Mediobanca CEO calls for changes to Italy's capital markets bill

By Gianluca Semeraro and Giuseppe Fonte

MILAN (Reuters) - Mediobanca's CEO on Friday urged the Italian government to make changes to its capital markets legislation, because plans to give investors more power over the way a company's outgoing board presents candidates for the next term are unworkable.

The bill includes several measures to attract companies to the Milan stock exchange, which has lost a string of prominent companies to other markets and to buyouts.

But representatives of investment funds and Italy's financial industry have all voiced concerns that measures boosting the influence of leading shareholders in listed companies could backfire and discourage foreign investment.

"It is a legislation that will be difficult to implement or will require corrective action if it is to be enforceable," Mediobanca chief executive Alberto Nagel said while presenting the bank's first-half results.

A list of candidates championed by a company's outgoing board is common practice in other countries and has recently been adopted by some leading Italian companies, including Mediobanca, insurer Generali and UniCredit.

In Italy it has been more common for shareholders to directly propose the new board candidates.

Under the bill, approved by the lower house of parliament this week, the board's list of candidates will need approval by at least two-thirds of directors, which critics say could give minority shareholders veto powers.

The bill also introduces a second vote on individual candidates once the board's overall list wins sufficient votes by shareholders to be chosen.

Lawyers say the bill is ambiguous and it is not clear whether all shareholders can participate in the second ballot or only those who took part in the first one, or even only those who voted for the list of board candidates that got the most votes.

"If we were in a situation where the board's list came first in the vote, there would be no automatic certainty of the election of the chairman and CEO indicated," Nagel said.

The scheme was championed by businessman Francesco Gaetano Caltagirone, who has tried to shake up management at Italian insurer Generali, where he is the third biggest shareholder.

Generali Chief Executive Philippe Donnet said in a newspaper interview in November the legislation could make large listed groups unmanageable.

Prime Minister Giorgia Meloni, who supports the provision, has said it would curb the practice of directors getting re-appointed indefinitely with little regard for shareholders.

The new rules, which are expected to be passed by the upper house of parliament in the next few weeks, will become effective in 2025. Companies, including Generali, whose board comes up for renewal next year, will have to amend their bylaws to comply with them.

(Editing by Gavin Jones and Jane Merriman)