guys, in class we talked about contestability of control and hostile takeover, i was wondering why in this case it's difficult that a hostile takeover will happen?
I believe that, in this case, it is almost impossible to have an hostile takeover as the controlling party is clearly defined and owns much more than the "safe" 50+1%. Furthermore, realizing an hostile takeover will mean buying shares from Delfin s.a.r.l. without the consent of who controls it. That will probably sound a little bit strange.
This company is controlled de jure by one owner, so it is impossible to acquire the majority of the shares without his consensus. Only a friendly takeover (thus an agreement with the owner) can be possible in this case.
As one of the most common ways throught which takeovers take place are proxy fights, where the acquiring firm attempts to persuade the company shareholders to replace management with a new which will approve the takeover, in this case is very diffcult that this can happen. In fact, Delfin SARL , which is owned by Del Vecchio himself, who's part of Luxottica top management, has a huge amount of shares ((67,83 %) , therefore a bidder could only acquire a 33% which will not provide him with the needed majority.
I agree with you. Since Del Vecchio controls the 67,83% of the shares, hostile takeovers would be ineffective because nobody can acquire a sufficient number of shares for the control of the company. We have instead a risk of an hostile takeover when the company is control by a person that owns less than the 50% plus 1 of the shares.
Yeah, I agree with you. Luxottica is controlled by Delfin S.a.r.l, who owns 67.83% of the shares; this company is totally controlled by Del Vecchio, so we can say that Del Vecchio controls also Luxottica. He is both the owner and the Chairman of the BoD, so it is impossible to launch a hostile takeover because nobody else can acquire shares in order to have the control of the company.
Since Del Vecchio family controls Luxottica through Delfin s.a.r.l. with 67,83%, it will be impossible to launch an hostile takeover. Here there is NOT control contestability, and therefore it will be impossible to buy shares of the direct controlling party, without Del Vecchio family's consensus. As expressed by Federica, the remaining percentages however will not be enough to obtain the majority.
I agree, an Hostile takeover in this case is not possible because Del Vecchio through Delfin s.a.r.l.owns more than 50% of shares and He is part of the top management so it's impossible to obtain the majority of shares without his consensus.
In this case it is not possible to launch an hostile takeover since Del Vecchio owns 67,83% and no one could be able to acquire the shares for controlling the company.
I agree with you, an hostile takeover in this case is not possible since Leonardo Del Vecchio owns more than 50% of the shares of Luxottica, since he controls Delfin (i.e. de jure control). I'd like to add only one consideration on the hostile takeover potential benefit. In fact it can be an important instrument to monitor the management performance in public companies, where the control is in the hand of the management and there is not an ultimate controlling party able to exercise the power of governing. In this situation managers know that, if the don't satisfy the interests of the shareholders the can exercise the "exit power", selling their shares. In this way the price of the shares could fall down and an investor could take the advantage, buying enough shares to get the control and fire the Board members, including managers.
More than 50% of the shares are in the hand of one single shareholder, so it is impossible to launch an hostile takeover unless the controlling party will give up
In this situation It is not possible to have a hostile takeover because Del Vecchio, through Delfin S.a.r.l., has de Jure Control of the company. The only way for an investor who wants to take the control of the company is through a negotiation with the major shareholder , after having informed the Board of Directors of his/her will.
In this situation, an hostile takeover is not possible because Del Vecchio is the ultimate controlling party of Luxottica and also its chaiman, so it is impossible to obtain the majority of the ownership without his consesuos.
In this case there is not control contestability. Del Vecchio Family controls Luxottica through Delfin (67.83%). Thus an hostile takeover can not take place. In practical terms ,to buy the shares of the controlling party it is needed the Del vecchio family approval.
Because to make an hostile takeover you have to buy all the shares that make you able to have the control. In this case it is quite difficult because a hostile takeover should be against Del Vecchio but he owns 67.83% of shares through DELFIN SARL and he is also the chairman, so it is impossible to have the control of Luxottica if Del Vecchio does not agree. This situation is not good for the market.
Remaining in the field of hostility, there is no chance for such a takeover to happen. This could have been possible if the ownership structure of Delfin S.a.r.l. was different. In that case, an hostile takeover could have taken place via Delfin in a very complex, costly and risky operation.
A question for you! As we know the BoD role is mainly to monitor the management, but researches have found that often there are few mechanism of control and managers do not feel to be addressed by them and even when they need to ask for more defined requirements by the board, members seem to be not well prepared on the agenda. this happens because bod members are often interlocking directors or they result to be busy. how do you think that this problem can be avoided?
QUESTION. Mr X represents the major shareholder of the company A. Mr X is also the Chairman of the BoD. Provide me a proper reason to appoint a Lead Independent Director.
One way that is adopted by Valero Energy Corporation, that is our case-study, is to make sure that the candidates for the directorship can dedicate enough time to work effectively and efficiently in the BoD. This rule is clearly indicated in the statute.
Since Luxottica is controlled by Delfin S.a.r.l, who owns 67.83% of the shares we can say that this company is controlled by Del Vecchio, so Del Vecchio controls also Luxottica. Is not possible to launch a hostile takeover because Del Vecchio is the owner and Chairman, so nobody else can acquire shares in order to get the control of the company.
in this case it is quite impossible to make an hostile takeover because Leonardo Del Vecchio owns more than 50% of the shares of Luxottica, and he controls Delfin by de jure (which is also the chairman)
In this situation it's not possible to make an hostile takeover, due to the fact that, The company is totally controlled by Del Vecchio, Luxottica with 67.83% of share and unless it would be approved by the Del vecchio family.
Guys, I would like to ask you a question if you have heard about the recent events in luxottica. Notice that some Guerra was the CEO of the company, after him Cavatorta (ex CFO) took his place. Recently Cavatorta left. Behind those events there is Leonardo Del Vecchio (the owner). My question is: Do you guys think that an ex CFO could be a good CEO? Are those elements a way to indicate that in luxottica everything is fully decided by the owner, sometimes overlaping competences? Can it be dangereus?
In this case it is not possible to launch an hostile takeover because Del Vecchio holds 67,83% of the total equity and so no one could be able to acquire a sufficient number of shares for the control of the company. Typically we have risks of hostile takovers when a company is controlled by a person that owns less than 50% of the shares.
The major shareholder owns almost 70% of the shares, this to take over this percentage means a considerable financial effort in order to be able to take over. A hostile take over is not impossible, however, highly difficult in the light of the high amount of shares owned by one shareholder.
As we know from the lessons, hostile takeover is not possible in case of ownership more than 50% shares. It is often related to italian companies where the owner is often a family, as also in this situation - Luxottica is the major shareholder, this hostile takeover is impossible.
Leonardo Del Vecchio is the controlling party because he owns the 67.83% of shares representing the delfin s.a.r.l, being the ultimate controlling party, chairman and inside the board of directors, it's important that the CEO will be independent because in this way it will be avoided the possibility that the leading director will pursue personal interests of the chairman.
Yes it does. Since Leonardo Del Vecchio is also the controlling party of Delfin s.a.r.l. (Major shareholder of Luxottica with 67.83% of shares), Luxottica's board of directors must have a lead independent director according to the italian legislation (when the office of chairman is held by person controlling the issuer, then a lead independent director is required).
Yes, Luxottica definitely needs a lead indipendent director to avoid agency problems to arise. In fact this is the case in which there is an identity between the chairman of the firm, the one who sets the tone in the BOD, and the controlling party, the one who owns the majority of shares in the company, and this situation , according to the italian legislation, requires at least one indipendent director to assure neutrality. Leonardo del Vecchio, as we can see from the graph, a part fom being chairman of Luxottioca, also controls it throught Delfin SARL of which he owns the majority of shares.
