He cannot be considered as an independent director since he gain a lot of money from that transaction, that has been approved by the major shareholder. Furthere more he should monitor the major shareholder, by discipline the agency problem of type II ( conflict of interest between minority and majority shareholders)
Being paid by the major shareholder for exerting monitoring on the major shareholder's activity within the BoD does not make this Franzo Grande Stevens an independent director? Two hypothesis that might compromise his integrity in the judgement: 1) he could be sacked; 2) as already said, his employer is the major shareholder that sits in the BoD.
I agree with Federica: he cannot be considered an indipendent director, as he does not satisfy different requisites of indipendence. In fact, he had business relations with the company and (for those relations) he received a compensation from the company other than directorship fees, Moreover, as pointed out these relations may have been authorized by the major shareholder, denoting a further fact that might undermine more his indipendence.
He is not an independent director because there is an economic transaction (services) between him and the company and because he has to monitor the controlling shareholder in order to discipline the 2 type agency problem (since there is a concentrated ownership).
In my opinion he cannot be considered really independent since he was appointed , like all others Fiat's board members, by the major shareholder and because he had relevant transaction with the firm which necessarily compromise his independence.
I agree with Federica too. Franzo Grande Stevenss not an independent director because there is an economic transaction between him and the company. Further more, the major shareholder appointed him to control the major shareholder himself. This is a clear case of agency problem type II.
I also agree with you guys; he can't be considered as an indipendent director because there is an economic transaction (legal services) between him and FIAT, and also because he has been appointed by the major shareholder.
Franzo Grande Stevens cannot be considered as an independent director due to the economic transaction between him and Fiat. In addition, he does not satisfy different requisites of indipendence, because he received a compensation from the company + his wage.
In case of transactions like this we cannot consider him an independent dircetor. The independent has the role of controlling the Agnelli family. The only fact that the company (and then the majority shareholders) pays him such a huge amount of money can be considered as a significant link between them.
franzo grande stevens cannot be considered independent because there is a commercial transaction between him and fiat that lead to the presence of the agency problem type 2, because he has to monitor the controlling shareholder, but with this huge level of transaction he maybe not considered independent, the risk is that he can be removed and he can loose the transaction. For this reason it is considered a red flag, but you cannot consider it as a detrimental transaction because it is a relationship with someone you know and often it is better thanks to the presence of less asymmetric informations.
HE is not truly independent because the commercial transaction with Fiat and because it was approved by the major shareholder that HE should control in order to avoid agency problem type 2.
We can not say that Franzo Grande Stevens is for sure an independent director since he has business transaction with the company remunerated outside his fees. It is enough to say that is not a truly independent director.
He cannot be considered an independent director since he does not satisfy the requirements needed,for example he gains other compensations different from the directorship fees.
As most of you already said, FGS (taking as reference the years before 2010) cannot be considered independent. He had been appointed by Fiat to provide for services, thus receiving an important amount of money authorized by the majority shareholder via an extraordinary internal business transaction.
Probably no, but we have to consider also further information. For istance what happen if the deal was justified by the convenience of the price comparing to the market?
No he can't be considered a real independent director, because he is paid from those who have to control. To be an independent director he should be paid by minority shareholders
Of course he can't be considered an independent director. Here we have a commercial transaction with the holding company and a agency problem type 2 (because Fiat is controlled by Agnelli family). A independent director has to monitor the controlling shareholder, but if Franzo Grande Stevens receive money from the controlling party for advises it is very difficult that he will monitor the agency problem type 2. For this reason he is considered a non-independend director.
Franzo Grande Stevens can't be considered as an independent director because of the benefits related to the transactions. Furthermore, he has a strong relationship with Agnelli family.
Obsiously no, because he, first, received a lot of money from legal services provided to the company and second, he should guarantee minority shareholders about the agency problem type 2 ( concentrated ownership)
In my opinion Franzo Grande Stevens can't be considered as an independent director due to the fact that there is an economic transaction between them and also Franzo Grande Stevensis appointed by the major shareholders, on the other hand he is not fulfill to be an independent director.
No, it is not an independet director. The reason lies on the fact that it does not respect the independece criteria: Franzo Grande Stevens receives a compensation for legal services.
no, for sure he isn't independent. But my question is, can shareholders ask for the removal of an unreal independent director? Can they ask for someone intervention?
On the grounds that he has an economic relationship with Fiat spa he cannot be considered indipendent.The risk of rendering services to the firm a director works for, is that he's probably paid a greater amount of money for the transaction(obviously approved by majority) than he should , and so he is going to go on staying in line with majority interests rather than solving agency problem type 2 which is particularly relevant in the fiat case.
He cannot be considered independent because he has an economic relationship with the company and he receives a compensation for legal services instead of the unique compensation for directorship. It invalidates the indepence requirement since he will be "dipendent" from the management.
When there is an economic link,as in this case,cannot be considered an independent director.i also quote the point of the legal services instead of the unique compensation for directorship as aurora suggest.
In my view, Franzo Grande Stevens is not an independent director because it does not respect the independece criteria: Franzo Grande Stevens receives a compensation for legal services.
I agree with all of you, guys. He can not be considered independent because of the big amount of money received by the firm (that surely has requested the dominant shareholders' approval) and because he was appointed by the major shareholders, the same he has to control in order to avoid the agency problem of type II.
Of course he can't be considered a truly independent director, the remuneration for legal services paid by the company confirms the strict relationship between Franzo Grande Stevens and the controllling shareholder of FIAT.
Of course Franzo Grande Stevens can not be considered as an independed director, because he is in transaction economic relationship with Fiat, and it could be a conflict of interest.
