The Covalis hedge fund does not stop at the Enel case and is preparing to launch an association representing funds and managers for the meetings of listed companies as an alternative to the Assogestioni system. In a letter sent to funds and investors, the founder, Zach Mecelis, the same one who proposed a third alternative list for the renewal of the electricity group’s top management, launched a call for May 23 during which he intends to open a debate “on the opportunity to launch a new investor-led association that promotes shareholder values and sound governance practices. Many of our fellow investors would like to see the creation of an investor-oriented, independent platform to express their concerns, perspectives and aspirations. The next steps of the initiative proposed by Covalis will be discussed and agreed with other investors during the call».
Criticism: no position taken by Assogestioni on governance and ESG
The letter starts from a harsh attack on the representation system gathered around Assogestioni. The Covalis fund claims to have spoken to many investors about the Enel affair and to have found that they “are sincerely disappointed by the absence of any public statement from Assogestioni on governance, basic ESG principles and the importance of having a independent president. We believe investment managers with strong governance values have a duty to align their voting decisions with their values and ensure the election of a majority of independent directors with an independent chairman.” In this regard, the manager of the Covalis fund reminded investors “of the importance of having an independent president who represents all Enel’s institutional investors”.
The candidate for president of the Ministry of Economy, Paolo Scaroni, has declared that he is not independent. The objections to Assogestioni start on this point: «The industrial groups currently operating in Italy, including Assogestioni – it is stated – have not commented on the need to have independent chairmen to oversee the boards of directors and have not expressed any concern about the lack of debate on Italian governance processes and practices. Covalis fundamentally disagrees with Assogestioni’s decision not to propose an independent chairman in Enel who would represent all the shareholders and act as a counterweight to management. And this when instead some large and important shareholders have publicly expressed their preference for an independent president of Enel. The complexity of Italy’s list voting system could result in the election of a non-independent chairman of Italy’s largest publicly traded company if shareholders did not vote for Covalis’ list.
The theme of the independence of the president
Essentially, this is Covalis’ reasoning, if Assogestioni had proposed an independent candidate for president today perhaps there would be less need for a third alternative list. Instead, the situation that has arisen is such that, paradoxically, the vote for Assogestioni would be a vote thrown to the wind because it would not allow for the election of an independent president. And this because in the voting system of the Enel group the vote for the Chairman (president) is separate from that of the list for the board: therefore the only independent candidate for president, i.e. Marco Mazzucchelli, can be elected only if the Covalis list obtains at least the minimum number of votes necessary for him to enter the new board.
The new initiative will be launched on 23 May
If the games are essentially over for the Enel affair (electronic voting for funds that vote by proxy could only be changed until May 8), the initiative to give Italian and foreign investors a different representation in the shareholders’ meetings of listed companies continues. “We want to reaffirm our faith in the Italian regulatory system and governmental institutions – says the fund’s note – Covalis believes that the healthy debate generated by Enel’s competitor lists has been positive for the Italian investing community and we encourage institutional investors to ensure that their voice is heard in the ongoing debate on governance”. This will be discussed, in fact, in the call convened for May 23rd.