Pros And Cons Of An Imported Model Of Corporate Governance
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An Introductive Overview On Italian Corporate
Governance
In order to increase the competitiveness of the Italian
market, especially from an international perspective, the
Italian corporate reform, enacted by the Legislative Decree
6/2003, provides for three management models for Italian
corporations:
the traditional model, which allows shareholders to
appoint a board of directors with responsibility for managing
the company and a panel of statutory auditors with
responsibility for auditing the accounts and ensuring
compliance with the law;
the German model, comprising a Board of Directors and a
Supervisory Panel; and
the Anglo-Saxon model, providing for a Board of Directors
and an internal Audit Committee.
As clearly showed by a research conduced by the Association
of Italian Chambers of Commerce and the Register of enterprises
in March 2007, the traditional model is the most common and
popular model adopted by Italian commercial entities. According
to this research, in fact, only 143 limited companies had
adopted the German model, compared with almost 25,000 which are
organized according to the traditional model.
Its wide diffusion is simply explained by the fact that it
was the only corporate management model available to Italian
limited companies before the reform in 2004. In fact, leaving
aside the strengths and weaknesses of the traditional model,
its popularity is essentially a consequence of an ingrained
familiarity in Italian commerce, because it is a model devised
and developed in Italy with a set of very well-know rules.
Article 2409 octies of the Italian Civil Code
demonstrates the leading role of the traditional model in the
Italian corporate system. In fact, in absence of a provision to
the contrary in a company's bylaws, the traditional model
applies by default.
However, it remains to be seen whether either the German or
the Anglo-Saxon model, both of which are relatively new to
Italy, offers a viable alternative to the traditional
model.
The present article identifies the strengths and the
weaknesses of the German model and shows that it may be
particular useful in a private equity context, enabling private
equity funds to manage their Italian portfolio companies more
efficiently.
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Diffusion Of The German Model In
Italy
As said in the precedent paragraph until march 2007 only 143
limited companies have adopted the German model. Otherwise, the
financial and banking world have had strongly revaluated the
German model. In fact, several large, high-profile corporations
have recently adopted it, including Intesa San Paolo, the
company formed by Italy's largest bank merger; Mediobanca,
Italy's most prestigious merchant bank; Banche Popolari
Unite/Banca Lombarda and Banca Popolare di Verona/ Banca
Popolare Italiana.
Furthermore, outside the banking world, several listed
companies have adopted the model, including Societ
Sportiva Lazio, The Serie A football club; Ergo Previdenza, an
insurance company; M&A Management & Capitali and Monti
Ascensori. Other prominent companies have either already
adopted the model or are further investigating it.
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Supervisory Panel
The main difference with the traditional model is the
existence in the German model of a supervisory panel, while
there is no difference between the traditional model and the
German model in respect of the role, duties and liabilities...
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