Finance: Strampelli (Bocconi), ‘legitimate outgoing board of directors list, relevant proxy advisor role’

The list for the renewal of the board of directors presented by the outgoing board of directors is legitimate, even if not expressly provided for by the Consolidated Law on Finance. In the corporate governance of Italian listed companies it is spreading more and more and even in the most controversial cases, such as for companies in which there are no controlling shareholders but the shareholding structure is not completely divided, Consob’s references to transparency and correctness of procedures. This is the picture outlined by Giovanni Strampelli, professor of the Department of Legal Studies at the Bocconi University in Milan, contacted by Adnkronos. The list of the outgoing board of directors, now adopted by numerous Italian blue chips, was one of the breaking points between Francesco Gaetano Caltagirone, a major shareholder of Generali, and the rest of the board of the insurance company. But it remains a legitimate tool.

The board list “is not expressly provided for by law. The Consolidated Law on Finance does not provide for it and suggests that the normal case is that the shareholders present the lists for the renewal of the board”, explains Strampelli. This does not mean that “it is not legitimate, on the contrary it is to be considered that it is, given that about fifty companies already adopt this system”. And also Consob, with its attention, “has in fact confirmed the legitimacy of the list of the outgoing board of directors”. And the recommendation in the Corporate Governance Code that the nomination committee assists the board in presenting the board’s slate confirms this interpretation.

In Italy, Strampelli continues, “the somewhat more problematic situation” is when there are no controlling shareholders in a company, but the shareholding structure is not completely divided. “Also in this case, the list is legitimate and the reminder of Consob is valid, which has drawn attention to the transparency and correctness of the procedure, to the adoption of an ex ante procedure for making the list and to any concerted or forms of connection between shareholders and the list of the board of directors, in the event that a shareholder who has representatives on the board then proposes his own list “.

However, with the presence of two competing majority lists, one from the outgoing board of directors and one presented by other shareholders, there is a risk. Institutional investors “may be inclined to vote for the list of the board of directors”, because practically everywhere outside Italy “the indication of candidates by the board of directors is the norm, since the voting of the list as regulated by Italian law is not envisaged” . An element of this kind, Strampelli warns, “should not perhaps be overestimated. Indeed, the role of proxy advisors is certainly relevant for guiding the choices of institutional investors”. Furthermore, “many of the institutional investors have stewardship teams capable of evaluating the voting proposals according to the applicable national legislation”.

On the advisability of the outgoing board of directors to present their list even in the event of a clash with other shareholders “it is really difficult to give general indications. The specific case must be decided by the individual companies taking into account the specificities of the specific case that must be evaluated by the board of administration “, adds the professor of the Bocconi Department of Legal Studies.

In any case, the list of the outgoing board of directors is integrated into the Italian system of list voting for the renewal of the boards. A system that has been able to “give a voice to minorities and which so far has given good evidence of itself”. The system perhaps “may need some tweaking, precisely because the shareholding structure of the companies has changed and there are different situations since 1998. It should be preserved, perhaps with some minor tweaks on some aspects, precisely because it has proven to be effective” , concludes Strampelli.