One-Tier Model and List of Candidates from the Outgoing Board: Better Corporate Governance for Italian Market or Just Xenophilia?

Challenges and Opportunities in Italian Corporate Governance, Forthcoming

17 Pages Posted: 17 Jul 2019

See all articles by Sabrina Bruno

Sabrina Bruno

Università degli Studi della Calabria; Luiss Guido Carli University; Stanford Law School

Fabio Bianconi

Morrow Sodali

Francesco Surace

Morrow Sodali

Date Written: July 1, 2019

Abstract

The superiority of the one-tier board model, over others, has recently been argued in Italy by a study published by the Research Center of Consob, the Italian Stock Exchange Authority by bringing forward two main arguments: i) the need to simplify and rationalize the system of internal controls for listed companies; and ii) the need to foster competitiveness of Italian listed companies in order to attract foreign capital by encouraging standardization and convergence, as the one-tier board model is the most common in the world. Some important Italian listed companies have recently switched their board model to the one-tier, in particular, by providing justification of a need to attract foreign investment since institutional investors prefer the one-tier board, being the model they know better.

Another recent trend in Italian corporate governance is the amendment of bylaws by certain companies, allocating power to the outgoing board to file its own list of candidates to renew the board of directors. This is actually the rule in many jurisdictions, but it has not been the case under Italian law, where the right to file one or more lists of candidates for in the event of board renewal, is expressly granted to shareholders. Also, in this case, some important Italian listed companies have recently amended their bylaws to introduce such power by explaining that this is common practice in other jurisdictions and therefore it is favored by foreign institutional investors.

Based on these two issues – that are at the core of the most recent Italian corporate governance debate and practice – the research questions of this paper are:

1. Do institutional investors really prefer the one-tier board in Italian investee companies?

2. Do institutional investors show preference with reference to the power to file a list of candidates?

After having examined the theoretical background, also under the legal perspective of both corporate governance set of rules, institutional investors’ actual preferences regarding structure of the board of directors and power to file a list of candidates in case of renewal of the board will be explored and final considerations will be drawn. Providing an answer to these questions seems particularly important in both academic and practitioner fields as some important Italian listed companies started to adopt or to think whether adopting one or both of the above-mentioned rules with general support in the public opinion. After the Introduction, Section 6.2 compares the traditional model and the other two models of corporate governance in Italy, and deals with the main features of the recent trends in Italian corporate governance. Subsequently, we review the applicable theory and main literature in section 6.3. We present our methodology in Section 6.4. Finally, we present the results of the analysis in section 6.5 and provide concluding discussions and comments in the last two sections.

Keywords: One-tier board - Two - tier vertical and horizontal board - efficiency - corporate governance - institutional investors - slate of directors from the outgoing board

Suggested Citation

Bruno, Sabrina and Bianconi, Fabio and Surace, Francesco, One-Tier Model and List of Candidates from the Outgoing Board: Better Corporate Governance for Italian Market or Just Xenophilia? (July 1, 2019). Challenges and Opportunities in Italian Corporate Governance, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3413299 or http://dx.doi.org/10.2139/ssrn.3413299

Sabrina Bruno (Contact Author)

Università degli Studi della Calabria ( email )

Via P. Bucci
Arcavacata di Rende, COSENZA 87036
Italy

Luiss Guido Carli University ( email )

Via O. Tommasini 1
Rome, Roma 00100
Italy

Stanford Law School ( email )

559 Nathan Abbott Way
Stanford, CA 94305
United States

Fabio Bianconi

Morrow Sodali ( email )

509 Madison Ave #1206
New York, NY 10022
United States

Francesco Surace

Morrow Sodali ( email )

509 Madison Ave #1206
New York, NY 10022
United States

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