GOVERNANCE DANONE 2007
areas where improvement is neces- sary. Over 40 eld audits were per- formed in 2007 alone. Danone also remains rmly committed to main- taining a transparent, reliable nan- cial reporting system, even though the Group is no longer subject to Sar- banes Oxley requirements since it delisted from the New York Stock Exchange last July. In 2007 our internal regulation efforts bene ted from a robust set of tools. Vestalis, an approach deployed in most of Danone’s business units, xtending beyond the traditional areas helps identify and rank operational of internal control and risk manage- risks for entire countries or business ment, corporate governance at lines and evaluates their potential Danone addresses social responsi- impact on the Group. bility, public health and other critical More recently, the DANgo (Danone new challenges. For, in today’s envi- Governing and Operating) program ronment, the importance of good has centralized best practices from all corporate governance is in no doubt business lines, ensuring that these are for international businesses. consistent Group-wide. Danone has Danone has long been sensitive to also stepped up internal anti-fraud Ethese issues and since 1995 has redou- measures through a special program bled its efforts to meet the highest and related awareness campaigns. standards of governance. With com- These efforts were rewarded in 2007 prehensive rules and procedures for when Danone was recognized by the
Corporate governance the Danone Way takes in new business challenges, while still being driven primarily by dialog and the ability to listen.
regulatory compliance and effective Dow Jones Sustainability Index (DJSI) risk management already in place, for its outstanding performance in Danone’s Corporate Risk Management corporate governance, more speci - department is now focusing on imple- cally in the areas of risk management mentation at subsidiaries of the and codes of conduct. Group’s operating principles and its Danone applies its code of conduct to commitment to transparency. address an increasingly broad range of As part of its internal audit and risk issues, which now includes societal management responsibilities, the de- and environmental responsibility. CORPORATE partment works with the Board of Its Audit and Social Responsibility Directors and senior management to Committee—set up in late 2006 to improve internal control mechanisms make environmental, social and ethical and ensure compliance in each Group issues an integral part of the Group’s company using self-assessment tools. approach to governance—regularly GOVERNANCE Internal Audit teams take a hands-on review the primary risks and opportu- approach, going out into the eld to nities associated with Danone’s opera- track progress in achieving goals, tions. These include environmental THE DANONE WAY while identifying good practices and issues as well as internal social 80 81
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policies, reporting systems, ethical Danone Way Ahead, this initiative fo- guidelines, and the impact of socially- cuses on societal innovation, stress- Executive Committee oriented initiatives on the Group and ing 16 core principles—universally Franck Riboud, Felix local communities. applicable and regularly audited—and 52, French, Martin Garcia, But Danone’s vision of governance is giving Danone’s subsidiaries a meth- Chairman and CEO 47, Spanish, even more comprehensive. In adopting odology for evaluating the impacts, Executive Vice Emmanuel Faber, its mission of bringing health through risks and opportunities of proposed President Fresh Dairy 44, French, Products Central food to as many people as possible, it projects. Societal innovation can also Co-Chief Operating effectively made a commitment to address environmental issues such as and Eastern Europe, 1 Offi cer developing “health governance” protecting water resources, and even Africa/Middle East, guidelines (see page 39). That means includes experimenting with new mod- Bernard Hours, Asia and Oceania track ing social trends, cultivating els for local development, as in the 51, French, Christian Neu, Co-Chief Operating partnerships with scientists and nutri- case of Grameen Danone Foods Ltd 51, German, Offi cer 3 tionists, regulating its own conduct, (see pages 44-57). Executive Vice providing reliable nutrition informa- An even more fundamental source of Jordi Constans, President tion to the public, and pursuing a inspiration dates back to the 1970s, 43, Spanish, Baby Nutrition rigorous Research & Development when Antoine Riboud insisted on mak- Executive Vice Muriel Pénicaud, program to validate the health bene ts ing the environment an integral part of President Fresh Dairy 52, French, associated with Danone products. the Group’s dual commitment to busi- Products Executive Vice Western Europe 2 The commitment became even more ness success and social