No, Franzo Grande Stevens can not be considered as independent in this case. First- he has an economic transaction with the company, that already puts his "interdependency" under question mark. Second, for his services he received a huge compensation, that again leads us to the thought that he has a big personal interested in this transaction. And then, third, he charged for the same services different amount of money for 2 buyers, that is not correct. So we can make a suggestion WHY he was the member of the Board UNTILL 2004 )
Well, In my view, It is impossible to say that Franzo Grande Stevens is an independent director while his salary is moderate. Other hand, it conficts with an Economic transaction between him and Fiat
I agree with the things that my colleagues said above. He cannot be cosidered independent since he has had relevant economic transactions with Fiat group.
in my opinion, according to the strong relationship between Agnelli's family and Franzo Grande Stevens which approved this transaction.And also board of directors approved this transaction because major part of boards was appointed by controllling shareholder which means that they are not independend
He cannot be considered as an independent director. In fact he received a lot of money for a transaction ( provision of legal services) that surely has been approved by the dominant shareholder. At the same time since it is a director of a concentrated company he should discipline an agency problem of type II and therefore he should monitor the controlling shareholder.
No, Franzo Grande Stevens is not an independent director since exists an economic transaction between him and the company, and since this transaction has been approved by the major shareholder.
I agree with my colleagues. The fact that the transaction has been approved by the majority shareholder is fundamental for making this situation a situation of conflict of interest.
but the majority shareholders can also block the transaction whenever Mr Franzo Grande Stevens tries to monitor the major shareholder itself.Thus Stevens is not in the position to be an independent since his source of revenue is decided by whom is to be controlled.
Franzo Grande Stevens has been the "official lawyer" of Agnelli Family ( he was called "l'avvocato dell'avvocato"), he had and still has a strong relation with Agnelli family(now he is the honorary president of Juventus); since Agnelli family is the major shareholder, of course they supported this transaction
Obviously again, in concentrated company like Fiat, the major shareholder has the control of the board; thus not surprising that the transaction has been approved.
...bu also by the controlling shareholder since Fiat is controlled by Agnelli family, therefore the director for sure cannot be considered independent.
Thuy what do you wanna mean when you say that the transaction should be controlled by the controlling shareholders?thanks,i would like only to know more about the argoument!
I cannot read the original message of Giulia, but may you tell me an example just to understand how it is possible to capture the board independence using rpt? I thought it should be a way to mislead (though mining their independence) the board members who are considered potentially "dangerous" by the UCP.
This could be also a way to capture the board independence when the director is elected by the minority shareholders. In fact in this case even if the director is not apponted by the dominant shareholder he could not be considered truly independent.
What if the independent director tries to justify those extra (big) amounts by sustaing the following thesis : his services are very qualified, thus the compensation recieved is a quite normal one?
The main issue is not about on whether the independent director deserves such a high remuneration or not, but it's on the fact that the majority shareholder plays an important role in funding the wage of Stevens, and has the power to deprive him of it in case of a friction among them. Therefore Stevens' behaviour will probably be biased by the economic link he has to the company.
In my opinion, in this case the transaction may be justified if his legal services are really better than the ones the company could acquire from unrelated parties. However, the director is not independent also in this particular situation.
As I said in the previous discussion, Franzo Grande Stevens has a strong relationship with Agnelli family, and for sure he will offer a better service in terms of quantity and quality to them, so I think this transaction is justified by that;
I agree with you Giulia for this kind of jobs (like a legal consulting) is better to appoint a trusted person like Franzo Grande Stevens. But we can not consider him an independent director.
Giulia, i could agree with your hypotesis (in the main comment), but... isn't it a sort (not even too much hidden) of corruption? Is it legal? According to the possibility that his services was to be considered the best in class at that time, I don't know. He was long time near the family and the group, his independence was already mined before this transactions as he was close to the UCP family members, isn't it?
yes it is ( the independency mined by the relationship with the family) but probably this is the italian way to organize the management. Put as much friends are possible in order to control them
I perfectly agree with Pierpaolo about the strong relationship between Agnelli's family and Franzo Grande Stevens that have a repercussion in terms of quality and quantity.This absolutely justify this transaction.
In my humble opinion, the majority shareholder has an important role in funding the wage of the director, and has the power to "punish" him in case of a friction among them. Therefore Stevens' behaviour will probably be biased by the economic link he has to the company has Luigi said.
hi guys, i want to ask a question: in general we know that we have related party transactions that could be considered external/internal and unrelated party transactions, could you explain me the differences among these 3 types and how we can define unrelated transactions more in detail?
The internal transactions are those that are made among members of the group while the extarnal are those made with actors that are not included in the group. In particular then, the related parties external to the group are transactions made with actors that have a link with the group (for example a supplier controlled by the holding) and are more riskier than the unrelated parties that are made with actors that have no relationship with the holding.
I agree with you. In particular, as Morgan said, the related party transactions with external actors are the riskiest one because they can never be justified using the business group perspective.
There could be 2 kinds of related party transactions. The first type is between subsidiries and/or the holding, and it is called internal transaction. The second type, which is called external transaction, occurs with related parties which are outside the group! Moreover, the latter are riskier than the internal ones.
i agree with you and i would add that these kind of transactions can be controllled in relationship whit the sum of the other transaction. for example if a company has the 50% of operations among subsidiaries, this could be a problem because is too concentrated on themselves, and this could lead an illegal increases of revenues. (sell/buy among same internal companies)
Yes I agree with you guys.. Related party transactions can be distinguished in external & internal and the first are the riskiest because they cannot be interpreted with the business group perspective since they are undertaken with parties external to the group.
guys my question is: In order of what arianna confirms in all the cases the internal party transactions can be interpreted with the business group perspective? Thanks
Internal RPTs are within the business group, for ex.between the holding and one of its subholdings, while external ones are those which happen with external entities: suppliers,retailers,state, banks.The external RPts can be with related parties ( think of relationships with a supplier that is controlled by the same holding party) or unrelated ( for ex. with a bank or an insurance company not controlled by your holding)
Hi Francesco, in my opinion when the RPTs are controlled my the majority shareholder, they can damage the benefit of minority shareholders. This fact can decrease the attraction of group's stock. By confirming that in all cases the RPTs are interpret to business group perspective, the firm can protect the ability to raise capital from market.
