2025 Universal Registration Document

There were mixed views about the composition of the benchmark panel, with some investors preferring a strictly geographical approach excluding US peers, and others favouring sector relevance and alignment with the Group's actual global footprint. 

On the recommendation of the Human Resources and Remuneration Committee, the Board re-examined the composition of the benchmark panel, with the support of an independent consultancy firm, to ensure that it is still suited to L'Oréal's profile. This review was based on the following principles:

Rigour and transparency: The companies in the panel are selected based on objective criteria (business sector, sales, market capitalisation, headcount and geographical location) which are set out in the remuneration policy. This stable methodological framework ensures that the analysis remains consistent over time.

Alignment with the Group's geographical footprint: Because North America accounts for over a quarter of its sales, L'Oréal considers it necessary to include peers from this market to reflect its global competitive environment. The Board pays close attention to the specific features of remuneration practices in the United States, with any non-comparable remuneration structures excluded from the analysis.

Stability: The acquisition of Kenvue by Kimberley Clark announced for 2026 (a company that the Board removed from the panel at the time of its 2025 review), is likely to compromise the panel’s consistency over time. In view of this context, the Board decided to take action in advance of this acquisition in order to ensure stability in the methods used and preserve the panel's readability. The removal of Kenvue without replacing it also helps address the reservations expressed by certain shareholders regarding the weighting of US companies within the panel. At the same time it increases the relative proportion of European companies, while maintaining a robust and representative comparison basis that reflects L'Oréal's international dimension. 

There was a request for greater transparency about financial targets and the associated payment scales for the annual variable remuneration.

The Board of Directors has taken care to seek the right balance between the need to be transparent to shareholders and the imperative of protecting the Group's interests.

Preserving L’Oréal’s competitive advantage: The Board has chosen to base the Chief Executive Officer's remuneration on the Company's key performance indicators, thereby guaranteeing clear and close alignment between remuneration and value creation. As these indicators are intrinsically linked to L’Oréal’s growth strategy and internal budget, the disclosure of quantified targets (whether ex ante or ex post) would reveal sensitive information relating to growth assumptions and market strategies, whereas L'Oréal has a policy of not providing quantified financial targets in its financial communications. In addition, the Group operates in an extremely competitive global industry, where such disclosure would be detrimental to the protection of L'Oréal's interests.

Transparency: In order to meet investors' expectations without jeopardising the confidentiality of L’Oréal’s internal data, the Board has decided to adopt a differentiated approach. From now on, the payment scale for the criterion of “sales growth differential as compared to main competitors” will be published on an ex ante and ex post basis. This criterion, which is based on relative performance rather than internal budget data, increases the transparency of remuneration without disclosing the Company's forward-looking information.

While some investors said they wanted to see more long-term profitability indicators in order to more closely align the remuneration with their interests, other investors think that the current operations-focused criteria are better, and welcome the absence of an indicator based on relative share performance.

The Board of Directors still firmly believes that the current financial criteria, which are fully consistent with the Group's financial communications, are a very effective management tool for achieving balanced and sustainable growth.

While deciding to maintain these criteria, the Board took steps to meet the expectations of certain shareholders who wanted to verify that the remuneration is aligned with overall performance (in particular with the share price or with a long-term profitability indicator). The Human Resources and Remuneration Committee therefore commissioned an independent “Pay for Performance” study covering the first four years of the Chief Executive Officer’s tenure. This study measured the correlation between the remuneration (actual 2024 remuneration and 2025 remuneration policy) and four fundamental indicators: ROCE, EBITDA, EPS and share price performance.

To ensure that the analysis was totally objective, L'Oréal's performance was compared not only to its international benchmark panel, but also to a specifically European panel.

The findings of this study confirm that the criteria used are appropriate. In terms of ROCE, EBITDA and EPS, L'Oréal ranks among the best companies in the two panels, which confirms its ability to create superior value. For the share performance criterion, L'Oréal's value creation is at the median of the panels.

These results confirm the strong correlation between the Chief Executive Officer's remuneration and L'Oréal's multi-dimensional performance. They support the Board's decision to keep the current structure of the remuneration policy, which has been demonstrated to be appropriate and demanding over the long term.

Some shareholders expressed reservations about the possibility of the Board granting any potential additional performance shares, although any such grants would be strictly limited and capped.

This system was originally included in the remuneration policy for the sake of completeness, in order to cover any exceptional situations, without any particular intention of using it. Since that time, it has never actually been used.

In order to simplify the remuneration policy and in view of the opinions expressed, based on the recommendation of the Human Resources and Remuneration Committee, the Board of Directors has decided to remove that possibility in the 2026 remuneration policy for the Chief Executive Officer.