|Ownership and control structure
In line with historical evidence, concentrated ownership keeps prevailing among Italian listed companies ... more
|At the end of 2018, there are 231 Italian companies listed on the Italian Stock Exchange (Mercato telematico azionario, MTA), with an overall market capitalization slightly higher than 460 billion euros. As for the distribution by sector, 127 firms are industrial companies, while 55 and 49 are respectively services and financial companies.
In line with historical evidence, concentrated ownership keeps prevailing among Italian listed companies. In details, firms are controlled by a shareholder owning a stake higher than half of the capital in 123 cases, through a stake lower than 50% in 57 cases (weakly controlled) and by a coalition of shareholders in 23 cases. Only 13 companies (5.6% of the total number of listed firms, representing 20.5% of market capitalization) can be defined as widely held.
The average stake held by the largest shareholder is 48.3%, slightly higher than its 2010 level (46.2%) and in line with the value recorded in 1998 (48.7%). The market holds an average stake of 39.5%, three percentage points higher than its 1998 level.
Family firms account for almost 66% of the market. They are mainly small companies, belonging to the Star index or not included in any index. The State and other local authorities are the main shareholders in one firm out of ten, mainly large companies operating in the service sector. In 16.4% of the cases it is not possible to identify an ultimate controlling agent, being the firm widely held or controlled by a non-controlled company.
Major ownership by institutional investors has slightly increased over 2018. Institutional investors hold major shareholdings (i.e., above the ownership disclosure threshold) in 62 Italian listed companies (60 at the end of 2017), accounting for approximately 27% of the market, with an average share of capital equal to 7.6%. Major institutional ownership is referable to Italian investors in 13 listed companies and to foreign investors in 51 companies.
Italian institutional investors more frequently hold stakes in small-sized firms, while foreign investors are major shareholders in companies of different size and industry.
In 2018, the number of stakes held by institutional investors has increased to 79 from 76 in 2017. Data confirm the decline in the number of major holdings owned by banks and insurance companies, especially by Italian ones, and the increase in the stakes held by active investors such as private equity, venture capital and sovereign funds, especially foreign ones.
At the end of 2018, 81% of the Italian listed firms do not belong to any group. This value is higher than both its long run (56% in 1998) and its medium run values (75.6% in 2010). The percentage of firms belonging to a pyramidal group is 12% (in line with the previous year), while the proportion of firms belonging to the vertical part of a mixed group is 3.5% (4.3% in 2017). Only 2.2% of companies belong to a horizontal group.
As for the issuers belonging to a vertical group, the degree of separation between ownership and control was measured by comparing voting rights and cash flow rights held by the largest shareholder. In details, both the ratio (leverage) and the difference (wedge) between voting rights and cash flow rights show a reduction over both their medium and long run values: at the end of 2018 the average leverage is 1.6 (1.9 in 2010 and 3.5 in 1998) while the average wedge is equal to 12.7% (16.8% in 2010 and 24.2% in 1998).
As for deviations from the principle ‘one-share-one-vote', the adoption of non-voting shares continues to decline while the introduction of loyalty shares and multiple voting shares is occurring at a slow pace. In details, at the end of 2018 saving shares are in place only in 14 companies, while preference shares have disappeared. The subgroup of the 33 firms controlled by another listed company and/or issuing non-voting shares displays an average wedge equal to 17.3%. Three firms have provided for a category of multiple voting shares and 47 issuers have introduced loyalty shares in their bylaws. Loyalty shares have vested their increased voting power (active loyalty shares) in 28 firms, where the leverage and the wedge are equal respectively to 1.3 and to 12%.
The traditional management and control system remains by far the most widely adopted by Italian listed companies ... more
|The traditional management and control system remains by far the most widely adopted by Italian listed companies, representing 92% of market capitalization at the end of 2018.
Corporate boards count on average 10 members, who are independent by the Corporate Governance Code and/or the Consolidated Law on Finance (Tuf) in almost half of the cases. Minority directors weigh on average about 9% of the board and at the end of 2018 are present in half of the Italian listed companies (this percentage reaches around 86% for Mid Cap companies).
Corporate boards record at least one member holding multiple directorships (interlocker) in 180 companies, representing 97% of total market capitalisation. Interlockers particularly sit in Ftse Mib and Mid Cap firms, where they hold more than three board seats and account respectively for 27% and 32% of the board size. In most cases, interlockers are a minority within the board, as they weigh less than 25% of the total number of directors in 89 firms and between 25% and 50% in 67 cases.
