Baby Steps in Italy

Italy has passed new corporate governance rules that went into effect at the end of January. Like the new rules in the U.S. resulting from a series of scandals here, Italy's new rules were triggered by the Parmalat scandal 3 years ago.

Under the new rules minority shareholders have been given more power. If the board has 7 or more members, minority shareholders must elect at least one director. Although there is still no requirement that a majority of directors of public companies be independent, Italy has taken a baby step in this direction with the requirement that at least one director be independent.

The reforms in Italy are far from complete. A move toward a majority of independent directors, as well as changes to Italy's accounting rules, are still needed.