EXECUTIVE SUMMARY

State Owned Companies: state capture, clientelism and corruption in Italy

State Owned Enterprises (SOEs) in Italy had experienced major changes in the last three decades. Since the end of the nineties, the major State Owned enterprises have been privatized and then listed in the stock exchange. Recently, SOEs that were not privatized (e.g. passenger railway company, road maintenance company) are merging in one single company. This brings about questions on whether or not those companies remain governed by dynamics of public companies or not. The market plays an important role in deciding the survival of these companies.

In 2016 the Italian Government has enacted the legislative decree no. 175/2016 ‘Testo unico in materia di società a partecipazione pubblica’ aimed at reforming the public owned enterprises or SOEs, making them more efficient, by better controlling and streamlining them. The new rules have been modified by the legislative decree no. 100/2017, entered into force the 27 June 2017.

In contrast to national SOEs, the local and inter-regional companies have been characterized by a significant number of inefficient companies. In 2016 and 2017 the Parliament have approved a legislation aimed at rationalizing the public ownership in these companies. The main rules refer to the following issue.

1. Justification of public ownership: the public administrations are allowed to own only companies whose activity is strictly linked to the institutional aim of the public administration;

2. Procedures by which public administrations can establish, acquire or participate in SOEs;

3. Corporate Governance: managers and members of the board of the company should have the necessary requisites of good reputation, professionalism, and independence. Generally, the management of a local and regional SOE is represented by an executive manager. Exceptions for management boards are allowed in specific situations due to the dimension or complexity of the enterprises;

4. Remunerations of managers

5. Rationale of participation: By September 30th, 2017 all public administration shall map and report all the owned companies. The reporting will enable to know the exact amount of public owned companies in Italy that is still uncertain. The decree establishes the periodic rationalization of public participation in enterprises on an annual basis at the end of each year (December 31st). From 2020 onwards, public participation in companies with an average yearly turnover in the previous three years below EUR 1 million will be no longer permitted. From 2018 on, public participation in companies which have losses in four out of the five last years will be not allowed. Companies with no employees or with the number of managers superior to that of employees shall be dissolved.

6. Economic balance and human resources management: Public owned enterprises shall draw up a company risk assessment plan. The aim for this is to ensure that they adopt tools to enable a periodic monitoring and assessing of their financial situation avoiding any potential negative impacts on public administration that are members of the enterprise due to financial losses or liquidity crisis.

Due to the recent approval of the reform, its results cannot be fully assessed. However, if it would be enforced it should be able to solve at least the worst situation in terms of bad management.

The legal framework on anti-corruption has also evolved in recent times. From the introduction in the Italian legal framework of the principle of administrative liability of legal persons in 2001 to the comprehensive anti-corruption legislation that has been enacted in 2012. Since 2012 Italy shifted from an approach mainly based on repression towards a more comprehensive prevention approach focused on planning, coordination, evaluation. The anti-corruption law requires to the SOEs to put in place specific prevention measures to prevent the occurrence of acts of corruption and bad management. They include:

  • appointment of a compliance officer with the responsibility to be the reference for the drafting of the anti-corruption plan, monitor its implementation and assess its sustainability over time;
  • adoption of an anti-corruption plan, based on the National Anticorruption Plan, in which are identified all areas that entail a degree of risk of corruption and set out what arrangements have been made (or will be made) to prevent the occurrence of corruption in these areas.
  • adoption or integration of the already existing code of conduct for employees in order to prevent corruption;
  • adoption of measure and initiatives to promote transparency and guarantee the publication of the information, which have to be public, according to the new legislation;
  • adoption of measures on incompatibility for the board members and the executive managers of the company;
  • adoption of measures to protect any whistle-blowers with the aim to protect their identity and prevent public employees from dismissal, sanctions or discrimination at the workplace as a result of their reporting acts of misconduct.

While the result in terms of transparency are in general good, the anti-corruption legal framework has shown, according to the experts, some limitations. In particular, the major issue is that the risk analysis is carried out as a bureaucratic task and it does not turn into something useful to prevent corruption and increase competitiveness.

The cases selected represents a good variety of examples of ownership and governance.

It could be underlined that:

overlapping ownership has proved to be effective in balancing the political influence, in particular in the sector where a natural monopoly exists;

the anti-corruption plan represents a tool that oblige the companies to provide information on crimes occurred in the company and disciplinary action taken towards employee along several other issues; the anti-corruption plan together with the other measures impose on the company could result into a huge amount of paper work that do not change the company approach;

the transparency measure are making companies more accountable to the general public, but a proper accountability mechanism towards the final beneficiaries (i.e. citizens) is far from being reached

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