Finance industry attacks Rome’s late additions to markets reform plan

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Banks and asset managers have attacked a series of last-minute changes being proposed by Italy’s government to a long-awaited overhaul of the country’s capital markets, warning that they could put off foreign investors.

Giorgia Meloni’s government is about to approve a set of measures designed to improve the appeal of its capital markets, including simpler listing requirements and the option to issue shares with expanded multiple voting rights.

The proposals come after a number of big-name companies moved their listings or legal headquarters outside Italy, and follow the OECD’s 2020 warnings about improving the country’s capital markets to boost economic growth and a report compiled by the Italian treasury.

But late amendments to the long-awaited measures, which have been incorporated into the government’s plans for the sector and which would override company bylaws on how board of directors are appointed, have come under fire during a conference at the Milan bourse on Friday. 

“These provisions are totally useless and it’s unclear who they would benefit, surely not the market,” said Andrea Vismara, chief executive of Italian investment bank Equita. 

Analysts and investors say they would favour domestic minority investors but damage other shareholders.

In Italy boards of directors, including the chief executive, typically have three-year mandates. At the end of the term, listed companies with an international investor base — for instance Generali, UniCredit, Banco BPM or Mediobanca — usually give the outgoing board the possibility to nominate a list of candidates for the next term. If the departing directors have had a successful tenure then these proposals are usually backed by institutional investors.

However, under the proposed amendments, the right of boards to nominate directors would be significantly curbed in favour of lists presented by large shareholders.

One change would see a board unable to present their list of candidates if there is a single investor that owns more than 9 per cent of the company and nominates directors. Another change would boost the votes of a rival slate of candidates, even if the board’s list wins a majority.

The provisions could create “an absurd scenario where the victorious slate of candidates could [in effect] obtain less seats on the board”, said Luisa Torchia, a board member at insurer Generali, which is at the centre of a long-running battle between its main shareholders.

Massimo Tononi, the chair of Banco BPM, Italy’s third-largest bank, said the rules affecting board of directors were “perplexing” and should be reviewed because they risk scaring off international investors “that aren’t accustomed to such practices which could undermine Italy’s good corporate governance standards”.

The amendments would also give a strong incentive to hold shares for more than a decade, as such long-term investors are granted more voting rights than other shareholders.

“These amendments strongly contrast with international best practice and they risk deeply distorting the relationship between market actors,” said Carlo Trabattoni, the chief executive of Generali Investments Partners, the insurer’s investment arm.

The national financial regulator Consob also warned in a report of the backlash such changes could bring by “undermining the objectives of simplification, stability and clarity of sector regulations”.

Trabattoni, who also chairs the national funds association Assogestioni, whose members include the likes of BlackRock, Amundi, Pimco, Vanguard and Invesco, urged the government to open up the proposed amendments to discussion to avoid the broader capital markets reform backfiring.

However, he also criticised a provision in the original proposals strengthening the possibility for companies to introduce multiple voting rights — designed to prevent the flight of domestic companies to Amsterdam where it is standard market practice — that is deeply disliked by international funds.