progress. President important when the Group added baby Since then, Danone’s internal decision- Philippe-Loïc Human Resources nutrition and medical nutrition to its making processes have been grounded Jacob, Sven Thormahlen, business lines, since these industries in outside realities and feedback, ben- 43, French- 51, German, are already in dialog with stakeholder e ting from the ideas and criticisms of Canadian, Executive Vice organizations and institutions. sources ranging from local of cials Secretary General President The common starting point in all these and associations to the international Thomas Kunz, Danone Research areas is the unique vision that grew out scientific community. Openness to 50, Swiss, Dirk Van de Put, of the Danone Way program, which dialog with all stakeholders has ena- Executive Vice 47, Belgian, back in 2001 made governance a pri- bled Danone to identify new social President Waters Executive Vice ority for all 9,000 of Groupe Danone’s issues, particularly in public health, President Fresh Dairy managers. and to anticipate changes in the regu- Products and Waters Updated in 2007 under the new name latory environment. Americas
Philippe-Loïc Jacob, Felix Martin Garcia, Executive Vice President Thomas Kunz, Secretary General (1) FDP Central and Eastern Europe, Africa/Middle Executive Vice President Waters (5) New members of the Executive Committee Bernard Hours, East, Asia and Oceania (3) The Committee has welcomed fi ve new members refl ecting changes in its scope Co-Chief Operating Offi cer (2) in charge Muriel Pénicaud, of the Group’s four business lines Executive Vice President Human Resources (4) of consolidation including changes in business lines and management structures.
JORDI CONSTANS FELIX MARTIN CHRISTIAN NEU MURIEL PÉNICAUD DIRK VAN DE PUT joined Danone Spain GARCIA began his career with was initially a civil began his career with in 1990. In 2002 joined Danone Mexico Procter & Gamble. servant, holding positions Coca-Cola in Brazil. he became General in 1998 as General He joined Danone including adviser to the He joined Groupe Manager, before Manager after working in 1986 as General Minister of Labor. She Danone in 1998 taking charge with Unilever. In 2001 Manager, fi rst in joined Danone in1993 as General Manager 5 of Danone France he took charge of Germany, then Belgium as Director of Training, of Fresh Dairy Products in 2004. In 2007 Fresh Dairy Products, and the Benelux. then Vice President Orga- Latin America, and he was appointed Central and Eastern In 2001 he was nization and HR Policies. also General Manager General Manager Europe, before appointed General In 2002 she moved to of the Beverages Fresh Dairy Products, becoming General Manager of the Dassault Systèmes as business line for Southern Europe. Manager, Fresh Dairy Northern Europe area. Executive Vice President the same markets. Since January 2008 Products Central Since early 2008 charged with Organiza- Since 2008 he has 4 he has headed the and Eastern Europe, he has been General tion, HR and Sustainable been General Manager general management Africa/Middle East, Manager, Baby Development. In 2008 Fresh Dairy Products of Fresh Dairy Products Asia and Oceania Nutrition. she rejoined Danone as and Waters, Americas. Western Europe. in January 2008. Executive Vice President Human Resources.
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“OUR STRATEGIC SHIFT MAKES GOVERNANCE EVEN MORE CRITICAL” 7 On July 31, 2007, Danone announced the reorganization of its management team and on January 1, 2008, appointed two Co-Chief Operating Offi cers— Bernard Hours and Emmanuel Faber. Interview.
What are the new Emmnuel Faber: Our am- So the challenges makes investing to protect priorities for the Group bitions are to live up to the Danone faces the environment both a soci- and its corporate importance of our commit- include societal and etal imperative and a business 6 governance? ments to economic success— business issues? imperative. Bernard Hours: There are which means growth and EF: There’s de nitely a link BH: Both of our new busi- many of them, but they are increased profitability—but between societal and business nesses—baby nutrition and all guided by the convic- also to the social progress that issues. Of course we want to medical nutrition—serve tion that health is shaped by is an integral part of our mis- create wealth, but we also want vulnerable groups, and we
Sven Thormahlen, Christian Neu, Emmanuel Faber, Executive Vice President Danone Research (6) Executive Vice President Baby Nutrition (8) Co-Chief Operating Offi cer (10) Listening to all stakeholders and encouraging dialog Jordi Constans, Dirk Van de Put, in charge of Corporate Functions have long been a priority for Danone, and will continue Executive Vice President Fresh Dairy Products Executive Vice President Fresh Dairy Products & Western Europe(7) Waters Americas (9) to structure our governance policies.
