ABSTRACT
Andrea Melis suggests that unlike the US system summarized by Roe as “strong managers, weak owners,” in Italy the reality is almost the reverse with “weak managers, strong blockholders, and unprotected minority shareholders.” Since Italian company law has supported the certainty of majority control rather than the representation of minority interests, there has been little incentive for small investors to become involved in the stock market. Similarly Italian managers tend to be committed to the interests of majority blockholders rather than shareholders in general. These legal and managerial preferences can be explained by the very high concentration of ownership in Italy with the main shareholder owning on average 48 percent of the total shares in non-fi nancial listed companies in the mid-1990s. This direct ownership is further leveraged by the use of pyramid structures to further concentrate control with complex shareholding structures. The existence of a powerful blockholder allows the effective monitoring of management. However if the Anglo-American system is typifi ed by concerns regarding the abuse of executive power, the Italian system of governance is typifi ed by the potential abuse of power by blockholders. Some sectors of Italian industry such as fashion, design, textiles, footwear and ceramics have succeeded in becoming world leaders based on a networked, family-based mode of ownership and control that has allowed skill formation through many generations. Yet the bankruptcy of Parmalat in 2003 has exposed a similar disregard for accounting conventions as witnessed in the US, and focused attention on some of the manifest weaknesses in the Italian system of corporate governance.
