(Recasts, adds comments, background)
By Maria Pia Quaglia and Danilo Masoni
MILAN May 21 Italian government plans to impose
ethics clauses on state-owned companies have been criticised as
ill-conceived and possibly illegal by two advisory groups, who
urged big shareholders to vote against the adoption of such
policies at two major groups.
Earlier this year the cross-party coalition government of
Prime Minister Matteo Renzi pressed state-controlled companies
to introduce enhanced "honourability" rules into their bylaws,
aiming to eject directors charged of financial crimes.
But motions put forward by the main state shareholders of
oil and gas group Eni, Italy's biggest listed company,
and defense firm Finmeccanica were thrown out by
investors earlier this month.
Now two proxy advisors - which give advice on how to vote on
corporate matters to institutional investors such as pension
funds - have recommended investors in utility Enel and
power grid operator Terna do the same thing.
Advisory group ISS has advised Terna investors to vote
against the motion, according to a document seen by Reuters,
while peer Glass Lewis has recommended "no" votes at Enel and
Terna, according to people familiar with the matter.
"This item warrants a vote against because ... the proponent
(the state) has failed to disclose a sound rationale and a
risk-benefit assessment associated to the proposed bylaw
amendments," ISS said in a recommendation for Terna investors
seen by Reuters.
Terna, 30 percent owned by state lender Cassa Depositi e
Prestiti, holds its shareholder meeting on May 27.
ISS said in its recommendation Rome had not explained why
enhanced honourability requirements would be beneficial or how
they could offset potential risks to management stability.
It also cited an opinion that Eni obtained from lawyer and
academic Guido Rossi, a former president of Italian stock market
watchdog Consob, who argued the proposed clause went against the
assumption of innocence granted by the Italian constitution.
ISS, Glass Lewis and Enel declined comment. Terna was not
immediately available for comment.
Under the proposed clauses, a board member would be required
to leave his or her functions once charged, but before the
verdict of any court case.
Some smaller Italian investors however said the clauses
could be seen as a step forward in a drive to fight corruption
and improve corporate accountability.
"I think they strike a positive note. All companies must
respond to tough ethical standards," said Roberto Lottici, a
fund manager at Ifigest. Eni is 3 percent of his portfolio.
Corporate Italy has been shaken by a string of corruption
scandals often involving alleged kickbacks to politicians and
Defence group Finmeccanica is grappling with several
corruption cases involving its former management, while former
Eni CEO Paolo Scaroni is under investigation in a corruption
probe involving oil service company Saipem.
Scaroni, Saipem and Finmeccanica all deny wrongdoing.
The leader of Italy's anti-establishment 5-Star Movement,
Beppe Grillo, is winning strong support across the country in a
campaign against the ruling elite and widespread corruption.
But Italian retail investors could yet make a difference at
Enel, Italy's biggest utility, industry sources said.
State-controlled Enel is due to hold its shareholder meeting
on Thursday, May 22, and the greater presence of retail
investors could leave the Treasury with enough clout to get the
ethics clause through.
"The Treasury had 65 percent of votes present last year and
so it would only need another 2 percent or so to reach the
two-thirds quorum for this sort of vote," said Sergio Carbonara
at consultancy Frontis Governance.
Carbonara acknowledged the clauses did not exist elsewhere
in Europe but said they could be useful.
(Additional reporting and writing by Stephen Jewkes; Editing by