the food you eat. Our first sion, in other words, to bring to share it, because sharing it simply cannot afford to miss goal is naturally leadership health through food to as many is the best way to ensure last- the mark. These sectors are on our market—food with a people as possible. These two ing performance. Put another subject to strict regulations 9 focus on health—for all four objectives are closely related. way, when we invest to devel- and standards—demanding of our business lines. That in For a business like Danone, it op the skills and talent of all requirements that mean we 8 turn demands credibility, so is not enough to simply pile up our employees, we contribute have to put more effort into 10 we back up our products and financial results. Stake- to their personal development organization and quality growth with airtight clinical holders including consumers but also to their professional control than ever. The stakes studies. Credibility is essen- and public authorities keep performance over the long could not be any higher. Peo- tial to all our businesses, but a close eye on what we are term. That is the core priority ple can also be very suspi- perhaps even more so in medi- up to; they are very attentive of human resource policy at cious of big food companies, cal nutrition, which is a highly to the quality of the products Danone. The same applies to so we will have to meet even regulated segment—almost on that we put on the market, the environment. At Danone, more stringent standards for the line between medicine and how we communicate about we have an objective alliance transparency and informa- food. Then there’s innovation, them, and their overall im- with nature in that natural tion. Clearly a new approach always a priority for driving pact on society. We have to produce is the raw material to governance is needed for performance and meeting lo- take this into account in our for our own products—milk, Groupe Danone to meet the cal nutrition needs. governance practices. water, fruit and so on. Which challenge.
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Franck Riboud, Bernard Hours, Richard Jacques Nahmias*, 52, Chairman and 51, Co-Chief Operating Goblet d’Alviella*, 60, Chairman and Chief Executive Offi cer, Offi cer, Groupe Danone 59,Deputy director, Chief Executive Offi cer, Groupe Danone Sofi na SA Pétrofrance Chimie SA Bruno Bonnell*, Jacques Vincent, 49, Chairman, Christian Laubie*, Benoît Potier*, 62, Vice-Chairman Robopolis SAS 69, member, Haut 49, Chairman and of the Board of Directors Conseil du commissariat Chief Executive Offi cer, and Co-Chief Operating Michel David-Weill, aux comptes Air Liquide Offi cer, Groupe Danone 75, Vice-Chairman of the Board of Directors, Jean Laurent*, Naomasa Tsuritani*, Emmanuel Faber, Chairman of Supervisory 63, Chairman of 64, Senior Managing 44, Co-Chief Operating Board, Eurazeo the Pôle de Compétivité Director, Yakult Honsha Offi cer, Groupe Danone “Finance Innovation” Co. Ltd.
Hakan Mogren*, 63, Deputy Chairman, Astra Zeneca
* Independent director.
