According to our Observatory on Corporate Governance Excellence, the quality of corporate governance is one of the most important aspects regarding investment choices for institutional investors, and it is fundamental for guaranteeing a company value creation over the long-term. Therefore, being able to depend on a good system of governance becomes a determining factor for competing on both a national and international level.
The quality of Corporate Governance, i.e., all those rules and mechanisms through which companies are managed and controlled, is a decisive factor in a company’s ability to create value in a sustainable way.
In other words, a good governance system allows for better management of a company. Although not claiming a causal relationship, our Observatory on Corporate Governance Excellence in Italy has shown that if a company has good Corporate Governance, it is very likely that its performance will be superior to that of its competitors.
In addition, the market itself is increasingly aware of the quality of governance systems. A recent study of ours shows that this corporate aspect is one of the most important criteria when institutional investors select their investment targets: those companies most committed to implementing effective governance systems are those that are able to attract more capital to be used for their growth.
This is true not only for large listed corporations, but also unlisted companies that are evaluated according to the characteristics of their stakeholders (banks, suppliers, customers, etc.), not just on the basis of traditional balance sheet indicators, but also in terms of other corporate aspects, of which the most important is the quality of the governance system.
In 2004, The European House – Ambrosetti created a top-level permanent Observatory whose goal is to provide concrete suggestions and proposals to promote the attainment of excellence in the governance systems of Italian companies. The Observatory is aided in this by an Advisory Board and is supported by companies which are partners in the initiative.
Through regular relations with a range of stakeholders (institutional investors, regulatory bodies, issuers and academia), the Observatory acts as the transmitter of guidelines and suggestions to contribute to improving the current approach to corporate governance and to spreading a “culture of governance excellence” among Italian companies, both listed and unlisted.
Each year, the results of the Observatory’s work and recommendations are presented to representatives of the business and financial communities and government during a final workshop.
Also thanks to the significant database developed by the Observatory, The European House – Ambrosetti has developed a unique methodological approach (the Index of Governance Excellence – EG Index) that provides an objective evaluation of the quality of a company’s governance system through the mapping of a portfolio of qualitative and quantitative indicators. This tool, together with the analysis of corporate documents and one-to-one interviews with members of the board of directors and committees, and corporate heads and management, provide a rigorous and detailed picture of the state-of-health of the governance of each company.
This analysis makes it possible to highlight the strong points and potential areas for improvement of the governance system, both in terms of the sampling of companies used as the benchmark, as well as requests from the market (first and foremost, institutional investors).
The European House – Ambrosetti assists Boards of Directors with services designed to improve the efficiency of governance systems:
The European House – Ambrosetti assists family businesses during key moments of strategic and organizational re-thinking and change through:
What the Observatory has produced
Over the years since its formation, the Observatory has contributed to improving the governance of companies and applicable laws in a number of ways, including:
Check-Up of the client company governance system
The company felt it necessary to ask The European House – Ambrosetti assistance in preparing an objective evaluation of the quality of its governance system in relation to a group of identified companies.
The European House – Ambrosetti provided the company with support in the following activities:
Organizational and strategic check-up, redefinition of the Strategic Framework and creation of the Winning Team
This Group, which found itself having to face a series of externally-related changes, perceived the need to generate alignment, stimulus and motivation within the management team and to effectively manage the process of change underway.
1.The European House – Ambrosetti provided initial support to this Group by performing a strategic/organizational check-up that highlighted:
2.Subsequently, The European House – Ambrosetti provided support to top management in: