International investors protest that Italy’s corporate governance changes could undermine decision-making

Planned changes to Italy's capital market rules agreed in March aimed at simplifying shareholder and board powers at the country's listed companies could in fact undermine corporate governance and discourage investors from abroad, says the International Corporate Governance Network, whose members oversee $77trn in assets. It says the effect of the reforms could be to diminish the voice of foreign shareholding in governance processes and hold executives hostage to long-standing investors with small shareholdings. There's also unrest in Hong Kong about the potential impact of rule changes proposed by Hong Kong Exchanges and Clearing intended to ensure the integrity and independence of non-executive directors, by limiting the number of independent directorships an individual can hold to six and setting a limit of nine years as a director, after which they would no longer be considered independent.

Changes to Italian shareholder and board powers could deter international investment: governance body

Changes to Italy's capital market rules agreed in March aimed at simplifying shareholder and board powers at listed companies could undermine corporate governance and discourage investors, according to the International Corporate Governance Network. The organisation, a group of institutional investors overseeing $77trn in assets, is concerned that the changes would allow shareholders to meet behind closed doors, limiting the ability of investors outside Italy to participate, while giving board representation rights to minority shareholders could hamper management decision-making at larger companies and financial groups. The network has warned Italy's undersecretary of state for the economy and finance, Federico Freni, that the reforms would give long-standing shareholders with board representation greater power than shorter-term investors, undermine the competitiveness of the Italian market, and reduce its appeal to international investors.

Best source: Agenzia Nova

Assessing board members’ climate expertise hampered by inconsistent criteria: MSCI

Inconsistent data and a lack of consensus on assessment methods impedimpede the ability to assess the climate expertise of company board members, according to MSCI. Having a designated climate director may not be a good indicator that a company is taking the environment seriously, nor whether directors can take action effectively, according to the rating provider. Using its in-house framework that looks for experience, qualifications and other relevant information in published biographies, just 4% of directors at 164 companies that have signed up to membership of Climate Action 100+ can be considered to have climate expertise.

Best source: Sustainable Views

Hong Kong exchange faces opposition to cap on independent non-executive directorships at listed companies

Hong Kong Exchanges and Clearing faces opposition from directors, companies and investors over its proposal to cap the number and tenure of independent non-executive directorships. The exchange has introduced the proposals as part of a package to improve corporate governance, including setting a maximum of six independent director positions per person, and a ceiling of nine years on each board. The cap would apply from January next year for newly-listed businesses, with companies already traded on the Hong Kong Exchange having three years to implement the requirements.

Best source: South China Morning Post (subscription required)

ING may end relationships with companies whose transition plans are inadequate, starting in 2026

Dutch banking group ING says it may impose stricter conditions on corporate clients with transition plans that score poorly according to its ESG.X data tool, or even end its relationships with them. The tool uses public climate data, information on companies' current emissions and future targets, and details of their action plans, governance and strategy to calculate a transition score for each client. The system has already been used to analyse 2,000 of the group's largest clients, including those in carbon-intensive industries. From 2026, if engagement has not resulted in improvements by the laggards, the bank will restrict the products and services it offers or stop financing them completely.

Best source: ESG Today

German government investigates handling of Commerzbank shareholding sale

The German government is investigating the sale by the state of a 4.5% stake in Commerzbank to Italy's UniCredit, which also bought shares on the open market to increase its shareholding to 9% and has indicated it might seek full acquisition of Germany's second-largest bank. The sale of part of the shareholding, acquired when Commerzbank was bailed out in 2009, was handled by the federal finance agency. The government is questioning why no officials anticipated a single strategic investor seeking to acquire the entire 4.5% tranche. A parliamentary committee will also examine the deal, which was expected to attract a number of financial investors looking to acquire smaller stakes. UniCredit first indicated its interest in acquiring Commerzbank to create one of Europe's largest banking groups in 2017.