I agree with my colleagues, since the ultimate controlling party of the company is also chairman of the Board of directors, according to the italian legiglation on corporate governance, issues by Borsa Italiana, the company need a lead independent director. In fact the chairman of the board has a pivotal role, especially in spreading information among all the other directors, and thus the controlling party of a company should not be also the chairman of the BoD (cause he could use this authority to pursue his personal interests)
Of course Luxottica needs an independent director. For example independent directors can offer financial, technical, and/or strategic advice to the operational officers of the company.
In accordance to the Italian Corporate Governance Code, if the office of chairman is held by the person controlling the issuer as it is in this particular case then the board SHOULD designate a lead independent director. I stressed the verb "should" since the decision is up to the company itself and therefore it does not represent a compulsory procedure.
For sure, the reason why Luxottica BoD would be strongly recommended to appoint a lead independent director is to assure the market that the risk of extracting private benefit is mitigated by the appointment of an independent BoD member, viewed in the light of Majortiy Shareholder vs Minority ones.
Yes, Luxottica needs an independent director. The Italian corporate governance code states that the lead director should be independent in two situation. The first one in which there is coicidence between CEO and Chairman (CEO duality) is not relevant in our case, since Andrea Guerra is the CEO and Leonardo del Vecchio is the Chairman. Secondly a company needs a lead independent director when the Chairman controls the company. In our case Leonardo Del Vecchio (Chairman) controls Luxottica via Delfin, so the firm absolutely needs a lead independent director.
Yes, the Company needs a lead indipendent director. According to the Italian corporate governance cose indeed, this is one of the two circumstances in which there is a need for a lead indipendent director: Del Vecchio, the ultimate controlling party, is also the Chairmain of the Company's Board.
In Luxottica, Del Vecchio represents both the Chairman of the BoD and the owner of the company (CEO duality). According to the Italian corporate governance code, the Board shall designate an independent director when this determined situation occurs. So Luxottica needs an independent director. Moreover, in order to avoid and monitor the related-party transactions it's important to have an independent person within the board.
I completely agree with my colleagues. Since the Chairman (Leonardo del Vecchio) is at the same time the ultimate controlling party of Luxottica, through Delfin s.a.r.l., according to the Italian Corporate Governance Code, there is the need of a lead independent director!
To begin with, I agree with colleagues's comments,yes,a lead independent director might be necessary in this case as suggested in the Italian corporate governance code in the event of the chairman of the BOD " Leonardo Del Vecchio" featured the ultimate controlling power of which leads to no separation between control and management, thus for better protection of non executives and other independent directors. However, it is not mandatory in compliance issue just suggestions from the code respects.
Yes it definitely need an independent director because the ultimate owner of the company is also the chairman. So there is no separation between the management and control. And this might affect his judgments later on.
The ultimate owner of the company is also the chairman, so there is no separation between the management and control, and this might affect his decisions later on. So yes indeed they do need a lead independent director.
In my view, yes, the company needs a lead indipendent director. By helping directors reach consensus, and by keeping board matters on track, he could help ensure board relations run smoothly.
We know that a company needs a lead independent director in two circumstances: 1) in the event that the chairman of the board of directors is the CEO of the company; 2) in the event that the office of chairman is held by the person controlling the issuer. So, in the case of Luxottica, Del Vecchio controls Luxottica through Delfin and he is at the same time the chairman. For this reason, Luxottica shall designate an independent director.
According to the italian corporate governance code, issues by Borsa Italiana, this company need a lead independent director, since the ultimate controlling party (Del Vecchio) of the company is also chairman of the Board of directors. Thus, we are in a situation (I) in which is required to have a lead independent director. Even if this code is not mandatory, company should follow its principles in order to implement the best corporate governance system.
Yes,it needs a lead independent director because as stated by the Italian Corporate Governance code the office of chairman is held by the ultimate owner and so the Bod should designate a lead independent director. It's not mandatory,but this office can represent a point for the independent directors and can guarantee that directors are prompty informed.
Of course Luxottica needs a Lead Independent Director among BoD, due to the possible conflict of interest from the figure of Leonardo DelVecchio (the italian legislation says that a firm must have a lead independent director if the chairman is also the ultimate controlling party).
Yes it needs an independent director because the ultimate owner of the company is already the chairman. So there is no separation between the management and ownership. and this may create a conflict of interest
The answer is yes, because the ultimate controlling party of the company is also the chairman. But the italian legislation does not impose it, but it is just a recommendation.
yes Luxottica needs an indipendent CEO since, as stated in the Italian corporate governace code, in this case the chairman is also the ultimate controlling party.
A lead independent director is needed both when there is the CEO duality and when the ultimate controlling party is the chairman of the board. In this case we have the second one condition. So, yes it should need but it does not mean that it will be done.
As Alberto said, we could discuss the need, but there is no evident obligation to do that according to the Italian Law. If I'm not wrong, the Italian CG legislation neither obliges you to tell why you are chosing a different path, like the german one. Personally, I think that an Independet director is avisable in case like this, because CEO duality may bring relevant agency problems.
I would like to add a simple consideration. In the luxottica case, we cannot exclude that the choice to put the controller to do chairman and CEO, is not ponderated and welcomed also by the other major shareholders. We keep talking about theory, but in the reality of facts if you give a look to Del Vecchio's biography you will discover that he spent an entire life in the glasses manufacturing (being the founder of luxottica himself). What I want to stress is that he MAY be the right person to be the CEO (as well) right now. As we can imagine, his son will (the other is not in the board "yet"), most probably, take the control of the firm as chairman so it is difficult that this "duality" will last any longer.
Yes it is required because the same person is both CEO and ultimate owner. This role is increasing in importance in recent times and often the lead independent director is strongly recommended also when CEO and/or ultimate owner and chairman are splitted, even if in italy it is not quite common in this case.
Yes, this company need a lead independent director because the ultimate controlling party that is Del Vecchio, is also chairman of the Board of directors.
Yes. it's In the luxottica case we can see that Del Vecchio represents both the Chairman of the BoD and the ultimate owner of the company so we can clearly see that CEO duality and the company needs a lead independent director.
Definitely agree with you guys.The Italian corporate governance code states two cases where lead independent is needed.The second case is applicable in this situation. This because Leonardo Del Vecchio ( the Chairman) controls Luxottica via Delfin, so the firm absolutely needs a lead independent director.
Anyone of you can bring examples of a company that needs a lead independent director according to the first provvision of the italian co.go. code? That basically states the need for lead independent director if there is coicidence between CEO and Chairman (CEO duality).
The need for an independent director is high in this case. The reason why Luxottica would be recommended to appoint somebody like this is to assure that the agency problem does not arise and the director act to his own benefit, extracting revenues to his own account.
In this situation we have no separation between direction and control, Leonardo Del Vecchio is the Board Member and Top Manager in the same time, it means there is a threat of agency problem because of less external control. Thus, of course, an independent director is necessary in this case.
In personal view absolutely yes, Luxottica needs an indipendent CEO since, as stated in the Italian code, in this case the chairman is also the ultimate controlling party. And the is obligatory to set an independent director
Yes, because according to the italian corporate governace code when the office of chairman is held by the person who controlling the issuer, then a lead independent director is required.
Yes, I agree with your comments, independent director might be necessary in this case that leads to no separation between control and management, thus for better protection of non executives and other independent directors.
What is the position of Claudio Del Vecchio within the board? Is it normal that he will sit next to a (probable) relative who is also Chairman and the one who controls Luxottica?
I think it's quite a normal situation in Italy. We can also see such a situation in fiat, or in any of the companies held by the Berlusconi family. Obviously being a member of the Del Vecchio family, the group who controls luxottica, Claudio Del Vecchio couldn't be an independent director.
Claudio del Vecchio does not result to be an indipendent director because he's Leonardo Del Vecchio son, therefore one of the condition necessay for a director to be considered indipendent is not accomplished :"not to be a member, or an IMMEDIATE FAMILY MEMBER of a member, of the mangement of the company( Leonardo Del Vecchio is top management chairman).
Of course Claudio Del Vecchio is not independent. In Italy we have a lot of company in which we can find these situations. Fathers that put in the company sons and other relatives.
I guess that This Italian top managers behaviour is often based on 'a kind of trust' instead of real capability... that's why there are so many family members on the top!
Yes it is. It's very common to find in Italian companies, situations in which a board member is a family member of the Chairman. In this case, Claudio Del Vecchio does not respect the criteria to be considered an indipendent director, indeed, its role is as 'Non executive' director.
Claudio Del Vecchio is a board member, but he's not independent because he breaks the rule to be an independent member which is you cant be a member or an immediate family member of a member of the management of the company, so he is not independent.
Claudio Del Vecchio is a board member, but he's not independent. However, he is an immediate family member of a member of the management of the company, so he is not independent.
In my opinion it's a absolutely normal situation here in Italy. Del Vecchio family controls Luxottica through Delfin, so it is normal to see relatives that sit together in the board of directors. How you can see, Claudio Del Vecchio is a non-executive director, and he has not the legal requirements for being independent.
I think this is a normal situation that we have in Italy. Since the major shareholder has the power to appoint the directors, we can imagine that he will surround himself with people he trusts in.
Yes it is. In italy especially. anyway he is a non executive director. Usually this category is composed by independent directors and affiliated outside directors. He cannot be an independent director because he is a relative of Leonardo Del Vecchio so he will be for sure an affiliated outside director.
His position is simply a non-executive non-independent director (Probability is 100% in this case, as he's ultimate controlling party's son). He is non-executive most probably because of the lack of technical experience he has in the field and that the father has instead, but this will not avoid him and his brother Leonardo, to inherite the control of the company in the near future.
Since the ultimate owner also holds the position of Chairman there is no doubt that there no exists a substantial separation between ownership and management. Moreover, to strenghten the grip of the family on the management of the organization, relatives and or close friends are usually appointed as in the case of Claudio del Vecchio. In view there is nothing strange in the appointment of Claudio del Vecchio since it is quite trivial to observe that the willingness of the family is to get involved in the business.
I agree with Gian Marco D'urso: Claudio Del Vecchio is a non-executive and non-indipendent director. Moreover, as already pointed out in Italy, where there are a lot of family-owned companies, this is not a weird way of designing the board.
Yes even if Claudio Del Vecchio is a board member, and also one of the immediate family member that manage the company as you can see above Claudio Del Vecchio is not independent director.
Well, as my collegaues said, Claudio Del is a non executive and not independent. We know that in italy it is quite normal situations on wich relatives put on high positons on companies. A think that the owner put Claudio Del Vecchio in the board for two reasons: 1) increase effectivenes of company control by the owner 2) learn how to be a owner since company is thought to still remain familiar
Because the chairman is not independent. He might take certain steps that are only for his favour and not for the favour of the company and he might not give all the details for the board because he might be afraid that he might get caught one day. Just like the agency theory said, its not good to have all the control in one hand.
I agree with Sandy, having no separation between control and management can be detrimental becuase too much power is given to Leonardo Del Vecchio (he is the ultimate owner and the chairman of the board). So, there is a higher risk that he will not be fair in leading the board directors and that he will lead for his own interests.
I think that, due to the absence of separation between control and management, the risk is that strategic decisions and performances of the management would only reflect the interests of the ultimate controlling party. This, for example, could discourage potential investors in buying shares, since they fear that their interests will not be protected in the right way.
Because, in this case (and in similar cases of course) the Non-Independence of Leonardo DelVecchio within the board of directors (he is Chairman but also Ultimate Owner through DELFIN S.a.r.l.) could deliver a Conflict of Interest, meaning that as Chairman and Owner he can exploit private benefits, and this situation, in most cases, is detrimental for minority shareholders.
The lack of separation between the management and the control might compromise the independence of the directors that are meant to serve the interests of the shareholders. Thus, there exists large room for extracting private benefit at the expense of shareholders with the tacit consent of the BoD that has been appointed by the major shareholder itself.
Well the absence of separation between control and management may be a problem for the firm life. Corporation's duration is supposed to be independent from the controlling party's life. Thus the decisions taken may reflect a person/family moment. Moreover, the absence of separation may detrimental of company performance since being a manager of a corporation just because you are a family member does not imply you are a proper manager.
Because we have the second type of agency problem that is about the conflict between the major shareholder and the minorities but also we have a conflict of interest because Leonardo Del Vecchio is the ultimate controlling party and is the chairman of the board. But it does not mean that it is detrimental for the firm. In fact that is just detrimental if Del Vecchio looks at its private interests going against with the interests of the firm.
Probably because if there is no separation between ownership and control the only interest is that of the ultimate controlling party, in this case Del Vecchio family. Some years ago the chairman have also created a new foundation to ensure the company shares to his heirs, a clear example of management policy oriented to the satisfaction of Del Vecchio family needs. It's just of today the announcement about the Ceo resignation, Enrico Cavatorta, ( appointed only one month ago) due to the presence of external consultant close to the family in the management of the firm with the result of a 10% loss on the stock market.
Guys, be careful. You are al right saying that a situation in which this duality takes place is usually detrimental for the firm. But not always. The very popular news Edoardo is reporting us, is the prove you all are right. In cases like these, however, my attention would go to check that the control rights of the owner and his cash flow rights are not so far from each other, like in Luxottica. It is uncommon, in my opinion, that Mr. Del Vecchio would give up his 60+% of dividends making decisions who may be detrimental for the firm itself, maybe they can be detrimental for the other shareholders' interests (agency problem), but not for the firm he founded somehow and that represents today one of the main asset of his family.
It is always a negative factor when the same person is in the board of director and top-management team, because it means that he can act regarding his own interests, what for sure sometimes can be detrimental for the corporation.
I totally agree with Saverio; conflict of interests between major shareholder and the minorities and other conflict of interests because Delvecchio is the ultimate controlling party and the chairman of the board; but actually it cannot be detrimental because of course Delvecchio until now it seems that is looking at the interests of the firm
Because there could be situations in which the major shareholder try only to pursue his private interest and this could be detrimental not only for the firm but also for shareholders. One of other cases of detrimental situation is the case of Ligresti family that allowed many transactions among firm and family causing damages to other shareholders.
On my view could be very dangerous because the management without an independent control can extract profit from the minority shareholders for his private benefit.
This situation can be a powerful engine inside the firm and can be useful for decision-making. If we have different opinions upon strategies within the firm, and all of these are not related to private interests of shareholders (or group of them), surely this will bring a positive evolution of ideas and strategies, and the final decision, in most cases, could sum up the best characteristics of these different point of view.
I believe cognitive conflict , differently from conflict of interest which is almast always negative, is a good phenomenon in a company. It highlights the fact that in the firm there is an active comparison of opinions in different topics and that decisions are not just imposed but discussed and reasoned. An ex. of this phenomenon is when a manager wants to choose a strategy which is different from the one the CEO wants to implement, if the conflict is constructive and does not lead to confusion it can really help firms in making better decisions.
