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Protecting minority shareholder rights in Italy

Home / Hermes EOS Blog / Protecting minority shareholder rights in Italy

Rochelle Giugni,
14 November 2014

Good corporate governance is heavily dependent on board effectiveness, and a major part of this is the election of appropriately skilled directors to a company’s board. In Italy, the election of boards of directors and statutory auditors is done through a slate voting system called Voto di Lista.

First introduced in 1994, in 2005 the system became the mandatory voting process for the election of the board of directors and board of statutory auditors for all listed Italian companies.

Under the Voto di Lista system, at least one seat on the board of directors must be reserved for a minority shareholder representative who is elected from the minority slate of candidates with the highest number of votes.

Slate voting
Shareholders holding between 0.5%-4.5% of a company’s share capital are entitled to present a slate of candidates ahead of the AGM. Minority shareholders are able to aggregate their holdings to reach the threshold required to present such a slate. But rather than elect individual directors, shareholders are asked to vote for a slate of candidates. If only one slate is presented, board members will be selected from this list. Where multiple lists are presented, members will be selected from the different lists on offer in line with the company’s by-laws.

The objective of the Voto di Lista system is to protect the rights of minority shareholders from shareholders with a controlling interest in the company, which is common in Italy. This is done by guaranteeing minority shareholders a minimum of one seat on the board.

The Italian association of asset managers Assogestioni is highly influential in the Voto di Lista system. It is involved in the screening of candidates for inclusion on the slates presented on behalf of minority shareholders. Assogestioni looks for candidates that are independent, have corporate governance experience and in addition are proficient in Italian. While these characteristics seem reasonable in theory, the ability to speak fluent Italian is likely to limit the talent pool for non-executive directors with international expertise.

One of the main concerns with slate voting is that investors are unable to vote for individual candidates. The ability to vote for individual candidates gives investors direct control over who is elected to the board. Consideration should be given to the individual candidate’s skills, experience and reputation and how these characteristics will fit in with the current board composition, its diversity and the company’s strategic objectives.

Although the slate voting system entitles minority shareholders to the minimum one board seat, their representation is not proportional, as majority shareholders have the power to elect the remaining seats on the board.

Therefore, while we can see the benefits of guaranteeing minority shareholders a seat at the table, we wonder how much influence they can actually wield in a group of majority shareholder elected directors.

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Rochelle Giugni Rochelle Giugni works in Hermes EOS’ Business and Client Development team after previously engaging in the consumer goods and retail, financial services and utilities sectors. Prior to joining Hermes EOS, Rochelle worked for a prominent Australian-based corporate advisory firm providing transaction and forensic accounting services. She has worked extensively with distressed businesses and specialised in restructuring and corporate recovery, where she gained hands-on experience across sectors ranging from retail, property, hotel & leisure, agriculture & farming, through to banking & securities. Rochelle is a qualified chartered accountant and holds a degree in Commerce-Accounting and diploma in Business Administration from Macquarie University. She also holds the CFA’s Investment Management Certificate.
Read all articles by Rochelle Giugni
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