DANONE - Registration document 2015

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DANONE REGISTRATION DOCUMENT 2015
Corporate Governance
6.1 Governance bodies
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Application of the AFEP-MEDEF Corporate Governance Code for listed companies
Pursuant to the Act of July 3, 2008, on December 18, 2008 the Board of Directors reviewed the provisions of the AFEP-MEDEF Code and
decided that Danone would refer to this Code of Governance (this decision was published in a press release issued on December 19, 2008).
This code is available on the MEDEF website .
Danone applies the recommendations of the AFEP-MEDEF Code, with the exception of the following points which the Company does not
apply in a strict manner:
Recommendations Danone's practice and justification
Assessment of the Board (section 10.2 of
the AFEP MEDEF Code)
One of the objectives of the assessment of
the Board of Directors must be “to measure
the actual contribution of each director to the
Board's work through his or her competence
and involvement in discussions”.
This recommendation is not applied, mainly because of the practical difficulties related to
implementing such a recommendation and its potential impact on teamspirit and collegiality.
Nevertheless, each Director periodically completes a very detailed questionnaire regarding
the operation of the Board, which allows each member to express his/her opinion freely
on potential problems. In this way, the Directors who so wish can freely express their view
of the actual individual contributions during their interview with the Board Secretary.
The Board of Directors' review of the completed questionnaires thus provides it with the
opportunity to fully assess the contributions and involvement of all Directors in the work
of the Board and its Committees.
Lastly, the Board's rules of procedure expressly state that this assessment should make it
possible to “ensure the availability and commitment of Directors”. The contribution of each
Director is assessed by the Nomination and Compensation Committee and by the Board, in
particular at the time of renewal of the terms of office of Directors and Committeemembers.
Given the satisfactory results of these assessments, to date the Board of Directors has
not expressed the desire to conduct a formal assessment of each Director's contribution.
Termination of employment contract in case
of appointment as corporate officer (section
22 of the AFEP MEDEF Code)
“When an employee is appointed as a corporate
officer, it is recommended to terminate his or
her employment contract with the company or
with a company affiliated to the group, whether
through contractual termination or resignation.
This recommendation applies to the chairman,
chairman and chief executive officer, and gen-
eral manager of companies with a board of
directors […].”
At the time of the renewal of their terms of office as Directors and at the recommendation of
the Nomination and Compensation Committee, on February 22, 2016 the Board of Directors
confirmed the position taken by it in September 2014 and decided that the employment
contracts of Mr. Franck RIBOUD and Mr. Emmanuel FABER should be maintained (although
they should remain suspended), given their age, personal situation and seniority as Danone
employees. The Board considered this arrangement relevant for corporate officers with
at least 10 years of seniority at Danone in order to encourage the principle of internal pro-
motion and sustainable management that Danone strives to implement, as terminating the
employment contract could, on the contrary, dissuade internal candidates from accepting
positions as corporate officers.
The Board believed that implementing the recommendations of the AFEP-MEDEF Code to
permanently terminate these employment contracts would cause them to lose the rights
and benefits gradually acquired under their employment contracts during their careers
at Danone on the basis of seniority (i.e., 34 years for Mr. Franck RIBOUD and 18 years for
Mr. Emmanuel FABER) and actual service, particularly the severance pay and long-term
benefits (such as participation in group plans), the total amount of which, in any case, would
not exceed the cap of two years of compensation (fixed and variable).
The French Financial Markets Authority believes that a detailed explanation on the mainte-
nance of an executive director's employment contract permits to justify the non-compliance
with the AFEP MEDEF Code.
Functioning of Compensation Committee
(section 18.2 of the AFEP-MEDEF Code)
“WhenthereportontheworkoftheCompensation
Committee is presented, the Board should de-
liberate on issues relating to the compensation
of the corporate officers without the presence
of the latter.”
Corporate officers are present when the Board of Directors deliberates on issues relating
to their compensation but do not take part in any debate or vote in relation to decisions
that affect them.
In addition, the Board of Directors only decides on compensation upon recommendation of
the Nomination and Compensation Committee, which is entirely composed of independent
Directors and which includes no corporate officer.
A Lead Independent Director was appointed in 2013 to provide additional assurance that the
Board is functioning correctly and that power is well-balanced on the General Management
and Board of Directors.
Stock-options and performance shares
(section 23.2.4 of the AFEP-MEDEF Code)
“It is recommended that performance shares
allocated to corporate officers be conditional
upon the purchase of a defined number of shares
when the allocated shares vest, in accordance
with the terms and conditions set by the Board
and made public at the time of grant.”
Given the high obligation imposed on corporate officers and other Executive Committee
members to retain DANONE shares, the Board of Directors, acting upon recommendation
of the Nomination and Compensation Committee, considered that it was not necessary to
require them to purchase a certain number of Company shares at the end of the holding
period of their shares, subject to performance conditions.