I'm with you guys, but be careful about the risk of remaining stuck that this type of conflict may arise. I do not think that a lasting cognitive conflict, spread to the public of investors via media, may have a nice effect on the firm's stocks exchange in the market. People may fear the lack of "decisionism" in a huge public company.
i think cognitive conflicts could be positive and negative. if there are too many conflicts that create obstructionism between ceo and bod or other managers it could be detrimental for the firm because there will be no a final compromise to reach. otherwise cognitive conflicts could help the organization to implement brainstorming and to added value to the firm.
To some extent cognitive conflict is positively perceived since this is proved to foster innovation within BoD team. However, if not properly directed and managed, it might turn to be detrimental for the effectiveness of the decision making process. In conclusion I believe that CG is as good as the directors exert a mediating process in accordance to what is being suggested by the Team Production Theory. Mediating is the only way to make it works.
If the conflict betwenn two hypothetical directors is edifying, they can polish their clashing views up in a way that is beneficial for the company. However, this not might be the case, as the two business ideas may not be conciliable to an extent that they find themselves stuck in an uneffective conflict.
May be the cognitive conflict the only good conflict that can exist in a company. It indicates that in the firm there is an active comparison of opinions in different topics.
IMHO cognitive conflict is a good and constructive situation in a company. It shows how within the firm opinions in different topics are compared and that strategies and decisions are not just imposed but discussed and reasoned. I believe this activism can strongly help companies in making good decisions.
Perfectly agree with Federica. Cognitive conflict is positive, while conflict of interest is negative. I am also agree with Nardi when he says that it is the only positive conflict in the firm.
Cognitive conflict is a situation in which, for example, one shareholder want to implement a strategy A and another one a strategy B. Both of them agree in terms of acting in the interest of the firm but They do not agree about the way the company must reach the interest of the firm. Thus, I believe that this situation is positive since both act for the firm's interest, but if the conflict is too much, it can be detrimental for the firm itself since the shareholders are not able to take a decision regarding the strategy to implement.
John Elkann (Chairman and Chief Executive Officer of EXOR S.p.A, that controls Juventus football club s.p.a.) is a member of the Board of Directors of News Corp., the group that controls also Sky Italia; can we say that there is a conflict of interests?
Yes we can say that because Sky Italia has important transactions with Juventus FC. But to be honest we can say also that in your question there is conflict of interests because you, as ASRoma supporter, are too sensitive about this topic in this period.
Giovanni's judgement is clearly not independent, however I, as an external observer who does not follow footbal, would claim the existence of a conflict of interest in this case, aimed at indirectly promoting one of the main football team in the Italian League.
Saverio's point is where I wanted to address. For instance there may be some conflict of interests in Sky/Juventus transactions for TV broadcasting rights of football matches.
Giovanni, I'm gonna worsening the picture: there is EXOR even behind the future "Stadio della Roma" D: Through their american main controlled company, Cushman & Wakefield (79.79%), Agnelli obtained a role in the new stadium building several months ago. Google it for more financial info about.
Of course this could deliver conflict of interest, so Giovanni you are right. In general, we can talk about conflict of interest in cases where sectors are correlated, and of course in this specific case SKY/Juventus are strongly linked, also because there are a lot of transactions between them.
The conflict you are talking guys gets bigger and bigger in our football league because tv rights are an enormous part of the financial statements of italian football clubs. The same situation is produced with Milan since the creation of Mediaset Paytv. @Giovanni - yeah, that's exactly what I meant. I'd say even quadruple, quintuple...
In fact the conflict of interest consist of deciding between a private interest or the interest of the company. In this case we do not know how John Elkan operate, so we cannot judge. Being in a group and having economic relations with a particular company in order to procure benefits to another (the holding maybe) cannot be considered a conflict of interest.
Absolutely this could be conflict of interests!! In fact there are a lot of transactions between Sky and football clubs, for example in purchasing broadcast rights from the various football clubs.
According with the theory of the separation between ownership and control, why the CEO of Luxottica Cavatorta leave and why the share value is falling?
Maybe it doesn't have to do "directly" with this theory. I was surely the case of Cavatorta's predecessor, Mr. Guerra. But with Cavatorta, he held his position of CFO for one month only. There is off course something behind the scenes we do not know. It is known, however, that a consulting company near the Del Vecchio family is making its way to the company and this could have been be one of the disturbing element. (one of the references: http://www.lastampa.it/2014/10/13/economia/cavatorta-lascia-luxottica-6Rbtl9RjzpSIvQWbJXJzmK/pagina.html)
On my view the problem for Luxottica is that there is a low separation between ownership and control. Mr Cavatorta left Luxottica because of his disagreement with the owner Leonardo del Vecchio and the market loose trust in the firm.
Perfectly agree with you Alessandro. I was reading these days also the fact that Del Vecchio is trying to manage properly his divorce with the ex wife who want a big part of the property. This facts, the change on top management occurring so frequently are a clear sign of the fact that the company suffers the private problems of the owner. The market than 'punishes' the company by paying less for the shares.
Hii guys, Delfin S.A.R.L has 67.83% share of the company, and other shareholder have less than 5% share of company. what are the negative and positive for the huge difference of the share in this case
Please, ask questions to your colleagues using the board of directors of Luxottica and the theory discussed during the lesson
ReplyDeleteguys, in class we talked about contestability of control and hostile takeover, i was wondering why in this case it's difficult that a hostile takeover will happen?
DeleteI believe that, in this case, it is almost impossible to have an hostile takeover as the controlling party is clearly defined and owns much more than the "safe" 50+1%. Furthermore, realizing an hostile takeover will mean buying shares from Delfin s.a.r.l. without the consent of who controls it. That will probably sound a little bit strange.
DeleteThis company is controlled de jure by one owner, so it is impossible to acquire the majority of the shares without his consensus. Only a friendly takeover (thus an agreement with the owner) can be possible in this case.
DeleteAs one of the most common ways throught which takeovers take place are proxy fights, where the acquiring firm attempts to persuade the company shareholders to replace management with a new which will approve the takeover, in this case is very diffcult that this can happen. In fact, Delfin SARL , which is owned by Del Vecchio himself, who's part of Luxottica top management, has a huge amount of shares ((67,83 %) , therefore a bidder could only acquire a 33% which will not provide him with the needed majority.
DeleteI agree with you. Since Del Vecchio controls the 67,83% of the shares, hostile takeovers would be ineffective because nobody can acquire a sufficient number of shares for the control of the company. We have instead a risk of an hostile takeover when the company is control by a person that owns less than the 50% plus 1 of the shares.
DeleteYeah, I agree with you. Luxottica is controlled by Delfin S.a.r.l, who owns 67.83% of the shares; this company is totally controlled by Del Vecchio, so we can say that Del Vecchio controls also Luxottica.
DeleteHe is both the owner and the Chairman of the BoD, so it is impossible to launch a hostile takeover because nobody else can acquire shares in order to have the control of the company.
Since Del Vecchio family controls Luxottica through Delfin s.a.r.l. with 67,83%, it will be impossible to launch an hostile takeover. Here there is NOT control contestability, and therefore it will be impossible to buy shares of the direct controlling party, without Del Vecchio family's consensus. As expressed by Federica, the remaining percentages however will not be enough to obtain the majority.
DeleteI agree, an Hostile takeover in this case is not possible because Del Vecchio through Delfin s.a.r.l.owns more than 50% of shares and He is part of the top management so it's impossible to obtain the majority of shares without his consensus.
DeleteIn this case it is not possible to launch an hostile takeover since Del Vecchio owns 67,83% and no one could be able to acquire the shares for controlling the company.
