Italy seeks to clean up boards of state-controlled companies

by Reuters
Thursday, 27 March 2014 16:23 GMT

The Italian flag is seen fluttering in the wind at the Quirinale palace in Rome, August 2, 2013 REUTERS/Tony Gentile

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MILAN, March 27 (Reuters) - The Italian government wants state-controlled companies to eject from their boards any director charged of financial crimes, in a drive to fight corruption and improve corporate accountability.

A letter sent recently by the treasury to Eni ENI.NI, Enel ENEI.MI and Finmeccanica SIFI.MI and other state-owned groups, asks shareholders to toughen up their corporate governance requirements in the company bylaws at upcoming shareholder meetings due in April and May.

The letter, seen by Reuters, comes as the new government of Matteo Renzi is trying to push through reforms aimed at improving corporate transparency and making Italy a better place for business. These include a proposal to cap the salary of top managers of state-controlled companies.

Corporate Italy has been shaken by a string of corruption scandals often involving alleged kickbacks to politicians and financial intermediaries.

Defence group Finmeccanica is grappling with several corruption cases involving its former management.

And long-standing Eni CEO Paolo Scaroni, who has said he is ready for a fourth mandate, is under investigation in a corruption probe involving oil service company Saipem, which is 43 percent-owned by Italy's oil major.

Scaroni and Saipem deny any wrongdoing.

The letter says managers who have been indicted for crimes against the public administration or financial crimes should be barred from sitting on the board of state-owned companies even before a first guilty verdict is passed.

A judicial conviction, even if not definitive, is also cause for removal from the board without prompting a claim for damages, the letter said.

It said, however, that the company still had the possibility to call a shareholder meeting and vote to keep a director on the board even if he or she faced a trial or had been convicted.

Italy's judicial system is so cumbersome and lengthy that a final verdict may take more than a decade to come through, as in the case of Parmalat PLT.MI, which collapsed due to a fraud back in 2003 but saw a final ruling early in March this year.

The Treasury confirmed that the letter had been sent. Utility Enel confirmed it was among those that had received the letter.

Eni and Finmeccanica said they had already noted in their 2013 financial statements published this month that shareholders would be called to amend company bylaws regarding the new requirements for directors at their annual shareholder meetings.

(Reporting by Paola Arosio, writing by Silvia Aloisi; Additional reporting by Stephen Jewkes and Lisa Jucca; Editing by Elaine Hardcastle)

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