The increased weighting does not result in higher prices

The gradual decline in the stock market, against a backdrop of legislative reforms proving inadequate to revitalise the market, the significant procedural rigidities introduced for the submission of the outgoing Board of Directors’ list, and the controversial mechanisms for strengthening voting rights. The sixth Report on Corporate Governance, compiled by Massimo Belcredi and Stefano Bozzi for the Fin-Gov Research Centre at the Catholic University of the Sacred Heart, provides a detailed overview of the application of the Corporate Governance Code and the impact of recent regulatory changes in Italia. In addition to the issues already mentioned, the report addresses regulatory misalignments between the Code and the Consolidated Law on Finance (TUF) regarding independent directors and the protection of minority shareholders, the controversial management of remuneration policies and severance pay, as well as the challenges associated with the new regulations on non-financial reporting and the persistence of the gender pay gap.

Returning to the first key issue linked to the crisis in share prices, the survey notes that the sample of listed companies has shrunk to 176 issuers, affected by a wave of delistings and the suspension of IPOs. Among the measures designed to encourage listing without relinquishing control, multiple voting has not been adopted by any newly listed companies, leading Massimo Belcredi to describe it as ‘a measure of dubious usefulness’, whilst proposals for super-majority voting have also suffered a sharp setback. Linked to this mistrust of the new regulations and the rigidity of corporate governance, one of the major controversies concerns the list of the outgoing board of directors, whose stringent constraints have led to its practical collapse. Commenting on the scale of this procedural obstacle, Massimo Belcredi emphasises that the new regulation ‘creates obstacles to a standard practice worldwide’, going so far as to suggest ‘considering the repeal (or significant amendments) of Article 147.1 of the TUF’, which introduced these restrictions.

Against the backdrop of the regulatory discrepancies mentioned at the outset, the analysis highlights a lack of perfect equivalence between the independence requirements laid down by the Code and those of the TUF, with the former adopting stricter criteria and assessments regarding the directors’ genuine independence of judgement. At the same time, the protection of minority shareholders reveals certain contradictions: the reform of the TUF allows newly listed SMEs to derogate from the requirement for directors nominated by minority shareholders, or requires significant reductions in the shareholding thresholds for the submission of candidate lists, fuelling uncertainty regarding the effective representativeness of minority shareholders.

As regards remuneration policies and governance of remuneration, the possibility of introducing a ‘non-binding’ vote on remuneration policy into the articles of association raises significant pitfalls. Belcredi issues a clear warning to companies: ‘Be careful about opting out — shortcuts can have drawbacks’, pointing out that the absence of a policy approved by the general meeting deprives the issuer of the ‘protection’ needed to exclude resolutions on remuneration from the application of the rules governing related-party transactions. At the same time, when examining the structure of the variable remuneration for chief executive officers, Stefano Bozzi notes that “the Corporate Governance Committee’s recommendation to include a variable component with a multi-year horizon in remuneration policies has not yet been fully implemented”, highlighting that long-term incentives are entirely absent in 19 per cent of family-controlled companies.

Still within the framework of the previously announced remuneration policies, there has been a decline in the use of sustainability metrics. With regard to the reporting of ESG parameters linked to remuneration, Bozzi notes that ‘the proportion of remuneration linked to ESG objectives has, for the first time, fallen slightly’, adding that ‘disclosure regarding individual objectives and their respective weightings leaves much room for improvement’, as only a minority of companies clearly state the individual targets and their relative weightings. Finally, further concerns arise regarding the governance of severance pay, an area in which a third of issuers still lack a structured policy; Bozzi points to a “growing divergence from the parameters adopted by proxy advisers and institutional investors”, given the 25 cases of companies providing for severance pay exceeding a total of two years’ salary, and suggests that “the Corporate Governance Committee could invite issuers to publish the calculation rules (and, where appropriate, to provide the data in tabular form)’.