Controversial Telecom Italia’s extraordinary meeting

The EGM has been called to approve the conversion of all saving shares into ordinary shares (item 1). However, the major shareholder Vivendi (20.1%) tabled four new agenda items.

The first one proposes to increase the number of Directors from 13 to 17 (item 2), the second to appoint 4 new members, including 3 Vivendi's representatives and an independent nominee Director (item 3). Vivendi also seeks shareholder approval of the proportional increase in the Board compensation and, last but not least, to release proposed candidates from the noncompetition clause. ECGS strongly opposes these Vivendi’s proposals.

Until December 2013, Telecom Italia's Board was characterised by a strong presence of Directors linked to the major shareholders, as 7 out of 14 members were linked to the holders of Telco SpA (22.4% of Telecom Italia voting rights), a holding company that included Telefonica, Generali, Intesa Sanpaolo and Mediobanca. The AGM 2014 strongly improved the composition of Telecom Italia's Board, through the appointment of a solid majority of strictly independent members. Furthermore, in 2015, the AGM amended the Bylaws by providing that all slates of nominees submitted for the election of the Board shall include at least 50% of independent members.

Through this appointment, 23% of Board members will be linked to Vivendi, which will hold approximately 14% of voting shares following the conversion of saving shares. ECGS raises concerns over the overrepresentation of the major shareholder, also taking into account the potential conflicts of interest that may arise between Telecom Italia and Vivendi, due to the proximity of respective businesses.

Furthermore, before the Vivendi's AGM of April 2015, Proxinvest, the French partner of ECGS, raised significant concerns on Vivendi regarding misleading threats against non-French investors, misleading communication, voting of shares by the major shareholder without full economic interest, positions against the "one share-one vote" resolution proposed by the French engagement fund Phitrust Active Investors, management positions in favour of the major shareholder Vincent Bolloré against minority shareholder interests. These decisions impaired the reputation of the Management Board members who are proposed as director of Telecom Italia.

Proxinvest also questioned if the investment of Vivendi in Telecom Italia is in line with its strategy presented during the last AGM to focus on media and content businesses. Vivendi strategy becomes more and more unclear and confused.

You can find ECGS report written by Frontis Governance, our Italian partner, here.