Note 35 - Related parties
35.1 MANAGEMENT REMUNERATION
The total gross remuneration awarded to the members of Lagardère SCA’s Executive Committee for 2020 amounted to €8.98 million, and €17.6 million including related charges. The figure with charges includes a provision recorded for the supplementary pension plan. The corresponding figures for 2019 were €9.6 million and €15 million, respectively. In 2020, these amounts take into account the maximum amount accrued in respect of annual variable remuneration, the payment of which will in any case be contingent on the approval of the General Meeting. The second amount also takes into account the amount accrued for severance payments (including related charges) following the departure of a member of the Executive Committee.
In 2020, none of these beneficiaries received attendance fees from any Group company and no rights to free shares were awarded. In 2019, none of the beneficiaries received any attendance fees and they were awarded 108,000 rights to free shares.
35.2 RELATED-PARTY TRANSACTIONS
Service agreement
Lagardère Capital & Management – which is controlled and chaired by Arnaud Lagardère, who is also General and Managing Partner of Lagardère SCA, provides an array of management resources and skills to the Group.
To accomplish its mission, LC&M employs the principal senior executives forming the Group’s Executive Committee. The role of the Executive Committee is to assist the Managing Partners in their duties, i.e., to determine the Group’s strategy and lead its development, and to take the resulting necessary management decisions and implement them globally at parent company level and in the Group’s different business activities. LC&M bears the entire cost of its senior managers’ salaries and the related overheads as well as the fees billed by any French and/or international consultants that they may work with.
LC&M carries out its mission within the framework of a service agreement with Lagardère Ressources, which is responsible for managing all of the Group’s corporate resources. After examination by the Audit Committee, this agreement was approved by the Supervisory Board on 12 March 2004. Since the inception of the agreement, the work performed has been described each year in the Statutory Auditors’ report on related party agreements and commitments, in accordance with the requirements of articles L. 226-10 and R. 226-2 of the French Commercial Code.
Since 2004, under the service agreement Lagardère Capital & Management’s remuneration has equalled the amount of expenses incurred in carrying out its mission, plus a margin of 10%, capped in absolute value terms at €1 million. These expenses are examined each fiscal year by the Audit Committee, which issues an opinion on their changes and developments before submitting them to the Supervisory Board.
In light of the acquisition by the Arnault Group of a stake in Lagardère Capital & Management through its subsidiary Financière Agache, the service agreement and all of its component parts, including the employment contracts of Executive Committee members and the supplementary pension benefit commitments, were transferred without any modifications to a new entity, Lagardère Management, exclusively controlled and chaired by Arnaud Lagardère, under the terms of a partial transfer of assets involving a full business transfer (transmission universelle du patrimoine). As of 31 August 2020, Lagardère Management automatically replaced Lagardère Capital & Management with regard to the performance of the service agreement. The operation took effect retroactively on 1 July 2020 for accounting and tax purposes.
The maximum fees due under the service agreement for 2020 total €18 million (€19.2 million for 2019). This amount includes a maximum provision accrued for variable remuneration payable to members of the Executive Committee. Payment of this variable remuneration plus, where applicable, its inclusion in the basis for calculating the fees to be invoiced under the service agreement, will be submitted to the 2021 General Meeting for approval.
Other transactions
The other transactions with related parties in 2020 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 conducted under arm’s length conditions, entered into in 2020 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 subsidiaries more than 50%-owned by Lagardère SCA directly or indirectly.