Chapter 3. Governance and Compensation - Page 78 | Publicis Groupe - 2019 Annual financial report

Read the document

2019 Annual financial report

- Message from the Chairman of the Supervisory Board
- Message from the Chairman of the Supervisory Board
- Message from the Chair of the Management Board
- Message from the Chair of the Management Board
- Key figures
- Key figures
- Governance
- Governance
- Chapter 1. Presentation of the group
- Chapter 1. Presentation of the group
- Chapter 2. Risks and risk management
- Chapter 2. Risks and risk management
- Chapter 3. Governance and Compensation
- Chapter 3. Governance and Compensation
- Chapter 4. Corporate Social Responsibility – Non-financial performance
- Chapter 4. Corporate Social Responsibility – Non-financial performance
- Chapter 5. Commentary on the financial year
- Chapter 5. Commentary on the financial year
- Chapter 6. Consolidated financial statements 2019 year
- Chapter 6. Consolidated financial statements 2019 year
- Chapter 7. 2019 Annual financial statements
- Chapter 7. 2019 Annual financial statements
- Chapter 8. Company information and capital structure
- Chapter 8. Company information and capital structure
- Chapter 9. General shareholders’ meeting
- Chapter 9. General shareholders’ meeting
- Chapter 10. Additional information
- Chapter 10. Additional information
- Contacts
- Contacts

GOVERNANCE ANDCOMPENSATION

3

GOVERNANCE OF PUBLICIS GROUPE

3.1.4 Application of the Afep-Medef Code: implementation of “apply or

explain” rule

Within the framework of the “Apply or explain” rule specified in articleL.225-37-4 8° of the French Commercial Code and referred

to in article27.1 of the Afep-Medef Code, the Company considers that its practices are compliant with the recommendations of the

Afep-Medef Code. However, one provision has been set aside, for the reasons explained hereafter:

Recommendations of the Afep-Medef Code Position

Article18.1 – Composition of the Compensation Committee

“It is recommended that… one member of the Committee

should be an employee director.”

Pierre Pénicaud was appointed member of the Supervisory

Board representing employees by the Publicis Groupe SA

Group Committee on June 20, 2017. Pierre Pénicaud is, at

his request, a member of the Strategy and Risk Committee.

The Supervisory Board supported this request, of the

opinion that his significant experience in the Group and his

operational knowledge are assets for this Committee. As a

Board member, Pierre Pénicaud attends meetings reviewing

compensation of corporate officers, which allows him to

express himself on these matters.

Article 26.2 – Annual information (information on ratios)

“Companies that have few or no employees in relation to

the overall headcount in France take into account a more

representative scope in relation to the payroll or headcount

in France of companies over which they have exclusive

control within the meaning of Article L.233-16 II of the

French Commercial Code”

As Publicis Groupe SA has very few employees, it decided

to publish the ratios as provided for in 6° of Article L.225-

37-3 of the French Commercial Code on a broadened scope,

representative of the Group’s operations in France, adding

the headcount of all Groupe companies in the United States

and the United Kingdom. This scope is a more valid financial

comparison insofar as it represents the bulk of the Group’s

payroll (64%) and Groupe revenue (70%), the remainder

being spread across other countries worldwide. This scope

was preferred to a scope limited to France, which only

represents 7% of Groupe payroll and 6% of revenue, and is

not representative of Groupe operations (see Section 3.2.2.7

of the Universal Registration Document).

3.1.5 Code of Ethics

The Group has a set of rules governing its behavior and

ethics under the name “Janus”. It is applicable to all of the

Group’s hierarchical levels, and sets out the rules of conduct

for operations: The Publicis way to behave and to operate. It

is regularly updated, circulated across all the networks and is

available in seven languages.

Janus includes the rules and principles related to ethics,

corporate social responsibility, compliance with regulatory and

legal frameworks, governance, communication, conducting

business and client relations, human resource management,

protecting the Group’s brand names and intellectual property,

financial and accounting management, as well as rules

governing mergers and acquisitions, investments, restructuring

and purchasing policies.

The guidelines include a Code of Ethics applying to all Group

employees with specific rules for members of the Management

Board and other main executives. The values embodied by

Publicis are clearly outlined there, starting with respect for

individuals and their diversity.

The aim of these rules of conduct is to provide the Group

with strict rules and procedures for running our business

worldwide in all fields: human management, business ethics,

financial management, individual responsibility. This includes

encouraging diversity and preventing discriminatory conduct.

They are meant to prevent any illegal activity, in particular

by ensuring that Group employees comply with laws and

regulations in the conduct of the Group’s business. Janus also

contains a separate chapter with a detailed code of conduct on

stock market trading, designed to prevent insider trading. The

Group’s rules of conduct are also meant to prevent favoritism,

misappropriation of funds, breach of trust, corruption, conflicts

of interest or other misconduct and subject the Group and its

employees to the highest standards in terms of integrity, ethics

and compliance. They are designed to protect the Group’s

data and know-how by establishing strict guidelines regarding

confidentiality and good faith. Finally, they establish procedures

for control and reporting by management of the Group and of

the various networks of any breach of these policy rules, which

have also been made public.

This Code is available on the Group’s website (www.

publicisgroupe.com) in the “Corporate Social Responsibility”

section, under “Library” then “Code of Ethics”.