All correct,internal RPTs are those transactions between two different legal entities in a economic entity (so for example a sales of inventory from a subsidiary to another one),while external ones are those transactions with external actors,so for example suppliers,banks and so on. As Federica said,external ones can be divided in related and un related transactions.
@Francesco: in my opinion, since the internal transactions are those that are made among members of the group, in all cases the RPTs can be interpreted with the business group perspective and so interpreting the intragroup transactions not as isolated transactions.
As already stressed these 3 transactions are quite different one from each other. First, the internal transactions take place in the same group among its members. Second, the external are carried out with actors "external", indeed, to the group. Third,, the R.P.T.s external to the group involve actors that have a sort of connection with the group. To sum up I agree with my colleagues, in particular when they said that the latters are the riskier.
Internal transactions are the ones that are made within the members of the group. External transactions are made with certain parties that are not part of the group but we have two types related ones and unrelated ones.
Internal transactions are related to members within the group, and external transactions are related with outside actors. External transactions has both related and unrelated transaction parties.
we define unrelated a party who is neither controlled by the controlling party of our company, nor by one of his relatives or family mebers. In a situation like the Italian one many groups are strongly related, even if not officially, so the analysis of related party transactions should be done on a much broader scope in order to correctly classify all the transactions.
Internal party transactions are transactions made inside the business group (I.e.holding and one subholdings); external party transactions are those made with external entities (suppliers,retailers, etc..) The external RPts can be with related parties or unrelated;
Internal party transactions are those, made inside the business group (between the subsidiaries, between the natural persons within the organization, between the member of BoD and the company..etc) Instead, external party transactions are those, made by the company or its people with the other businesses (outside the companies business group) or with the physical persons (owners, directors, managers) of the external company or the transactions with the suppliers. and so on. The transactions can be called unrelated, when there is no connection with the BoD or other people, who can have personal interest in the transaction and when there is no conflict of interest.
I agree with you, guys in term of definition of related and unrelated party transactions. And for sure, related party transactions are more risky for all corporation in geneal, because many shareholders and other actors depend on them, while the risk of unrelated party transaction is always private one, which related only to the person who did it, but do not have the influence on all corporation.
Internal party transactions are those made within the Group (ex. Between a parent and its subsidiary). The external party transactions are those made by the group with external business entities. To be considered as related ones, they must have a link with the group, for example controlled by the ultimate controlling party of the group or his relatives.
I agree with guys that External transactions are related to members within the group, and external transactions are related with outside actors. External transactions divided in related and unrelated transaction parties.
Hi guys, I have some doubts related to Fiat Partecipazioni Spa... What is its position/relation in/with Fiat Group S.p.a.? I found an official document of 2008 in which it's stated that Fiat Partecipazioni has participations in Fiat Group Automobiles Spa (http://tinyurl.com/pd3bjkv). I am a bit confused about the nature of this Fiat Partecipazioni Spa: was it a parent o a subsidiary? What about its business? was it just a holding? was it an economic entity or an azienda?
There was a partial spin-off of the wholly owned subsidiary Fiat Partecipazioni S.p.A. in favor of Fiat S.p.A. The transaction represented a partial Spin-off of a subsidiary in favor of the sole shareholder, therefore Fiat S.p.A. did not issue any new share. You can find some information here: http://www.fcagroup.com/en-US/investor_relations/shareholders/FiatDocuments/Demerge_fiat_partecipazioni/Relazione%20scissione_ENG.pdf
Considering the name, I suppose that Fiat Partecipazioni is a "Chinese box" whose financial statement is mainly composed of investments in subsidiaries. Like Olimpia, it does not produce anything. Moreover, it is just a way to separate ownership and control guaranteeing more "protection" to the ultimate controlling party. Chinese boxes are usually parent companies and cannot be considered as an azienda since they cannot survive with their own revenues.
I'd rather to add Ngos (Non-governmental organizations) and fundations because they are not allowed to have investments made with a profit-oriented purpose. As a consequence, they cannot own shares.
I agree with all of you guys, even if there are situation in with the State owns shares of a company. In this case do you still consider it totally external?
Giacomo,I think you should consider the State as external also in this case...external does not means that is not in relation with the organization,but that it's not an actor concerning with management! If you look at some slides,external actors are shareholders or debtholders..so yes,I think that in this case the State is always external!
i think that external stakeholders are the ones whom aren't directly related with the business of the firm, in fact even if they have indirect linkages the firm is able to run the business without them. they could be the state local communties and labor union for example.
I agree with some of you guys, the state, even though it owns shares in companies, however it could always be considered as external party if we interpret this situation on the base of the definition we have studied about 'External Actor'.
I agree with you, guys, about the State. But I let`s not forget that, for example, the customers and the local communities are also stakeholders and they are external as well.
Yes, I agree that State, customers and local communities are always external shareholders, but also finaciers as one of the main debtholder is among them, so we can consider Bank as an external shareholder too.
I agree with Camilla. There is not only the State. Answering to Arianna each case of "municipalizzate" can be considered as the situation you mentioned.
The Government is a typical example of an external stakeholder. But we should not forget that it can be also an internal one, namely in the case of a state-owned company.