Over 2018, both the nomination and the sustainability committees have become more widespread, while the remuneration and the internal control and risk management committees have recorded the opposite trend.
In details, the number of companies establishing the nomination committee has increased to 142 from 134 in the previous year (i.e., in terms of market capitalization to 88% from around 81%).
Over the same period, the number of firms entrusting the supervision of sustainability issues to a committee has risen up to 54 from 45 (i.e., to slightly more than 67% from around 61% in terms of total market value). Almost half of these firms are Ftse Mib companies following the recommendation on the establishment of a sustainability committee that the Corporate Governance Code explicitly addresses to the issuers belonging to this market index. In 48 cases the sustainability committee is combined with other committees. The average number of members is 3.4 (3.6 in Ftse Mib firms, varying from 3.2 in family firms to 3.9 in State-owned companies). The average number of independent directors is 2.9 (3.1 in Ftse Mib firms, corresponding to a proportion of 87% of the whole committee, peaking 90% in non-controlled companies). Finally, 20.8% of the directors who are members of a sustainability committee in Ftse Mib firms declare to have specific skills on sustainability issues.
The proportion of companies adopting a succession plan keeps steadily rising (about 23% at the end of 2018 from 20% in 2017), while the percentage of firms carrying out the annual board self-assessment remains stable around 86%.
Over 2011-2018 the characteristics of the board of statutory auditors have remained substantially stable as for size (on average around three members), and presence of minority auditors (on average one member) observed in almost 54% of companies from 35% in 2011. Board meetings are on average more frequent among financial companies (almost 23 in 2018 versus around 10 and 12 among industrial and service firms, respectively).
As in previous years, the average attendance to board meetings in 2018 was 92.7%, with the greatest participation recorded in Ftse Mib firms and in State owned companies.
As for director's attributes, board members are aged on average 56.6 years, are foreigners in almost 7% of the cases, hold a first degree (mainly in Economics) in about 89% of the cases and have a managerial background in about 69% of the cases. The proportion of family directors is slightly higher than 16% (almost 26% in family-owned companies).
Directors' attributes show a certain variability across industrial sectors and firm size. On average, directors sitting in the board of financial firms and Ftse Mib companies are older and more educated, while the highest proportion of foreign members is found in the service sector and among Ftse Mib firms. The managerial professional background is more frequent in the industrial sector and in large companies. As for board diversity by the identity of the ultimate controlling agent (UCA), companies controlled by financial institutions display directors who on average are younger, more educated, mainly male and more often foreigner than other firms.
At the end of last proxy season (June 2019) women serving as directors and internal auditors account for more than 36% and 39% respectively. Both figures hit the highest records of female representation in Italian listed companies' boards and are largely driven by Law 120/2011, mandating gender quotas for three board nominations after August 2012. Most listed companies have so far enacted the second and the third board nominations pursuant to the Law (113 and 62 companies, respectively) and display on average 37% of women on board. The one-third proportion of women on board has been also targeted by both the 26 firms that should comply with the lower quota of one-fifth of the board, having undergone just the first board appointment pursuant to the Law (on average 35% of the board) and by the 26 companies that are not subject to quotas, either because they are newly-listed (quotas apply in the three board appointments after listing) or as they have already completed the three board nominations envisaged by the Law (nearly 33% of the board).
The number of directorships held by women is on average 3.6, with higher figures recorded in medium and large-sized firms (4.4 and 4.3 board seats in Ftse Mib and Mid Cap indexes companies, respectively), while no significant difference across industries is detected.
Looking at the role within the board, women serve as the company's CEO in 15 firms, accounting for 2.5% of total market capitalization, and as chairwomen (honorary chairwomen included) in 25 issuers, representing one-third of total market value. Over 72% of women serve as independent board members, in continuous growth since 2013. As of June 2019, women appointed by minority shareholders through the slate voting system account for 68 directors, a figure higher than ever, in 56 large companies weighing nearly three-fourths on total market capitalisation.
Finally, for the first time since the implementation of the gender quotas, the proportion of women interlockers remains stable around its 2018 value (34% up from nearly 19% in 2013).
The average characteristics of the boards, mostly the level of education and the diversification of the professional background, underwent several changes following the appointment of women since 2012, and more so for non-family women. Indeed, since 2011 the proportion of family female directors has dropped to 10% from slightly more than 42%, while rising when referred to the seats of board committees.
|Annual general meetings
In line with the previous year, the 2019 Annual General Meetings (AGMs) of the 100 most capitalized Italian listed companies record a large attendance by shareholders ... more
|In line with the previous year, the 2019 Annual General Meetings (AGMs) of the 100 most capitalized Italian listed companies record a large attendance by shareholders (on average 72% of the share capital), and in particular by institutional investors (on average 21% of the share capital). Participation by both Italian and foreign institutional investors has remained stable over the last year (1.8% and 18.7% of the share capital, respectively).
