Italian governance code calls for at least two outside directors

Italian boards should have at least two independent directors, clawback clauses should be universal in compensation regimes, and press releases announcing the firing of executives should fully explain the process leading to the termination under changes to the corporate governance code of Italy’s main stock exchange.

The code, maintained by the Borsa Italiana and the Italian Corporate Governance Committee, which includes several issuers and investor associations, also recommends companies explain individually to investors each case of non-compliance with Italian law or the voluntary corporate governance code.

The changes to the code, most of which take effect on January 1, 2015, stipulate that a press release be issued to announce the termination of employment of an executive director or general manager, fully describing the process that led to the termination. The release should also include details of severance payments, benefits, non-competition clauses, ongoing rights to incentive plans, and more.

It should further ‘include information as to whether the replacement of the ceased executive director or general manager is governed by any succession plan adopted by the company,’ according to an informally translated copy of the code.

The code seeks to safeguard the independence of independent directors, calling for evaluation by the entire board of directors at least once a year for any relationships or other matters that could affect the directors’ impartiality.