The four-pronged Code aims to encourage issuers in Italy to focus on long-term sustainability and engagement.
A new edition of the Corporate Governance Code was released on 31 January 2020. The new Code focuses on four essential objectives and principles: sustainability, engagement, proportionality, and simplification.
Sustainability: The new Code intends to encourage Italian equity-listed issuers to adopt strategies based on sustainability. It recommends sustainable success as a priority for company management — defined as long-term value for shareholders and stakeholders — and calls on boards to integrate business plans, internal control and risk management systems, and remuneration policies with appropriate sustainability goals.
Engagement: The new Code recommends that listed issuers develop a dialogue with the market and with investors through specific engagement policies. It assigns a key role to the chairman, who — in agreement with the CEO — is directed to prepare a policy to manage dialogue with investors, which the board will approve and monitor.
Proportionality: The new Code tailors and graduates principles based on the size of the issuer, to promote access to equity capital markets and listing of small- and medium-size companies. Some recommendations are directed at large listed issuers (those with a market capitalisation higher than €1 billion for three consecutive years), while other recommendations apply to issuers with a concentrated ownership controlled by one or more shareholders.
Simplification: The format of the new Code has been simplified. To assist issuers in applying the Code, Q&As based on queries received from issuers will be published on a recurring basis.
The new Code also updates the content of many existing recommendations, including:
- Strengthening recommendations on the assessment of independence of directors, quality of information to directors, and role of the chairman
- Proposing best practices for succession plans, equality of treatment, and opportunities
- Specifying international best practices on the independence of the chairman, the role of the board secretary, and remuneration policies
The new Code will apply from the first fiscal year starting after 31 December 2020.