Italy’s Mediobanca Equity Sell-off and Privatization Spark Renaissance in Corporate Governance

The Economist reports that Mediobanca, an Italian investment bank formed in 1946 assist in the reconstruction of Italian industry, has commenced a planned sell-off of $2.2 billion in equity holdings as part of an effort to refocus the firm on its core mission of providing medium-term financing in the Italian sector.  Mediobanca’s sales of these shares as part of its unwinding of webs of cross-shareholdings and pacts among big shareholders, as well as the privatization of Fincantieri and Poste Itliane, have released large volumes of shares on to the markets, allowing institutional and other investors to add them to their portfolios.  This sudden flow of Italian equities in to the hands of new investors has, it seems, increased participation in corporate governance.

The shift seems already to be affecting corporate governance. Attendance and participation at shareholder meetings have increased. The recent vote on a poorly drafted ethics clause put forward by the government at various partly state-owned firms illustrates the difference such shareholders make. At Eni, Finmeccanica and Terna, which have lots of institutional shareholders, the clause, which seemed to muddy the treatment of managers charged with financial crimes, was voted down. However at Enel, the former electricity monopoly, which has fewer institutional investors, it was approved.