Abstract Report - CONSOB AND ITS ACTIVITIES
2022 Report on corporate governance of Italian listed companies
REPORT 2022
The Report on corporate governance of Italian listed companies provides evidence on ownership, corporate boards, annual general meetings and related party transactions, on the basis of data obtained from supervisory statistical reports and information disclosed by listed companies.
The 2022 Edition also delves into the engagement policies adopted by Ftse Mib companies at the end of 2022 and into the interest expressed by shareholders on ESG issues at the 2018 and 2019 AGM seasons.
| Ownership and control structure Governance of Italian listed companies at the end of 2021 recorded some changes, both with respect to previous year and over a long-term horizon. With regard to ownership concentration, the share of largest shareholder slightly increased, reaching 49% on average from 47.6% in 2020, about three percentage points higher compared to 2011. Among relevant shareholders, institutional investors are currently present in 55 companies, down by 10 and 20 units compared to 2020 and 2011, respectively (the decline is more noticeable for foreign entities). ... more |
| At the end of 2021, 216 Italian companies were listed on the Euronext Milan (EXM), totalling a capitalisation greater than 583 billion euros. More than half of the companies belong to the industrial sector, accounting for 36.6% of the total market value, while services and financial sectors account respectively for 23.6% and 22.2% of the listed issuers, representing 30.8% and 32.6% of the total capitalisation. Over 2021, the ownership concentration of the Italian listed companies has slightly risen, with the average stake held by the largest shareholder equal to 49% (47.6% in 2020) and that held by the market equal to 39% (40% in 2020). Families remain the main shareholders in most listed companies, being ultimate controlling agent in 63.4% of the firms, mainly small ones (included in the Star index or not included in any index) and belonging to the industrial sector. State and other local authorities are the controlling shareholder in 11.6% of the cases, mainly large firms in the service sector, while no ultimate controlling agent (UCA) could be identified for almost 19% of the issuers, generally large companies operating in the financial sector. Major shareholdings of institutional investors in Italian listed companies have decreased in recent years, both as to the number of investee companies (55 vs. 65 firms in 2020, with an average stake of around 8%) and as to the number of stakes held (72 stakes, down from 84 in 2020). Such a decline is driven by foreign investors recording in 2021 the lowest figures of number of investee companies and major stakes since, respectively, 2013 and 2014. On the opposite, the number of companies in which Italian institutional investors hold a major stake (especially small-sized ones) has remained stable at 18, with the total number of stakes held by such investors amounting to 20 (up from 19 in 2020). At the end of 2021, issuers adopting loyalty shares are 69 (64 in 2019), representing slightly more than 18% of the total market value, more frequently in the industrial and services sectors and among smaller companies. Loyalty shares vested their increased voting power (active loyalty shares) in 46 firms, where the average difference between cash flow rights and voting rights accruing to the main shareholder (so called wedge) is equal to 12.7%. Only four companies have adopted multiple voting shares. |
| Corporate boards and board diversity As for corporate boards, increasing gender diversity represented the most remarkable novelty. As a result of the application of the two-fifths gender quota of the body envisaged by Law no. 160/2019, at the end of 2022 the share of female directors in listed companies rose to 43%. In line with previous years, women are in the majority of the cases independent directors (73%) and rarely hold the role of CEO or chair of the board (in 17 and 32 cases, respectively). Although still more pronounced than male interlocking, female interlocking continued to decrease from the peak reached in 2019, when it concerned 34.9% of women, and falls to 28.6% at the end of 2022. ... more |
| Over 2019-2021, the average dimension of corporate boards of Italian listed companies adopting the traditional management and control model (about 98% of total firms, representing about 92% of market capitalisation) has remained stable, while the proportion of independent and minority members in the board of directors (BoDs) has slightly increased as well as that of the minority members of the statutory auditors. Interlocking declined over time, as shown both by the decrease in the number of directors holding other directorships in listed companies (on average, 2 interlockers in every board, in slight reduction from the value of 2.2 in 2021), and by the number and the capitalisation of companies with at least one interlocker on board (152 down from 167 companies in the previous year, accounting respectively for 87% and 97% of total market value). Interlocking increases with companies’ size (on