discussions will be based and, in particular, for examining the accounts before their publication. 9
During the meetings, the committee hears the auditors and the directors of the Company, who are responsible for compiling the accounts and internal auditing. It examines the principles and methods, the schedule and objectives as well as the general conclusions from the operational control and internal auditing processes. The financial director will make a presentation to the Committee on the Company s exposure to risks and significant off-balance sheet commitments. The Committee may also gather information from persons who are able to assist it with fulfilling its duties, in particular certain business and financial managers and those responsible for handling data, whilst keeping General Management informed. In addition, the committee may consult external experts about the financial statements approved by the Board, if it deems this necessary. 5.1.5 Activity reporting The Audit and Risk Management Committee reports to the Board about its work as many times as necessary and in any case before the final approval of the annual financial statements, outlining its observations. It is pointed out that the minutes of the Board meeting include a detailed transcript of the Audit and Risk report made to the Board. The Audit committee includes in its report any comments it deems useful on: the appropriateness of the various procedures and the overall system for achieving the stated objective of managing information and risks; the effective application of the procedures in place and, if applicable, on the means used to achieve the aims; the financial situation, treasury situation and commitments of the Company. The Company accounts, debt levels as well as share price and capital developments are also discussed by the Group's Finance Director in regular presentations. During the Board meetings held to approve the half-yearly financial statements of the Company, the auditors submit their report on the accounts with their comments, including on the conditions under which their task was completed. The auditors also include any recommendations and suggestions they may have on how to improve the effectiveness of the various procedures and the overall system and how to adapt them to any new situation. If, in the course of its work, the committee detects a major risk that has apparently not been adequately dealt with, it will alert the Chairman of the Board and the Board of Directors. The Audit and Risk Management Committee examines periodically its mode of operation and, taking into account any remarks it may have received from the Board or General Management, formulates any proposals to enhance the quality of its work within the framework of its duties. 5.2 COMMITTEE FOR EXECUTIVE OFFICERS AND REMUNERATION 5.2.1 Composition The Committee for Executive Officers and Remuneration consists of at least three members who are independent Directors of Essilor International. It shall not include any executive Directors. 10
The chair of the Committee for Executive Officers and Remuneration is assumed by a Director, proposed by the Nominations Committee and appointed by the Board of Directors amongst the independent Directors. A Director cannot be appointed to the Committee if an Essilor International executive Director is a member of a similar Committee of the company in which the Director acts itself as an executive Director. 5.2.2 Duties The main duties of the Committee for Executive Officers and Remuneration within the work of the Board of Directors consist of: putting forward proposals on the remuneration of the executive officers; putting forward proposals on the allocation of stock options and/or so-called "free" performance shares for the said officers as well as the number of shares resulting from the exercise of options or performance shares that the executive Director will be required to retain until the termination of his office; informing itself on general remuneration policies in the Company; submit annually to the Board of Directors the draft report on remuneration on which the Shareholders General meeting is called upon to decide in accordance with French regulation; putting forward proposals to the Board on the selection of executive officers; assisting the Chairman and the Board in their consideration of succession plans for the Group's Management and of major developments in the organisation. 5.2.3 Work organisation The committee meets after receiving a notice of meeting from its chairman, whenever the chair or the Board deems a meeting useful, but at least twice per year. The meeting agenda is fixed by the committee chairman or agreed with the Board, if the Board has initiated the notice of meeting. The committee may meet at any time, whenever it deems a meeting opportune, for example, to evaluate the performance of Company Management. If required, the committee will request the assistance of the Directors of Human Resources, Legal Affairs or Finance. 5.2.4 Activity reporting The committee must report to the Board about its work at regular intervals and submit proposals. 5.3 NOMINATIONS COMMITTEE 5.3.1 Composition The Nominations committee consists of a maximum of six members; half of the members are in principle appointed from among independent Directors. The Chairman and CEO and a Director representing employee shareholders are also part of this committee in consulting roles. The Chairman of the Nominations Committee is appointed by the Board 11
of Directors on advice from the Nominations Committee. A rotation of its members, based on its performance, as proposed by the Nominations Committee is effected by the Board of Directors. A Director cannot be appointed to the Committee if an Essilor International executive Director is a member of a similar Committee of the company in which the Director acts itself as an executive Director. 5.3.2 Duties The main duties of the Nominations Committee within the work of the Board of Directors consist of: putting forward proposals to the Board for the selection of Directors; supervising the self-evaluation process of the Board; putting forward proposals to improve the functioning of the Board; identifying independent director candidates for approval by the Board; evaluating the performance of the Directors; managing the evolution process of the Board and each Director's performance; putting forward proposals to the Board for the appointment of special committee members; reflecting on the composition of the Board of Directors and its future development. preparing Director replacements, if necessary. 5.3.3 Work organisation The Committee meets after receiving a notice of meeting from its Chairman, whenever the chair or the Board deem a meeting useful, but at least twice per year. The meeting agenda is fixed by the Committee Chairman, or agreed with the Board, if the Board has initiated the notice of meeting. The Committee may meet at any time, whenever it deems a meeting opportune, for example, to evaluate the performance of Company Management. 5.3.4 Activity reporting The Committee must report to the Board on its work at regular intervals and submit proposals. 5.4 COMMITTEE FOR STRATEGIC ISSUES 5.4.1 Composition The Committee for Strategic Issues consists of all the Directors of the Essilor International board. The Chairman of the Board of Directors or the Chairman Chief executive officer (when these positions are combined) is also the chairman of the Committee for Strategic Issues. 12
