Goodbye, shareholders’ agreements. Hello, better ethics score. This is what happened for Pirelli. After breaking up the shareholders’ agreement at the end of October, Standard Ethics raised its outlook from “stable” to “positive” and made it known that the company’s ethics rating could improve further to “E+”. Transparency, efficiency and accountability call for rules and standards of operations that have a direct, positive correlation to business ethics and respect for the values that guide an open, effectively regulated market. Good culture of enterprise is also this, bringing the era of agreements between just a few shareholders so as to maintain the status quo and opening the way to better government based on merit and on market standards. Without these protective barriers, the opinions of the investors in a company are based on both its short-term and, above all, its long-term profitability, on its capacity for growth, and on its respect for a set of values concerning people, safety, quality and sustainability. These are abilities that need to be measured, openly, not protected behind systems of relationships, preferential agreements, privileges for the strongest allies, and the exchange of favours and mutual protections. Ethics as transparency, as greater responsibility, and as an awareness of needing to be judged and either rewarded or penalised.
For a long while, Italian capitalism has been a “capitalism of relationships”. The shareholders’ agreements that have been a peculiar feature of Italy’s economy under the direction of Mediobanca have, for too long, protected the major corporations from the risks of crises and from the invasive “public hand” that, from the major banks to the state-owned industries, acted in a manner far-removed from the rules of the open market. But at the same time, they have kept those hands tied, acting as a barrier against the inefficiencies and undue competition of an economy dependent upon “partitocracy”, thereby safeguarding what little was left of great private-sector enterprise. But they slowed the development of a true market economy in Italy, and now an era has come to an end. Of course, it will be up to the historians to pass judgment on Italy’s family-based capitalism (which often descended into a more pathological familism) and on the tangle of conservative powers and business relationships that, at times, crossed over into a sort of financial incest, not to mention on Enrico Cuccia’s Mediobanca, on the “salotto buono” (the clique of bankers, industrialists and politicians that dominated Italian economic life) and on the “grandi famiglie” (literally: great families). As we await the wisdom of hindsight, today what we know for certain is that that era has finally come to an end after a long, slow decline (which began with the crisis between Fiat and Mediobanca and with Cesare Romiti leaving at the helm of the auto manufacturer). Now, there is no shareholders’ agreement that holds water, whether it be at RCS, Generali, Mediobanca, or elsewhere.
We are at the dawning of a market economy, of business openness, of accountability, and we are working towards a true metamorphosis from the traditional family-based capitalism to one of enterprises open to new financial and industrial investors and to new relationships between the shareholders (including those of family origin) and company management. The “public company” is now beginning to be more modern and a clear indication of the way forward.
The financial markets have become open, too, rich with capital in search of a good home, and globalisation is opening the door to leaders willing to support good enterprise and who have solid plans for growth, for the conquest of new markets for products and services, and for improved profitability over time (and not just as short-term speculation). It is a world that has not now nor could ever have had anything to do with shareholder agreements.
The number of international investors showing interest in Italian businesses is on the rise (although, unfortunately, Italy is still lagging behind the rest of Europe in terms of attracting foreign investment). At Pirelli, 36% of its capital is in the hands of international institutional investors focused on long-term returns on their investment, up from 27% in 2011. The recent presentation to financial analysts in London of the business plan up to 2017, a plan that is based on “industry and technology”, on a “premium strategy” and on strengthening in more dynamic markets from the Far East and Russia to Latin America, has heightened the attention being paid to the company. A company that is innovative, open, responsible, efficient, transparent, and ready to be accountable to shareholders both old and new. These are values to be fostered, to be realised and to be conveyed to others. A choice for efficiency and for the culture of enterprise.