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Corporate Governance Models

The Corporate Governance: What it is

Corporate governance is the set of company tools, rules, relations, processes and systems designed for the fair and efficient management of the enterprise, meant as a compensation system among the potentially divergent interests of the minority shareholders, the controlling shareholders, and the directors of a company. Hence the corporate governance structure expresses the rules and processes for company decision-making, the procedures for setting the company's objectives, and the means for attaining and measuring the results achieved.

There several different governance models, depending on the degree of capitalism in which the company operates. The liberal model, typical of the English-speaking countries, gives priority to shareholders’ interests. The model prevalent in continental Europe and Japan also recognizes the interests of the workers, managers, suppliers, customers, and society.

The rules of corporate governance are based on both the laws and regulations in the legal framework of the country in which the company operates, and its own bylaws. Relations include those among the actors involved in the company: the owners (shareholders), the managers, the directors, the regulatory authorities, the employees, and the company in the wide sense. The processes and systems refer to mechanisms of delegation of powers, performance measuring, security, reporting, and accounting.

Usually three different corporate governance systems are distinguished for joint-stock companies.

The ordinary system, typical of the Italian tradition, is applied in the absence of a different selection as per the bylaws. This system calls for the presence of an administrative body (a Sole Director or a Board of Directors whose number of members is determined by the shareholders’ meeting, unless set in the bylaws) and a Control Body (the Board of Statutory Auditors).

The two-tier system, typical of the German tradition (and the only direction and control system for joint-stock companies) and later adopted by other European countries such as France, the Netherlands, and Finland (where, however, it is optional), by which the company’s administration is divided into two different bodies, the management board and the supervisory board.

There must be at least two members of the management board, whose terms of office may not exceed three financial years and they may be removed at any time by the supervisory board. They are subject to the same responsibilities as directors.

There must be at least three members of the supervisory board, they are appointed by the shareholders’ meeting for three financial years (the shareholders’ meeting also appoints its chairman) and their terms are renewable. The shareholders’ meeting may remove them at any time.

The one-tier system, typical of the English-speaking country tradition, where management is assigned to a single board, the board of directors, among whose members a control committee is appointed.

Corporate Governance models: The three models

Governance at Hera

Hera adheres to the principles contained in the new Self-Regulatory Code drafted by the Borsa Italiana S.p.A. Corporate Governance Committee and published in March 2006, containing a detailed series of recommendations on the procedures and rules for the management and control of listed companies.

The company is governed by a Board of Directors consisting of 18 members.

The Board of Statutory Auditors - i.e. the company body that monitors fair administration, and in particular the adequacy of the organizational, administrative, and accounting set-up adopted by the directors and its actual performance - consists of five members, of whom three acting members and two alternate members. The terms of office for the members of both the Board of Directors and the Board of Statutory Auditors is three financial years, specifically until the date that the Shareholders’ Meeting approves the financial statements as at 31 December 2010.

Page updated 10 january 2014

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