DeleteI agree with you, an hostile takeover in this case is not possible since Leonardo Del Vecchio owns more than 50% of the shares of Luxottica, since he controls Delfin (i.e. de jure control). I'd like to add only one consideration on the hostile takeover potential benefit. In fact it can be an important instrument to monitor the management performance in public companies, where the control is in the hand of the management and there is not an ultimate controlling party able to exercise the power of governing. In this situation managers know that, if the don't satisfy the interests of the shareholders the can exercise the "exit power", selling their shares. In this way the price of the shares could fall down and an investor could take the advantage, buying enough shares to get the control and fire the Board members, including managers.
DeleteMore than 50% of the shares are in the hand of one single shareholder, so it is impossible to launch an hostile takeover unless the controlling party will give up
DeleteSince Del Vecchio controls the 67,83% of the shares, so it is impossible to have a hostile takeover unless the controlling party will give up.
DeleteIn this situation It is not possible to have a hostile takeover because Del Vecchio, through Delfin S.a.r.l., has de Jure Control of the company. The only way for an investor who wants to take the control of the company is through a negotiation with the major shareholder , after having informed the Board of Directors of his/her will.
DeleteIn this situation, an hostile takeover is not possible because Del Vecchio is the ultimate controlling party of Luxottica and also its chaiman, so it is impossible to obtain the majority of the ownership without his consesuos.
DeleteIn this case there is not control contestability. Del Vecchio Family controls Luxottica through Delfin (67.83%). Thus an hostile takeover can not take place. In practical terms ,to buy the shares of the controlling party it is needed the Del vecchio family approval.
DeleteBecause to make an hostile takeover you have to buy all the shares that make you able to have the control. In this case it is quite difficult because a hostile takeover should be against Del Vecchio but he owns 67.83% of shares through DELFIN SARL and he is also the chairman, so it is impossible to have the control of Luxottica if Del Vecchio does not agree. This situation is not good for the market.
DeleteRemaining in the field of hostility, there is no chance for such a takeover to happen. This could have been possible if the ownership structure of Delfin S.a.r.l. was different. In that case, an hostile takeover could have taken place via Delfin in a very complex, costly and risky operation.
DeleteA question for you! As we know the BoD role is mainly to monitor the management, but researches have found that often there are few mechanism of control and managers do not feel to be addressed by them and even when they need to ask for more defined requirements by the board, members seem to be not well prepared on the agenda. this happens because bod members are often interlocking directors or they result to be busy. how do you think that this problem can be avoided?
DeleteQUESTION.
DeleteMr X represents the major shareholder of the company A.
Mr X is also the Chairman of the BoD.
Provide me a proper reason to appoint a Lead Independent Director.
Answer to Cristina.
DeleteOne way that is adopted by Valero Energy Corporation, that is our case-study, is to make sure that the candidates for the directorship can dedicate enough time to work effectively and efficiently in the BoD. This rule is clearly indicated in the statute.
This comment has been removed by the author.
DeleteSince Luxottica is controlled by Delfin S.a.r.l, who owns 67.83% of the shares we can say that this company is controlled by Del Vecchio, so Del Vecchio controls also Luxottica.
DeleteIs not possible to launch a hostile takeover because Del Vecchio is the owner and Chairman, so nobody else can acquire shares in order to get the control of the company.
in this case it is quite impossible to make an hostile takeover because Leonardo Del Vecchio owns more than 50% of the shares of Luxottica, and he controls Delfin by de jure (which is also the chairman)
DeleteIn this situation it's not possible to make an hostile takeover, due to the fact that, The company is totally controlled by Del Vecchio, Luxottica with 67.83% of share and unless it would be approved by the Del vecchio family.
Deletehere, it is impossible to get the majority of the shares without consensus...
DeleteGuys, I would like to ask you a question if you have heard about the recent events in luxottica. Notice that some Guerra was the CEO of the company, after him Cavatorta (ex CFO) took his place. Recently Cavatorta left. Behind those events there is Leonardo Del Vecchio (the owner). My question is: Do you guys think that an ex CFO could be a good CEO? Are those elements a way to indicate that in luxottica everything is fully decided by the owner, sometimes overlaping competences? Can it be dangereus?
DeleteIn this case it is not possible to launch an hostile takeover because Del Vecchio holds 67,83% of the total equity and so no one could be able to acquire a sufficient number of shares for the control of the company. Typically we have risks of hostile takovers when a company is controlled by a person that owns less than 50% of the shares.
DeleteThe major shareholder owns almost 70% of the shares, this to take over this percentage means a considerable financial effort in order to be able to take over. A hostile take over is not impossible, however, highly difficult in the light of the high amount of shares owned by one shareholder.
DeleteLuxottica is own by almost 70% by delfin so an hostile takeover is quite impossible
DeleteHostile takeover is impossible. The major shareholder has almost 70% of shares so the only way is a friendly takeover.
DeleteAs we know from the lessons, hostile takeover is not possible in case of ownership more than 50% shares. It is often related to italian companies where the owner is often a family, as also in this situation - Luxottica is the major shareholder, this hostile takeover is impossible.
DeleteDoes Luxottica need a lead independent director? Why?
ReplyDeleteLeonardo Del Vecchio is the controlling party because he owns the 67.83% of shares representing the delfin s.a.r.l, being the ultimate controlling party, chairman and inside the board of directors, it's important that the CEO will be independent because in this way it will be avoided the possibility that the leading director will pursue personal interests of the chairman.
DeleteYes it does. Since Leonardo Del Vecchio is also the controlling party of Delfin s.a.r.l. (Major shareholder of Luxottica with 67.83% of shares), Luxottica's board of directors must have a lead independent director according to the italian legislation (when the office of chairman is held by person controlling the issuer, then a lead independent director is required).
DeleteYes, Luxottica definitely needs a lead indipendent director to avoid agency problems to arise. In fact this is the case in which there is an identity between the chairman of the firm, the one who sets the tone in the BOD, and the controlling party, the one who owns the majority of shares in the company, and this situation , according to the italian legislation, requires at least one indipendent director to assure neutrality. Leonardo del Vecchio, as we can see from the graph, a part fom being chairman of Luxottioca, also controls it throught Delfin SARL of which he owns the majority of shares.
DeleteI agree with my colleagues, since the ultimate controlling party of the company is also chairman of the Board of directors, according to the italian legiglation on corporate governance, issues by Borsa Italiana, the company need a lead independent director. In fact the chairman of the board has a pivotal role, especially in spreading information among all the other directors, and thus the controlling party of a company should not be also the chairman of the BoD (cause he could use this authority to pursue his personal interests)
DeleteOf course Luxottica needs an independent director. For example independent directors can offer financial, technical, and/or strategic advice to the operational officers of the company.
DeleteIn accordance to the Italian Corporate Governance Code, if the office of chairman is held by the person controlling the issuer as it is in this particular case then the board SHOULD designate a lead independent director. I stressed the verb "should" since the decision is up to the company itself and therefore it does not represent a compulsory procedure.
DeleteFor sure, the reason why Luxottica BoD would be strongly recommended to appoint a lead independent director is to assure the market that the risk of extracting private benefit is mitigated by the appointment of an independent BoD member, viewed in the light of Majortiy Shareholder vs Minority ones.
DeleteThis comment has been removed by the author.
DeleteYes, Luxottica needs an independent director. The Italian corporate governance code states that the lead director should be independent in two situation. The first one in which there is coicidence between CEO and Chairman (CEO duality) is not relevant in our case, since Andrea Guerra is the CEO and Leonardo del Vecchio is the Chairman. Secondly a company needs a lead independent director when the Chairman controls the company. In our case Leonardo Del Vecchio (Chairman) controls Luxottica via Delfin, so the firm absolutely needs a lead independent director.