average 3 interlockers, representing one-fourth of the board, in Ftse Mib firms). In most cases, interlockers do not exceed 50% of board members. In 2021, compared to previous years, the proportion of companies carrying out the annual self-assessment decreased, due to the introduction of the new proportionality measures in the Corporate Governance Code (CGC), which recommends that small and concentrated ownership companies conduct board evaluation at least every three years. On the contrary, the percentage of firms adopting a succession plan increased. The attributes of board members at the end of 2021 are reported with reference to 213 Italian listed companies, 2,057 director offices and 664 auditor offices. In line with the previous year, directors are aged on average 57 years and are rarely foreigners (on average 5.6% of the board, reaching 11% for Ftse Mib companies and 26% for companies controlled by financial institutions), almost always graduates and with a managerial background in two-thirds of cases. Family directors (either a family member of the controlling shareholder or the controlling shareholder) account for an average of 15.5% of offices, rising to 26% in family-controlled companies. The characteristics of the statutory auditors are also on average substantially stable over 2020-2021. They are aged on average 57 years and are almost always Italian (only 1.2% are foreigners), graduates and mainly consultants/professionals (in a proportion ranging on average between 80% and 90% of cases depending on industry sectors, company size, and the identity of the controlling shareholder). Compared to 2011, the attributes of the members of the corporate boards have changed, also due to the increase in the presence of women on boards, following the application of the provisions on gender quotas. Corporate board members show a higher level of education and, as far as BoDs are regarded, a more diversified professional background. At the end of 2021, all board committees but the sustainability one (i.e. the nomination, the remuneration and the control and risk committees) are established in around 90% of listed companies, representative of more than 90% of the market capitalisation. The sustainability committee is established in more than 50% of firms (more than 90% of State owned and larger companies). Board committees continue to see the prevalence of independent directors (weighing more than 85%) and women (more than 50%), and a more diversified professional background with a lower frequency of the managerial profile (50%). As a result of gender quotas rules, at the end of 2022 women account for 43% of boards of directors and 41% of boards of statutory auditors. The breakdown of companies according to the quota applied shows that most companies (180 accounting for 96.8% of market capitalization) have enacted the two-fifths quota for the underrepresented gender mandated by Law 160/2019. Such companies display on average 4 women, representing 43.6% of the seats. Fourteen companies have applied the one-fifth quota mandated by the same Law for the first appointment after listing and display on average over 3 women on board, representing 37.1% of the body. Finally, 13 newly listed companies, that have not yet undergone a board appointment under the new rules, show similar figures for gender board diversity (3 women accounting for 36.3% of the board). On average, women hold 4 board seats, with large and mid-sized companies and financial firms displaying a higher degree of gender diversity. As to the positions held by women, in line with historical features, women serve as the company’s CEO in 17 small-sized companies (2.1% of total market value) and chair the board of directors in 32 larger companies (27.4% of total market capitalisation), with both figures showing a slight increase as compared to the previous year (+1 female CEO and +2 chairwomen). Nearly three women out of four (73%) serve as independent directors and one woman out of ten was appointed by minority shareholders through the slate voting system (86 directors in 68 large companies, accounting for 76% of total market value). Finally, in line with long-standing evidence, women interlockers are more frequent than men (28.6% of women, as opposed to 20.9% of interlockers in the directors’ entire population). However, in recent years women interlocking has steadily declined after peaking to 34.9% in 2019. |
| Annual general meetings The 2022 shareholders' meeting season of the 100 largest listed companies recorded further growth in shareholder participation: in particular, an average 75.4% of the share capital took part in the AGM, up by about one percentage point compared to 2021 and five percentage points compared to 2012. Italian institutional investors represented 2.6% of share capital (1.1% in 2012) and attended 94 AGMs (40 in 2012). On average, the shareholders' meeting consensus on both remuneration policies (approved by 67.9% of the share capital) and the advisory vote on remuneration paid for the previous year (votes in favour for 68.8% of the share capital) increased in 2022 compared to the previous year. In the context of votes cast by institutional investors alone, dissent on remuneration policies increased over the past year (37.1% of the total shares of institutional investors, up from 34.5% in 2021), while the opposite can be observed for the vote on remuneration paid (32.3% of the total of their shares compared to 36% in 2021). ... more |
