Italian Corporate Governance: One American’s Perspective

Thursday, January 1st, 1998 at 12:00 am by Jonathan R. Macey
Jonathan R. Macey, Italian Corporate Governance: One American’s Perspective, 1998 Colum. Bus. L. Rev. 121

In recent years, the topic of corporate governance has received a tremendous amount of attention in Italy. In 1992, the Bank of Italy began a major research project, the goal of which was to analyze the extent of the corporate governance problems facing Italian companies, both large and small. Following completion of that project, the Bank of Italy has continued to place the topic of corporate governance high on its research agenda. Corporate governance is also frequently the subject of articles in the popular press, a trend that may have reached a high point in connection with the recent problems at Olivetti, the Ivrean information systems giant. Perhaps most importantly, the Italian Parliament is also studying corporate governance reform, and its work will undoubtedly be influenced by the work of the Bank of Italy, a highly prestigious and largely independent Italian institution. Corporate governance refers to the mechanisms and processes by which corporations are governed. At the most elementary level, corporate governance can be described as the processes by which investors attempt to minimize the transaction costs and agency costs associated with doing business within a firm. At first glance, it is not entirely obvious why the suppliers of capital get anything back. After all, they part with their money, and have little to contribute to the enterprise afterwards. The professional managers or entrepreneurs who run the firm might as well abscond with the money. Early academic discussions about corporate governance in the United States focused on such issues as the merits of the conglomerate merger and the hostile takeover as mechanisms for controlling agency costs. However, more recently, there has been renewed focus on the legal responsibilities of corporate boards of directors, and the efficacy of shareholder litigation as a mechanism for controlling agency costs. Serious comparative corporate governance is an even newer phenomenon for Americans. Of great interest recently has been the role played in corporate governance by institutional investors, particularly banks in the United States and abroad. While there is a tremendous amount of debate about specific details, over the past thirty years the broad outlines of a general consensus about corporate governance seems to have emerged.

Author Information

J. DuPratt White Professor of Law, and Director, John M. Olin Program in Law and Economics, Cornell Law School.