2020 Report on corporate governance - CONSOB AND ITS ACTIVITIES
2020 Report on corporate governance of Italian listed companies
REPORT 2020
| Ownership and control structure The vast majority of the listed firms (196 out of 228) are controlled by one or more shareholders ... more |
| At the end of 2019, Italian companies listed on the MTA (Mercato telematico azionario) are 228, with an overall market capitalization slightly higher than 537 billion euros. The vast majority of the listed firms (196 out of 228) are controlled by one or more shareholders. In particular, firms are controlled by a shareholder owning a stake higher than half of the capital in 115 cases, through a stake lower than 50% in 57 cases (weakly controlled) and by a coalition of shareholders in 24 cases. With respect to the previous year, data show a reduction in the number of firms controlled through a stake higher than 50% of the capital (from 123 to 115 corresponding respectively to 29.7% and 22.9% of market capitalisation). The number of widely held firms hits its highest since 2010, up to 19 at the end of 2019 (13 in 2018), representing 25.3% of market capitalization (20.5% in the previous year). The average stake held by the largest shareholder is 47.8%, slightly higher than its historical values, while the weighted average stake held by the largest shareholder, equal to 31.9%, is substantially lower than its 2018 value (36.5%) and the lowest ever. The market holds a weighted stake of about 60%, up by almost three percentage points with respect to its 2018 level. Family firms account for almost 64% of the market (66% in 2018) and represent 25.6% of total capitalization (33% in 2018). Companies are owned by the State and other local authorities in one out of ten cases, while no ultimate controlling agent could be identified for 17.5% of the firms, as they are either widely held or controlled by a non-controlled company. Family firms are mainly small companies, belonging to the Star index or not included in any index, while State firms are generally large companies operating in the service sector. Data on major holdings by institutional investors in Italian listed companies mark an increase in 2019 both in the number of investee companies (67 with an average stake of 8%, up from 62 in 2018) and in the total number of major stakes (90, up from 79 in 2018), held especially by foreign investors. While Italian institutional investors more often hold major stakes in small-sized companies, the investee companies participated by foreign investors are more diversified in terms of size and are especially industrial (at the end of 2019 the highest value is recorded among Ftse Mib companies, with major ownership by institutional investors in 41% of firms). The stakes held by foreign investors, especially by asset managers, at the end of 2019 confirm the rising trend displayed over time (overall 75, 10 more than 2018), while data on the major holdings by Italian institutional investors, especially banks and insurance companies, show a reversal in the declining trend experienced in the last decade (overall 15 stakes up from its lowest records equal to 13 in 2017 and to 14 stakes in 2018). At the end of 2019, the percentage of firms belonging to a pyramidal group or to the vertical part of a mixed group is 12.8% (15.5% in 2018), accounting for 33.8% of total market value (41.4% in 2018). The proportion of Italian listed firms which does not belong to any group is equal to 84.2% and are representative of 64.9% of market capitalization, the highest values ever recorded. Only 2.2% of companies belong to a horizontal group. The degree of separation between ownership and control for the issuers belonging to a vertical group remains substantially stable around its 2018 values, with the average ratio (leverage) and the average difference (wedge) between voting rights and cash flow rights respectively equal to 1.6 and 12.9%. At the end of 2019, firms issuing non-voting share are 12, two less than in 2018. In the 27 listed firms controlled by another listed company and/or issuing non-voting shares the average wedge is equal to 16.7%. Three firms introduced multiple voting shares, while the number of companies adopting loyalty shares is 53 (mainly small firms in the industrial sector). Loyalty shares vested their increased voting power (active loyalty shares) in 35 firms, where the average leverage and the wedge are equal respectively to 1.3 and to 12.1%. |
| Corporate boards At the end of 2020 the traditional management and control system remains by far the most common among Italian listed companies ... more |
