Legal infrastructures are no less important than the physical ones: they are the rules of economic institutions. The joint-stock company is fundamental, a structure for running the business with loans raised from the public of savers. The history, the experience, the evolution of the most advanced systems, in the past the doctrine (Ascarelli, G. Rossi, B. Visentini) and politics (E. Rossi, Assonime, Confindustria), show us the reference model. If the efficiency of management requires power in one person (managing director), the efficiency of the system requires that its power be oriented exclusively to the market, to contain abuses and distortions: the manager must be forced to make money, without the distraction of other purposes.
For this reason it must depend on who bears the risk of the deal, that is on the shareholders: they are the ones who legitimize the company and the manager; each share participates in the vote for the appointment and revocation of the mandate director (contractual theory). But for the mandate to be effective, a vote is not enough; hence the development of shareholders' rights, instrumental in the appointment of the manager and in the decisions that sanction his behaviour: revocation (merit) and liability action (legality). The effectiveness of the rights of the shareholders, who are in fact minorities, establishes the degree of independence of the director from the majority that supports him: if the risk of responding personally to the minority is intense, the director refuses the abusive order of the majority .
In companies with widespread shareholding, the shareholders are not in a position to exercise the rights recognized by the model of the family company. Even the vote is of interest only insofar as it appreciates the title; and because in extreme cases it may be appropriate to exercise it. Their interest is focused on the negotiation of shares and the exercise of liability actions, when the seriousness of the crisis makes negotiation unadvisable. The discipline becomes sophisticated. In order to decide on the negotiation, to vote or to promote liability action, the shareholder must have reliable but immediately understandable information. The information is in the balance sheet, the others are its development or integration. Therefore the audit is entrusted to independent professionals; therefore the assistance of an administrative authority (from us Consob) guarantor of the quality of information and negotiations.
In turn, the governance of the company makes the board the guarantor, on behalf of the shareholders, of the correctness of the manager, a competence that can only be effective if the board has an independent organization that allows each director to know the facts. The effectiveness of the system rests entirely on actions of responsibility towards: the manager; of the directors for the exercise of supervision over the manager; of the auditor for the accounting control. It is the effectiveness of judicial protection, albeit as a last resort, which makes the other tools of the sophisticated discipline operative. For this reason, the model wants the jurisdiction to be strengthened, e.g. with class actions and with the distribution of the burden of proof. Otherwise, the tools set up by the regulations remain a cumbersome, unnecessarily expensive bureaucracy.
If the discipline of the code was insufficient, with the reform and the legislation that followed, the result is perverse. Let's see the pattern that emerges. The managing director, who with the presidency can accentuate his power, is confronted with a submissive board of directors, due to the difficulties he encounters in exercising the liability action to sanction the inertia of the directors. Indeed, the action is barred to the shareholder, a solution already harshly criticized by Ascarelli; with the reform it can be exercised by a minority, but according to a procedure so cumbersome as to frustrate it. The difficulty of the action is aggravated by the suppression of the supervisory duty of the council over the delegate: it is no longer sufficient, to presume the negligence of the councilors, to demonstrate the insufficiency of the organization that the council has given itself to monitor the manager, but it is necessary prove the specific negligence of each adviser.
On the side of the accounts and the budget, the other component for monitoring management, we see the responsibility entrusted to the auditor, practically bypassing the mayors, who are weak but more independent controllers (the auditor is subject to revocation). In any case, the auditor's diligence is very weak due to the difficulty of calling him to answer. Its performance is no longer, as in the past, the reliance on the validity of the financial statements, which attested by certifying it, but to maintain a diligent behavior according to practices, developed by the auditors themselves, which also allow sample checks.
Therefore, in the case of irregular or false financial statements, it is not the auditor who must demonstrate that with all good will he could not have detected the falsehood, but it is up to the plaintiff to demonstrate that the inaccuracies should have been detected with diligence, a charge that nullifies the action . Auditing has become a useless office and a parasitic cost. The recent provision of the tuf on liability from prospectuses and market information seems to have been written by those who paradoxically intend to create favorable conditions with respect to the common law of liability, which is more severe. Even on the criminal level, deregulation has won: false declarations constitute crimes that are very difficult to ascertain.
The exemption from liability, strengthened by the dysfunction of the jurisdiction, makes the manager a power that easily escapes the control of whoever supplies the capital. In the Italian experience, society is not a monad. The legislation has favored cross-shareholdings, syndicate pacts, groups with minority control, and for this reason has essentially abolished the prohibition for the administrator to act in conditions of conflict of interest, so fundamental for good governance.
Consequently, the administrator's legitimacy rests on agreements between exponents in mutual collusion, even more devaluing the responsibility towards the saver, already diluted in the chain of shareholdings that allows for minority control personified by men who feel the deal as their prerogative. Decisions end up being an informal authority. When the constraint of market risk is loosened, the power that those who manage the company have in any case ends up orienting itself differently from profit, for personal, political interests, etc.; society becomes an uncontrolled institution. Only time reveals the corruption of the system.
That's what we see now with the obsolescence of major businesses; with the scandals we are witnessing; with "the skeletons in the credit closet" that Massimo Giannini reminded us of in the latest Affari&Finanza (no. 31) with the ironic listing introduced by "raise your hand if you don't know" of: Montepaschi, Ligresti-Mediobanca, Zaleski, etc. . Continuing I could add "who does not know how much the company law has contributed to aggravating the evils we complain about". The deregulation of company law reduces the effectiveness of private law and civil jurisdictions in preventing illegalities, leaving the sanction only to the criminal jurisdictions, which when they intervene have disruptive effects. We must think about the reform of the joint-stock company patiently, with culture.
