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An ambitious and balanced governance

An ambitious and balanced governance

The Supervisory Board officially adopted the Afep-Medef recommendations on corporate governance in 2009, as it deemed these recommendations to be entirely in keeping with the Group’s corporate governance policy. This framework includes the Afep-Medef Corporate Governance Code for listed companies (available on the Afep website or the Medef website) and the application guide of the High Committee on Corporate Governance (HCGE) which explains the recommendations of this code.

Organisational structure of Hermès International

TWO TYPES OF PARTNERS

Hermès International was converted into a société en commandite par actions (partnership limited by shares – SCA) by a decision of the Extraordinary General Meeting held on 27 December 1990, in order to preserve its identity and culture and thus ensure its sustainability over the long term, in the interests of the Group and all shareholders. This singular legal form, whose capital is divided into shares, brings together two types of partners.

The Active Partner (Émile Hermès SAS)

The Active partner Émile Hermès SAS is involved in the operation and organisation of the Company. It has structuring powers.

 

Powers:

  • determining for the Group: (i) strategic options, (ii) consolidated operating and investment budgets, and (iii) proposals to the General Meeting for the distribution of share premiums, reserves and retained earnings;
  • approving the decisions of the General Meeting of Limited Partners (except those falling within their own powers);
  • appointing or dismissing the Executive Chairmen;
  • establishing the compensation policy for the Executive Chairmen
  • authorising all significant transactions (loans, guarantees, investments, etc.) when their amount exceeds 10% of the Hermès Group’s net consolidated financial position;
  • formulating recommendations to the Executive Management on all issues of general interest to the Group;
  • proposing the appointment or dismissal of members of the Supervisory Board.
     

Émile Hermès SAS has been the sole Active partner of Hermès International since 1 April 2006.

The Executive Management Board of Émile Hermès SAS exercises the powers attached to being an Active partner of the Company.

The Active partner cannot participate in the vote on the appointment of members of the Supervisory Board at a General Meeting. The shares held in the Company are therefore removed from the quorum of the resolutions of the General Meetings concerned.

The Active partner is jointly and severally liable for the Company’s debts.
In accordance with Article 26 of the Articles of Association, each year, the Company pays the Active Partner an amount equal to 0.67% of the distributable profits.

The Limited Partners (shareholders)

The Limited Partners or shareholders, who provide capital, enjoy limited prerogatives.

 

Powers :

  • voting the parent company financial statements and the consolidated financial statements approved by Executive Management;
  • determining the allocation of net income (including the distribution of dividends);
  • approving related-party agreements;
  • appointing the Statutory Auditors;
  • appointing and dismissing the members of the Supervisory Board.

Any other decision of the shareholders is only valid if approved on the same terms by the Active partner.

The law explicitly prohibits them from any interference in the Company’s management, for any reason whatsoever, on pain of being liable under the same conditions as the Active partner.

The liability of the shareholders is limited to the amount of their contribution. Shareholders receive a share of the profits in the form of dividends. Shareholders receive a share of the profits in the form of dividends.

GOVERNANCE BY NATURE DISSOCIATED

The organisation of governance within an SCA follows the principle of the separation of powers. Executive powers are exercised by the Executive Management and control powers by the Supervisory Board. Hermès International’s governance therefore has a structure that is by nature dissociated.

Executive Management

The Company is currently administered and managed by two Executive Chairmen, one of whom is the Active partner. The role of Executive Chairman is to manage the Group.

Powers :

  • defining and implementing the Group’s strategy in accordance with the strategic options adopted by the Active partner;
  • directing the Group’s operations;
  • establishing and implementing internal control and risk management procedures;
  • approving the parent company and consolidated financial statements;
  • convening General Meetings and setting their agendas;
  • preparing the management report for the General Meeting;
  • exercising the broadest of powers to act on behalf of the Company in all circumstances with regard to third parties, subject to the limits of the corporate purpose and powers granted to the Supervisory Board and to Shareholders’ General Meetings.

The Executive Management is controlled by a Supervisory Board representing the Limited Partners. The Afep-Medef Code qualifies the Executive Chairmen as “Executive Corporate Officers”. The Executive Management is assisted by the Executive Committee and the Operations Committee, which constitute the Governing bodies.

The Joint Council

The Joint Council, composed of the members of the Executive Management Board of Émile Hermès SAS, the Active Partner and the members of the Hermès International Supervisory Board is a consultation body that has no decision-making powers of its own.

It is aware of all issues that are submitted to it or that it takes up, without being able to replace the bodies to which the decision-making powers are assigned.

Nevertheless, the Active Partner, through the Executive Management Board, and the Supervisory Board may, as the Joint Council if they so wish, take any decisions or issue any opinions within their competence.

Supervisory Board

The Supervisory Board is an offshoot of the General Meeting of Limited Partners. The appointment of members of the Board (except for the employee representatives) is solely that body’s responsibility.

 

 

Powers :

  • controlling the management of the Company (power comparable to that of the Statutory Auditors): audit of the parent company and consolidated financial statements and respect for equality between shareholders;
  • determining the allocation of net income to be put to the General Meeting each financial year; convening the Shareholders’ General Meeting whenever it deems it appropriate;
  • preparing the corporate governance report;
  • preparing a report to the General Meeting on the performance of its duties;
  • authorising or downgrading related-party agreements;
  • authorising the Executive Management to grant sureties, endorsements and guarantees
  • establishing the compensation policy for the members of the Supervisory Board;
  • deliberating on the actual compensation of the Executive Chairmen;
  • approving any proposed new wording of certain clauses of the Articles of Association of Émile Hermès SAS;
  • it must be consulted by the Active partner regarding: (i) strategic options; (ii) consolidated operating and investment budgets; (iii) proposals to the General Meeting pertaining to the appropriation of share premiums, reserves or retained earnings; and (iv) setting the compensation policy for the Executive Chairmen;
  • issuing, for the attention of the Active partner, a reasoned opinion on: (i) any appointment or dismissal of any Executive Chairman of the Company; and (ii) the reduction in the notice period in the event of resignation of the Executive Chairman.
     

The functions exercised by the Supervisory Board do not entail any interference with the Executive Management, or any liability arising from the management’s actions or from the results of such actions.

The law does not confer any other powers on the Supervisory Board. Consequently, it may neither appoint or dismiss the Executive Chairmen, nor set their compensation policy.

The Afep-Medef Code qualifies the Chairman and the members of the Supervisory Board as “non-Executive Corporate Officers”.

The Board is supported by the work of two permanent committees:

  • Audit and Risk Committee;
  • Compensation, Appointments, Governance and CSR Committee or “CAG-CSR Committee”.
     

These committees act under the collective and exclusive responsibility of the Supervisory Board. Their role is to discuss, analyse and prepare for certain deliberations of the Board, to which they submit their opinions, proposals or recommendations.