Across industries, industrial and utilities firms record the highest attendance rates of shareholders (76% and 75% of the share capital, respectively), while the presence of institutional investors shows little variation (20.7% in financial and industrial firms and 20.4% in listed utilities).
In 2019, Italian investment funds, banks and insurance companies have participated in 84 AGMs (the highest number of meetings since 2012, up from 38 in 2013), and have cast votes for 3% of the AGM. Foreign institutional investors have attended at the meetings of all the 100 largest Italian companies (in line with the previous four years), and have cast on average about 28% of the AGM (thus recording a slight decrease from the peak of 29% recorded in 2018).
As for the vote on the board members' remuneration policy, the 2019 proxy season marks the highest dissent of institutional investors, as abstention and rejection of the policy account for 44% of their shares and 8% of the share capital, respectively 12 and 4 percentage points more than the 2012 values. Agreement on the remuneration policy by non-institutional investors entails 98% of their votes (51% of the company's share capital), in line with previous years.
Since 2017 dissent has markedly grown in companies belonging to the Ftse Mib Index, inverting the declining trend experienced over 2012-2016: in detail, over the last two years dissent has recorded 37% of institutional investors' votes and 12% of the AGM (in 2016 the same figures were about 27% and 9%, respectively). Institutional dissent also shows an upward trend among Mid Cap firms, with institutional investors casting vote against the remuneration policy or abstaining from voting with 49% of their shares (46% in 2018).
Though still lower than other industries, dissent has increased among financial firms, reaching 10% of the AGM and 38.8% of institutional investors' votes, remarkably up as compared to 2018 and, even more so, 2017 (when dissenting votes were, respectively, 32.9% and 25.7% of institutional investors' shares).
Finally, institutional investors' dissent is lower in widely held companies (15.9% of institutional investors' shares versus a dissent as high as 52% in some categories of controlled companies) and in the presence of an institutional investor holding a major stake (30% of institutional investors' shares versus 52% recorded in the other companies).
|Related party transactions
Since 2011, material Related Party Transactions (hereinafter RPTs) reported by Italian listed companies – pursuant to the relevant Consob Regulation - amount to 547 (30 RPTs in the first half of 2019) ... more
|Since 2011, material Related Party Transactions (hereinafter RPTs) reported by Italian listed companies – pursuant to the relevant Consob Regulation - amount to 547 (30 RPTs in the first half of 2019). Such transactions have been more frequently entered into by small-sized companies and in the financial sector.
In line with the taxonomy developed by Atanasov et al. (2008) on tunnelling transactions, RPTs have been categorized into three major types – asset, cash flow and equity tunnelling – based on the nature of the resource transferred to/from the company's related party. Overall, the largest group of material RPTs entails the transfer of a portion of companies' cash flow, mostly in the form of financing contracts or other contracts (52% of the total). Over 30% of material RPTs encompass the transfer of major long-term assets, while 17% of transactions consist of mergers, reserved capital increase or other transactions resulting in a rearrangement of the related party's ownership claims over the firm's equity.
Looking at the counterparty, 82% of all RPTs have been entered into with the controlling shareholders or with other shareholders exerting significant influence over the company. Infra-group transactions (with subsidiary or associate companies) account for nearly 13% of the total, while less than 5% of RPTs involve non-shareholder directors or key managers or firms affiliated with them. In the first semester of 2019, the largest group of reported RPTs consisted of equity transactions, especially due to group reorganisations resulting in reduction of pyramids (37%), and were entered into with controlling shareholders (73%).
Since 2011, listed companies have also entered into material, arm's length RPTs in the ordinary course of business, that benefit of a waiver from the disclosure obligations set forth by Consob Regulation. Pursuant to such waiver, 216 material RPTs in the ordinary course of business have been reported to Consob, especially by large companies (included in the Ftse Mib Index) across every industry.