| In 2022, 83% of the Annual General Meetings (AGMs) were held without the physical attendance by shareholders, who conveyed their proxy votes to a special delegate (Rappresentante Designato), by virtue of the extension until July 31, 2022 of the provisional measures enacted during the health emergency caused by COVID-19 as an exception to the ordinary rules (if we consider the total amount of AGMs at 31 July, the figure rises to 93%). Remote voting mechanisms, on the other hand, were used in a very small number of cases. Looking at AGMs of the 100 largest Italian listed companies held during the first half of the year, the 2022 proxy season recorded a larger participation by all shareholders with respect to previous year: an average of 75.4% of the share capital intervened compared with 74.6% in 2021 (ranging between a minimum value of 44.5% and a maximum share capital of 95.4%). Institutional investors represented on average 21.9% of share capital (22.8% in 2021). Italian institutional investors accounted for 2.6% of the share capital (2.5% in 2021) and attended 94 meetings (95 in the previous year). They cast votes for 3.9% of the shares represented at the meeting, a figure slightly up from the 3.6% recorded in 2021. The remuneration policies subject to voting at the general meetings held in the first half of 2022 were all approved. On average, participants voted in favour of current remuneration policies with a percentage equal to 67.9% of the share capital (65.9% in 2021) and 89.6% of the capital represented at the meeting (88.6% in 2021). The consent on the remuneration policy by institutional investors was equal to 62.5% of their votes (20.6% of the AGM), up from 64.4% in 2021 (21.2% of the AGM in 2021). The dissent, which for the purpose of this report includes votes against and abstentions, amounted to 7.7% of the share capital (10.6% of the AGM). Institutional investors, whose vote accounts for most of the total dissent (7.2% of the share capital), showed almost unchanged dissent in terms of votes cast at the AGM compared to the previous year (amounting to 9.9% of the votes at the meeting), but an increase in dissent over the total number of shares held, amounting to 37.1% (compared to 34.5% in 2021). The latter percentage is higher among Mid Cap and industrial companies. Looking at the advisory votes cast on the remuneration report, which outlines the compensation paid for the previous year, the votes in favour were nearly 69% of the share capital (up from 66% in the previous year) and 90.8% of the votes of the AGM (87.7% in 2021). The consent by institutional investors accounted for 67.4% of their votes (22% of the capital present at the meeting), up from 62.9% in the previous year (20.8% of the capital present at the meeting in 2021). Institutional investors' dissent, amounting to 32.3% of the votes represented by them (down from 36% in 2021), is higher among Mid Cap companies and firms in the industrial sector. Overall, dissent was higher with reference to the remuneration policy than with reference to the remuneration report for 50 companies (51, if we consider institutional investors' dissent out of their total votes), whereas for 36 firms (34 in the case of institutional investors) dissent on compensation was higher than dissent on remuneration policy. |
| Related party transactions Over 2011-2022, Italian listed companies have disclosed 704 material related party transactions (RPTs), of which 34 reported in 2022 (this figure is lower than both previous years’ figure and the average number of 59 documents per year). ... more |
| Material RPTs have been classified according to the tunneling taxonomy developed by Atanasov et al. (2008), based on the nature of the resource transferred to/from the related party, namely asset, cash flow and equity (for further detail, see Methodological notes). Most transactions involve the transfer of a portion of companies’ cash flow, such as financing or other contracts (50.9% of all RPTs since 2011). With a lower frequency, the transactions entail the transfer of major long-term assets (31.8% of all RPTs) or a rearrangement of the related party’s ownership claims over the firm’s equity, namely by means of mergers or reserved capital increase (17.3% of all transactions). The transactions have been entered into with the controlling or major shareholders in 82% of cases, and in fewer cases with subsidiary or associate companies (12.9%) and non-shareholder directors or key managers or firms affiliated with them (4.8%). Since 2011, listed companies have also entered into 291 material arm’s length RPTs in the ordinary course of business (27 in 2022 and on average 24 per year). For such transactions, CONSOB Regulation grants a waiver from disclosure obligations provided that the same transactions are reported to CONSOB. Most transactions have been entered into by large companies (included in the Ftse Mib, amounting to 141 RPTs). The majority of exempted RPTs refer to the operating activities of the listed companies (i.e. the supply of typical goods and services for non-financial firms and financing contracts for banks accounting for, respectively, 35.7% and 26.1% of all reported material RPTs in the ordinary course of business) and have been entered into with controlling or major shareholders (88% of cases). |
