Doing business in Italy? Here’s what you need to know about governance changes

A client note from the law firm Latham & Watkins sets out some changes made to Italy’s corporate governance code. They mainly touch on sustainability and executive compensation.

Specifically, the changes come from the entry into force of EU Directive No. 2017/828 (i.e., the SHRD II) and the publication of the new Corporate Governance Code. The firm says that Italian-listed companies are increasingly focusing their attention on sustainability in corporate management, transparency in organizational structures, and shareholder engagement activities, in order to be more attractive to both domestic and foreign investors.

“Long-term sustainability, engagement, proportionality, and simplification are the four drivers of the 2020 Code,” the firm writes. Its takeaways:

• Starting from 2022 Italian listed companies will have to disclose, via the annual report on corporate governance and ownership structure, the measure and extent of the implementation of the new principles and recommendations under the 2020 Code.
• Boards are called to integrate business plans, internal control and risk management systems, as well as remuneration policies with appropriate sustainability goals.
• Companies should start reassessing and reviewing their governance structures, internal regulations, and corporate policies in order to be ready to introduce the necessary changes by the end of 2021.
• The new provisions relating to the shareholders’ votes on remuneration policy will apply starting from the upcoming general meetings season.
   You can read the entire client note here.