In the observations sent to Consob, Frontis Governance and all ECGS partners reiterated all their concerns regarding the introduction of the new Italian multiple voting regulation, also communicating that they will issue voting recommendations against any shareholder resolution aiming to allow the allocation of additional votes.
The possibility of assigning an additional vote to registered shares will be for the sole benefit of Italian majority shareholders, to the detriment of all minority shareholders and foreign investors, including long-term ones. In addition to representing a clear violation of the principle of equality of shareholders, the new rule therefore risks further alienating foreign investors from the Italian market, which has already suffered a sharp contraction in the last 10 years, going from 2003 to 2013. from 13th to 23rd place among the world's largest markets.
As defined by the new regulation, the additional vote will differentiate between registered and non-registered shareholders rather than rewarding stable shareholders. Institutional investors participating in Italian shareholder meetings are pension funds and asset management companies which, by their very nature, are long-term shareholders (in some cases, as with Telecom Italia, even more stable than so-called “reference shareholders”), as their sole objective must be to create value for their clients, namely private savers and pension fund subscribers. Share registration procedures risk further increasing the direct and indirect costs of responsible participation in corporate life, with the only benefit being a decidedly marginal increase in voting rights.
Furthermore, excessive statutory autonomy, as defined by the new law, could lead some companies to define the procedures for allocating additional votes in such a way as to hinder the registration of particularly “critical” shareholders.
Investing in a company whose majority shareholder holds absolute power over all general meeting resolutions could prove particularly risky, especially if the risk of the controlling party is not proportional to their influence on management, thanks to multiple voting rights. The cases of financial disasters caused by the excessive power of the reference shareholder are already sadly numerous both in Italy and abroad (consider Fondiaria-Sai or the case of Banco Espirito Santo in Portugal, to name just two of the most recent and well-known). We therefore believe that international investors may be attracted by greater effectiveness and efficiency of control tools, both internal and external, rather than by strengthening the power of “reference” shareholders.
Frontis Governance/ECGS answers to Consob questions
- Broadcasters should publish on their website the updated amount of shares collectively registered in the special list, so that all shareholders (current and potential) are aware of possible future changes in voting rights.
- Both the entry in the special list and the attribution of the additional voting right should be made on the basis of direct communication from the intermediary to the issuer, in order to avoid further costs for shareholders arising from the production of a certificate.
- Statutory autonomy on the allocation of additional voting rights should be limited to the maximum extent possible, in order to prevent any activities aimed at hindering the allocation of voting rights to shareholders considered particularly “critical”. For this reason, registration in the special register should be permitted at any time.
- The attribution of the additional vote should be automatic upon the expiry of 24 months from registration in the special list, without the need for further requests from shareholders. It would be at least inappropriate to expect shareholders to individually request recognition of an acquired right.
- In line with the provisions of other legislation (in particular that of the United Kingdom and Spain), voting rights should be limited to 30% in cases where shareholders who have obtained additional voting rights passively exceed this threshold, until the excess shares are sold to unrelated parties. In any event, the obligation to launch a mandatory public takeover bid should be triggered whenever a shareholder who has “unintentionally” exceeded the 30% threshold acquires further shares.