| At the end of 2020 the traditional management and control system remains by far the most common among Italian listed companies (220 out of 224, accounting for 92.2% of the market capitalization), while 3 firms chose for the one-tier model and one firm for the dual-tier model. In line with previous years, the board of directors consists of approximately 10 members, half of which independent by the Corporate Governance Code and/or the Consolidated Finance Act (d.lgs. 58/1998 Testo unico della finanza – TUF). Minority directors, present in 51% of Italian listed companies, sit more frequently in Ftse Mib and Mid Cap companies. In the majority of listed firms (177 companies, representing 97% of total market capitalisation) at least one board member holds multiple directorships (interlocker). On average, 2.3 board members are interlockers, while larger firms (i.e. Ftse Mib firms) show on average more than 3 interlockers, accounting for 28% of the board. In most companies, representing about 92% of market capitalisation, interlockers do not exceed 50% of board members (namely 94 firms where they account for less than 25% of the board and 59 additional companies where the share of interlockers varies in the range 25%-50%). Finally, 47 small-sized firms, overall representing 2% of total market value, display no interlocker on board. In 2019 the boards of statutory auditors of the Italian listed companies count on average slightly more than 3 members, in line with the 2011 figure. Minority auditors are present in about 56% of the firms, about 20 percentage points more than in 2011. As for the attributes of directors, board members are aged on average 56.6 years, are foreigners in slightly more than 6% of the cases, hold a first degree (mainly in Economics) in more than 89% of the cases and have a managerial background in about 66% of the cases. The proportion of family directors remains higher than 16%. As for the board of statutory auditors, members are aged on average 55.7 years, are foreigners in less than 1% of the cases, hold a first degree (mainly in Economics) in almost 96% of the cases and are predominantly a consultant/professional (85%). Members' attributes show also a certain variability across industrial sectors, firm size and UCA. In detail, the directors of the Ftse Mib firms and of the companies controlled by financial institutions have a higher level of education, are more frequently foreigners and with a managerial professional profile. The largest number of academics sit on the boards of financial firms and non-controlled companies. Younger directors are present in companies operating in the service sector and controlled by financial institutions. Finally, family directors in family-owned companies slightly increased in 2019 (27% from around 26% in the previous year; see 2019 Report); the highest figure is in the Star companies and in the industrial sector (approximately 22%), while the overall average value remains constant at around 16%. The proportion of women sitting on the board of statutory auditors is higher among Ftse Mib and Mid Cap firms (43% in both cases) and non-controlled companies (approximately 45%). The weight of members holding a first degree is higher among firms operating in the services sector, big companies and issuers controlled by financial institutions. Finally, as regards professional background, managers sit more frequently in Mid Cap firms, while academics are more frequently appointed in companies controlled by financial institutions. As in previous years, the average attendance to board of director meetings in 2019 was almost 93%, with the greatest participation recorded in Ftse Mib firms and in State owned companies. Over the same period the average participation to board of statutory auditor meetings was 97%, peaking to about 98% in companies controlled by financial institutions, by the State and operating in services sector. Over time, on average the characteristics of the boards of directors have changed, due to the appointment of women pursuant to the gender quota rule. In particular, since 2012 the proportion of members holding a first degree and a postgraduate degree rose (respectively, from 84% to slightly more than 89% in 2019 and from 15.3% to 25.2%) as well as the level of diversification of professional backgrounds. The proportion of companies establishing a remuneration committee and an internal control and risk management committee remains steadily above 90% and close to 100% in terms of market capitalization, whereas the number of companies with a nomination committee increased (67.4% of issuers at the end of 2019 versus 64% in 2018), representing over 92% of the total market value. Issuers entrusting the supervision of sustainability topics to a committee represent 35% of listed companies (24% in 2018), corresponding to 83% of the total market capitalization (a sharp growth compared to previous year's 67%). In the financial sector the committee was established by two thirds of the banks; in industrial sector the proportion of firms with the sustainability committee ranges between 37% (‘goods & services') and 67% (‘oil & gas'); utilities shows the highest frequency among services firms. On average, slightly more than 14% of the members of the committee refer specific skills in sustainability matters (18.6% in Ftse Mib companies), as disclosed in the Corporate governance reports and/or on the companies' website; the figure is close to one third in State-owned companies. The members of the board committees are largely independent; more than half are women; 4.7% are foreigners; in over 51% of cases, they have a managerial background. Compared to the average characteristics of the committees, the proportions of independent members and of women are higher in the internal control and risk committees (respectively almost 89% and 54% of the members). The sustainability committee instead stands out for a greater presence of chairmen (almost 9%), older (57.5 years) and more educated members (96% graduates), less frequently foreigners and family members, more often managers and academics. In line with previous years, in 2019 companies carrying out the annual self-evaluation of the board are about 86%, while the adoption of a succession plan has slightly risen involving about 26.5% of firms up from 23.4% in 2018. Data on corporate boards at the end of 2020 show that women account for nearly 39% of boards of directors and of internal boards of auditors (respectively, 38.8% and 38.6%). By marking the highest records of women directorships, data show the first effects of Law 160/2019 that mandates a two-fifth gender quota to be applied by listed companies for the six board appointments starting from 2020. Such gender quota is higher than the one-third quota previously mandated by Law 120/2011 for the three board nominations after August 2012, that is still being applied by companies that have not renewed board composition since 2020. Evidence shows that women on boards exceed the new two-fifth quota in the 76 companies that have undergone board nomination in 2020 (women hold on average 4 board seats and account for 42.8% of total board size). The presence of women is however only slightly lower in other companies, not only those that are still complying with the Law 120/2011 (overall 122 firms where women account for about 37% of board size) but also firms that at the last board appointment did not have to comply with any mandatory gender quota (26 firms, displaying 35% of women on board) because they either were newly-listed or had completed the three board nominations under Law 120/2011). Overall, women hold on average almost 4 directorships, with higher records in medium and large-sized firms (4.8 board seats in the Ftse Mib and Mid Cap Indexes) and almost no differences across industries. Looking at their role within the board, data at the end of 2020 confirm the historical figures on women serving as the company's CEO, occurring in 15 firms which account for 2.5% of total market capitalization. In line with the previous year, women chair the board of directors in 26 companies, but of smaller size than in 2019 (18% of total market capitalisation versus 32% in 2019). Nearly three-fourths of women serve as an independent director (in line with the previous four years), while the number of women appointed by minority shareholders through the slate voting system has risen up to 84 directors in 67 large companies (representing over 75% of total market capitalisation) from 67 in 54 firms in 2019. Finally, women are more often interlockers than men. In 2020, one-third of women are interlockers (nearly one in five in the directors' population): such figure has however remained stable over the last 3 years, after the upward trend recorded over 2013-2018. |
| Annual general meetings In light of the Covid-19 pandemic, attendance to shareholder meetings in 2020 was granted through enhanced forms of proxy and remote voting, ... more |
| In light of the Covid-19 pandemic, attendance to shareholder meetings in 2020 was granted through enhanced forms of proxy and remote voting, envisaged by the Italian Government through Article 106 of Law Decree No. 18/2020 of March 17th 2020 (Cura Italia Decree). Overall, 92% of the meetings called after such Decree have been held without the physical attendance by shareholders, who conveyed all their proxy votes to a special delegate (Rappresentante Designato). Remote voting mechanisms, allowed by the Cura Italia Decree regardless of the necessary bylaws provision, were adopted by a small number of companies. Looking at the Annual general meetings (AGMs) of the 100 largest Italian listed companies, the 2020 proxy season records a larger participation than in previous years both by all shareholders (on average 73.6% of the share capital) and institutional investors (on average 22.2% of the share capital). Attendance of Italian institutional investors remained almost stable whereas that of foreign institutional investors slightly increased over the last year (1.9% and 20.3% of the share capital, respectively). Across sectors, shareholders' attendance rates are the highest among industrial and utilities firms (76.3% and 77.4% of the share capital, respectively), whereas financial firms show the highest presence of institutional investors (24.4% of the share capital versus 22.3% and 20% for industrial firms and listed utilities respectively). In 2020, Italian investment funds, banks and insurance companies attended 86 AGMs (the highest number of meetings since 2012, up from 38 in 2013), and cast votes for 3% of the AGM. Foreign institutional investors participated in 98 meetings and cast on average about 29.3% of the AGM votes (thus recording an increase with respect to the previous year, when the figure was equal to 27.6%). Following the transposition of the Shareholder Rights Directive II (2017/828/UE), the 2020 proxy season marks the first adoption of the new provisions mandating a binding vote on the remuneration policy of Italian listed companies (which previously was advisory, except for financial companies subject to sectoral regulations) and a new advisory vote on the remuneration report (providing information on remuneration paid for the relevant