L'Oréal Finance and Shareholders

The Strategy and Sustainable Development Committee

The Strategy and Implementation Committee

This Committee clarifies,through its analyses, the strategic orientations submitted to the Board, and monitors the implementation and advancement of significant operations in progress. It ensures that the main financial balances are preserved. It reviews the main lines of development, options and strategic projects presented by the General Management, together with their economic and financial consequences, acquisition opportunities, and financial transactions that may significantly change the balance sheet structure.

The Committee met four times in 2010. Along with the constant and close review of the group’s business activity and the analysis of markets andcompetitors, the Committee monitored the economicconditions during emergence from thecrisis, after having in 2009 noted the strategicdecisions taken by the General Management ata very early stage to tackle the difficult economicenvironment. Furthermore, the Committee wascalled on to study projected acquisitions.

The Audit Committee

The Audit Committee

This Committee is, in particular, responsible for monitoring the process of preparing financial information, the effectiveness of internal control and risk management systems, the auditing of the annual and consolidated financial statements, and the independence of the Statutory Auditors. Mr Charles-Henri Filippi, L’Oréal director and a financial expert, is the Chairman of the Committee.

The Committee met five times in 2010. It reviewed the evolution of the main items of the profit and loss accounts and balance sheets. It considered that the work by the Internal Audit Department and the Internal Control process put in place, from the risk viewpoint, are improving in quality.

After taking note of the French financial markets authority (AMF) Report of July 2010 on the functioning of Audit Committees, the Committee found that its work was carried out in a framework complying with AMF recommendations. The Committee examined the conditions of industrial and environmental risks management and of those linked to quality and safety in product design. It noted that the systems and processes put in place, which are based on a sound methodology, are comprehensive and satisfactory. Finally, the Committee is regularly informed of legal risks and of any litigation, and, once a year, meets the Statutory Auditors without the presence of the management.

The Human Resources and Remuneration Committee

The Human Resources and Remuneration Committee

This Committee makes proposals on matters including in particular the remuneration of the Chairman of the Board and the Chief Executive Officer, the amount of attendance fees to be submitted to the Annual General Meeting and the method of distribution of such fees, and the implementation of long-term incentive plans, such as those providing, for example, for distributions of stock options or for free grants of shares.

The Committee met four times in 2010 to consider all these matters. In connection with the proposal made to renew the Chief Executive’s term of office, the Committee proposed to the Board that his contract of employment should continue to be suspended, which was accepted by the Board. After the closing of accounts, it made proposals to the Board with regard to the remuneration of the corporate officers and the implementation of a plan relating to stock options and conditional allocations of shares to employees concerning a large number of people. The Board approved the Committee’s proposals, particularly with regard to the performance conditions to be achieved by the Chief Executive Officer (who must, furthermore, conserve some of the options that he exercises) and by the members of the Executive Committee.

The Appointments and Governance Committee

The Appointments and Governance Committee

The Appointments and Governance Committee makes proposals to the Board on the choice of directors, examines the expediency of separating the roles of Chairman of the Board and Chief Executive Officer, clarifies the Board’s decision concerning the conditions in which the General Management is exercised and the status of corporate officers, discusses the independent director qualifications reviewed each year by the Board, ensures that the Corporate Government Code to which the company refers is applied, and prepares for the Board’s decisions about updates to its Internal Rules.

It also ensures the implementation of a procedure preparing the succession plans for the corporate officers in the event of an unforeseen vacancy, and conducts the reflection process with regard to the Committees in charge of preparing for the Board’s work.

The Committee met three times in 2010. When the Directors’s terms of office were considered for renewal, the Committee proposed that the Board should review the situation of each of its members on a case-by-case basis, in particular in light of the independence criteria set out in the Afep-Medef Code. In the 2010 Reference Document, the independent directors are clearly qualified as such, in light of the criteria adopted by the Board.
The Committee also confirmed its wish to carry out a harmonious renewal of directors’ terms of office, and it made proposals to the Board in the framework of the Annual General Meeting. Finally, the Committee examined the evolution of the Executive Committee and the talent pool for the future, and stated its view concerning a possible succession plan.