Foreign funds raise concern over Italy shareholder loyalty plan

[MILAN] Institutional investors and independent directors at some of Italy's biggest companies have called on the government to scrap plans to facilitate a scheme that will strengthen the voting power of long-term shareholders.

Italy last year introduced a law allowing companies to amend their bylaws to boost the influence of longer-standing investors by granting them multiple votes for each share they own.

Drinks group Campari, builder Astaldi and hearing aid firm Amplifon adopted the scheme last week, taking advantage of a short-term provision under which only a simply majority was required to change their statutes.

From this month, a two-thirds majority is needed for such a change. However, Prime Minister Matteo Renzi's government is discussing a proposal to restore the simple majority rule until the end of 2015.

"If the objective of the government is to attract capital into the country, this is completely counterproductive," said Karina Litvack, a non-executive director at oil and gas group Eni and one of signatories of a letter to Renzi.

The petition, sent to Renzi, economy minister Pier Carlo Padoan and market regulator Consob on Monday, was signed by 20 investment funds, including Fidelity, UBS Global Asset Management, Schroders, Amundi and Aviva, and more than 90 academics and board directors.

They argue that passing the scheme would become a mere formality for many companies in Italy, where 90 per cent of listed companies have some form of dominant shareholder.

By insisting on the two-thirds majority rule usually required for a statute change, the signatories hope minority shareholders will be given a greater say.

Otherwise Italy risks that "international investors pack up and take their capital elsewhere," Luca Enriques, a professor of corporate law at the University of Oxford said in a press release accompanying the letter.

Italy introduced the multiple-vote scheme to convince small and medium-sized firms to list more shares on the stock market without necessarily losing control of a company they have in some cases owned for generations.

But some investment funds say the measures could concentrate power into the hands of a small group of shareholders to the detriment of minority stockholders.


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