| Addendum: Engagement policies of Ftse Mib firms In relation to the Addendum of this Report, the analysis of the engagement policies shows that Ftse Mib companies have largely followed the recommendation of the Corporate Governance Code on the adoption of a policy for managing dialogue with the generality of shareholders, although choosing heterogeneous implementation methods. In particular, policies differ with respect to the possible ways in which the dialogue may be carried out (proactive in 17 cases, bilateral or collective in 19 cases, and one-way in 15 cases), and with respect to the possible participants who may include persons within the company other than the director in charge, as well as external parties other than shareholders). ... more |
| The new Italian Corporate Governance Code recommends that the boards of Italian listed companies adopt a policy for managing dialogue with the generality of shareholders, upon proposal of the chair in agreement with the chief executive officer (art. 1, Reccomendation 3). The Code does not provide detailed indications on the content of the policies. In order to support companies in preparing these policies, both Assonime and Assogestioni have issued specific guidelines. At the end of 2022 all Italian Ftse Mib firms but one (32 companies over 33) have published a policy for managing dialogue with the generality of shareholders (engagement policies). In 16 cases the policies expressly contemplate the possibility that the dialogue can take place, both in the classic two-way mode and in one-way mode, thus allowing the company to listen to the shareholders participating in the dialogue without expressing themselves. In one case, this possibility is reserved only to investors holders of a stake higher than 0.1% of the share capital. Furthermore, 20 policies indicate the possibility that the dialogue can also take place collectively and not only bilaterally. Finally, 18 policies envisage that the same company can activate the dialogue with the shareholders (proactive engagement) as well as react to a request for dialogue from them (reactive engagement). In the majority of cases (28 cases), the policies identify the Investor Relations function as the contact point between the company and the shareholders. In many cases the Investor Relator is supported by another function, mainly the Corporate Affairs function. In two cases no contact point was identified while one company refers to the Financial Market Coverage Department and another company claims to have set up a specific unit, called Focal Point S-DE. In the majority of the cases the policies identify the director responsible for managing shareholder dialogue (RD), who coincides with the chief executive officer (CEO) in 17 companies. In 12 policies this role is assigned to both the CEO and the board chair (in agreement, in concert or by reason of their relative responsibilities), and in one case to the chair alone. The policies often apply not only to shareholders but also to other categories of recipients. In 16 policies the dialogue is also extended to proxy advisory firms, in 10 to financial analysts, rating agencies and/or the financial press, in 15 to potential shareholders (in 2 cases only if different from physical persons), in 13 to holders of other financial instruments issued by the company. Finally, 9 policies apply to those who have an interest in the company due to the holding of shares or other financial instruments issued by the company. Only one company includes stakeholders in general among the recipients of the policy. Finally, two firms allow only institutional investors or investors with a stake higher than 0.1% of capital to activate the dialogue with board directors. The policies often allow involvement in the dialogue of other persons than the RD, to be identified on the basis of the matters under discussion. In particular, it is envisaged the participation of other directors (9 policies), other directors and managers (13 policies), other directors, managers and other individuals internal and/or external to the company (for example, consultants; 3 policies), other internal and external persons (2 policies). Finally, in 5 cases no information is provided on this aspect. According to the Corporate Governance Code, «The chair ensures that the board of directors is in any case informed, within the first suitable meeting, of the development and the significant contents of the dialogue that has taken place with all the shareholders». The analysis of the policies shows that this recommendation has been followed by most of the companies: 30 policies envisage that the board is informed on the significant contents of the dialogue promptly or ‘within the first useful meeting’. In addition, 8 firms combine timely reporting with duties of periodic reporting to the board, usually annually or half-yearly. In one case the information is provided annually while in another case the timing of the disclosure to board is not specified. |
