Board of directors, the funds promote Italy, and yet it can still improve

The governance of listed companies in Italy has seen a notable improvement in recent years, particularly with the quality of their board members. This, along with the slate voting system, has led to the Italian system being among the most appreciated by investors globally. Yet, there is still room for improvement, by also taking advantage of international experience.

At a closed-door forum hosted by Il Sole 24 Ore and Morrow Sodali, a panel of industry experts including Morrow Sodali’s Managing Director, Andrea Di Segni, shed light on the requests of the institutional investors regarding the board elections, new skill requirements, composition and appointment process.

“Improvement efforts can be concentrated on the innovation and digital expertise of the boards which are essential today, but these skills are rarely concentrated in one single board, therefore the focus should be on a more robust induction,” remarks Andrea Di Segni, in the article published in Il Sole 24 Ore following the event.

“The slate voting system is highly recognized by the market, however, it may be worth widening the vision and introducing the advisory vote which allows assessment of individual candidates and that is already practiced in many countries,” comments Di Segni. Also, the term of the board members' tenure and the remuneration policies need greater attention and potentially to be improved.

The discussion revolved around a number of subjects. Investment funds seek out companies with the best boards to ensure they will run efficiently in the long term, as well as their compliance with ESG criteria. However, board skills such as cybersecurity, ESG and digitalization should not overshadow the traditional business, governance and professional competencies, that are essential to characterize the board and enable a spirit of collegiality. There is no single recipe to ensure good corporate governance, as it is the result of several factors, and the choices of investors are not always fully recognized and appreciated externally. Also, in terms of improvement, one of the suggestions contemplated the disclosure of the criteria that are used for the specific board composition, in order to enable the international funds to make more conscientious choices during the slate voting.

Read here the excerpt of Andrea Di Segni’s presentation and the full article here (in Italian).