Chairman candidate says Telecom Italia must act as true public company

Reuters News
Posted: Mar 28, 2014 2:38 PM

By Lisa Jucca

MILAN (Reuters) - Giuseppe Recchi, the frontrunner to become chairman of Telecom Italia, said Italy's largest telecoms group by market value must act as a true public company and as chairman he would represent all shareholders equally.

In his first interview since he became a candidate for the post, Recchi, who will leave his job as chairman of oil major Eni if elected by Telecom Italia shareholders on April 16, said he would ensure good corporate governance practices.

The board of Telecom Italia, which has competitor Telefonica and three Italian financial institutions as its core shareholders, has been accused by investors of not caring for the interest of smaller shareholders.

"Telecom has to behave and act as a public company, because of the challenges in the industry and relevance for financial investors, in Italy and abroad," Recchi told Reuters.

"Our intent is to create value in the interest of all shareholders. There are no different types of shareholders, in my view. There is only one category of shareholders, which is 'all' shareholders".

Telefonica and its three allies, Generali, Intesa Sanpaolo and Mediobanca, are united in a shell company, called Telco, that owns 22.4 percent of Telecom Italia. The three financial investors have pledged to exit Telco, with Generali planning to leave it as early as June.

Telco presented a list of candidates for the next Telecom Italia board that sees Recchi as candidate for the chairmanship. Other shareholders have presented different lists of candidates but as Telco is the largest shareholder Recchi is considered the frontrunner for the job.

The current board of Telecom Italia was almost overthrown at a shareholder meeting in December as investors protested against what they said was a lack of transparency and chronic share underperformance at the debt-laden group.

To address these concerns, Telecom is pushing through a reform of its governance.

"Telecom is emerging from turbulent times in terms of governance. Governance is today of crucial importance...a key part of the board's value-creation proposition," said Recchi.

The relationship with Telefonica, which has the option to further boost its indirect Telecom Italia stake, is crucial to the future of the Italian group. A big question marks hangs over a possible sale of TIM Brazil, one of Telecom Italia's most lucrative assets, but also a rival to Telefonica.

"I consider Telefonica a shareholder like others. Its industrial expertise could be very useful if it provides value to Telecom Italia," Recchi said.

Knight Vinke, a U.S. activist investor which until recently had a stake in Eni, said Recchi had proved his independence.

"In his role as Chairman of Eni he has certainly represented the interests of all shareholders," said David Trenchard, Vice Chairman of Knight Vinke Asset Management.

The boards of Italian state-owned companies are also coming under increased scrutiny. Over the next few weeks, the top brass of dozens of state-owned firms, including Eni, will be renewed as is customary in Italy every three years, with the Treasury presenting a list of candidates for the board to be voted on at the annual general meeting.

Corporate governance experts have complained that political affiliation, rather than professional experience, have played the key role when these 500 board and committee posts come up.

"It is true that in the past the logic of nominations were linked to political decisions. But this happened in the far past. This is no longer an era of state-owned monopolies," said Recchi.

Recchi, who was a top executive at U.S. giant GE, noted his nomination at Eni was already a break from the past.

In efforts to clean up Italy's corporate image and make the country a better place to do business, the government of Matteo Renzi has told state-owned companies they must eject board members who have been indicted or convicted.

This policy, Recchi said, would carry some risks.

"There are many examples of people who have been indicted and then resulted fully innocent. It is a fact that in Italy, the judicial system is very lengthy and sometimes dysfunctional."

(Editing by Alessandra Galloni and Elaine Hardcastle)