| Shareholders’ ESG engagement at the 2018-2019 AGMs The second Addendum - prepared by Angela Ciavarella, Sara Nocella (CONSOB); Federico Bertacchini, Gianluca Gabrielli, Pier Luigi Marchini (Università degli Studi di Parma); Ennio Lugli (Università degli Studi di Modena - Reggio Emilia); with the support of Beatrice Mancini for data collection and analysis - assesses shareholders’ interest in sustainability issues by analysing their interventions on ESG topics at the AGMs held in 2018 and 2019 on the basis of the related minutes. Over the considered period, at least one shareholder took the floor on such issues in more than 80 companies (85 in 2018 and 87 in 2019, respectively) representing 41% of the sample. On average, in 2018, 1.5 shareholders per meeting intervened on at least one sustainability topic (1.4 shareholders in 2019), for a total of 411 ESG interventions (384 in 2019), considering that some shareholders addressed more than one topic. Interventions mainly concerned Social issues, followed by Governance and Environmental topics. ESG interventions were more frequent in highly capitalised companies, operating in the energy and utilities sectors, and in companies publishing the NFS. ... more |
| In February 2019, CONSOB established a Steering Committee to implement its commitments and strategic objectives with a view to enhance regulatory and supervisory interventions related to the development of sustainable finance. The Steering Committee took actions in various areas, from internal induction to dialogue with stakeholders, to research, analysis and data collection on various topics of sustainable finance, in order to support an evidence-based approach to supervision. Among these actions, a few research projects were launched in the area of engagement on sustainability goals of both issuers and investors (institutional and retail investors). Economic literature highlighted the positive effects on the development of sustainable finance of investors’ engagement ranging from dialogue with issuers (so-called soft engagement) to activism in the exercise of minority shareholder rights, e.g., by requesting the convening of shareholders meetings, supplementing meeting agenda or exercising the right to participate and vote at the meetings (hard engagement). This Section falls within this line of investigation and is aimed at highlighting the level of shareholders engagement on ESG issues in Italian listed companies, through the collection of data on the frequency, relevance, and content of a specific kind of hard engagement such as the interventions made by shareholders during the annual general meetings of companies listed on the regulated market Euronext Milan – EXM. Data have been collected by analysing the minutes of the annual general meetings held in 2018 and 2019 (approval of the 2017 and 2018 financial statements), published by 209 Italian companies listed on the aforementioned regulated market. Such analysis was preceded by the collection and classification of data about quantity and characteristics of shareholders who actively intervened during the meetings’ debate, and took the floor, in particular, on ESG topics. The following information was then recorded for each minute/company: total number of shareholders (in person or by proxy) who took the floor during the debate on the various items on the agenda (no account was taken of the possible replies made by shareholders who had already spoken previously on the same item on agenda); number of shareholders who spoke on ESG issues: this figure records only the shareholders (or their delegates) who addressed at least one ESG issue during their intervention; total number of ESG issues raised at each meeting: this figure was defined by assigning a maximum value of 3 for each shareholder taking the floor on ESG issues, considering that each shareholder may refer to a maximum of 3 ESG topic areas (1 for Environmental, 1 for Social and 1 for Governance). Thus 0 means that no ESG issues were addressed, while values major than 0 indicate that at least one ESG issue was addressed. The score was assigned for thematic areas (E, S and G) and not for any topic possibly addressed in each area, so in case a shareholder addressed two topics, climate change and waste treatment, it has been assigned only a value of 1 for the topic Environmental to the intervention. Thereby, weight was given to the variety of ESG areas in which shareholders show interest in engaging rather than the depth of one of the three ESG factors. On the basis of the data and values relating to the interventions made by each shareholder, it was also possible to derive the total number of ESG topics addressed per area (Environmental, Social and Governance) for each company. Data collected were further classified taking into account also the following variables: i) the kind of shareholder taking the floor (controlling and non-controlling