Numero 29 - Novembre 2016

Questo numero è stato chiuso in redazione il 15 Ottobre 2016

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ISSN 2284 - 3450
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Corporate Governance and Stewardship

di Cristina Ungureanu(*)

Nota edtoriale

La Presidenza NED ha chiesto a Cristina Ungureanu, responsabile della C.G. e della stewardship di Eurizon Capital SGR del Gruppo Banca Intesa Sanpaolo, di redigere un articolo su questo tema per "La Voce degli Indipendenti".
Pubblichiamo il suo articolo redatto in inglese allo scopo di proseguire nell' opera di internazionalizzazione dell'attività svolta da Nedcommunity che abbiamo iniziato nello scorso N. 28 di questa rivista pubblicando l'articolo " Are boards on board with digital ?" della Presidente di ecoDA Turid Elisabeth Solvang.

The drivers of global and local corporate trends are multiple: globalization of companies, corporate scandals, complexity of investor bases and responsibility issues - are all factors that impact the governance of companies.

Around the world, institutional investors have called for reforms to enable them to elect independent directors who would challenge management, constructively, on strategy and hold them accountable for performance. In this sense, the Italian slate voting ("voto di lista") is among the world's admired board election systems. Given Italy's ownership concentration, slate voting enables minority shareholders to nominate at least one member for the board of directors, or the board of statutory auditors, thereby counterbalancing the presence of any controlling shareholders and ensuring that the interests of the minority shareholders are adequately represented. That is regarded as positive in terms of enhancing board accountability and independence. Other countries have also developed systems around the same principle of allowing shareholders to nominate representatives on the board, among the most recent ones being the proxy access in the US.

Italy was also among the first promoters of a national Corporate Governance Code during the 90's, a Code that has been under ongoing revisions to keep up with the pace of the global governance trends. Another artifice of the Italian market has been the adoption of the Stewardship Principles, which we will discuss further herewith.

Corporate Governance and Investors

I would take a quick step back and highlight some fundamental aspects.

Elevated standards of corporate governance are important for the fair and effective functioning of the capital markets. Good governance ensures that company policies and practices are robust and effective, defining the extent to which a company operates responsibly in relation to its shareholders, as well as in relation to customers, employees and the wider community.

Institutional investors are the ones with the largest participation in the different market segments. Accordingly, due to size and relevance, institutional investors play a central role in defending the sustainability of the financial market. Investors are also becoming more global in operations and outlook, as international investment holdings and commensurate corporate governance and sustainability staffs have expanded.

As the list of institutional investors grows and their caliber evolves, there is higher demand for good corporate governance, for accountability and transparency. Consequently, as investors, we want to see a core set of shareholder rights and responsibilities applied across all the markets in which we invest. As a result, also corporate governance is evolving to accommodate these priorities.

The important role that investors play in preserving and enhancing long-term value on behalf of the beneficiaries or clients, has also been referred to by several global policy makers. For example, the OECD states in 2015 that "the effectiveness and credibility of the entire corporate governance system and company oversight depend on institutional investors that can make informed use of their shareholder rights and effectively exercise their ownership functions in their investee companies".


Our role as institutional investors cannot be separated from the fiduciary duties assumed when we become responsible for managing funds on behalf of individuals or entities. We become the stewards of third parties' funds, meaning that we "take care" of the securities, which represent our assets. The responsible engagement in the activities of the issuers of securities is part of the institutional investors' fiduciary duty. Not necessarily activists, but certainly active players.

Over the past few years, institutional investors have held boards increasingly accountable for company performance and have demanded greater transparency and engagement with the management of companies. Our interest in more disclosure and interaction arises from the desire for improved performance, both on the part of boards and in terms of overall corporate governance.

Therefore the engagement of institutional investors with the issuers of invested securities is of utmost importance in order to improve the companies' governance practices. In several countries, such engagement was almost inexistent few years ago, whilst in recent years investors increasingly engage with companies to build understanding of own long-term strategy, performance in achieving it and how corporate culture supports it.

