At a Board meeting held today, the Directors of Mediobanca reviewed the request made under Article 126-bis of Italian Legislative Decree 58/98 (the “Italian Finance Act”) on 28 September 2021 by shareholder Delfin for an item to be added to the agenda of the Annual General Meeting, as extraordinary business, to be held on 28 October 2021, on the following terms: “Amendments to Article 15, paragraphs 4, 9, and 15, to Article 18, paragraph 4, and to Article 23, paragraph 3, of the Articles of Association; ensuing and consequent resolutions”.
First of all, the Board of Directors assessed the request made by the shareholder Delfin for an additional item to be included in the agenda, to ascertain that it complies with the legal requirements in this area. The Board found that the request is legitimate, and conforms to the provisions set by the law, and accordingly has agreed to execute it, duly adding the item to the agenda as illustrated below.
Secondly, the Board of Directors noted that shareholder Delfin did not promote any prior engagement with the company but addressed the shareholders themselves directly, departing from what is now the consolidated best practice in relations between shareholders and listed companies. Such practice requires that the shareholder intending to present requests should embark first on constructive dialogue with the company, according to a timescale which is consistent with the prior commitments of the governing bodies and supervisory authorities, and approach shareholders directly only in cases where the Board fails to act promptly or does not agree to the request.
As to the proposals themselves, the Board of Directors agrees with the first request to delete the statutory provisions regarding the presence of members of the Group’s management on the Board of Directors. Such proposal, indeed, reflects the position that has developed since last year’s Annual General Meeting in the light of conversations entertained with proxy advisors and institutional investors, as part of a process aimed at standardizing the Bank’s governance with best practice. Indeed, it had already been scheduled for the AGM to be held in 2022 ahead of the Board’s reappointment scheduled for 2023. The Board agrees that it is appropriate to remove this condition, despite remaining firmly convinced that the presence of the Group’s managers as members of the Board of Directors (which in fact dates back to 1982) has been one of the strengths of the Bank’s governance, and may continue to be so in the future, because of the technical contribution they make to the Board’s discussions, thus helping to ensure that prudent, independent and informed decisions are taken.
Regarding the second proposal, to make changes to the list voting mechanism, the Board believes that Delfin’s proposal, applied specifically to Mediobanca’s ownership structure, is unable to guarantee representation for institutional investors, and for this reason is counter to:
- The trend in ownership structure: the composition of the shareholder base in listed companies which, as in the case of Mediobanca, do not have a controlling shareholder, has for some time now seen an increasing percentage of institutional investors, which now represent around 50% of Mediobanca’s share capital;
- The market’s ability to monitor the Bank’s performance, which Delfin itself has asserted;
- Delfin’s own stated objective of further diversifying its own composition by increasing the number of positions for minority representatives and the number of lists presented.
Delfin’s proposal raises the following issues:
- To set a fixed number (if more than two lists are submitted) of four minority representatives in a Board that may consist of a variable number of Directors ranging from 9 to 15, appears unbalanced. Whereas at the majority of Italian banks the minority list appoints less than 20% of the total number of Directors, with this proposal the minority representation on the Board of Mediobanca would rise to 36% if the Board consists of eleven members and 44% if it consists of nine members;
- The proposed formula for quorums, if certain circumstances occur, could lead to the exclusion of candidates proposed by representatives of institutional investors. If, for example, the list submitted by the Board itself ranks first in terms of the number of votes it receives, and two minority lists are submitted, the one which receives fewest votes (which could easily be the one representative of the market) would only have a candidate appointed Director if it receives at least one-quarter of the votes received by the first-ranking minority list and, without prejudice to the foregoing, a number of votes higher than 5% of the company’s capital. In scenarios such as this, the voting mechanism proposed by Delfin could result in at most one representative of the market being appointed to the Board, with the concrete possibility that all four of the Directors attributable to minorities are appointed from a single list;
- The 5% threshold proposed for appointing a Director from the second minority list reduces the possibility of members appointed by institutional investors being represented on the Board, and makes it more likely that the Board will represent shareholders with significant investments which do not, however, represent the broader ownership structure as a whole.
Nonetheless, the Board believes that the critical issues highlighted above can be overcome, and that the objectives identified by shareholder Delfin, in terms of ensuring increased representation for minority interests, can be achieved, and so has formulated an alternative proposal which:
- Assigns a variable number of positions on the Board to be allocated to minorities depending on the size of the Board itself, equal to 20% of the total number of members (a percentage which is above average for the banks listed on the FTSE-MIB), i.e. three Directors if the Board has at least 13 members. This percentage, unlike the proposal tabled by Delfin should, in the Board’s view, prevent excessive polarization between majority and minority shareholders, and promotes a constructive diversity in terms of the types of shareholders represented on the Board to the benefit of the Bank’s sound and prudent management;
- Ensures that the component representing institutional investors is included on the Board, by reserving one place to them even if the list submitted by them receives fewer votes than the lists submitted by other minority shareholders;
- Reduces the percentage of votes required to appoint a Director from the second minority list from 5% to 2% of the share capital.
Accordingly, the Board of Directors adopted a resolution to include the following additional item in the agenda for the Annual General Meeting to be held on 28 October 2021 as extraordinary business:
3. Amendments to Article 15, paragraphs 4, 9, and 15, to Article 18, paragraph 4, and to Article 23, paragraph 3, of the Articles of Association; ensuing and consequent resolutions,
Shareholders should note that the following proposals will be put to the vote in this order:
a. The proposal submitted by shareholder Delfin, and, if not approved,
b. The alternative proposal submitted by the Board of Directors.
The resolutions are subject to authorization by the ECB.
* * *
The following documents are available to the general public at websites mediobanca.com (section Governance/General Meetings/General Meeting 2021) and emarketstorage.com:
Illustrative report drawn up by shareholder Delfin in accordance with Article 126-bis, paragraph 4, of the Italian Finance Act;
Considerations of the Board of Directors of Mediobanca drawn up in accordance with Article 126-bis, paragraph 4, of the Italian Finance Act, including the proposed alternative resolution;
Notice of meeting for the Annual General Meeting, including the additional item referred to above;
Proxy forms, including the additional item number 3 on the agenda as extraordinary business, with an indication of the two proposed resolutions.
Milan, 8 October 2021