What's wrong with the system? The case of Italy

"Stewardship" is all the rage now. Investors are supposed to be taking more interest in the companies in which they invest. There's a need for dialogue between companies and shareholders, and – is it first and foremost, or last but not least? – shareholders need to vote. Well, they can't, not always. The European Union has been trying to enact measures that tear down some of the barriers to voting, harmonise procedures in different countries and, simply put, get rid of some of the cost and hassle of voting. A working paper from a pair of academics in the US looks specifically at one of the reputed worst places for shareholder voting – Italy. Notwithstanding the 2007 EU Shareholder Rights Directive, Italy maintains voting impediments that have the dual effect of a) putting investors off voting, and because of that b) put them off investing. It raises the cost of capital, gums up the financial system, and puts Italy in a worse competitive position. The paper suggests that moving to a centralised or "direct" share registration system would reduce voting-chain complexity, and highlights examples from the Nordic countries where their use reduces so-called "empty" voting, too.

Source document: The working paper "Reforming Share-Voting Systems: The Case of Italy," by B. Espen Eckbo and Guilia Paone of the Tuck School at Dartmouth, is a 21-page pdf file.