The Group undertakes to provide a copy of its Code of Ethics

free of charge to any person upon request. A request may be

made directly to the Group’s Legal Department by telephone

on 33(0)144437000 or by mail to 133, avenue desChamps-

Élysées, 75008Paris, France.

78

2019 UNIVERSAL REGISTRATION DOCUMENT

PUBLICIS GROUPE S.A.

3

GOVERNANCE ANDCOMPENSATION

COMPENSATION OF CORPORATE OFFICERS

3.2 COMPENSATION OF CORPORATE OFFICERS

In accordance with applicable legal and regulatory provisions,

this section sets out the compensation policy for corporate

officers for the 2020 financial year as well as the items of

compensation for corporate officers for the 2019 financial year.

3.2.1 Compensation policy for

corporate officers for the

2020 financial year

Pursuant to articleL.225-82-2 of the French Commercial Code,

the General Shareholders’ Meeting of May27, 2020 will be asked

to approve the compensation policy for corporate officers for

the 2020 financial year. To this end, four resolutions are tabled

for the members of the Supervisory Board, the Chair of the

Supervisory Board, the members of the Management Board and

the Chair of the Management Board, respectively. As required

by law, the General Shareholders’ Meeting will be asked to vote

on this policy at least once a year as well as whenever there is a

major change to the compensation policy.

In exceptional circumstances, the Supervisory Board may

derogate from the compensation policy where this is temporary,

in the best interests of the Company and necessary to ensure

the Company’s long-term future and viability.

3.2.1.1 Principles applicable to all

corporate officers

General principles and Governance

The compensation policy for corporate officers is determined

by the Supervisory Board on the back of proposals from the

Compensation Committee.

The Compensation Committee plays a key role in determining

the compensation policy and the individual decisions. In this

regard, the Compensation Committee meets at least once a year

to review the compensation policy for corporate officers, confirm

the quantitative and qualitative performance results from the

previous year and determine the new performance criteria for

the current year. To this end, the Compensation Committee

bases itself in particular on the work done and presented by the

Secretary General. It specifically looks at past practices in terms

of the compensation of corporate officers, looks at external

benchmarks as well as the terms and conditions of compensation

and employment of employees and other managers within the

Groupe. In addition, the Compensation Committee takes various

measures to avoid or manage conflicts of interest. Composed

of 80% independent members in 2019 (see Section3.1.3.9 “The

Supervisory Board’s Specialized Committees” ), it ensures the

application of the Supervisory Board’s internal rules, notably by

asking its members to report any conflicts of interest and, if such

a conflict arises, by verifying that the persons concerned abstain

from participating in the debate or vote on the matter, that

they do not request or communicate any information relating

thereto, or that they resign from their position (see Section3.1.1.4

“No convictions for fraud or conflicts of interest”). The resulting

policy is then submitted to the Supervisory Board before being

voted on by the General Shareholders’ Meeting.

This policy is adopted once the Supervisory Board has ensured

i) that it is in line with the best interests of Publicis Groupe

while ensuring that it is attractive and competitive to make

it possible to attract and retain top talent and ii) that it will

contribute to the Groupe’s long-term future while at the same

time serving the commercial strategy set out in section1.3.2 of

this document. In this regard, the compensation policy is built

on a fair balance between the items of compensation (fixed

compensation, target variable compensation and performance

shares) to reflect market practices and incorporate the Groupe’s

performance criteria over the medium to long-term. The

financial criteria (namely organic growth and operating margin),

and the Groupe’s structural projects (in particular the Groupe’s

digital transformation and reorganisation ), represent a key part

in the variable compensation of corporate officers.

In line with the decision of the Supervisory Board, and in addition

to the exceptional items related to the Covid-19 pandemic

described below in the section “Exceptional items related to

the Covid-19 pandemic”, it should be noted that the following

substantial changes were made to the compensation policy

compared to the compensation principles and criteria approved

by shareholders at the last General Shareholders’ Meeting on

May29, 2019:

 Addition of two CSR criteria to the non-financial criteria of

the 2020 variable compensation. These CSR criteria apply to

all members of the Management Board (the relative weight

of this criterion varies between members). The criteria are,

on the one hand, an increase in the number of women on the

various Executive Committees (the scope in question may,

however, be different for each corporate officer) and, on the

other hand, an increase in the share of renewable energy in

our consumption.

 Change of criterion relating to the organic growth in the

Company’s net revenue within Groupe-related financial

criteria. The Supervisory Board has simplified this criterion

by setting a Commitment-related objective instead of

setting it in comparison with the organic net revenue growth

of peer companies (Omnicom, WPP and IPG). Since the

Commitment is set with ambitious objectives, meeting this

criterion is still difficult to achieve. This change applies to all

corporate officers.

 The Supervisory Board reviewed Steve King’s financial

and non-financial objectives for 2020. In terms of financial

criteria, quantitative criteria linked to the Groupe’s financial

performance remain unchanged. Those linked to Publicis

Media were adjusted to take a combined Publicis Media

and PMX performance into consideration. The Supervisory

Board made substantial changes to the non-financial criteria

applicable to Steve King, in particular, taking his new European

79

2019 UNIVERSAL REGISTRATION DOCUMENT

PUBLICIS GROUPE S.A.