DeleteYes, the Company needs a lead indipendent director. According to the Italian corporate governance cose indeed, this is one of the two circumstances in which there is a need for a lead indipendent director: Del Vecchio, the ultimate controlling party, is also the Chairmain of the Company's Board.
DeleteIn Luxottica, Del Vecchio represents both the Chairman of the BoD and the owner of the company (CEO duality). According to the Italian corporate governance code, the Board shall designate an independent director when this determined situation occurs. So Luxottica needs an independent director.
DeleteMoreover, in order to avoid and monitor the related-party transactions it's important to have an independent person within the board.
I completely agree with my colleagues. Since the Chairman (Leonardo del Vecchio) is at the same time the ultimate controlling party of Luxottica, through Delfin s.a.r.l., according to the Italian Corporate Governance Code, there is the need of a lead independent director!
DeleteTo begin with, I agree with colleagues's comments,yes,a lead independent director might be necessary in this case as suggested in the Italian corporate governance code in the event of the chairman of the BOD " Leonardo Del Vecchio" featured the ultimate controlling power of which leads to no separation between control and management, thus for better protection of non executives and other independent directors. However, it is not mandatory in compliance issue just suggestions from the code respects.
DeleteYes it definitely need an independent director because the ultimate owner of the company is also the chairman. So there is no separation between the management and control. And this might affect his judgments later on.
DeleteThe ultimate owner of the company is also the chairman, so there is no separation between the management and control, and this might affect his decisions later on. So yes indeed they do need a lead independent director.
DeleteIn my view, yes, the company needs a lead indipendent director. By helping directors reach consensus, and by keeping board matters on track, he could help ensure board relations run smoothly.
DeleteWe know that a company needs a lead independent director in two circumstances: 1) in the event that the chairman of the board of directors is the CEO of the company; 2) in the event that the office of chairman is held by the person controlling the issuer.
DeleteSo, in the case of Luxottica, Del Vecchio controls Luxottica through Delfin and he is at the same time the chairman.
For this reason, Luxottica shall designate an independent director.
According to the italian corporate governance code, issues by Borsa Italiana, this company need a lead independent director, since the ultimate controlling party (Del Vecchio) of the company is also chairman of the Board of directors. Thus, we are in a situation (I) in which is required to have a lead independent director. Even if this code is not mandatory, company should follow its principles in order to implement the best corporate governance system.
Delete* situation II of the code
DeleteYes,it needs a lead independent director because as stated by the Italian Corporate Governance code the office of chairman is held by the ultimate owner and so the Bod should designate a lead independent director. It's not mandatory,but this office can represent a point for the independent directors and can guarantee that directors are prompty informed.
DeleteOf course Luxottica needs a Lead Independent Director among BoD, due to the possible conflict of interest from the figure of Leonardo DelVecchio (the italian legislation says that a firm must have a lead independent director if the chairman is also the ultimate controlling party).
DeleteYes it needs an independent director because the ultimate owner of the company is already the chairman. So there is no separation between the management and ownership. and this may create a conflict of interest
DeleteThe answer is yes, because the ultimate controlling party of the company is also the chairman. But the italian legislation does not impose it, but it is just a recommendation.
Deleteyes Luxottica needs an indipendent CEO since, as stated in the Italian corporate governace code, in this case the chairman is also the ultimate controlling party.
DeleteA lead independent director is needed both when there is the CEO duality and when the ultimate controlling party is the chairman of the board. In this case we have the second one condition. So, yes it should need but it does not mean that it will be done.
DeleteAs Alberto said, we could discuss the need, but there is no evident obligation to do that according to the Italian Law. If I'm not wrong, the Italian CG legislation neither obliges you to tell why you are chosing a different path, like the german one. Personally, I think that an Independet director is avisable in case like this, because CEO duality may bring relevant agency problems.
DeleteI would like to add a simple consideration. In the luxottica case, we cannot exclude that the choice to put the controller to do chairman and CEO, is not ponderated and welcomed also by the other major shareholders. We keep talking about theory, but in the reality of facts if you give a look to Del Vecchio's biography you will discover that he spent an entire life in the glasses manufacturing (being the founder of luxottica himself). What I want to stress is that he MAY be the right person to be the CEO (as well) right now. As we can imagine, his son will (the other is not in the board "yet"), most probably, take the control of the firm as chairman so it is difficult that this "duality" will last any longer.
DeleteYes it is required because the same person is both CEO and ultimate owner. This role is increasing in importance in recent times and often the lead independent director is strongly recommended also when CEO and/or ultimate owner and chairman are splitted, even if in italy it is not quite common in this case.
DeleteYes, this company need a lead independent director because the ultimate controlling party that is Del Vecchio, is also chairman of the Board of directors.
DeleteYes. it's In the luxottica case we can see that Del Vecchio represents both the Chairman of the BoD and the ultimate owner of the company so we can clearly see that CEO duality and the company needs a lead independent director.
DeleteExactly Yes. Since Leonardo is also the controlling party of Delfin
DeleteDefinitely agree with you guys.The Italian corporate governance code states two cases where lead independent is needed.The second case is applicable in this situation. This because Leonardo Del Vecchio ( the Chairman) controls Luxottica via Delfin, so the firm absolutely needs a lead independent director.
DeleteAnyone of you can bring examples of a company that needs a lead independent director according to the first provvision of the italian co.go. code? That basically states the need for lead independent director if there is coicidence between CEO and Chairman (CEO duality).
DeleteThe need for an independent director is high in this case. The reason why Luxottica would be recommended to appoint somebody like this is to assure that the agency problem does not arise and the director act to his own benefit, extracting revenues to his own account.
DeleteIn this situation we have no separation between direction and control, Leonardo Del Vecchio is the Board Member and Top Manager in the same time, it means there is a threat of agency problem because of less external control. Thus, of course, an independent director is necessary in this case.
DeleteIn personal view absolutely yes, Luxottica needs an indipendent CEO since, as stated in the Italian code, in this case the chairman is also the ultimate controlling party. And the is obligatory to set an independent director
DeleteYes, because according to the italian corporate governace code when the office of chairman is held by the person who controlling the issuer, then a lead independent director is required.
DeleteYes, I agree with your comments, independent director might be necessary in this case that leads to no separation between control and management, thus for better protection of non executives and other independent directors.
DeleteThis comment has been removed by the author.
ReplyDeleteWhat is the position of Claudio Del Vecchio within the board? Is it normal that he will sit next to a (probable) relative who is also Chairman and the one who controls Luxottica?
ReplyDeleteI think it's quite a normal situation in Italy. We can also see such a situation in fiat, or in any of the companies held by the Berlusconi family. Obviously being a member of the Del Vecchio family, the group who controls luxottica, Claudio Del Vecchio couldn't be an independent director.
DeleteClaudio del Vecchio does not result to be an indipendent director because he's Leonardo Del Vecchio son, therefore one of the condition necessay for a director to be considered indipendent is not accomplished :"not to be a member, or an IMMEDIATE FAMILY MEMBER of a member, of the mangement of the company( Leonardo Del Vecchio is top management chairman).
DeleteOf course Claudio Del Vecchio is not independent. In Italy we have a lot of company in which we can find these situations. Fathers that put in the company sons and other relatives.
DeleteI guess that This Italian top managers behaviour is often based on 'a kind of trust' instead of real capability... that's why there are so many family members on the top!
DeleteYes it is. It's very common to find in Italian companies, situations in which a board member is a family member of the Chairman. In this case, Claudio Del Vecchio does not respect the criteria to be considered an indipendent director, indeed, its role is as 'Non executive' director.