In my opinion, If you want to get 3 points, we should comment average at least 3 comments in each topic. There are 18 topics so you should comments about 50 comments.
guys, how do you think that corporations decide to use agency theory behavior respect to the stewardship? and is it only a decision taken in consideration by controlling party or also by managers
In my opinion, managers decide to act as agent or as steward depending on the perception of the situation in which they are involved. Furthermore, owners decide to create an agency or stewardship relationship not only on the basis of the perception of the situation, but also depending on the managers's behaviour.
The main decision about the structure of the company (in respect with the theories) is finally taken by the owners ( the controlling party lets say). But as, anyways, the real "movers" and actors of the company are managers, who have more deep understanding and knowledge of the business, it seems to me, that the owners rely on them in deciding what theory can better suit the company.
I do not think a firm choose one theory instead of another. Perhaps, it depends on the board characteristics and dynamics within it. I am referring not only on board's overall characteristics, but also on directors' features.
I think it depends on managers decide to act as agent r or as steward depending in the of the situation in which they are engage.Thus, controlling party decide to create an agency or stewardship relationship not only on the basis of the of the situation, but also how managers acts in particular situations.
Following the theory, independent directors are not considered so good since they lack of what is called "firm-specific knowledge and skills". Thus, they are not so deeply involved within firm culture to better face board issues.
I think it depend. To enhance the effectiveness , it must comprise of an independent board of directors as stated under the Corporate Law Economic Reform Program Act 2004 (CLERP 9). Conversely, independent directors will not function efficiently and effectively if several essential principles are not met. here are five important aspects to that make up the nature of an independent director. These include independence, remuneration, knowledge and qualification, assurance, and autonomy. Application of these aspects ensures effective corporate governance.
Sorry guys I have 2 questions, they are not related to this slide...1 ) What are the three specific corporate governance issues with reference to banks? 2)what are the 3 important points on how debt finance strenghtens the co.go?
For question number 1 I suppose they are: 1. Banks are very strong institutions and may ask for proposing some own directors being creditors. 2. They usually do not care about firm's long-term orientation. 3. They often assume firm control in case of its bankrupcy resetting its organization.
For question number 2: 1. Debtholders are legally protected in case of insolvence instead of shareholders. Thus, they tend to be more respected. 2. With long-term loans, debtholders will be more interested in firm future performance with all the consequential benefits. 3. Debtholders do not invest money. They simply lend them to firms.
Is Franzo Grande Stevens an independent director? Why?
ReplyDeleteHe cannot be considered as an independent director since he gain a lot of money from that transaction, that has been approved by the major shareholder. Furthere more he should monitor the major shareholder, by discipline the agency problem of type II ( conflict of interest between minority and majority shareholders)
DeleteBeing paid by the major shareholder for exerting monitoring on the major shareholder's activity within the BoD does not make this Franzo Grande Stevens an independent director? Two hypothesis that might compromise his integrity in the judgement: 1) he could be sacked; 2) as already said, his employer is the major shareholder that sits in the BoD.
DeleteI agree with Federica: he cannot be considered an indipendent director, as he does not satisfy different requisites of indipendence. In fact, he had business relations with the company and (for those relations) he received a compensation from the company other than directorship fees, Moreover, as pointed out these relations may have been authorized by the major shareholder, denoting a further fact that might undermine more his indipendence.
DeleteHe is not an independent director because there is an economic transaction (services) between him and the company and because he has to monitor the controlling shareholder in order to discipline the 2 type agency problem (since there is a concentrated ownership).
Deletehe should not be considered independent as we can say he is "dependent" on the transaction itself
DeleteIn my opinion he cannot be considered really independent since he was appointed , like all others Fiat's board members, by the major shareholder and because he had relevant transaction with the firm which necessarily compromise his independence.
DeleteI agree with Federica too. Franzo Grande Stevenss not an independent director because there is an economic transaction between him and the company. Further more, the major shareholder appointed him to control the major shareholder himself. This is a clear case of agency problem type II.
DeleteI also agree with you guys; he can't be considered as an indipendent director because there is an economic transaction (legal services) between him and FIAT, and also because he has been appointed by the major shareholder.
DeleteFranzo Grande Stevens cannot be considered as an independent director due to the economic transaction between him and Fiat. In addition, he does not satisfy different requisites of indipendence, because he received a compensation from the company + his wage.
DeleteIn case of transactions like this we cannot consider him an independent dircetor. The independent has the role of controlling the Agnelli family. The only fact that the company (and then the majority shareholders) pays him such a huge amount of money can be considered as a significant link between them.
Deletefranzo grande stevens cannot be considered independent because there is a commercial transaction between him and fiat that lead to the presence of the agency problem type 2, because he has to monitor the controlling shareholder, but with this huge level of transaction he maybe not considered independent, the risk is that he can be removed and he can loose the transaction. For this reason it is considered a red flag, but you cannot consider it as a detrimental transaction because it is a relationship with someone you know and often it is better thanks to the presence of less asymmetric informations.
DeleteHE is not truly independent because the commercial transaction with Fiat and because it was approved by the major shareholder that HE should control in order to avoid agency problem type 2.
DeleteWe can not say that Franzo Grande Stevens is for sure an independent director since he has business transaction with the company remunerated outside his fees. It is enough to say that is not a truly independent director.
DeleteHe cannot be considered an independent director since he does not satisfy the requirements needed,for example he gains other compensations different from the directorship fees.
DeleteAs most of you already said, FGS (taking as reference the years before 2010) cannot be considered independent.
DeleteHe had been appointed by Fiat to provide for services, thus receiving an important amount of money authorized by the majority shareholder via an extraordinary internal business transaction.
Probably no, but we have to consider also further information. For istance what happen if the deal was justified by the convenience of the price comparing to the market?
DeleteThis comment has been removed by the author.
