The new Code of Conduct for listed companies

New Code of Conduct Presented Today

The New Code of Conduct for listed companies was presented today in Milan, at Palazzo Mezzanotte, Borsa Italiana’s headquarters.
This Code results from the work of the Corporate Governance Committee, which is promoted by Borsa Italiana and represents entrepreneurs and market participants.

The Committee’s activities were supported by a panel of experts including Guido Ferrarini, Franzo Grande Stevens and Piergaetano Marchetti, who coordinated the activities of a technical working group composed of representatives of trade associations and Borsa Italiana.

The principles of good governance were adapted in light of the evolution of best practice, taking into account the changed regulatory framework in Italy, the European Community and internationally.

Though its order of contents is similar to the 2002 version, the structure of the Code has been profoundly changed. Each article is divided into three distinct sections: general “principles”; “application criteria”, containing detailed instructions for implementing the principles; and “comments”, aimed at defining the range of the principles and criteria, also including suitable examples.

The main new features are as follows:

• Role of the Board of Directors: the adjustment of the recommendations in the Code to the new business regulatory framework, more specifically regarding groups; the introduction of recommendations of limits to the number of roles held by each  director and annual self-assessment by the board;
• Composition of the Board of Directors: the improved definition of the definition and role of non-executive directors; the introduction of the  so called “lead independent director”, in case of concentration of roles of Chairman and CEO;
• Independent Directors: the setting of the principle of substance over form in assessing independence; with examples of criteria based on which the Board of Directors must perform the assessment; involvement of the board of auditors in order to verify the correct application of the criteria; and the provision of a meeting to be attended only by independent directors;
• Internal Committee of the Board of Directors: the provision of general regulations regarding the composition, powers, and methods of carrying out its mandate;
• Appointment of Directors: the restatement and specification of the transparency principle in the appointment procedure; with examples of possible duties of the Nominating Committee;
• Remuneration of Directors: the definition of the structure and purposes of remuneration, providing a distinction between executive and non-executive directors; the specification of duties of the Remuneration Committee;
• Internal Control System: the updating of the concept of control in line with the evolution of international best practice; the improved definition of roles and relations between various persons/bodies involved in defining, monitoring and updating the system (specifically relations between the Board of Auditors and the Internal Control Committee);
• Directors’ Interests and Transactions with Related Parties: the setting of recommendations consistent with the changed regulatory framework (articles 2391 and 2391-bis of the Italian Civil Code);
• Statutory Auditors: the extension of the guarantee of independence, and the definition of measures aimed at guaranteeing efficient and effective performance of their role;
• Relations with Shareholders: the promotion of initiatives aimed at facilitating their awareness of company information and favouring their participation in shareholders’ meetings and the exercise of their rights;
• Alternative Management and Control Systems: the invitation to companies which adopt the one tier or two tier system to apply the Code’s recommendations, adapting them to the chosen system and providing ample disclosure of the adaptations used and the reasons for such choice.

Entrance into force – Issuers are requested to apply the new Code, which substitutes the Code drafted in 1999 in its entirety, within the end of the financial year begun in 2006, notifying the market in the corporate governance report to be published during 2007.

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