Best source: Bloomberg (subscription required)

Bank of London announces £42m fundraising after HM Revenue and Customs issues winding-up order over tax debt

UK clearing institution Bank of London has announced a fundraising of £42m, led by Luxembourg's Mangrove Capital Partners, an existing investor whose CEO Mark Tluszcz has been a member of the board since 2018. The fundraising followed swiftly after the bank's holding company was the subject of a winding-up order from HM Revenue and Customs to compel it to pay a debt to the UK tax authority, with founder and CEO Anthony Watson revealing he would step down. Bank of London insists that the winding-up order was the result of an internal miscommunication and was not related to the departure of Watson, who will remain a non-executive director and be replaced as CEO by Stephen Bell, formerly the head of risk and compliance. The Bank of London had earlier told potential investors it had an immediate funding requirement for £3.5m by August 9 and an additional £15m by the end of the month to meet regulatory capital needs. The board of directors and new management team had been unaware of its outstanding debt until HM Revenue & Customs filed the winding-up petition on September 5.

Best source: The Guardian

See also: City A.M.

See also: Sky News

Companies may not comply with EU corporate disclosure directive if data problems are not addressed: consultancy

Companies may opt to not comply with or could implement ineffectively the EU's Corporate Sustainability Reporting Directive. A report by sustainability consultancy SB+CO has found that a lack of supervisory guidance, concern about timelines and the practicalities of gathering hard-to-find data may prompt companies to take a deliberate decision not to comply with the legislation. That may lead to directors and executives with responsibility for compliance being at odds with the law, as well as those external agencies and consultancies that suggest they follow such an approach due to cost, complexity and staffing issues. Compliance, which entails reporting on more than 1,000 data points, is initially obligatory only for large companies but smaller businesses will progressively be required to adhere to the CSRD's requirements.

Best source: Thomson Reuters Institute

Former Wirecard executives found liable for €140m in civil damages over group’s losses to Singapore entity

Former Wirecard CEO Markus Braun and two other former Wirecard executives, chief financial officer Alexander von Knoop and chief product officer Susanne Steidl, have been ordered to pay €140m plus interest to the failed fintech firm's administrator Michael Jaffé. The Munich court order stems from a civil action in which the court found the three executives personally liable for losses incurred on $100m in unsecured loans and the purchase of securitised bonds, of which the beneficiary was Ocap, supposedly an outsourcing provider to Wirecard in Singapore. The court found that Braun and von Knoop were at least negligent in the granting of credit to Ocap, while Steidl should have been suspicious. But Wirecard vice-chairman Stefan Klestil was not considered liable for the loss, although the court found he was in breach of his duty to monitor the credits. Braun is currently also on trial in Munich on criminal charges of fraud over the collapse of Wirecard in 2020.

Best source: Finextra

See also: Reuters (free registration)

Auto manufacturer Stellantis faces investor class action over falsification of emission levels

Dutch non-profit foundation Fiat Chrysler Investors Recovery Stichting has filed a class action against auto manufacturing group Stellantis, funded by an affiliate of US alternative investment manager Fortress Investment Group. The lawsuit alleges that predecessor company Fiat Chrysler failed to disclose between 2014 and 2017 that it had installed illegal software in its vehicles that wrongly made it appear that they met emission standards, to the detriment of investors who acquired or owned Fiat Chrysler's shares during that period. The US business of Stellantis has already admitted criminal conspiracy following a US Justice Department investigation.

Best source: Reuters (free registration)

Swiss regulator seeks power to intervene over banks’ growth plans

CEO Stefan Walter says Swiss regulator Finma should have the power to intervene to compel changes in banks' business models and growth strategies if the agency detects inadequate controls, risk management or infrastructure. Walter believes a dysfunctional business strategy was at the root of the near-collapse of Credit Suisse that resulted in its absorption by UBS. He also supports the Bern government's plans to boost capital requirements for international and other large banks, which could require UBS to set aside an additional $25bn in capital, although it might take years for the rules to apply.

Best source: Bloomberg

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