DeleteNo he can't be considered a real independent director, because he is paid from those who have to control. To be an independent director he should be paid by minority shareholders
DeleteOf course he can't be considered an independent director. Here we have a commercial transaction with the holding company and a agency problem type 2 (because Fiat is controlled by Agnelli family). A independent director has to monitor the controlling shareholder, but if Franzo Grande Stevens receive money from the controlling party for advises it is very difficult that he will monitor the agency problem type 2. For this reason he is considered a non-independend director.
DeleteFranzo Grande Stevens can't be considered as an independent director because of the benefits related to the transactions. Furthermore, he has a strong relationship with Agnelli family.
DeleteObsiously no, because he, first, received a lot of money from legal services provided to the company and second, he should guarantee minority shareholders about the agency problem type 2 ( concentrated ownership)
DeleteIn my opinion Franzo Grande Stevens can't be considered as an independent director due to the fact that there is an economic transaction between them and also Franzo Grande Stevensis appointed by the major shareholders, on the other hand he is not fulfill to be an independent director.
DeleteNo, it is not an independet director. The reason lies on the fact that it does not respect the independece criteria: Franzo Grande Stevens receives a compensation for legal services.
Deleteno, for sure he isn't independent. But my question is, can shareholders ask for the removal of an unreal independent director? Can they ask for someone intervention?
DeleteOn the grounds that he has an economic relationship with Fiat spa he cannot be considered indipendent.The risk of rendering services to the firm a director works for, is that he's probably paid a greater amount of money for the transaction(obviously approved by majority) than he should , and so he is going to go on staying in line with majority interests rather than solving agency problem type 2 which is particularly relevant in the fiat case.
DeleteExactly no, because of not to receive compensation is one of main rule of Independent directors...
DeleteHe cannot be considered independent because he has an economic relationship with the company and he receives a compensation for legal services instead of the unique compensation for directorship. It invalidates the indepence requirement since he will be "dipendent" from the management.
DeleteWhen there is an economic link,as in this case,cannot be considered an independent director.i also quote the point of the legal services instead of the unique compensation for directorship as aurora suggest.
DeleteIn my view, Franzo Grande Stevens is not an independent director because it does not respect the independece criteria: Franzo Grande Stevens receives a compensation for legal services.
DeleteI agree with all of you, guys. He can not be considered independent because of the big amount of money received by the firm (that surely has requested the dominant shareholders' approval) and because he was appointed by the major shareholders, the same he has to control in order to avoid the agency problem of type II.
DeleteNo, he can't. Not only because of the money he received by the firm but also for his strict relationship with the major shareholders
DeleteOf course he can't be considered a truly independent director, the remuneration for legal services paid by the company confirms the strict relationship between Franzo Grande Stevens and the controllling shareholder of FIAT.
DeleteOf course Franzo Grande Stevens can not be considered as an independed director, because he is in transaction economic relationship with Fiat, and it could be a conflict of interest.
DeleteNo Franzo Grande Stevens is not an independent director because of the huge amount of money he is receiving from FIAT
DeleteFranzo Grande Stevens cant be considered as an independent director because of the transaction related with FIAT.
DeleteNo, Franzo Grande Stevens can not be considered as independent in this case. First- he has an economic transaction with the company, that already puts his "interdependency" under question mark. Second, for his services he received a huge compensation, that again leads us to the thought that he has a big personal interested in this transaction. And then, third, he charged for the same services different amount of money for 2 buyers, that is not correct. So we can make a suggestion WHY he was the member of the Board UNTILL 2004 )
DeleteWell, In my view, It is impossible to say that Franzo Grande Stevens is an independent director while his salary is moderate. Other hand, it conficts with an Economic transaction between him and Fiat
DeleteI agree with the things that my colleagues said above. He cannot be cosidered independent since he has had relevant economic transactions with Fiat group.
DeleteFranzo Grande Stevens is not an independent director because he has commercial transactions within the group.
Deletein my opinion, according to the strong relationship between Agnelli's family and Franzo Grande Stevens which approved this transaction.And also board of directors approved this transaction because major part of boards was appointed by controllling shareholder which means that they are not independend
DeleteHe cannot be considered as an independent director. In fact he received a lot of money for a transaction ( provision of legal services) that surely has been approved by the dominant shareholder. At the same time since it is a director of a concentrated company he should discipline an agency problem of type II and therefore he should monitor the controlling shareholder.
ReplyDeleteNo, Franzo Grande Stevens is not an independent director since exists an economic transaction between him and the company, and since this transaction has been approved by the major shareholder.
ReplyDeleteI agree with my colleagues. The fact that the transaction has been approved by the majority shareholder is fundamental for making this situation a situation of conflict of interest.
ReplyDeleteI agree, furthermore he could also be considered dependent on future transaction and in the fear of losing them
DeleteGiovanni why consider them dependent could skip the possibility of losing them?
DeleteThe transaction is approved by the board of directors but...
ReplyDelete...but it is surely a transaction to which the dominant shareholder said "yes".
Deleteand the major shareholder sits in the board, doesn't he?
Deletebut the majority shareholders can also block the transaction whenever Mr Franzo Grande Stevens tries to monitor the major shareholder itself.Thus Stevens is not in the position to be an independent since his source of revenue is decided by whom is to be controlled.
DeleteFranzo Grande Stevens has been the "official lawyer" of Agnelli Family ( he was called "l'avvocato dell'avvocato"), he had and still has a strong relation with Agnelli family(now he is the honorary president of Juventus); since Agnelli family is the major shareholder, of course they supported this transaction
DeleteOtherwise he should control the controlling shareholder (Agnelli).
Delete...it could not have been possible without the "placet" of the controlling party.
