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Italy’s parliament has approved a controversial set of measures radically affecting the way that listed companies’ board of directors are appointed, in spite of fierce opposition from international investors.
The measures were an eleventh-hour addition by the rightwing government in Rome to a wider, long-awaited bill designed to reform the country’s capital markets. The bill, which has been in the works for three years, is seen as a way of helping attract stock market listings and prevent Italian companies from moving their headquarters abroad.
The changes, approved along with the wider bill on Tuesday, will override company bylaws on how board of directors are appointed, in effect giving long-term investors with a stake of more than 9 per cent an advantage over other shareholders.
The additions “are foreign material to this bill, it would be more sensible to eliminate them”, said lawmaker Bruno Tabacci, a veteran centre-left lawmaker, speaking in parliament just minutes before the vote.
International investors, as well as both centrist and leftwing opposition parties in Rome, had vocally opposed the proposals which, they warned on Tuesday, would be “hard to digest by the markets” and risked “scaring off foreign investors”.
Some analysts say the measures affecting corporate governance will overshadow the benefits of the broader capital markets reform.
Boards of directors in Italy, including the chief executive, typically have three-year mandates. At the end of the term, shareholders can nominate a new slate of candidates for the next term or the outgoing board has the option to do so, including nominating the old management again.
The most significant change in the new measures limits the outgoing board’s ability to present its own slate of candidates. Up until Tuesday’s changes, such slates had become the standard board appointment mechanism at insurer Generali and at lenders Mediobanca, UniCredit and Banco BPM.
Some local investors, however, such as Francesco Gaetano Caltagirone, a building tycoon and a large investor in Mediobanca and Generali, publicly complained that boards of directors held too much power and said their ability to reappoint themselves should be curbed by law.
The government ultimately sided with his view and supported the last-minute amendments to the bill. Under the new measures, if a minority investor with a stake of 9 per cent or more presents its slate of board nominees, the outgoing board of directors will be barred from presenting its own slate.
Additional reporting by Giuliana Ricozzi in Rome