Listed Companies and the Reform of
Corporate Law
A Focus on the New Corporate Governance Models
Carmine Di Noia
Head of Capital Markets
and Listed Companies Division
Assonime
London, June 26, 2003
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Summary
Overview of the
governance models
new
The Two-tier board model
The One-tier board model
corporate
Summary
Overview of the
governance models
new
The Two-tier board model
The One-tier board model
corporate
Overview of the
governance models
Traditional Model
Two-Tier Board
Model
Shareholders’
Meeting - Assemblea
Shareholders’
Meeting
appoints
new
appoints
corporate
One-Tier Board
Model
Shareholders’
Meeting
appoints
Supervisory Board
Board of
Statutory
Auditors
Collegio
Sindacale
Board of
Directors
Consiglio di
Amministrazione
Consiglio di
sorveglianza
appoints
Managing Board
Consiglio di gestione
Board of Directors
Audit
Committee
Comitato controllo
sulla gestione
Overview of the
governance models
new
corporate
New models in line with Council Regulation on
European Company (Regulation 2157/2001,
effective as from 8 October 2004)
Implementation of models by by-laws may give
rise to “competition among rules”: the model
which better fulfils corporation’s needs will
prevail
Same models in different legal systems may
have different effects. The adoption of
alternative models by Italian corporations will
probably be slow (path-dependency)
Traditional corporate governance model
Chairman
Internal Control
System
Executive Directors
Non Executive/Independent
Directors
Board of Statutory
Auditors
Investor
Relations
Board of Directors/Sole Director
Shareholders’
Meeting
Internal
Procedures for
Confidential
Information
Committee for
Appointment of
Directors
Committee on
Remuneration
and Stock Option
Internal Control
Committee
Summary
Overview of the
governance models
new
The Two-tier board model
The One-tier board model
corporate
Two-tier board model: overview
Separation of ownership and control. Powers
from Shareholders’ Meeting to Supervisory
Board.
A “transplant” from the German (and French)
system:
however
no
involvement
of
employees.
Two-tier system: who appoints whom
Traditional model
Board of
Auditors
Two-tier board model
Shareholders’
Meeting
G.M.
BoD
Focus
appoints
Supervisory Board
appoints
Managing Board
Two-tier System
may prevent
hostile takeovers
because it would
compel the bidder
to change two
separate boards
Composition of boards
Supervisory Board
Consiglio di sorveglianza
Managing Board
Consiglio di gestione
At least 3 members (one
auditor).
Bylaws
may
establish other requirements
(independence,
professionality,
honourableness)
Number of members (not
less than 2) fixed by bylaws
No person may at the same time be a member of
both the supervisory board and the managing
board
Tasks of Supervisory Board
The Supervisory
Board shall:
 Appoint and revoke
members of the
managing board
Bylaws can entitle GM
with this task
 Supervise the work of
the managing board.
Bring actions for
liability of managers
and report to GM on
the supervision carried
out
Tasks of GM in the traditional
model
 Approve annual accounts
Bylaws may provide for approval
of annual accounts by GM in case
supervisory board does not
approve them. Shareholders may
challenge resolution which
approve annual accounts.
No audit duties, which
are performed by:
Tasks of Managing Board
The Managing
Board:
GM does not have management
powers
 shall be responsible for
managing the company
 may delegate powers to
individual directors
A 3-board system?
Two-tier Board model and listed
companies
Two-tier Board model is applicable to listed
companies (see Article 223-septies )
Focus on:
Minority appointment of at least one member
of Supervisory Board
Action for liability taken by shareholders vs.
members of Supervisory Board?
Summary
Overview of the
governance models
new
The Two-tier board model
The One-tier board model
corporate
One-tier Board model: overview
Supervisory
Directors
body
within
the
Board
of
A “transplant” from the Anglo-Saxon system
Attractive to listed companies (today, they
have both an audit committee and a board of
statutory auditors; risk to duplicate controls –
and costs).
One-tier system: who appoints whom
Shareholders’
Meeting
appoints
Board of Directors
Consiglio
d’Amministrazione
appoints
Audit
Committee
Comitato controllo
sulla gestione
Bylaws may delegate, to
GM, powers to appoint
Audit Committee
Composition of boards
At least 1/3 of members
shall be independent*
Board of Directors
Consiglio
d’Amministrazione
Audit
Committee
Comitato controllo
sulla gestione
*
Independence requirements = those
applicable to members of board of auditors
in the traditional model + those fixed by
Corporate Governance Code
Consists entirely of nonexecutive,
independent
members. At least 3 members.
By-laws may lay down further
independence requirements
Tasks of boards
Board of Directors
 shall be responsible for
managing the company
(same tasks as in the traditional
model)
Audit
Committee
Audit duties
performed by:
 Oversees the adequacy of
the company organisation,
administration, accounting
and internal control system
Members cannot perform
any executive task
One-tier Board model and listed
companies
One-tier Board model is applicable to listed
companies (see Article 223-septies )
Focus: minority may appoint at least one
member of Audit Committee
Focus
The Reform abolishes the duty for shareholders
to deposit shares 5 days before the day of G.M.
in order to vote at G.M. However this does not
introduce the “record date” in our system.
Market operators are analysing the implications
of new Article 2370.
No more limit for listed bonds of listed
companies.