Deletethere is no separation between ownership and control
DeleteWithout the dominant party approbation, the transaction cannot be applied
Deletebut probably the transaction was allowed by the controlling party.
Deleteand it does not mean that the transaction will be detrimental for the firm
DeleteObviously again, in concentrated company like Fiat, the major shareholder has the control of the board; thus not surprising that the transaction has been approved.
Delete....but without the dominant party the transactions can't be approved because a company like Fiat the BOD is controlled by the major shareholders.
Deletecan minority shareholders ask for him removal?
DeleteI agree with Pierpaolo, there are evident affiliations of Franzo Grande Stevens with the controlling party:easy game.
Delete...bu also by the controlling shareholder since Fiat is controlled by Agnelli family, therefore the director for sure cannot be considered independent.
Deletealso this time I agree with pierpaolo and also with Edoardo, the linkages between the two parties are evidents!
DeleteI agree with you there is an obvious relationship with the controlling party!
Deletethe board was appointed by the major shareholder, so ther is a strong relationship with the ultimate controlling party.
DeleteThe transaction is approved by the board of directors but he should control the controlling shareholder
DeleteThuy what do you wanna mean when you say that the transaction should be controlled by the controlling shareholders?thanks,i would like only to know more about the argoument!
DeleteThe transaction is approved by the board of directors and by the controlling shareholder!
Delete....but it should be also approved by controlling parties
DeleteBut he has close relationship to the owners, that is the Agnelli family
DeleteHe has relation to the ultimate controlling party, the Agnelli family.
Deletebut maybe the transaction was approved by the controlling party
DeleteHow can it be possible to give legal services to a Chinese box?
DeleteThis comment has been removed by the author.
ReplyDeletein order to (of course it is just an hypothesis)...
DeleteRelated party transactions with directors could be an instrument used by the controlling shareholder to capture the board independence
DeleteI cannot read the original message of Giulia, but may you tell me an example just to understand how it is possible to capture the board independence using rpt? I thought it should be a way to mislead (though mining their independence) the board members who are considered potentially "dangerous" by the UCP.
DeletePerhaps the example that Gian is looking for could be also the previous of Franzo Grande and Fiat, am I right?
DeleteI don't know Damiano, but Gian can be right
DeleteYes Damiano, I think that that this case could be an optimal example
DeleteI absolutely agree with Gian Marco.
Delete@Damiano: yes, I believe the one of Franzo Grande and Fiat can be a proper example
According to me, RPT could be an instrument used to capture the board independence..and maybe the previous case is a suitable example.
DeleteThis could be also a way to capture the board independence when the director is elected by the minority shareholders. In fact in this case even if the director is not apponted by the dominant shareholder he could not be considered truly independent.
ReplyDeleteWhat if the independent director tries to justify those extra (big) amounts by sustaing the following thesis : his services are very qualified, thus the compensation recieved is a quite normal one?
DeleteThe main issue is not about on whether the independent director deserves such a high remuneration or not, but it's on the fact that the majority shareholder plays an important role in funding the wage of Stevens, and has the power to deprive him of it in case of a friction among them. Therefore Stevens' behaviour will probably be biased by the economic link he has to the company.
DeleteIn my opinion, in this case the transaction may be justified if his legal services are really better than the ones the company could acquire from unrelated parties. However, the director is not independent also in this particular situation.
DeleteAs I said in the previous discussion, Franzo Grande Stevens has a strong relationship with Agnelli family, and for sure he will offer a better service in terms of quantity and quality to them, so I think this transaction is justified by that;
DeleteI agree with you Giulia for this kind of jobs (like a legal consulting) is better to appoint a trusted person like Franzo Grande Stevens. But we can not consider him an independent director.
DeleteGiulia, i could agree with your hypotesis (in the main comment), but... isn't it a sort (not even too much hidden) of corruption? Is it legal? According to the possibility that his services was to be considered the best in class at that time, I don't know. He was long time near the family and the group, his independence was already mined before this transactions as he was close to the UCP family members, isn't it?
Deleteyes it is ( the independency mined by the relationship with the family) but probably this is the italian way to organize the management. Put as much friends are possible in order to control them
DeleteI perfectly agree with Pierpaolo about the strong relationship between Agnelli's family and Franzo Grande Stevens that have a repercussion in terms of quality and quantity.This absolutely justify this transaction.
DeleteI strongly agree with Luigi's and Andrea's points
DeleteIn my humble opinion, the majority shareholder has an important role in funding the wage of the director, and has the power to "punish" him in case of a friction among them. Therefore Stevens' behaviour will probably be biased by the economic link he has to the company has Luigi said.
DeleteIn my opinion the behaviour adopted by Franzo Grande Stevens is strongly affected by its financial relationship with the company.
DeleteThis comment has been removed by the author.
DeleteIn my view, it is possible if the director is not appointed by the dominant shareholder he could not be considered truly independent.
DeleteI think it is not sure to consider Franzo Grande Stevens is an independent director.
DeleteThis comment has been removed by the author.
DeleteThis comment has been removed by the author.
ReplyDeletehi guys, i want to ask a question: in general we know that we have related party transactions that could be considered external/internal and unrelated party transactions, could you explain me the differences among these 3 types and how we can define unrelated transactions more in detail?
ReplyDeleteThe internal transactions are those that are made among members of the group while the extarnal are those made with actors that are not included in the group. In particular then, the related parties external to the group are transactions made with actors that have a link with the group (for example a supplier controlled by the holding) and are more riskier than the unrelated parties that are made with actors that have no relationship with the holding.
DeleteI agree with Claudia. In addition, we can say that the related party transactions with external actors are the riskier one.
DeleteI agree with you. In particular, as Morgan said, the related party transactions with external actors are the riskiest one because they can never be justified using the business group perspective.
