Market Intelligence
Rebecca Sherratt Image
Rebecca Sherratt
Publications Editor, Diligent Market Intelligence

IN-DEPTH: Italian activists face unique battle for board seats

April 19, 2024
0 min read
The Italian voto di lista system and its impacts on shareholder activism

Activism is off to a brisk start in Italy this year, while the country’s unique protections for minority shareholders continue to provide a popular path to board representation.

As of April 15, two Italian companies have been subject to campaigns involving primary- and partial-focus activists this year, the same number as the entirety of 2023, according to Diligent Market Intelligence’s Activism data. Four of the eight campaigns involving such activists, which included an appoint personnel demand since 2019, have been at least partially successful.

In the wider European region where a total of seven campaigns have been initiated by dissident investors in the first quarter, the level of activity in Italy is largely on par with the U.K., while France and Germany have each recorded a single campaign in the period.

First implemented in 1994, Italy’s voting system “voto di lista”, also known as slate voting, ensures that directors nominated by minority shareholders are guaranteed seats on both the board of directors and the board of statutory auditors at all Italy-listed companies.

Given that a significant portion of companies in the region are primarily owned by founding families or controlling shareholders, the mechanism is considered extremely valuable in holding companies accountable to smaller shareowners.

How it works

At Italian annual meetings, shareholders are given the opportunity to vote for slates of candidates. Controlling shareholders present a slate of candidates, while minority shareholders can also submit so-called “minority lists.”

Any shareholder which owns a certain amount of the company’s share capital – that varies between 0.5% - 4.5% depending on market capitalization - can submit a slate, and investors also have the option to pool their holdings to reach the required threshold.

Investors can only support one bundled slate and cannot vote for directors individually. Those who put forward slates must rank their nominees in order of preference.

To ensure minority shareholders secure some form of board representation, at least one member of the board of directors and the chair of the board of statutory auditors are elected from the slate that received the second-most votes after the majority slate. Company bylaws may allow for further seats reserved to minorities, and current best practice provides for up to 20% - 33% of board seats.

In 2021, 56.1% of Italy-listed companies had at least one minority-appointed director on its board, up from 36.5% in 2011, according to data from Italian securities regulator Commissione Nazionale per le Societa e la Borsa (Consob).

“The ‘voto di lista’ mechanism benefits investors who, as minority shareholders, can have their representatives elected to the board and thus are allowed to shape the company’s governance,” Natalia Bagnato, Italian partner at U.S. law firm Boies Schiller Flexner (BSF), told DMI in an interview. “It also benefits shareholders looking to invest in a company characterized by a widespread and fragmented ownership structure and those investors – especially institutional – seeking transparent and articulated mechanisms to select the best candidates to run the company.”

A blunt tool

Although the mechanism gives minority shareholders a louder voice and greater influence on the board, it is also considered to have its own challenges.

The fact that investors can only vote for nominees from one slate limits their ability to freely pick and choose their ideal board composition across multiple slates, making “voto di lista” somewhat of a blunt tool.

“As a mechanism, it falls short of providing investors with the ability to really fine-tune their votes to pick each individual who they perceive to be suited for the ideal board directors,” said Lauren Gojkovich, founder and managing member of LDG Advisory, in an interview with DMI. “This is especially true now that the U.S. has the universal proxy card, which gives great freedom to investors in voting for their personal preferences.”

One lawyer, who wished to remain anonymous, told DMI that slate voting can also work at odds with board gender quotas. “Where winning slates feature nominees of one gender only, the second slate may find itself forced to appoint nominees of the underrepresented gender, regardless of how they ranked their nominees,” the anonymous source said.

Voto di lista in action

In 2023, 81 minority slates were submitted for election at 52 Italian companies, resulting in the election of 103 minority candidates, according to data from Italian asset manager association Assogestioni.

Historically, most minority slates have been nominated by Assogestioni, but recent years have seen more international investors submit their own slates.

In May 2023, U.S. activist shareholder GreenWood Investors secured four spots on the board of Italian aerospace giant Leonardo SpA, taking aim at the company’s lackluster performance compared to peers. This marked GreenWood’s second ever activist campaign and its first campaign in the Italian market, defeating a rival slate from Assogestioni. GreenWood held a 1.5% stake in the company at the time.

“The Leonardo campaign was a groundbreaking win for the Italian market, with an investor securing four of four board seats, including a seat for the fund’s founder, Steven Wood,” Gojkovich said. “In addition, both Institutional Shareholder Services (ISS) and Glass Lewis recommended for GreenWood’s full slate, which I believe marked the first time Glass Lewis had ever supported a dissident slate against Assogestioni.”

That same month, Assogestioni, armed with an almost 2% position, secured three seats at utility company Enel, while the Italian government secured six seats as a controlling shareholder. A rival six-director slate nominated by U.K. asset manager and minority shareholder Covalis Capital was not successful.

Both Vanguard and State Street supported Assogestioni’s slate, with the former noting in a voting bulletin that these nominees “were best positioned to exercise effective, independent oversight of management and protect the interests of minority shareholders [and] possessed relevant skills and experiences in the industrial sector, capital markets and corporate governance.”

In another campaign to emerge this season, Telecom Italia (TIM) is facing a board challenge from three different investor groups - Merlyn Partners, which is running a 10-person slate of its own; London-based activist Bluebell Capital, which is fighting for five board seats as well as a fourth list of candidates backed by shareholder group ASATI, holder of a 0.5% stake in TIM.


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