The future of European stock markets is played out around the rules that impact issuers and good corporate governance. These are the two main themes that were explored in the conference organized yesterday at Borsa Italiana by Assonime and EuropeanIssuers which was attended by, among others, Massimo Tononi (President of the Italian Stock Exchange), Didier Lombard (President of EuropeanIssuers), Emil Paulis (DG Internal Market and Services of the European Commission), Xavier Rolet (CEO London Stock Exchange), Charles Bozotti (President and CEO, STMicroelectronics), Laurent Degabriel (ESMA), Alberto Giovannini (CEO, Unifortune Sgr), Jorgen Holmquist (ECGI President), Andrea Belatti (Intesa Sanpaolo), Gabriele Galateri of Genola (President of Assicurazioni Generali and of the Corporate Governance Committee) e Dominique Senequier (CEO, AXA Private Equity). The final observations were instead entrusted to the Minister of Economy Vittorio Grilli.
Thus the central theme of governance returns to the debate: an essential tool also for companies seeking access to the markets and wanting to attract private investors. “When companies are governed in a transparent way – said Micossi – they will have easy access to the capital markets and will find stable investors willing to support their growth strategies. At the same time, poor corporate governance deprives the company of potential and can pave the way for decline and shareholder dispossession.
MICOSSI, BALANCE BETWEEN MANDATORY AND NOT MANDATORY RULES
The corporate governance rules of listed companies in the European Union are a combination of legislation, both at European and national level, and non-binding (soft) regulations, including corporate governance recommendations and codes. The European Commission will soon publish a Corporate Governance Action Plan, following up on the 2011 Green Paper.
For Micossi it is important to maintain a balance between mandatory and non-mandatory rules. “The mandatory rules establish the general principles and the minimum standards – explained Micossi – and in fact the law should not have as its purpose the regulation in detail of all the issues related to corporate operations because the legislation is not always capable of ensuring the changes that may require business development. This is where you need non-mandatory governance tools. Self-regulation sets best practice. Self-regulation can be used to cover gray areas or raise legal standards. It can be changed faster, sometimes paving the way for useful changes in the law.'
As far as Italy is concerned, both mandatory and soft rules have been introduced in the last ten years in line with the best European standards: in 2010 Consob adopted a regulation on transactions with related parties; full transparency on directors' remuneration is in place and new legislation on company meetings and gender issues has been adopted. Without forgetting the recent law that prohibited interlocking in competing financial entities which led to 70 changes in the boards of listed Italian companies. At the end of 2011, a new Corporate Governance code was adopted which adopted innovative recommendations on the role and composition of the board, strengthened risk management and drafted new recommendations on remuneration. Together with the new code (fourth version after those of 1999, 2002 and 2006) a new Corporate Governance Committee was also created with the aim of promoting best practices, updating the code and monitoring the implementation of the code. The code is based on three pillars: the effectiveness of the board of directors, independence and accountability also thanks to detailed annual reports on corporate governance.
GALATERI, ITALY HAS MADE SIGNIFICANT PROGRESS
“In Italy – points out Gabriele Galateri di Genola, president of the Committee called to intervene on the subject at yesterday's conference as well as president of Assicurazioni Generali – the space covered by the mandatory rules is greater than in other countries, which is why the code can appear rather light in some cases”. An example: the Board of Statutory Auditors is expected to be responsible for the internal control function and this reduces the role of the Control and Risk Committee within the board of directors.
A meeting of the Committee chaired by Galateri di Genola is on the agenda for today to discuss how to evaluate the level of implementation of the code. "Particular attention - explained Galateri di Genola - will be paid to the issue of comply or explain and monitoring, also bearing in mind the developments in the various member states of the European Union". The role of institutional investors in exercising their shareholder rights will also be examined. The next meeting will be held in the first half of 2013. "From my personal experience - concluded Galateri di Genola - corporate governance in Italy has made significant progress in listed companies, the majority are in line with the best practices of other markets which obviously they are always evolving”.
BELTRATTI, BEST BALANCE COSTS AND BENEFITS FOR YOUR COMPANY
Andrea Beltratti, a professor at Bocconi and president of the Board of Intesa Sanpaolo, also spoke on the subject of regulation, asking himself "how much should we regulate"? We have to be careful, he replies. “Corporate Governance can be chosen in the best way by balancing costs and benefits, also in the light of the framework on the theme of the country (in terms of investor protection) - he says - There is international evidence that good companies located in weak countries are willing to invest in corporate governance to send a strong signal to investors and obtain, for example, a lower cost of capital. There are differences in the sectors, in the size of the companies, today too many rules may not allow companies to find the best structure".
CRICKETS, NO MORE RULES BUT BETTER DEFINITION AND SUPERVISION
"Good company and good governance go together", also comments the Minister of Economy Vittorio Grilli in his concluding reflections, in which he retraced the crisis, the problems and what has been done up to now, reaffirming the centrality of the Banking Union project , with the first step being single supervision if a common game plan is to be achieved and to avoid market segmentation which harms companies and markets. “We have to redraw the rules – he explained – in this process at the beginning they seem to be too many and make life more difficult. But the world of rules before the crisis was not satisfactory. So it is not a matter of more rules but of a better definition and supervision”. Rules that must be consistent in the various markets, countries and economic areas: "if we want savings to be well allocated we must ensure that the rules are well applied everywhere", he underlined in his speech in which he raised the issue of scarce access to financial markets by SMEs. According to Grilli, Europe has already made many efforts and taken decisions unlike other countries and in the near future it will be used as a benchmark and will no longer be perceived as an area left behind.