DeleteThere could be 2 kinds of related party transactions. The first type is between subsidiries and/or the holding, and it is called internal transaction. The second type, which is called external transaction, occurs with related parties which are outside the group! Moreover, the latter are riskier than the internal ones.
DeleteThis comment has been removed by the author.
Deletei agree with you and i would add that these kind of transactions can be controllled in relationship whit the sum of the other transaction. for example if a company has the 50% of operations among subsidiaries, this could be a problem because is too concentrated on themselves, and this could lead an illegal increases of revenues. (sell/buy among same internal companies)
DeleteYes I agree with you guys.. Related party transactions can be distinguished in external & internal and the first are the riskiest because they cannot be interpreted with the business group perspective since they are undertaken with parties external to the group.
Deleteguys my question is:
DeleteIn order of what arianna confirms in all the cases the internal party transactions can be interpreted with the business group perspective?
Thanks
Internal RPTs are within the business group, for ex.between the holding and one of its subholdings, while external ones are those which happen with external entities: suppliers,retailers,state, banks.The external RPts can be with related parties ( think of relationships with a supplier that is controlled by the same holding party) or unrelated ( for ex. with a bank or an insurance company not controlled by your holding)
DeleteHi Francesco, in my opinion when the RPTs are controlled my the majority shareholder, they can damage the benefit of minority shareholders. This fact can decrease the attraction of group's stock. By confirming that in all cases the RPTs are interpret to business group perspective, the firm can protect the ability to raise capital from market.
DeleteAll correct,internal RPTs are those transactions between two different legal entities in a economic entity (so for example a sales of inventory from a subsidiary to another one),while external ones are those transactions with external actors,so for example suppliers,banks and so on. As Federica said,external ones can be divided in related and un related transactions.
Deleteso the external are the riskiest...thank you for answer to my question guys!
Delete@Francesco: in my opinion, since the internal transactions are those that are made among members of the group, in all cases the RPTs can be interpreted with the business group perspective and so interpreting the intragroup transactions not as isolated transactions.
DeleteAs already stressed these 3 transactions are quite different one from each other. First, the internal transactions take place in the same group among its members. Second, the external are carried out with actors "external", indeed, to the group. Third,, the R.P.T.s external to the group involve actors that have a sort of connection with the group. To sum up I agree with my colleagues, in particular when they said that the latters are the riskier.
DeleteInternal transactions are the ones that are made within the members of the group.
DeleteExternal transactions are made with certain parties that are not part of the group but we have two types related ones and unrelated ones.
Internal transactions are related to members within the group, and external transactions are related with outside actors. External transactions has both related and unrelated transaction parties.
Deletewe define unrelated a party who is neither controlled by the controlling party of our company, nor by one of his relatives or family mebers. In a situation like the Italian one many groups are strongly related, even if not officially, so the analysis of related party transactions should be done on a much broader scope in order to correctly classify all the transactions.
DeleteInternal party transactions are transactions made inside the business group (I.e.holding and one subholdings);
Deleteexternal party transactions are those made with external entities (suppliers,retailers, etc..)
The external RPts can be with related parties or unrelated;
Internal party transactions are those, made inside the business group (between the subsidiaries, between the natural persons within the organization, between the member of BoD and the company..etc) Instead, external party transactions are those, made by the company or its people with the other businesses (outside the companies business group) or with the physical persons (owners, directors, managers) of the external company or the transactions with the suppliers. and so on. The transactions can be called unrelated, when there is no connection with the BoD or other people, who can have personal interest in the transaction and when there is no conflict of interest.
DeleteThis comment has been removed by the author.
DeleteI agree with you, guys in term of definition of related and unrelated party transactions. And for sure, related party transactions are more risky for all corporation in geneal, because many shareholders and other actors depend on them, while the risk of unrelated party transaction is always private one, which related only to the person who did it, but do not have the influence on all corporation.
DeleteInternal party transactions are those made within the Group (ex. Between a parent and its subsidiary). The external party transactions are those made by the group with external business entities. To be considered as related ones, they must have a link with the group, for example controlled by the ultimate controlling party of the group or his relatives.
DeleteI agree with guys that External transactions are related to members within the group, and external transactions are related with outside actors. External transactions divided in related and unrelated transaction parties.
DeleteHi guys, I have some doubts related to Fiat Partecipazioni Spa... What is its position/relation in/with Fiat Group S.p.a.? I found an official document of 2008 in which it's stated that Fiat Partecipazioni has participations in Fiat Group Automobiles Spa (http://tinyurl.com/pd3bjkv). I am a bit confused about the nature of this Fiat Partecipazioni Spa: was it a parent o a subsidiary? What about its business? was it just a holding? was it an economic entity or an azienda?
ReplyDeleteThere was a partial spin-off of the wholly owned subsidiary Fiat Partecipazioni S.p.A. in favor of Fiat S.p.A.
DeleteThe transaction represented a partial Spin-off of a subsidiary in favor of the sole shareholder, therefore Fiat S.p.A. did not issue any new share. You can find some information here: http://www.fcagroup.com/en-US/investor_relations/shareholders/FiatDocuments/Demerge_fiat_partecipazioni/Relazione%20scissione_ENG.pdf
I can't open the link
DeleteConsidering the name, I suppose that Fiat Partecipazioni is a "Chinese box" whose financial statement is mainly composed of investments in subsidiaries. Like Olimpia, it does not produce anything. Moreover, it is just a way to separate ownership and control guaranteeing more "protection" to the ultimate controlling party. Chinese boxes are usually parent companies and cannot be considered as an azienda since they cannot survive with their own revenues.
DeleteIf I remeber well Fiat partecipacioni is a subsidiary of fiat group, but I don't remember the source where I red it.