DeleteClaudio Del Vecchio is a board member, but he's not independent because he breaks the rule to be an independent member which is you cant be a member or an immediate family member of a member of the management of the company, so he is not independent.
DeleteClaudio Del Vecchio is a board member, but he's not independent. However, he is an immediate family member of a member of the management of the company, so he is not independent.
DeleteI think it is possible because Claudio Del Vecchio is not an independent director
DeleteIn my opinion it's a absolutely normal situation here in Italy. Del Vecchio family controls Luxottica through Delfin, so it is normal to see relatives that sit together in the board of directors. How you can see, Claudio Del Vecchio is a non-executive director, and he has not the legal requirements for being independent.
DeleteI think this is a normal situation that we have in Italy. Since the major shareholder has the power to appoint the directors, we can imagine that he will surround himself with people he trusts in.
Deleteas long asClaudio Del Vecchio is a board of member and an immediate family member that manage the firm , so he is not independent.
DeleteYes it is. In italy especially. anyway he is a non executive director. Usually this category is composed by independent directors and affiliated outside directors. He cannot be an independent director because he is a relative of Leonardo Del Vecchio so he will be for sure an affiliated outside director.
DeleteHis position is simply a non-executive non-independent director (Probability is 100% in this case, as he's ultimate controlling party's son). He is non-executive most probably because of the lack of technical experience he has in the field and that the father has instead, but this will not avoid him and his brother Leonardo, to inherite the control of the company in the near future.
DeleteSince the ultimate owner also holds the position of Chairman there is no doubt that there no exists a substantial separation between ownership and management. Moreover, to strenghten the grip of the family on the management of the organization, relatives and or close friends are usually appointed as in the case of Claudio del Vecchio. In view there is nothing strange in the appointment of Claudio del Vecchio since it is quite trivial to observe that the willingness of the family is to get involved in the business.
DeleteI agree with Gian Marco D'urso: Claudio Del Vecchio is a non-executive and non-indipendent director. Moreover, as already pointed out in Italy, where there are a lot of family-owned companies, this is not a weird way of designing the board.
DeleteClaudio Del Vecchio is not independent and non-executive. In our country (Italy) we have a lot of company in which we can find these situations.
DeleteYes even if Claudio Del Vecchio is a board member, and also one of the immediate family member that manage the company as you can see above Claudio Del Vecchio is not independent director.
DeleteIt is normal in Italian firms...
DeleteWell, as my collegaues said, Claudio Del is a non executive and not independent. We know that in italy it is quite normal situations on wich relatives put on high positons on companies. A think that the owner put Claudio Del Vecchio in the board for two reasons: 1) increase effectivenes of company control by the owner 2) learn how to be a owner since company is thought to still remain familiar
DeleteAs said above Claudio del vecchio is not an executive nighters an independent
DeleteA typical italian situation. Clearly he is not an independent director.
DeleteClaudio Del Vecchio is not independent. Because he couldnt be manager while he a member of BOD
DeleteQUESTION:
ReplyDeleteWhy the absence of separation between control and management, as in Luxottica case, can be detrimental for the firm?
Because the chairman is not independent. He might take certain steps that are only for his favour and not for the favour of the company and he might not give all the details for the board because he might be afraid that he might get caught one day. Just like the agency theory said, its not good to have all the control in one hand.
DeleteThe chairman might do things that are only for his own interest and not for the interest of the company. He is not independent.
DeleteThis comment has been removed by the author.
DeleteAs in Luxottica case, there are not separation between control and management. We can see that
Delete| ---------------------------------------------------------------------------------------------------------------------------------|
| Board members ------------------------------------ || --------------------------- Top Management ------------|
| ------------------------------------------------------------ || ------------------------------------------------------------------|
| Leonardo Del Vecchio (Chairman) ----------- || -------- Leonardo Del Vecchio (Chairman) --------|
| Luigi Francavilla (Vice-Chairman) ------------ || -------- Luigi Francavilla (Deputy Chairman) -----|
| Andrea Guerra (Chief Executive Officer) --- || -------- Andrea Guerra (CEO) -------------------------|
| Enrico Cavatorta (Board member) ------------ || -------- Enrico Cavatorta (CFO) ----------------------|
| ----------------------------------------------------------------------------------------------------------------------------------|
This lead to the detrimental for the firm in management risks for example finance, decision making, ....
I agree with Sandy, having no separation between control and management can be detrimental becuase too much power is given to Leonardo Del Vecchio (he is the ultimate owner and the chairman of the board). So, there is a higher risk that he will not be fair in leading the board directors and that he will lead for his own interests.
DeleteI think that, due to the absence of separation between control and management, the risk is that strategic decisions and performances of the management would only reflect the interests of the ultimate controlling party. This, for example, could discourage potential investors in buying shares, since they fear that their interests will not be protected in the right way.
DeleteBecause, in this case (and in similar cases of course) the Non-Independence of Leonardo DelVecchio within the board of directors (he is Chairman but also Ultimate Owner through DELFIN S.a.r.l.) could deliver a Conflict of Interest, meaning that as Chairman and Owner he can exploit private benefits, and this situation, in most cases, is detrimental for minority shareholders.
DeleteThe lack of separation between the management and the control might compromise the independence of the directors that are meant to serve the interests of the shareholders. Thus, there exists large room for extracting private benefit at the expense of shareholders with the tacit consent of the BoD that has been appointed by the major shareholder itself.
Deletei agree with wissam that the chairman may take decision for his own interest , not for the firm's interest
DeleteWell the absence of separation between control and management may be a problem for the firm life. Corporation's duration is supposed to be independent from the controlling party's life. Thus the decisions taken may reflect a person/family moment. Moreover, the absence of separation may detrimental of company performance since being a manager of a corporation just because you are a family member does not imply you are a proper manager.
DeleteBecause we have the second type of agency problem that is about the conflict between the major shareholder and the minorities but also we have a conflict of interest because Leonardo Del Vecchio is the ultimate controlling party and is the chairman of the board. But it does not mean that it is detrimental for the firm. In fact that is just detrimental if Del Vecchio looks at its private interests going against with the interests of the firm.
DeleteProbably because if there is no separation between ownership and control the only interest is that of the ultimate controlling party, in this case Del Vecchio family. Some years ago the chairman have also created a new foundation to ensure the company shares to his heirs, a clear example of management policy oriented to the satisfaction of Del Vecchio family needs.
DeleteIt's just of today the announcement about the Ceo resignation, Enrico Cavatorta, ( appointed only one month ago) due to the presence of external consultant close to the family in the management of the firm with the result of a 10% loss on the stock market.
Guys, be careful. You are al right saying that a situation in which this duality takes place is usually detrimental for the firm. But not always. The very popular news Edoardo is reporting us, is the prove you all are right. In cases like these, however, my attention would go to check that the control rights of the owner and his cash flow rights are not so far from each other, like in Luxottica. It is uncommon, in my opinion, that Mr. Del Vecchio would give up his 60+% of dividends making decisions who may be detrimental for the firm itself, maybe they can be detrimental for the other shareholders' interests (agency problem), but not for the firm he founded somehow and that represents today one of the main asset of his family.
DeleteIt depends on situation and definitely we cant tell that Yes or Not...
DeleteIt is always a negative factor when the same person is in the board of director and top-management team, because it means that he can act regarding his own interests, what for sure sometimes can be detrimental for the corporation.
