We have decided to focus on Hermès, one of the biggest listed company in France. The management form is a a two-tier formula (Art. L 225-68 C. Com.). Their corporate governance is characterized by a Supervisory Board that is controlling the company management; the Specialized Committees of the Supervisory Board and the Active Partner.The latter, is liable for all Hermès’ s debts for an indefinite period of time. After the Supervisory Board has given its recommendations, the Active Partner has the power to appoint or revoke the Executive Chairmen’s power.
A detailed description of this entity is made in the Hermès website : “The Active Partner makes all decisions pertaining to the Group’s strategic options, consolidated operating and investment budgets, and recommendations to the General Meeting with respect to the distribution of share premiums, reserves and retained earnings, on the recommendation of the Supervisory Board. It may submit recommendations to the Executive Management on any matter of general interest to the Group. It authorises all Company loans, sureties, endorsements and guarantees, any pledges of collateral and encumbrances on the Company’s property, as well as the creation of any company or acquisition of an interest whenever the investment amounts to more than 10% of the Group’s net worth.
“There are 11 members – 3 women and 8 men- in the Active Partner entity. At the head of it, there are Henri-Louis Bauer Executive Manager and Chairman, Philippe Dumas Vice-Chairman and Hubert Guerrand Vice-Chairman.Concerning the Specialized Committee of the Supervisory Board, also called Audit Committee, it fairly consolidates the financial statements and communicate Hermès’s financial position to the external and internal stakeholders. Monique Cohen, the chairwoman, is managing four people in the Audit Committee.The Supervisory board has the same powers as the Statutory Auditors. It ensures and controls the good function of the company’s management The members of the Supervisory Board fixed the earnings objective defined during the Annual General Meeting for the financial year. The Supervisory Board is working closely with the Active partners. For instance, the Active Partner is asking the Supervisory Board approval before changing any strategic options or financial actions.
Regarding the Supervisory Board, it must surrender to the Active Partner the revocation of the the Executive Chairmen’s power if needed or communicate their potential new Executive Chairmen.The Supervisory Board is composed of 13 members; 6 women and 7 men. Its current chairman is Eric de Seynes, the Vice Chairwoman is Monique Cohen and the Vice Chairwoman is Dominique Senequier.Rules and procedures are giving a framework to the Supervisory Board to increase the quality of the Board’s work through good corporate governance principles and respect of the ethics. Each year the Compensation and Appointments are releasing a report submitted to the board where they discuss about the independent aspect of the directors.
To be part of the supervisory board the member should own 200 Hermès International shares. A Board member is considered as independent if he/she doesn’t have any type of relationship with the company, group or management that could biased the exercise of judgement in any way. It is agreed that at least ? of the Board members should be independent members.Let’s see now how the members of the boards should function and conduct. The members of the Supervisory Board must always act in the firm’s corporate interest as they are Representatives of all the shareholder and must take into account the opinions of the other stakeholders. Members of the board must respect legal and regulatory provisions according to their position, the governance codes and rules specific to Hermès.
Furthermore,they have to respect the provisions written in the Stock Market Ethics Code. “Independence, integrity, loyalty and professionalism” are the basis of the good functioning of Hermès’ Corporate Governance.Finally, we will see in this paragraph how the board is operating.
To ensure a good intern communication, the board is meeting at least 4 times per year and when it is required to assure the company’s interest and best operations. The Statutory Auditors and the Works Council representatives need to participate to each Supervisory Board meetings. Members of the Executive Committee and the Management Committee may be invited by the Chairman to provide any information needed during the meeting. To make sure that the board is operating well, each member is receiving all information needed to fulfill their duties and responsibilities. It is also possible for the members to benefit trainings in order to understand well certain topics such as accounting, finance or corporate governance.
A periodically assessment, organized every three years, is also made to evaluate the board’s performance, their responsibility and commitment.