financial year). Shareholders' voting behaviour is consequently observed through their endorsement or dissent, which for the purpose of this report includes both votes against and abstentions, on these two items on the agenda of AGMs. The 2020 vote on remuneration policy records on average a rising consent by institutional investors, casting votes in favour of the policy for 63% of their shares, up from the lowest record of 2019 when they voted for the policy with 54% of their shares. On average, remuneration policies gained approval by two-thirds of the share capital (namely, 15.6% held by institutional investors and 50.4% by other investors) and 90% of the AGM (22% by institutional investors and 67% by other investors). Votes against and abstentions amounted to nearly 8% of the share capital, especially represented by institutional investors. In one case the remuneration policy was rejected by the AGM. Focusing on the institutional investors' votes, dissent on the remuneration policy slightly decreased over the last year (from 10.8% to 9.6% of the AGM), especially for large and medium-sized companies. The weight of dissenting votes on the total number of shares held by institutional investors decreased from 36.5% to 30.2% in Ftse Mib companies and from 49.2% to 42.8% in Mid Cap firms. The long term trend since 2012 shows that overall dissent is lower in larger companies. For the first time since the introduction of say-on-pay in 2012, financial firms mark a higher dissent than companies in other industries, though institutional investors' dissent decreased over the last year (34.9% down from 38.8% in 2019). Looking at the votes cast on the remuneration report, the AGMs recorded agreement with companies' compensation practices by almost two-thirds of the share capital (66.4%) and 90% of the AGMs votes. Institutional investors voted in favour of the report with nearly two-thirds of their shares (66.3%); dissenting votes, representing 35% of their shares, are higher in smaller companies and in financial and industrial sectors. Overall, dissent was in most cases greater on the remuneration policy than on the remuneration report (52 cases out of 100), with a higher dissent on the policy amounting on average to 5% of the meeting and 16% of institutional investors' votes. In 32 cases, dissent was on the opposite higher on the remuneration report, while in 16 cases votes on the two remuneration items coincided. Finally, institutional investors' dissent is lower in widely held companies on both the votes on the remuneration policy and on the remuneration report (respectively 20% and 15% of institutional investors' shares versus a significantly higher dissent in controlled companies). |
| Related party transactions Material related party transactions reported since 2011 by Italian listed companies amount to 629, ... more |
| Material Related Party Transactions (hereinafter RPTs) reported since 2011 by Italian listed companies - according to the relevant rules of CONSOB Regulation - amount to 629, on average about 63 per year. Such transactions have been more frequently entered into by small-sized companies and in the financial sector. According to the tunnelling taxonomy developed by Atanasov et al. (2008), RPTs have been categorized based on the nature of the resource transferred to/from the company's related party into three major types – asset, cash flow and equity tunnelling. Overall, most material RPTs entail the transfer of a portion of companies' cash flow, in the form of financing contracts or other contracts (52% of the total). In over 30% of cases, the RPTs involve the transfer of major long-term assets while in 17% of cases the transactions result in a rearrangement of the related party's ownership claims over the firm's equity (e.g. mergers and reserved capital increase). 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, other counterparties being subsidiary or associate companies (12.7% of all RPTs) and non-shareholder directors or key managers or firms affiliated with them (4.9% of RPTs). Since 2011, listed companies 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, overall 235 material RPTs in the ordinary course of business have been reported to CONSOB, especially by large companies (Ftse Mib firms reported the majority of RPTs) across every industry. Most material RPTs in the ordinary course of business are connected with the company's operating activities, namely the supply of typical goods and services for non-financial firms and financing contracts for banks (respectively, 35.3% and 30.2% of all material RPTs in the ordinary course of business). Other material RPTs in the ordinary course of business, overall accounting for 32.8% of total transactions, relate to funding activities of/by non-financial firms, that benefit of the waiver as they are closely related to the firm's operating activities. Most RPTs in the ordinary course of business involve controlling or major shareholders (88% of the total and 100% of transactions in 2020). |
The Report was prepared by:
Nadia Linciano (coordinator) - CONSOB, Head of the Economic Studies, Research Department (n.linciano@consob.it)
Angela Ciavarella - CONSOB, Economic Studies, Research 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.
ISSN 2281-535X [online]