2016 Consob Report on Corporate Governance of Italian Listed Companies

At the end of 2015, data on control models and the ownership structure of Italian listed firms show persisting high ownership concentration and limited contestability of control. Moreover, the vast majority of Italian listed companies keep being owned by families (143 out of 234 listed firms), although non-controlled issuers and issuers controlled by a non-controlled company represent almost 36% of the total market value.

Nevertheless, some little changes can be detected. Over the last five years, the number of coalition control structures have kept decreasing, while widely held companies have risen both in number and in weight.

In addition, recourse to enhanced control mechanisms, such as pyramids and dual class shares, continues to decline. At the end of 2015, listed firms belonging to pyramids accounted for 18% of the market versus 39% in 1998, while over the same period the number of firms issuing non-voting shares has shrank to 19 from 70. Since 2014, however, Italian listed firms may deviate from the one-share-one-vote rule by providing in their bylaws for loyalty shares, ie by acknowledging an increased voting power to at least two-year shareholders, whereas IPO companies may provide in their bylaws for multiple voting shares. So far, 26 companies have amended their bylaws by introducing loyalty shares, while one company has envisaged multiple voting shares.

The characteristics of corporate boards of Italian listed firms are overall quite stable over time, in spite of some changes in board diversity mainly driven by the application of Law 120/2011 on gender quotas representation. At the end of 2015, the directors of Italian listed companies are on average aged slightly less than 57 years. Foreigners account for 7% of the board, while ‘family’ members (ie directors who are the controlling shareholder themselves or family members of the controlling shareholder) represent almost 16% of directors. As for the level of education, around 86% of board members hold a first degree and 20.5% have a postgraduate diploma. Almost 7 directors out of 10 can be classified as a manager, nearly 21% as a consultant/professional and 8% as an academic.

At the end of June 2016, the representation of women on Italian corporate boards has broken the 30% ceiling, following the continuous upward trend in the wake of gender quotas regulation. As compared to the 2012 records, the percentage of directorships held by women has nearly tripled (from 11.6% to 30.5%). As for the role, only 17 small companies have female CEOs, while independent board members in 205 companies account for over two-thirds of female directors. Finally, 30% of women directors are interlockers, up from 18% in 2013.

Board members’ characteristics display a certain degree of variability across gender. At the end of 2015, male directors are on average older than female members are, as well as more frequently classifiable as family members (respectively, in 17% and 13% of the cases). Women on boards more often hold a postgraduate diploma, while being less frequently classifiable as managers. Overall, over the last four years, newly appointed female members have contributed to lowering the average age of directors and to raising diversity as regards both the professional background and the level of education of board members.

At the end of 2015, institutional investors are major shareholders in nearly 36% of the market, holding on average 6.9% of the share capital of 83 firms. The number of investee companies has slightly declined with respect to its highest 2013-2014 records, mainly due to the lower participation of Italian institutional investors. On the contrary, the presence of foreign institutional investors has steadily risen over the last five years. Records on 2016 Annual General Meetings of the largest 100 Italian companies consistently highlight an increase in the participation of foreign institutional investors from around 10% to 18% of the share capital. As for dissent on remuneration policy, in 2016 institutional investors’ disagreement accounted for 8.6% of the votes, marking the highest value since the first application of the say-on-pay rule.  Over time, institutional dissent has declined in Ftse Mib firms, while steadily increasing in Mid Cap and smaller companies.

This post summarises the Report on Corporate Governance of Italian Listed Companies – 2016.

The opinions expressed in this post are the authors’ personal views and are in no way binding on Consob.

Nadia Linciano is head of the Economic Research Unit at the Commissione Nazionale per le Società e la Borsa (CONSOB).

Angela Ciavarella is  senior economist at the Commissione Nazionale per le Società e la Borsa (CONSOB).

Rossella Signoretti is senior economist at the Commissione Nazionale per le Società e la Borsa (CONSOB).