A Big Win for Italy as Its Old Boys Club Goes Down to Defeat

(Bloomberg Opinion) -- When it finally took place on April 29, the much-heralded showdown at the annual general meeting of Assicurazioni Generali SpA, Italy's largest insurer, did not produce fireworks or much drama. Shareholders voted to give a third term to Chief Executive Officer Philippe Donnet, a Frenchman who has led the company since 2016. It was a relatively easy victory over dissidents led by two of the country's most famous tycoons: Francesco Caltagirone, 79, who presides over an enormous construction empire, and Leonardo del Vecchio, 86, founder of Luxottica, the biggest eyewear maker in the world (including the Ray-Ban and Oakley brands).

But the significance of the results should not be discounted. It is a victory for transparent corporate governance in Italy. That is to be celebrated because it means there might be more reforms to come.

One striking takeaway from the squabble is that it signals that global institutional investors now have the upper hand in Italy. According to a breakdown of voting, institutional investors overwhelmingly voted for Generali's Donnet and the existing board. Among them: Norges Bank Investment Management, one of the main institutional investors in Generali with a stake of around 1.4%; ISS Special Situations Research; and Glass Lewis. Overcoming Italy's wealthy clique of investors is crucial. It signals a tidal change in the country's business status quo.

Generali has been at the apex of Italian crony capitalism for decades. Board after board has been unsettled by decades of parlor games and cloak-and-dagger infighting — the kind of instability inherent in the Italian sistema of cross-shareholding and clubby influence that has discouraged institutional investors from committing to the euro-zone's third largest economy. It has kept the most talented executives from even considering taking a job in Italy, or sticking with it.

Generali was one of the many chess pieces in the provincial world of Italian finance centered on Milan. And because of that, it's been relegated to provincial importance in the world of finance. Today, the insurer's 29 billion-euro ($30.56 billion) market capitalization is half of France's Axa and just about a third of Germany's Allianz SE. Two decades, ago it was a close rival of both.

Caltagirone and Del Vecchio, were right in complaining Generali under Donnet had missed opportunities. But the ego-driven opera buffa way of business, which these score-settling dramas ultimately resemble as they play out in the press, is part of the problem. The latest wrangle involved months of off-the-record briefings and unattributed leaks about a boardroom bust-up as various operatives in the company took sides in the feud between Donnet and the dissidents.

A decade ago, Caltagirone and Del Vecchio were caught up on the ouster of Generali President Cesare Geronzi and another CEO, Giovanni Perissinotto. Mario Greco, who is considered the most capable CEO of Generali in recent years, served only one term because he became irritated by the jockeying for influence over him by big shareholders. Greco is now the boss of Zurich Insurance Group AG.

Given the outsize egos involved, the drama could move on to another stage: Mediobanca Banca di Credito Finanziario SpA, which owns a major part of Generali. Del Vecchio is Mediobanca's biggest shareholder and he may just turn his focus to its management and, specifically, its stake in Generali. Caltagirone may have a supporting role in the next opera buffa: he has about 3% of the bank, too.

All that might just lead to the transformation of Mediobanca, itself an established player in Milan. Its 11% stake in Generali is a potent reminder of its central role in the web of cross-shareholdings meant to protect Italian companies from foreign takeover after World War II. If Mediobanca were to cut that stake, it would extricate Generali even more from the internecine strife of Milanese finance.

In any event, Italy's cozy, cliquey capitalism is finally playing itself out.

More from This Writer and Others at Bloomberg Opinion:

No More Time for Extend and Pretend on Monte Paschi: Rachel Sanderson
When $1 Billion Tech Unicorns Start to Look Like Ponies: Lionel Laurent
John Paulson's Piano Man Gig Pays Off With Steinway IPO: Chris Bryant

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Rachel Sanderson was Milan correspondent for the Financial Times from 2010 to 2020. She has also written about Italy for the Economist and reported for Reuters and Reuters TV from Rome, Paris and London.