Research Handbooks in Corporate Law and Governance series
Edited by Randall S. Thomas and Jennifer G. Hill
Chapter 24: Director and Executive Compensation Regulations for Italian Listed and Closed Corporations
Carlo Amatucci and Manlio Lubrano di Scorpaniello 1 INTRODUCTION The aim of this chapter is to examine the regulation of director and executive compensation in Italy in the context of both public listed corporations and unlisted corporations. As will be discussed, a complex array of laws, regulations, corporate governance principles and stock exchange rules affect this issue in Italian corporations. Many Italian corporate law scholars (Bonafini 2005a; Cappiello 2003; Ferrarini 2005) agree on the importance of performance-based pay as a mechanism to align the interests of corporate directors and managers with those of shareholders, particularly in the case of listed corporations that have a clear separation between ownership and control. The Italian Securities and Exchange Commission (“Consob”), Italy’s main corporate regulator, also takes this view. Yet, the basic concept of interest alignment can itself be problematical. For example, in 2007 Consob noted in a consultation document that “compensation plans could, on the one hand, be considered a potential means of giving top managers excessive compensation, and on the other hand be considered as incentives for managers and directors to make business decisions that are not in the interest of shareholders, or even an incentive to commit fraud and manipulate markets” (Consob 2007). Consob’s warning was given added force by the onset the global financial crisis. The Financial Stability Board (“FSB”) considered compensation practices at large financial institutions to be a contributing factor to the crisis, stating that “[h]igh short-term profits led to generous bonus payments to employees without adequate...
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