By Andrea Mandala
MILAN (Reuters) -The CEO of Italy's top insurer Generali (BIT:GASI) on Monday urged the Italian government to revise its new capital markets law, saying it gives minority shareholders too much power over board appointments.
The legislation, approved by parliament last month, has drawn criticism from investment funds and Italy's financial industry, which argue that clauses boosting the power in listed companies of existing leading shareholders even if they are minority stakeholders could discourage foreign investment.
Generali's Chief Executive Philippe Donnet, speaking at a conference in Milan, said the new rules in the legislation affecting how a company's outgoing board draws up candidates for a new board "could create many problems", potentially giving minority shareholders veto powers and opening the door to activist investors.
Treasury Junior Minister Federico Freni, who spoke at the same event as Donnet, acknowledged his criticism, and signalled that the government was open to consider changes.
Like in many other countries, it has become a common practice in Italy for outgoing boards to present a list of candidates for the new board but so far companies have decided how this is done.
Under the new law, an outgoing board's list of candidates will need to be approved by at least two-thirds of the directors. That clause will become effective in 2025 and companies including Generali, whose board comes up for renewal next year, will have to amend their bylaws to comply with them.
"The measure gives enormous importance to minorities, as a small shareholder with a tiny share could even get 20% seats on the board, which could damage the quality of corporate governance," Donnet said.
Noting that the contested provision would enter into force on Jan. 1, Freni said: "Let's see, there is time. Why all this rush?".
The legislation also requires a second vote on individual candidates once the outgoing board's overall list wins sufficient votes from shareholders, a measure that professional investors see as an unnecessary complication.
Lawyers say the new legislation is ambiguous and it is not clear whether all shareholders can participate in the second ballot or only those who took part in the first one, or even only those who voted for the list of board candidates that got the most votes.
"The power given to minorities opens the door to activist investors, which is very dangerous as Italian or foreign activists could have immense influence that will be contrary to the interest of the vast majority of shareholders," Donnet added.
Besides Generali, Mediobanca and UniCredit (LON:0RLS) are among Italian companies that have in recent years adopted the system of an outgoing board presenting a list of new board candidates.
The new rules were championed by businessman Francesco Gaetano Caltagirone, who has tried to shake up management at Generali, in which he is the third biggest shareholder.
Prime Minister Giorgia Meloni, who supports the provision, has said it would curb the practice of directors getting re-appointed indefinitely with little regard for shareholders.