Presentation on theme: "Listed Companies and the Reform of Corporate Law"— Presentation transcript:
1 Listed Companies and the Reform of Corporate Law A Focus on the New Corporate Governance ModelsCarmine Di NoiaHead of Capital Marketsand Listed Companies DivisionAssonimeLondon, June 26, 2003This presentation is solely for the use of the attendees to this event. No part of it may be circulated, quoted, or reproduced for distribution without prior written approval from Assonime. This material was used by Assonime during an oral presentation and it is not a complete record of the discussion.
2 Overview of the new corporate governance models SummaryOverview of the new corporate governance modelsThe Two-tier board modelThe One-tier board model
3 Overview of the new corporate governance models SummaryOverview of the new corporate governance modelsThe Two-tier board modelThe One-tier board model
4 Overview of the new corporate governance models Two-Tier Board ModelappointsShareholders’ MeetingConsiglio di sorveglianzaConsiglio di gestioneSupervisory BoardManaging BoardOne-Tier Board ModelShareholders’ MeetingBoard of DirectorsAudit CommitteeappointsComitato controllo sulla gestioneTraditional ModelShareholders’ Meeting - AssembleaappointsBoard of Statutory Auditors Collegio SindacaleBoard of Directors Consiglio di Amministrazione
5 Overview of the new corporate governance models 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 prevailSame models in different legal systems may have different effects. The adoption of alternative models by Italian corporations will probably be slow (path-dependency)
6 Traditional corporate governance model ChairmanExecutive DirectorsNon Executive/IndependentDirectorsAudit FirmInternal Control SystemInvestorRelationsInternal Procedures for Confidential InformationBoard of StatutoryAuditorsShareholders’ MeetingBoard of Directors/Sole DirectorCommittee for Appointment of DirectorsCommittee on Remuneration and Stock OptionInternal Control Committee
7 Overview of the new corporate governance models SummaryOverview of the new corporate governance modelsThe Two-tier board modelThe One-tier board model
8 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.
9 Two-tier system: who appoints whom Traditional modelTwo-tier board modelBoard ofAuditorsG.M.Supervisory BoardManaging BoardShareholders’MeetingBoDFocusappointsTwo-tier System may prevent hostile takeovers because it would compel the bidder to change two separate boardsappoints
10 Consiglio di sorveglianza Composition of boardsAt least 3 members (one auditor). Bylaws may establish other requirements (independence, professionality, honourableness)Supervisory BoardConsiglio di sorveglianzaNumber of members (not less than 2) fixed by bylawsManaging BoardConsiglio di gestioneNo person may at the same time be a member of both the supervisory board and the managing board
11 Tasks of Supervisory Board Tasks of GM in the traditional modelThe Supervisory Board shall:Appoint and revoke members of the managing board Bylaws can entitle GM with this taskApprove annual accountsBylaws 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.Supervise the work of the managing board. Bring actions for liability of managers and report to GM on the supervision carried outNo audit duties, which are performed by:Audit Firm
12 Tasks of Managing Board shall be responsible for managing the companymay delegate powers to individual directorsThe Managing Board:GM does not have management powersA 3-board system?
13 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 BoardAction for liability taken by shareholders vs. members of Supervisory Board?
14 Overview of the new corporate governance models SummaryOverview of the new corporate governance modelsThe Two-tier board modelThe One-tier board model
15 One-tier Board model: overview Supervisory body within the Board of DirectorsA “transplant” from the Anglo-Saxon systemAttractive to listed companies (today, they have both an audit committee and a board of statutory auditors; risk to duplicate controls – and costs).
16 One-tier system: who appoints whom Shareholders’ MeetingappointsBoard of DirectorsConsiglio d’AmministrazioneBylaws may delegate, to GM, powers to appoint Audit CommitteeappointsAudit CommitteeComitato controllo sulla gestione
17 Composition of boards At least 1/3 of members shall be independent* Board of DirectorsConsiglio d’AmministrazioneAt least 1/3 of members shall be independent** Independence requirements = those applicable to members of board of auditors in the traditional model + those fixed by Corporate Governance CodeConsists entirely of non-executive, independent members. At least 3 members. By-laws may lay down further independence requirementsAudit CommitteeComitato controllo sulla gestione
18 Tasks of boards Board of Directors GM does not have management powersBoard of Directorsshall be responsible for managing the company (same tasks as in the traditional model)Audit CommitteeOversees the adequacy of the company organisation, administration, accounting and internal control systemMembers cannot perform any executive taskAudit duties performed by:Audit Firm
19 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
20 FocusThe 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.