The 2021 update of the Frontis Governance guidelines for Italian companies is available in the section Documents & Links of the site. In the same section of the site, compliance documents with Legislative Decree 49/2019 transposing Shareholder Rights Directive II are also available:
Annual Report pursuant to Article 124-octies of the Consolidated Law on Finance relative to 2020
Policies on relations with broadcasters and media outlets
Dialogue activities with listed companies conducted in 2020
Report on conflicts of interest
The Documents & Links section has also been supplemented with a archive pagewhere you can view all transparency and compliance documents published by Frontis Governance since 2015.
What's new in the 2021 Guidelines
The 2021 Guidelines incorporate the changes that have taken place since January of this year in relations with European partners. In particular, reference is made to the European guidelines of Proxinvest, which replaced the ECGS network in business and cooperation relations between partners. The change is purely formal, since Proxinvest has adopted the same international guidelines as ECGS, and these have always been defined in agreement between all partners.
Below are the main changes to the document, mostly aimed at clarifying Frontis Governance's position on certain aspects of corporate governance:
Approval of the Annual Report:
- In the Voting Policies, it has been specified that a recommendation against approval of the Annual Report is also possible if adequate disclosure on social and environmental sustainability issues is not provided, serious concerns arise on tax, corporate governance or sustainability practices, or if such issues are not sufficiently considered in risk management. In such cases, the recommendation may be against approval of the Annual Report if there are no other more relevant resolutions on which to express dissent, such as the re-election of members of corporate bodies responsible for areas related to social or environmental sustainability.
Corporate bodies
- It has been clarified that Frontis Governance is generally in favour of amendments to the Articles of Association to allow the presentation of a list of candidates to the Board of Directors by the outgoing Board, especially in companies without controlling shareholders. This practice, in fact, may allow for greater transparency in the selection of candidates and guarantee greater independence in the definition of the lists, provided that the Board itself or the Appointments Committee is composed of a majority of independent directors.
- It was also emphasised, however, that Frontis Governance is strongly opposed to any nomination or election mechanism that could lead to the 'entrenchment' of management, which could guarantee its re-election regardless of the results achieved.
- In line with the Corporate Governance Code approved in 2020, and applicable from 2021, issuers are recommended to have a policy or guidance on the optimal composition of the Board of Directors. In contrast to the Code, which limits this recommendation to companies without controlling shareholders, Frontis Governance urges the publication of the guideline to all listed companies, in order to guide shareholders (including controlling shareholders) in defining proposals on the size and remuneration of directors and in selecting the most suitable candidates to hold office, taking into account the specificities of the company and the sector.
- Also in line with the new Corporate Governance Code, the provision whereby a candidate who meets the independence requirements loses his or her independent status upon appointment as Chairman of the Board of Directors has been eliminated.
- It was specified that cases of cross membership concern executive officers of both the issuer and controlling shareholders.
Remuneration policies
- In the case of variable compensation in the form of shares, Frontis Governance recommends that the number of shares to be paid to beneficiaries at various performance levels be defined at the beginning of the period. Therefore, it has specified the opposition to plans in which the value of the incentive to be paid is fixed in advance, varying the number of shares according to their value at the time of vesting, as this practice significantly reduces the alignment between the interests of management and the growth (or destruction) of the company's value during the vesting period of the incentive.
- A recommendation has been included to prohibit or strongly discourage the use by executives and executive directors of forms of personal hedging or remuneration insurance. This recommendation, already provided for in the Bank of Italy's Supervisory Provisions, is extended by Frontis Governance to all listed companies.
Frontis Governance - Corporate Governance Principles and Voting Guidelines 2021
