1. 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
This 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
Summary
Overview of the new corporate governance models
The Two-tier board model
The One-tier board model

3. Overview of the new corporate governance models
Summary
Overview of the new corporate governance models
The Two-tier board model
The One-tier board model

4. Overview of the new corporate governance models
Two-Tier Board Model
appoints
Shareholders’ Meeting
Consiglio di sorveglianza
Consiglio di gestione
Supervisory Board
Managing Board
One-Tier Board Model
Shareholders’ Meeting
Board of Directors
Audit Committee
appoints
Comitato controllo sulla gestione
Traditional Model
Shareholders’ Meeting - Assemblea
appoints
Board of Statutory Auditors Collegio Sindacale
Board 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 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)

6. Traditional corporate governance model
Chairman
Executive Directors
Non Executive/Independent
Directors
Audit Firm
Internal Control System
Investor
Relations
Internal Procedures for Confidential Information
Board of Statutory
Auditors
Shareholders’ Meeting
Board of Directors/Sole Director
Committee for Appointment of Directors
Committee on Remuneration and Stock Option
Internal Control Committee

7. Overview of the new corporate governance models
Summary
Overview of the new corporate governance models
The Two-tier board model
The 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 model
Two-tier board model
Board of
Auditors
G.M.
Supervisory Board
Managing Board
Shareholders’
Meeting
BoD
Focus
appoints
Two-tier System may prevent hostile takeovers because it would compel the bidder to change two separate boards
appoints

10. Consiglio di sorveglianza
Composition of boards
At least 3 members (one auditor). Bylaws may establish other requirements (independence, professionality, honourableness)
Supervisory Board
Consiglio di sorveglianza
Number of members (not less than 2) fixed by bylaws
Managing Board
Consiglio di gestione
No 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 model
The Supervisory Board shall:
Appoint and revoke members of the managing board Bylaws can entitle GM with this task
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.
Supervise the work of the managing board. Bring actions for liability of managers and report to GM on the supervision carried out
No audit duties, which are performed by:
Audit Firm

12. Tasks of Managing Board
shall be responsible for managing the company
may delegate powers to individual directors
The Managing Board:
GM does not have management powers
A 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 Board
Action for liability taken by shareholders vs. members of Supervisory Board?

14. Overview of the new corporate governance models
Summary
Overview of the new corporate governance models
The Two-tier board model
The One-tier board model

15. One-tier Board model: overview
Supervisory body within the Board of Directors
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).

16. One-tier system: who appoints whom
Shareholders’ Meeting
appoints
Board of Directors
Consiglio d’Amministrazione
Bylaws may delegate, to GM, powers to appoint Audit Committee
appoints
Audit Committee
Comitato controllo sulla gestione

17. Composition of boards At least 1/3 of members shall be independent*
Board of Directors
Consiglio d’Amministrazione
At 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 Code
Consists entirely of non-executive, independent members. At least 3 members. By-laws may lay down further independence requirements
Audit Committee
Comitato controllo sulla gestione

18. Tasks of boards Board of Directors
GM does not have management powers
Board of Directors
shall be responsible for managing the company (same tasks as in the traditional model)
Audit Committee
Oversees the adequacy of the company organisation, administration, accounting and internal control system
Members cannot perform any executive task
Audit 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. 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.