Increasingly, investors are paying attention also to wider ESG (Environmental-Social-Governance) performance, as evidence mounts that sustainability-related activities are material to the financial success of a company over time. Investors care more about sustainability issues than many executives believe. Therefore a growing number of investors are also now engaging with companies on ESG issues, in addition to traditional governance topics such as executive compensation, shareholder rights, and board of directors' topics.

Stewardship Principles

All these aspects have brought into focus the Stewardship Codes - incorporating relative Principles - the success of which has so far not been as significant as that of the Corporate Governance Codes, but encouragingly are now creating own momentum and buy-in.

At an individual company level, stewardship stimulates and promote high standards of corporate governance, contributing to sustainable value creation, thereby increasing the long-term return to investors and their beneficiaries. At an investor level, stewardship helps to preserve and enhance long-term value, as part of a responsible investment approach. This includes the consideration of wider ethical, environmental and social factors as core components of fiduciary duty. In a broader context, stewardship enhances overall financial market stability and economic growth.

The Stewardship Principles were developed to achieve a number of objectives: to ensure that investors fulfill their responsibilities to manage their investments, to stimulate investors to monitor and engage with the companies in which they invest; to increase the quantity and quality of engagement between companies and investors; to exercise their voting rights in a conscious and transparent manner and, not least, to help clients of asset managers differentiate between them by judging how they carry out their stewardship responsibilities. The Principles also encourage investors to explain their stewardship policies and practices, thereby aiming to improve transparency about their relationships with companies, including behaviours and values. All this, in order to integrate core stewardship practices into the asset management process.

Many jurisdictions share these views, which is evidenced in the proliferation of Stewardship Codes around the world. In Italy, the "Stewardship Principles for the Exercise of the Administrative and Voting Rights in Listed Companies" were defined by Assogestioni (the Italian Association of Investment Companies), with impetus from major investors, in line with the principles contained in the "Code for External Governance" approved by EFAMA (the European Fund and Asset Management Association), which induce the assumption of the role of responsible and active investors.

Eurizon Capital was one of the first signatories to the Italian Stewardship Principles. Eurizon Capital has an important focus on delivering superior, sustainable, risk adjusted returns for our clients - responsibly. In practice, this means delivering excellent, long-term investment performance, but doing so with an appreciation of the wider impacts that our investment decisions will have on the economy, environment and society - and thus ultimately on clients and the beneficiaries they represent. In 2015, Eurizon Capital was also the first Asset Management Company in Italy to intensify its monitoring of the external Corporate Governance by introducing a specialized resource, within the Corporate Affairs unit, that was tasked with the specific Stewardship activities.

At Eurizon Capital we have thus developed a more holistic approach that combines investment and corporate governance perspectives and that includes strengthened communications between the Corporate Governance team, Sustainability team and Portfolio Managers. Consequently, we have been adopting a considered and intelligent approach to voting that seeks to take account of key company-specific financial and non-financial matters and avoids a 'one-size-fits-all' mindset.

Change in culture

Of course, establishing a culture of stewardship by investors takes time, even while real progress is being made. By launching the Stewardship Principles, Assogestioni and other international investor associations seek to develop a stewardship culture in the country of reference, to promote a proprietary attitude among institutional investors and create responsible engagement standards. The development of stewardship activities by institutional investors will drive the adoption of good corporate governance practices, which will support value creation for companies, as active investors lead them to have more structured management processes mitigating potential risks. Stewardship principles prioritize the essence over the form.

This all requires a long-term perspective on the purpose of each company, its finance and also culture, values and corporate governance. By weaving a healthy corporate culture and governance into the business model, companies are not just contributing to the overall success of their own business, but creating an environment on which investors can rely. Stewardship leverages this, and in this way both companies and investors create sustained growth in the economy.


(*) Cristina Ungureanu is Head of Corporate Governance at Eurizon Capital SGR, the asset management company of Intesa Sanpaolo Bank group.
Before her role in Eurizon, she worked in international corporate and academic environments in South Africa, United Kingdom and Italy, providing high-level corporate governance consulting and research to a diverse range of institutions.
She holds a Bachelor Degree in Economics and Business Administration, a Master's Degree in International Affairs and a PhD in Finance and Banking. She is author of several publications on corporate governance and financial regulation and is often invited at international conferences to present on related topics.

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