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Board of Directors_01 Board of Directors_02
Activities of the Board of Directors
The company’s Board of Directors is made up of 13 members, appointed for renewable terms of three Nomination and Compensation Committee years. Each director is required to hold 4,000 shares in registered form. An eventful year made for a full The Nomination and Compensation Committee submits proposals for the appointment of Directors to agenda in 2007, when the Board met nine times for an average of two hours, with attendance averaging the Board, conducts preparatory work for the Board’s consideration of governance issues, takes charge 86%. The recurrent subjects considered included business reviews, Group nances, treasury, guarantees of the assessment of the Board of Directors and other Committees, proposes methods for the calcula- and endorsements granted, share buybacks and cancellation, the adoption of nancial statements, nancial tion of the various components of corporate of cers’ compensation, proposes distribution of Directors’ communications in connection with the publication of annual and half-year accounts, acquisitions and fees, and submits any other proposals it may have concerning the Group’s compensation policies. In divestments, Danone share prices, reports from the three Board committees, business plans and budgets. 2007, the Committee met four times, considering in particular salaries and bene ts for members of the The Board also considered the sale of the Biscuit business line to Kraft Foods, the tender offer for Numico, Executive Committee, as well as a number of appointments. These include the co-optation of Naomasa nancing and re nancing for the acquisitions, the two-for-one share split, withdrawals of listing with the Tsuritani to the Board of Directors, the appointment of the members of the new Social Responsibility New York Stock Exchange and registration with the SEC, the Wahaha issue, and changes to the Group’s Committee, and renewal of senior management with the appointment of two Co-Chief Operating general management. Following the self-assessment conducted during the year, the Board also amended Of cers, Bernard Hours and Emmanuel Faber. It also reviewed conditions for the termination of the internal regulations at its meeting on July 30, providing for Directors to receive more information concern- mandates of corporate of cers. ing operational management of the Group as well as acquisitions and divestments. Executive Compensation Audit Committee Compensation of the Chairman and Chief Executive Of cer, Franck Riboud, and the Vice Chairman, The missions of the Audit Committee were de ned at a meeting of the Board of Directors on December Jacques Vincent, is set by the Board of Directors on the basis of recommendations from the Nomination 15, 2006, then transposed into the Committee’s internal regulations. The Committee is charged with and Compensation Committee. Policies regarding compensation of other members of the Executive reviewing parent-company and consolidated nancial statements before their adoption by the Board Committee are reviewed annually by the Committee. Executive compensation includes a xed portion of Directors, selecting statutory auditors, and reviewing audit plans. It also veri es the existence and and a variable portion, the latter ranging from 40 to 60% of the total. The variable portion is dependent effective implementation of internal control and risk management procedures, reviews internal control on targets for nancial, social and personal achievement. In the case of Chairman and Chief Executive reports and validates and comments on internal audit plans. In 2007, the Committee met ve times to Of cer, Franck Riboud, and the Vice Chairman, Jacques Vincent, the business performance criteria consider, among other things, progress on internal control procedures, risk assessment and control, audit of the variable portion is based on the Group targets announced to nancial markets for sales, operat- plans and ndings, pre-approval of statutory auditors’ assignments, and the method used to account for ing margin on ordinary business (trading operating margin), free cash ow and net income per share Wahaha in consolidated accounts. on ordinary business. Total compensation and bene ts in kind received by members of the Board of Directors in 2007 were as follows: Franck Riboud, Chairman and Chief Executive Of cer, €2,503,948; Social Responsibility Committee Jacques Vincent, Vice Chairman and Chief Operating Of cer, €1,553,668: Emmanuel Faber, Execu- Set up on December 15, 2006, the Committee adopted internal regulations de ning its mission and tive Vice President, Asia-Paci c, €1,121,220; Bernard Hours, Executive Vice President, Fresh Dairy organization in February 2007. It is in particular charged with considering the main environmental risks Products, €1,353,620. and opportunities for the Group and reviewing social policies, their objectives and results. It also reviews reporting, assessment and control procedures to ensure the reliability of the non- nancial information the Group supplies, and examines this information, in particular as it concerns social and environmental issues. It conducts an annual review of non- nancial ratings of the company and its subsidiaries from independent agencies and oversees compliance with the Group’s code of ethics. Similarly, it assesses the impact of the Group’s CSR (Corporate Social Responsibility) initiatives and compliance with Group Audit Committee irman principles where investments and action in this area are related to the Group’s business. It is attentive Benoît Potier*, Cha to the protection of the Group’s interests and acts to avoid any con icts of interests between CSR Richard Goblet d’Alviella*, Christian Laubie* investments and the Group’s other activities. In 2007, the Committee met three times, considering in Committee Full details of compensation and bene ts received by executive of cers and Compensation particular new sustainability policies for water management, the impact of social, environmental and and board members are presented in the Group’s 2007 reference document, Nomination man Michel David-Weill, Chair governance issues in the food sector, and the Group’s plans for societal initiatives. accessible at www. nance-danone.com. an Mogren* Jean Laurent*, Hak ittee Social Responsibility Comm rman Jean Laurent*, Chai Bruno Bonnell*, Emmanuel Faber dent director. 88 * Indepen
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