shareholder); ii) the level of capitalisation of every company (for this purpose, companies were divided into quartiles, identifying issuers with high, medium-high, medium-low and low capitalisation); iii) the business sector (according to the classification provided by Borsa Italiana); iv) whether or not the company qualifies as a relevant PIE (Public Interest Entity) pursuant to Legislative Decree no. 254/2016 on non-financial reporting, thus distinguishing between companies required or not to prepare and publish a non-financial statement (NFS) pursuant to the aforementioned decree. In 2018, in 167 companies at least one shareholder took the floor during the annual general meeting; the figure dropped to 157 the following year. With regard to interventions on ESG issues, in 2018 at least one shareholder addressed such issues in 85 companies (40.7% of the sample), rising to 87 (41.6% of the sample) in 2019. In 2018, the total number of shareholders taking the floor during the meetings was 1,043, an average of five per meeting. Among them, 318 addressed at least one ESG topic (an average of 1.5 members per meeting up to a maximum of 23). Considering that some shareholders addressed more than one ESG topic, the total number of ESG issues raised at the AGMs in 2018 was 411, with an average of 2 topics per AGM. During 2019, the total number of shareholders taking the floor during the meeting stood at 868, slightly down from the previous year, 289 of which addressed at least one ESG topic. The average number of shareholders taking the floor per meeting was 4.2, while the average number of shareholders who spoke on ESG issues was 1.4 up to a maximum of 26 in a sole meeting. In line with the decrease of the total number of shareholders taking the floor, the number of ESG topics addressed during the meetings also decreased slightly to 384. In 2018, the most recurring sustainable area covered in shareholders’ interventions was Social (170 cases), followed by Governance and Environmental (145 and 96 cases, respectively). This ranking is confirmed in 2019, although Social (148) and Governance (130) issues are decreasing, while Environmental issues are increasing (106). The evidence varies significantly when distinguishing between controlled companies ('C'; 187 in 2018 and 190 in 2019) and non-controlled companies ('NC'; 22 in 2018 and 19 in 2019). In NC companies, on average, the number of ESG topics covered at the AGM is higher than the figure for C companies in both seasons 2018 and 2019 (more than double). However, it is important to point out that in the two-year period under review, the figure for NC companies mainly reflects interventions at four AGMs in particular. Interventions on ESG topics are more frequent in highly capitalised companies, where 75.4% of the total ESG topics addressed were raised and 87.5% of the interventions on the Environmental area in 2018. Similar data are recorded in 2019. Overall, fewer ESG topics are addressed in the AGMs of issuers with low capitalisation, particularly in the Environmental and Social areas. In this regard, the figure for 2018 is illustrative: no interventions on environmental topics were made at the AGMs of companies with low capitalisation. The energy and utilities sectors, followed by the financial sector for Social and Governance issues and especially in 2018, show the highest figure of ESG topics covered. Looking at other economic sectors, we note that no ESG issues was addressed in the health care sector (8 companies) in 2018; no Environmental and Social issue was addressed in the real estate sector (8 companies) over the analysed t-year period, nor in information technology sector (14 companies) in 2019. Finally, the analysis shows a significant difference in terms of the number of interventions on ESG issues in companies publishing the NFS (66% of the sample) compared to those not required to do so. In the course of 2018, 97% of the interventions on Environmental topics, 89% of those on Social topics and 87% of those on Governance topics were discussed at the meetings of companies publishing the NFS. In 2019, the number of Environmental themes per company was 7 times higher in such companies compared to the others. In general, in both years under consideration, issuers publishing the NFS show a higher number of ESG issues addressed by shareholders during the meetings. |
The Report was prepared by:
Nadia Linciano (coordinator) - CONSOB, Head of Research Department (n.linciano@consob.it)
Angela Ciavarella - CONSOB, Corporate Governance Department (a.ciavarella@consob.it)
Giovanna Di Stefano - CONSOB, Economic Studies, Research Department (g.distefano@consob.it)
Rossella Signoretti - CONSOB, Corporate Governance Department (r.signoretti@consob.it)
Lucia Pierantoni - CONSOB, Economic Studies, Research Department (l.pierantoni@consob.it)
Eugenia Della Libera - CONSOB, Economic Studies, Research Department (e.dellalibera@consob.it)
Elena Frasca - CONSOB, Economic Studies, Research Department (e.frasca@consob.it)
The opinions expressed in the Report are the authors' personal views and are in no way binding on Consob.
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