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Governance

Background

The Group’s goal is to be in line with the highest standards for good corporate governance. As a company governed by French law, Sanofi’s practices comply with recommendations contained in the NRE (Nouvelles Régulations Economiques) and in the AFEP-MEDEF Code de gouvernement d’entreprise (Corporate Governance Code of the Association Française des Entreprises Privées and the Mouvement des Entreprises de France).

Policy

• Governance structure
• Independence of directors
• Functioning of the Board and its committees
• Complying with corporate governance standards

Governance structure

The offices of Chairman and Chief Executive Officer have been separated since January 1, 2007. While this decision was initially adopted out of a desire to ensure an orderly succession in light of the scheduled departure of Jean-François Dehecq, who was nearing the mandatory age limit set in the Company’s Articles of Association, the annual evaluations conducted since have indicated that this governance structure is suitable to the Group’s current configuration. This arrangement was thus continued with the appointment of Serge Weinberg to the office of Chairman. The Board of Directors considers that this governance structure is appropriate in the Group’s current context.

The Board is attentive to the interests of shareholders and other stakeholders. 

Non-voting employee representatives attend and participate at Board meetings, contributing their point of view to questions debated by the Board.  Employee input and questions on key corporate issues is also solicited through such internal tools as the corporate intranet, the establishment of non-mandatory consultative bodies such as the European Works Council, and alert mechanisms such as those required under the U.S. Sarbanes-Oxley law.

Regular contacts with large or small investors are ensured by the Board or company employees acting on its behalf on questions of corporate governance through various channels and events such as Salon Actionaria organized in France, the establishment of a minority shareholder committee, the maintenance of an award winning Investor Relations and Individual Shareholder department, interactions with Proxy Agencies and Social Rating Agencies, and individual outreaches *.

Independence of directors

The corporate governance standards used by Sanofi primarily come from the AFEP-MEDEF Corporate Governance Code.

Under the terms of the AFEP-MEDEF corporate governance code, a director is deemed to be independent when the director has no relationship of any nature whatsoever with the Company, the group it belongs to or its senior management which could compromise the exercise of the director’s freedom of decision. More specifically, independent directors are required:

• not to be an employee, nor a corporate officer of the Company, nor a corporate officer of a related company,
• not to be a customer, supplier nor a banker with respect to the business or financing of the Company,
• not to have close family ties with any corporate officer of the Company,
• not to have acted as auditor for the Company over the course of the last five years,
• not to have been a director of Sanofi for more than 12 years,
• not to be representative of a significant shareholder or control person of the Company.

In conformity with the Board Charter and pursuant to the AFEP-MEDEF Corporate Governance Code, a discussion as to the independence of the current directors took place during the meeting of the Board of Directors of December 13, 2011.

Of the 15 directors, eight were deemed to be independent directors having regard to the independence criteria set forth in the AFEP-MEDEF Corporate Governance Code: Uwe Bicker, Lord Douro, Jean-René Fourtou, Claudie Haigneré, Suet-Fern Lee, Carole Piwnica, Klaus Pohle, and Gérard Van Kemmel.

Not only is a majority of Sanofi’s Board composed of independent directors, but each of the Board’s committees are made up a majority of independent directors and are presided either by the Chairman of the Board or by an independent director.

In its examination of the independence of each Director, the Board of Directors took into account the various relationships that could exist between Directors and the Group and concluded that no such relationships were of a nature that could put into question their independence. The Board of Directors noted that the Company and its subsidiaries had, in the normal course of business, over the last three years, sold products and provided services with, and/or purchased products and received services from, companies in which certain of the Company’s directors who are classified as independent or members of their close family were senior managers or employees during the financial year 2011. Each time, the amounts paid or received from such companies over the past three years were determined in accordance within the normal course of business and did not represent amounts that the Board considered to be of such nature as to bring into question the independence of the directors in question. In the same manner, the Board of Directors did not find the office of trustee held by Uwe Bicker and Klaus Pohle with the Aventis Foundation (Germany) was of such nature as to bring into question their independence with respect to the Sanofi Board of Directors.

Functioning of the Board and its committees

The Board Charter provides that once a year, the Board of Directors dedicates one item of its agenda to a debate concerning its functioning and that every three years a formalized assessment is made.

An overall positive appreciation of the functioning of the Board and its committees resulted from the annual debate on the Board and its committees’ functioning in 2011. Directors recognized progress on several areas such as openness of discussion, the clarity of the strategy and the balance of powers between President and CEO.

The assessment revealed that the Board appreciated the different presentations of Group activities made during meetings of the Board or its Strategy Committee, in particular the Executive Vice President Chief Financial Officer, the Senior Vice President Legal Affairs and General Counsel, the Senior Vice President and Chief Medical Officer, the President Global Operations, the Vice President of Industrial Affairs, the Vice President of Mergers and Acquisitions the Senior Vice President Animal Health, the Senior Vice President Latin America Region, and the Chairman and Chief Executive Officer of Sanofi Pasteur.

Aside from their informational value, these presentations provide an opportunity for directors to better know the senior leadership of the Group. Directors have expressed a strong interest in continuing such initiatives. In this period of intense changes, Directors renewed their commitment for a regular review of the performance of growth platforms and a control of required assets.

In connection with their appointments, Carole Piwnica and Suet-Fern Lee were each provided a several days of training during which they were familiarized with the Company, its occupations and the highly specialized sector of  health care, and in particular, of the pharmaceutical industry. The triennial formal evaluation on the functioning of the Board and its committees will be held in 2012.

Additionally, the Group has organized its internal control system through the distribution of Group codes and charters. Their degree of implementation is monitored on a regular basis through audits and self-assessments.

For more information on corporate governance:

• Directors, Senior Management and Employees, beginning (extract from 2011 Form 20-F)
• Gouvernement d’entreprise of the 2011
• Rapport du Président du Conseil d’administration
• Corporate governance organization on the Sanofi website

Complying with corporate governance standards