The largest group of material RPTs in the ordinary course of business relates to the company's operating activities, i.e. the supply of typical goods and services for non-financial companies and financing contracts for banks (respectively, 35.2% and 31.5% of all material RPTs in the ordinary course of business). Other material RPTs in the ordinary course of business, overall accounting for 31.5% of total transactions, involve the funding of/by non-financial firms, benefiting of the waiver being closely related to the operating activities. Material RPTs in the ordinary course of business mostly occur with controlling or major shareholders (88% of the total). Finally, 50% of the 10 ordinary RPTs in the first semester of 2019 entailed bank financing with the controlling company.
|Focus: remuneration and sustainability
At the end of 2018, 33 listed companies link their CEOs remuneration to sustainability, through either the short-term component (32 cases) or the long-term component (nine cases) ... more
|At the end of 2018, 33 listed companies link their CEOs remuneration to sustainability, through either the short-term component (32 cases) or the long-term component (nine cases). As for the remuneration of executive directors other than CEOs, eight listed companies link ESG factors to variable remuneration. In six companies ESG factors refer to short-term compensation, in one to long-term remuneration and in another one to both short and long term compensation.
The majority of the firms envisaging sustainable remunerations for the CEOs belongs to the Ftse Mib index (22 companies, representing 65% of the index), followed by Mid Cap and Star. As for the industry, sustainable remunerations are envisaged in 10 financial companies (20.4% of the industry), 15 industrial firms (12% of all industrial companies) and eight service issuers (14.5% of the sector). Sustainable remunerations are more common among State-owned enterprises (14 firms controlled by the State and/or a local authority representing 61% of all SOEs), and less frequent among family companies (9 firms accounting for 6% of the segment).
The percentage of CEOs short-term sustainable compensation is on average 14% of the total remuneration, ranging between 5% and 35%. The metrics used to measure the ESG parameters are qualitative in 12 cases, quantitative in 11 cases, and both qualitative and quantitative in two cases, whereas in the remaining seven cases they are not specified. Remuneration is mainly linked to social factors (11 cases) and to both social and environmental factors (eight cases). In five cases the description of the ESG link is so generic to make any classification difficult. Finally, two firms bind short-term CEOs compensation to the company's inclusion in a specific sustainability index or to the achievement of a specified sustainability rating. The specific themes taken into consideration are mainly connected to social issues and, in particular, to job safety (in nine cases) and to human capital (in six cases). Environmental issues are either generic (four cases) or related to CO2 emissions.
The proportion of long-term CEOs remuneration linked to ESG factors is on average 18%, ranging between 10% and 40% of the total long-term compensation. The metrics are qualitative in four cases, quantitative in two and both qualitative and quantitative in one case. Among the nine firms envisaging sustainable long-term compensation, two issuers link their remuneration to environmental factors (CO2 emissions), two consider social factors (customer satisfaction, gender diversity, financial education), whereas one includes both. In two cases the level of remuneration depends on the firm's placement in a specific sustainability index.
Finally, 30 firms integrate ESG factors into the remuneration of executives with strategic responsibilities (ESRs), with 27 of them foreseeing sustainable remuneration also for the CEO. Short-term and long-term remunerations of ESRs are correlated with sustainable parameters in 28 and seven firms, respectively.
On average, 14% of the short-term ESRs compensation is linked to ESG factors (ranging between 5% and 25%). Metrics are quantitative in 13 cases, qualitative in seven cases and both quantitative and qualitative in one case. Environmental and social parameters are the most commonly mentioned ESG factors. As for the specific themes, social parameters concern mainly job safety (in eight cases), human capital (in five cases) and customer satisfaction (in five cases). Environmental issues are either generic (in four cases) or related to CO2 emissions (in four cases) or to environmental impacts.
The long-term remuneration of executives with strategic responsibilities is connected to sustainability parameters in seven cases. The average proportion of the compensation linked to ESG factor is 13% (ranging between 10% and 20%). Parameters are quantitative in three cases and both quantitative and qualitative in two cases. As for the parameters considered, two firms refer to environmental issues, one to social factor, another to both. Two firms link the compensation to the company's inclusion in a specific sustainability index. Lastly, in one case the remuneration is linked to both social and governance parameters.
The Report was prepared by:
Nadia Linciano (coordinator) - CONSOB, Head of the Economic Studies, Research Department (email@example.com)
Angela Ciavarella - CONSOB, Economic Studies, Research Department (firstname.lastname@example.org)
Rossella Signoretti - CONSOB, Corporate Governance Department (email@example.com)
Lucia Pierantoni - CONSOB, Economic Studies, Research Department (firstname.lastname@example.org)
Eugenia Della Libera - CONSOB, Economic Studies, Research Department (email@example.com)
Elena Frasca - CONSOB, Economic Studies, Research Department (firstname.lastname@example.org)
The opinions expressed in the Report are the authors' personal views and are in no way binding on Consob.
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