Annual Report 2017

Rothschild & Co | Annual Report 2017

Corporate governance

Pursuant to the AMF recommendations, the recommendations of the Afep-Medef Code not applied by the Company are described in the table below,

with an explanation for each of them:

Afep-Medef recommendations

Explanations by the Company

Independence criterion for members

of the Supervisory Board related to the

length of office (§8.5 of the Afep-Medef

Code):

Criterion providing that in order to be

considered as independent a Director

must not “

have been a Director for

more than twelve years

”.

Given the Company’s ownership structure, which is controlled by an enlarged Rothschild Family Concert

acting in concert with companies owned by members of the Rothschild family and by other shareholders

with long-standing ties to the Rothschild family, and given the legal and statutory characteristics of a French

partnership limited by shares, the Supervisory Board has expressly decided to waive the criterion relating to

the duration of Supervisory Board members’ terms of office.

This particular criterion was therefore expressly waived in the Supervisory Board’s internal rules of procedure

as follows:

“The independence criteria that apply are those referred to in Article 9.4 of the Afep-Medef Corporate

Governance code of December 2008, amended in June 2013, excluding the criterion relating to terms of

office, which is expressly set aside.”

The Supervisory Board considers that length of service is a key element for assessing and understanding

the Rothschild & Co Group’s activities and that the effectiveness of the Supervisory Board is ensured by

a wide-ranging composition in terms of diversity, professional experience and expertise of its members.

Independence criterion for members

of the Supervisory Board related to

directorship in a company the corporation

consolidates (§8.5 of the Afep-Medef

Code):

Criterion providing that in order to be

considered as independent a director must

not “

be an employee or executive director

of the corporation, or an employee or

director of its parent or a company that the

latter consolidates, and not having been in

such a position for the previous five years

”.

Mr. Peter Smith is non-executive Chairman of the Board of Directors of N M Rothschild & Sons Ltd (NMR)

and non-executive Director of the Board of Directors of Rothschild Bank AG, two Group entities. However the

Supervisory Board considered that as a result of Mr. Peter Smith performing duties in important international

groups, this gives him a good perspective and a strong vision which contributes to the effectiveness of the

Supervisory Board. Moreover, his experience and Group knowledge gives him a freedom of speech and

opinion which is a guarantee of independence. He is therefore able to challenge the Supervisory Board

and make an extremely valuable contribution to the discussions at the Supervisory Board.

Mr. Sipko Schat is a director at Rothschild Bank Zurich AG, Chairman of its Audit and Risk Committees and

a senior advisor at NMR. However the Supervisory Board considered that he performed management duties

in an important banking group and it gives him expertise and capacity of judgement which contributes to the

effectiveness of the Supervisory Board.

Accordingly, the Supervisory Board considers their situations do not affect their independence and they can

be deemed as independent members.

Status of the Chairman of the

Remuneration and Nomination

Committee (§16.1-17.1 of the

Afep-Medef Code):

“

The committee

(in charge of

compensation)

should not include any

executive directors, and should have a

majority of independent directors. It

should be chaired by an independent

director. It is advised that an employee

director be a member of this committee

.”

Mr Sylvain Héfès is the Chairman of the Remuneration and Nomination Committee despite his status of

non-independent member.

The Supervisory Board renewed during its meeting on 13 March 2018 its past positions entrusting the

Chairmanship to Mr. Héfès due to his extensive knowledge of the Group’s business operations. He served

notably for several years as head of Europe wealth management in one of the top leading global investment

banking, securities and investment management firms and thanks to his various positions within this firm,

he has developed an excellent appreciation of all matters related to the remuneration policies within the

banking sector for the benefit of the Company and the Group.

In addition, after having considered the moral authority that he enjoys within the Company and within the

family company Rothschild Concordia as statutory independent director, his important knowledge of the

specificities of the remuneration systems in France, the United Kingdom and other major locations where

the Group operates, the Supervisory Board decided his appointment is justified to support the Group’s

economic and financial challenges.

Therefore, the Supervisory Board considers his situation as not jeopardising his ability to be the Chairman

of the Remuneration and Nomination Committee and act in the best interest of the Company and the Group.