The Italian Association for the Exercise of Shareholders’ Rights, AIEDA, has been set up by a group of professionals, managers and entrepreneurs with the aim of promoting good corporate governance and facilitating dialogue between listed companies directors and minority shareholders as well as the exercise of their rights.
Writing in the Oxford Law Blog, one of AIEDA’s co-founders Francesco Dagnino, suggested that minority shareholders of SMEs were not participating in the mechanisms that Italian law provided to give them protection against the potential abusing behaviour by controlling shareholders.
Dagnino, a partner in the Italian law firm LEXIA Avvocati, said that Italian law gives minority shareholders of public companies the right to appoint a member of the Board of Directors and the chairman of the Board of Statutory Auditors. Minority shareholders, representing certain thresholds of share capital (determined annually by CONSOB for each issuer based on certain parameters and oscillating between 0.5% to 4.5%), could submit slates of candidates for the appointment of the members of these bodies.
Companies must ensure – when minority shareholders’ slates are submitted – that at least one member of the board of directors (BoD) and the chairman of the board of statutory auditors are elected from the slate that receives the second-highest number of votes and is not connected in any way, directly or indirectly, to the shareholders who submitted or voted for the highest voting slate.
He added: “Nevertheless, in 2015, less than 36% of SMEs listed on Italian regulated markets (Assonime data) had a representative of the minority list on the BoD, due to the absence of minority slates. The picture is similar for the Board of Statutory Auditors. The absence of representatives of minorities in corporate bodies can easily determine potentially abusive behaviour by controlling shareholders, and ultimately a decrease in the stock price.”
Dagnino said that AIEDA intended to promote and encourage shareholder stewardship in Italian listed SMEs by submitting of slates of candidates for the election of independent minority representatives on corporate boards. An AIEDA committee will select candidates for these slates based on criteria that will ensure compliance with requirements of integrity, professionalism and independence more stringent than those imposed by the law or the Italian Corporate Governance Code. AIEDA will also be soliciting proxies on-line to convey votes on its candidates.
Improving corporate governance at Italian SME’s would have the added benefit, Dagnino suggested of improving their access to funds that come from investors which were important when the country’s banking sector was rationing the credit it gave to companies.