5.4.2 Duties The main duty of the Committee for Strategic Issues within the work of the Board of Directors consists of regularly reviewing the Group's strategies for both products and technology, as well as its geographical and marketing strategies. The CEO, assisted by members of the Executive Committee as far as necessary, is responsible for making presentations on these matters on a regular basis. The CEO personally gives a presentation on the Group's strategy to the Committee for Strategic Issues annually. This committee submits proposals to the Board, which approves any major strategic decisions. 5.4.3 Work organisation The Strategy Committee meets after receiving a notice of meeting from its chairman, whenever the chair or the Board deems a meeting useful. By way of delegation from the Board of Directors, the agenda of the meetings of the Committee for Strategic Issues is prepared by its strategic steering group, taking into account, in particular, any proposals by the Chairman and CEO. Supporting documentation for the discussions must be sent out at least forty-eight hours before the meeting and returned at the end of the meeting. The Committee may meet at any time, whenever it deems a meeting opportune. 5..4.4 Activity reporting The committee chairman must report to the Board about the committee's work at regular intervals. 5.5 CORPORATE SOCIAL RESPONSIBILITY (CRS) COMMITTEE 5.5.1 Composition The CSR Committee consists of a minimum of four and a maximum of six members, at least two of whom must be independent directors, plus the Chairman and Chief Executive Officer and one director representing the employee shareholders. The CSR Committee is chaired by an independent director appointed by the Board of Directors based on the recommendation of the Appointments Committee. A Director cannot be appointed to the Committee if an Essilor International executive Director is a member of a similar Committee of the company in which the Director acts itself as an executive Director. 5.5.2 Duties The main duty of the CSR Committee, within the remit of the Board of Directors, is to ensure that the Essilor group is even more effective at addressing the economic and societal challenges associated with our mission to improve sight, which involves helping as many people as possible to see better, in order to live better. Of the seven billion people on the planet, 4.2 billion need visual correction and 1.7 billion actually get it. Therefore, some 2.5 billion people do not. The Group strives to offer products customized to each individual within its entire global scope. 13
This covers all areas of corporate social responsibility relating to the Group's mission and operations. In carrying out this mission, the Group focuses on two objectives: - economic goals related to profitability and creating economic value; - community-focused goals related to creating social value. This twofold approach, based on developing community initiatives, is an innovative means of positive differentiation in the market. The CSR Committee is also responsible for governance of the Group's social project. As such, and with particular regard to the Group's voluntary CSR process, the Committee must: examine the main opportunities and risks for the Group and for all stakeholders regarding challenges specific to its role and activities; remain informed and help to define and approve the scope of the Group's general CSR policy as required; oversee the implementation and gradual roll-out of this policy and these initiatives; guide the Board of Directors on the Group's long-term development, including its economic development, through its CSR initiatives in matters of sight and its improvement; assess the risks, identify new opportunities, take account of the impact of the CSR policy in terms of economic performance and evaluate the impact for the Group of investments with social and community-related goals in different businesses and in all countries; give an opinion on the CSR report to be published in accordance with the French legal obligations (Article L.225-102-1 of the French Commercial Code). 6. DIRECTORS' REMUNERATION The Directors, receive attendance fees, the amount of which is fixed by a vote at the Ordinary General Meeting. The distribution of these fees is decided by the Board. Any Director may waive his or her claim to receiving attendance fees. Additional meetings by videoconference or telecommunications do not result in the payment of fees, unless otherwise determined by the Board. The total amount of attendance fees is distributed between the Directors based on the following principles: - a fixed part and a variable part based on regular attendance at Board meetings; - a fixed part for committee chairs, with the exception of the Chairman of the Committee for Strategic Issues and for those members who are independent Directors a variable part based on regular attendance at special committee meetings only. If the term of office begins or ends during the year, the fixed portion is paid pro rata. Directors can be reimbursed for reasonable expenses and necessary for the performance of their corporate office on presentation of justifications and under the terms and conditions normal group travel as detailed in Directors expense reimbursement policy. 14
7. ANNUAL EVALUATION OF THE BOARD'S OPERATION The Board, under the auspices of the Nominations Committee, proceeds with a formal evaluation of its ability to meet shareholder expectations by reviewing periodically, and at least once a year, its composition, its organization and its own operations. It must think about the desired balance of its membership and that of its Committees, periodically reflect on the adequacy of its tasks to its organisation and functioning and, if necessary, takes measures required to improve it. The Board informs the company shareholders on this evaluation in its annual report. This evaluation must meet the three objectives set out by the provisions of the AFEP/MEDEF Code of Management for Listed Companies relating to the assessment of Board of Directors. Non-executive Board members will meet without the presence of executive and internal Directors at least once a year, in particular, to evaluate the performance of the Chairman and Chief Executive Officer. No formal action within the Board competency or of the missions of the Nomination Committee shall be taken during these meetings. 8. AMENDMENTS TO THE RULES OF PROCEDURE These Rules may be amended by a decision of the Board. 15