DeleteI actually read Giulia's link and yes, as the explanatory report says, there was a partial spin-off of the subsidiary in favor of Fiat S.p.A.
Delete@Giovanni try to copy and paste link on Internet. Giulia and Pierpaolo are right
DeleteWhat did Fiat partecipazioni spin-off? Investments in subsidiaries? I mean what kind of assets?
DeleteSorry but actually I can't open your link, I will try one at home
ReplyDeleteyes, me too, but i trust in gulia
ReplyDeleteGuys, who is that kind of stakeholder that is always external?
ReplyDeleteThe state is the stakeholder that is always external
DeleteI agree with Sandy,the State is always an external actor.
DeleteYes the only stakeholder that is always external is the state.
DeleteI'd rather to add Ngos (Non-governmental organizations) and fundations because they are not allowed to have investments made with a profit-oriented purpose. As a consequence, they cannot own shares.
DeleteI agree with sandy, the state is the external stakeholder.
DeleteI agree with all of you guys, even if there are situation in with the State owns shares of a company. In this case do you still consider it totally external?
DeleteIt should be considered external also when there are situations of illegal collusion between puplic and private interests?!
DeleteGiacomo,I think you should consider the State as external also in this case...external does not means that is not in relation with the organization,but that it's not an actor concerning with management! If you look at some slides,external actors are shareholders or debtholders..so yes,I think that in this case the State is always external!
DeleteIt should be the state
Deletei think that external stakeholders are the ones whom aren't directly related with the business of the firm, in fact even if they have indirect linkages the firm is able to run the business without them. they could be the state local communties and labor union for example.
DeleteI agree with Federica's point.But are there situtations in which the state is principal and others in which it is agent ??
DeleteI agree with some of you guys, the state, even though it owns shares in companies, however it could always be considered as external party if we interpret this situation on the base of the definition we have studied about 'External Actor'.
DeleteI agree with you, guys, about the State. But I let`s not forget that, for example, the customers and the local communities are also stakeholders and they are external as well.
DeleteI agree with you. The stakeholder that is always external to a Group is the Government.
DeleteYes, I agree that State, customers and local communities are always external shareholders, but also finaciers as one of the main debtholder is among them, so we can consider Bank as an external shareholder too.
DeleteI agree with Camilla. There is not only the State. Answering to Arianna each case of "municipalizzate" can be considered as the situation you mentioned.
DeleteThe unique stakeholder that is Always external to the Group is the government.
DeleteThe Government is a typical example of an external stakeholder. But we should not forget that it can be also an internal one, namely in the case of a state-owned company.
DeleteIn my opinion, minority shareholders is a kind of stakeholder that is always external.
Deletean other stakeholder that is always external is State
Deletei agree that state always external actor.But we shoul consider minority shareholders also as external actors,Iabsolutely agree with Thuy Le.
DeleteHow many comments do we need in order to deserve 3 points?
ReplyDeleteas much as you can
DeleteThat's insane!
DeleteI think more than 50 comments
DeleteIn my opinion, If you want to get 3 points, we should comment average at least 3 comments in each topic. There are 18 topics so you should comments about 50 comments.
DeleteIt is difficult to count how many comments we have wrote
Deleteguys, how do you think that corporations decide to use agency theory behavior respect to the stewardship? and is it only a decision taken in consideration by controlling party or also by managers
ReplyDeleteIn my opinion, managers decide to act as agent or as steward depending on the perception of the situation in which they are involved. Furthermore, owners decide to create an agency or stewardship relationship not only on the basis of the perception of the situation, but also depending on the managers's behaviour.
DeleteThe main decision about the structure of the company (in respect with the theories) is finally taken by the owners ( the controlling party lets say). But as, anyways, the real "movers" and actors of the company are managers, who have more deep understanding and knowledge of the business, it seems to me, that the owners rely on them in deciding what theory can better suit the company.
DeleteI do not think a firm choose one theory instead of another. Perhaps, it depends on the board characteristics and dynamics within it. I am referring not only on board's overall characteristics, but also on directors' features.
DeleteI think no because the decision depends on situation of each firm.
DeleteI think it depends on managers decide to act as agent r or as steward depending in the of the situation in which they are engage.Thus, controlling party decide to create an agency or stewardship relationship not only on the basis of the of the situation, but also how managers acts in particular situations.
DeleteWhy guys according to the Stakeholders theory independent directors are not considered as good as in other theories?
ReplyDeleteFollowing the theory, independent directors are not considered so good since they lack of what is called "firm-specific knowledge and skills". Thus, they are not so deeply involved within firm culture to better face board issues.
DeleteI think it depend. To enhance the effectiveness , it must comprise of an independent board of directors as stated under the Corporate Law Economic Reform Program Act 2004 (CLERP 9). Conversely, independent directors will not function efficiently and effectively if several essential principles are not met. here are five important aspects to that make up the nature of an independent director. These include independence, remuneration, knowledge and qualification, assurance, and autonomy. Application of these aspects ensures effective corporate governance.
DeleteSorry guys I have 2 questions, they are not related to this slide...1 ) What are the three specific corporate governance issues with reference to banks? 2)what are the 3 important points on how debt finance strenghtens the co.go?
ReplyDeleteFor question number 1 I suppose they are:
Delete1. Banks are very strong institutions and may ask for proposing some own directors being creditors.
2. They usually do not care about firm's long-term orientation.
3. They often assume firm control in case of its bankrupcy resetting its organization.
For question number 2:
1. Debtholders are legally protected in case of insolvence instead of shareholders. Thus, they tend to be more respected.
2. With long-term loans, debtholders will be more interested in firm future performance with all the consequential benefits.
3. Debtholders do not invest money. They simply lend them to firms.