2.8 Transactions with related parties (executive corporate officers and members of the Supervisory Board)

2.8.1 OPÉRATIONS CONCLUES AVEC LC&M

Lagardère Capital & Management (LC&M), controlled and chaired by Arnaud Lagardère and with Pierre Leroy as Chief Operating Officer, provides an array of management resources and skills to both the Group and each of its component parts, with the following aims:

• over the long term, to guarantee that the Group’s operating businesses have the best environment required for expansion;
• to supply the Group with strategic planning and operational services, coupled with high quality management services, including principally:
  • designing and developing economic and financial strategic scenarios; providing project monitoring skills;
  • providing research and follow-up concerning major markets and their development; assessing factors in different market environments that may create new opportunities for action;
  • monitoring and identifying potential investments and divestments;
  • managing business negotiations such as divestments, mergers and acquisitions;
  • orchestrating corporate actions, including state-of-the-art finance and capital management techniques;
  • establishing and maintaining relations in banking and finance, with particular attention to the characteristics of the various countries in which the Group does, or plans to do, business;
  • enhancing human resources by attracting high-potential management personnel;
  • providing overall management of the Group’s image.

To meet these aims, LC&M employs the members of the Group Executive Committee, whose role is to assist the Managing Partners in performing their duties.
LC&M’s mission is carried out within the framework of the Service Agreement initially put in place in 1988, and currently in force between LC&M and Lagardère Ressources (formerly Matra Hachette Général), which is responsible for managing all of the Group’s corporate resources. Following an amendment to the agreement in 2004, the remuneration paid to LC&M under the Service Agreement is equal to the amount of expenses it incurs in carrying out its mission, plus (in accordance with tax rules and customary market practices) a margin set at 10%, with an absolute upper limit of €1 million (an amount which in practice, has been applied each year since 2004). After examination by the Audit Committee, these terms and conditions were approved by the Supervisory Board on 12 March 2004 and subsequently by the General Meeting of Shareholders on 11 May 2004.
The expenses incurred by LC&M in carrying out its mission, which form the basis for its remuneration, can be split into three main categories, which would in any event have been borne by the Lagardère group. The first category, representing the majority of expenses (around 85%), includes remuneration payable to members of the Executive Committee, the associated payroll taxes and duties (tax on wages, levy on performance share awards) and the amount accrued to the provision for the supplementary pension plan.In accordance with applicable regulations, details of remuneration are provided in the annual report published by the Company. In compliance with the recommendations of the Afep-Medef Code, since 2014 remuneration allocated to executive corporate officers has been submitted to the shareholders’ vote and has always gathered very high approval rates. As from 2020, shareholders will also be asked to vote on the remuneration policy itself, in accordance with new binding “say-on-pay” legislation that the Company has chosen to adopt of its own volition.
The supplementary pension plan was set up in 2005 further to the authorisation of the Company’s Supervisory Board. It is also described in detail in the annual report and like other components of remuneration, is subject to a shareholder vote. The second category (around 10% of the expenses) corresponds to the work environment of Executive Committee members and includes for example offices, equipment and furniture, meeting rooms, secretarial services, official vehicles and telecommunications. As LC&M has none of its own resources, these items are made available to LC&M by the Lagardère group. The corresponding expenses are thus monitored by the Group Management Control Department, which determines the amount billed to LC&M for use of the above items. For the past dozen or so years, this amount has been stable at €1.9 million, and LC&M therefore bills the exact same amount to the Lagardère group.
The third category (around 5% of the expenses) includes miscellaneous other expenses incurred by LC&M in carrying out its mission. These expenses essentially consist of (i) fees for administrative and accounting services billed by the Lagardère group (following a similar scheme to the one for work environment costs), (ii) fees for consultants used by LC&M, and (iii) taxes and duties inherent to LC&M’s activities (property tax, etc.). Hence, this contractual framework between the Group and LC&M brings together in a clear and transparent manner the expenses corresponding to the total cost of the Group’s general management, and subjects them to the statutory monitoring procedure applicable to related-party agreements.
As part of this procedure, the Service Agreement is subject to an annual review by the Audit Committee and by the Supervisory Board and is also referred to in the special report of the Statutory Auditors prepared in accordance with article L 226-10 of the French Commercial Code.
The work of the Audit Committee on the precise conditions and costs related to the Service Agreement and any changes therein, is presented to the Supervisory Board in connection with the review
referred to in article L 225-88-1 of the French Commercial Code.
* * *
In 2019, LC&M invoiced €19.18 million to the Group in respect of the Service Agreement, further to review by the Audit Committee on 20 February 2020 and by the Supervisory Board at its meeting of 28 February 2020, versus €21 million in 2018. Total payroll costs recognized by LC&M amounted to €15.6 million. These correspond to gross salaries, plus the related taxes, payroll taxes and pension provisions. With the other expenses set out above (support costs invoiced by the Lagardère group for €1.9 million and other miscellaneous fees in an amount of €0.6 million, total costs amounted to €18.18 million versus €20 million in 2018. The contractual margin came out at €1 million, unchanged from 2018. Operating profit after tax from the above agreement amounted to €0.7 million.

Items appearing in the Annual Financial Report are cross‑referenced with the following symbol AFR

2.8.2 AGREEMENTS ENTERED INTO WITH MEMBERS OF THE SUPERVISORY BOARD

None – see section 2.7.2.

2.8.3 OTHER TRANSACTIONS

The other transactions with related parties in 2019 undertaken in the normal course of business took place under arm’s length conditions. In particular, Lagardère SCA has not identified any agreements, other than those relating to normal business operations and entered into on arm’s length terms, signed in 2019, directly or via an intermediary, between (i) any of the Managing Partners, any members of the Supervisory Board or any shareholders of Lagardère SCA owning more than 10% of the voting rights and (ii) any company controlled by Lagardère SCA within the meaning of article L. 233-3 of the French Commercial Code.

• Previous
• Next