DeleteI totally agree with Saverio; conflict of interests between major shareholder and the minorities and other conflict of interests because Delvecchio is the ultimate controlling party and the chairman of the board; but actually it cannot be detrimental because of course Delvecchio until now it seems that is looking at the interests of the firm
DeleteIt depends
DeleteBecause there could be situations in which the major shareholder try only to pursue his private interest and this could be detrimental not only for the firm but also for shareholders. One of other cases of detrimental situation is the case of Ligresti family that allowed many transactions among firm and family causing damages to other shareholders.
DeleteI totally agree with Edoardo.
DeleteOn my view could be very dangerous because the management without an independent control can extract profit from the minority shareholders for his private benefit.
ReplyDeleteTalking about independence, what is your opinion about cognitive conflict? Is it positive or negative?
ReplyDeleteThis situation can be a powerful engine inside the firm and can be useful for decision-making. If we have different opinions upon strategies within the firm, and all of these are not related to private interests of shareholders (or group of them), surely this will bring a positive evolution of ideas and strategies, and the final decision, in most cases, could sum up the best characteristics of these different point of view.
DeleteI believe cognitive conflict , differently from conflict of interest which is almast always negative, is a good phenomenon in a company. It highlights the fact that in the firm there is an active comparison of opinions in different topics and that decisions are not just imposed but discussed and reasoned. An ex. of this phenomenon is when a manager wants to choose a strategy which is different from the one the CEO wants to implement, if the conflict is constructive and does not lead to confusion it can really help firms in making better decisions.
DeleteI'm with you guys, but be careful about the risk of remaining stuck that this type of conflict may arise. I do not think that a lasting cognitive conflict, spread to the public of investors via media, may have a nice effect on the firm's stocks exchange in the market. People may fear the lack of "decisionism" in a huge public company.
Deletei think cognitive conflicts could be positive and negative. if there are too many conflicts that create obstructionism between ceo and bod or other managers it could be detrimental for the firm because there will be no a final compromise to reach. otherwise cognitive conflicts could help the organization to implement brainstorming and to added value to the firm.
DeleteTo some extent cognitive conflict is positively perceived since this is proved to foster innovation within BoD team. However, if not properly directed and managed, it might turn to be detrimental for the effectiveness of the decision making process. In conclusion I believe that CG is as good as the directors exert a mediating process in accordance to what is being suggested by the Team Production Theory. Mediating is the only way to make it works.
DeleteIf the conflict betwenn two hypothetical directors is edifying, they can polish their clashing views up in a way that is beneficial for the company. However, this not might be the case, as the two business ideas may not be conciliable to an extent that they find themselves stuck in an uneffective conflict.
DeleteMay be the cognitive conflict the only good conflict that can exist in a company. It indicates that in the firm there is an active comparison of opinions in different topics.
DeleteIMHO cognitive conflict is a good and constructive situation in a company. It shows how within the firm opinions in different topics are compared and that strategies and decisions are not just imposed but discussed and reasoned. I believe this activism can strongly help companies in making good decisions.
DeletePerfectly agree with Federica. Cognitive conflict is positive, while conflict of interest is negative. I am also agree with Nardi when he says that it is the only positive conflict in the firm.
DeleteCognitive conflict is a situation in which, for example, one shareholder want to implement a strategy A and another one a strategy B. Both of them agree in terms of acting in the interest of the firm but They do not agree about the way the company must reach the interest of the firm. Thus, I believe that this situation is positive since both act for the firm's interest, but if the conflict is too much, it can be detrimental for the firm itself since the shareholders are not able to take a decision regarding the strategy to implement.
ReplyDeleteI completely agree with you Federica. It's a two-sided coin.
DeleteJohn Elkann (Chairman and Chief Executive Officer of EXOR S.p.A, that controls Juventus football club s.p.a.) is a member of the Board of Directors of News Corp., the group that controls also Sky Italia; can we say that there is a conflict of interests?
ReplyDeleteYes we can say that because Sky Italia has important transactions with Juventus FC. But to be honest we can say also that in your question there is conflict of interests because you, as ASRoma supporter, are too sensitive about this topic in this period.
DeleteGiovanni's judgement is clearly not independent, however I, as an external observer who does not follow footbal, would claim the existence of a conflict of interest in this case, aimed at indirectly promoting one of the main football team in the Italian League.
DeleteSaverio's point is where I wanted to address. For instance there may be some conflict of interests in Sky/Juventus transactions for TV broadcasting rights of football matches.
DeleteGiovanni, I'm gonna worsening the picture: there is EXOR even behind the future "Stadio della Roma" D:
DeleteThrough their american main controlled company, Cushman & Wakefield (79.79%), Agnelli obtained a role in the new stadium building several months ago. Google it for more financial info about.
So @Gian Marco, there could be a sort of triple conflict of interest. Do you agree?
DeleteOf course this could deliver conflict of interest, so Giovanni you are right. In general, we can talk about conflict of interest in cases where sectors are correlated, and of course in this specific case SKY/Juventus are strongly linked, also because there are a lot of transactions between them.
DeleteI agree with you guys. There is a huge conflict of interest here as in all Italian football league.
DeleteThe conflict you are talking guys gets bigger and bigger in our football league because tv rights are an enormous part of the financial statements of italian football clubs. The same situation is produced with Milan since the creation of Mediaset Paytv.
Delete@Giovanni - yeah, that's exactly what I meant. I'd say even quadruple, quintuple...
I agree with you guys there is a high conflict of interest in Italian football league.
DeleteThere is a conflict of interest and this is detrimental for Firm
DeleteIn fact the conflict of interest consist of deciding between a private interest or the interest of the company. In this case we do not know how John Elkan operate, so we cannot judge. Being in a group and having economic relations with a particular company in order to procure benefits to another (the holding maybe) cannot be considered a conflict of interest.
DeleteAbsolutely this could be conflict of interests!! In fact there are a lot of transactions between Sky and football clubs, for example in purchasing broadcast rights from the various football clubs.
DeleteNo there cannot be a conflict of interest! Just a more favorable judgement!
DeleteFrom my view, itis could be conflict of interests because there are a lot of transactions between Sky and football clubs,
DeleteYes, problably there is conflict of interest due to the fact that Sky Corp pays broadcast rights to football clubs and also to Juventus F.C
ReplyDeleteI agree with you, Edoardo. Thanks for your attention.
DeleteThat is right Edoardo...
DeleteAccording with the theory of the separation between ownership and control, why the CEO of Luxottica Cavatorta leave and why the share value is falling?
ReplyDeleteMaybe it doesn't have to do "directly" with this theory. I was surely the case of Cavatorta's predecessor, Mr. Guerra. But with Cavatorta, he held his position of CFO for one month only. There is off course something behind the scenes we do not know. It is known, however, that a consulting company near the Del Vecchio family is making its way to the company and this could have been be one of the disturbing element. (one of the references: http://www.lastampa.it/2014/10/13/economia/cavatorta-lascia-luxottica-6Rbtl9RjzpSIvQWbJXJzmK/pagina.html)
DeleteOn my view the problem for Luxottica is that there is a low separation between ownership and control. Mr Cavatorta left Luxottica because of his disagreement with the owner Leonardo del Vecchio and the market loose trust in the firm.
DeletePerfectly agree with you Alessandro. I was reading these days also the fact that Del Vecchio is trying to manage properly his divorce with the ex wife who want a big part of the property. This facts, the change on top management occurring so frequently are a clear sign of the fact that the company suffers the private problems of the owner. The market than 'punishes' the company by paying less for the shares.
ReplyDeleteHii guys, Delfin S.A.R.L has 67.83% share of the company, and other shareholder have less than 5% share of company. what are the negative and positive for the huge difference of the share in this case
ReplyDelete