By Giampiero Cantoni (who is)

Italian capitalism is going through a new, important phase of adjustment which some commentators have defined "epoch-making", others the surmounting of the entanglement between finance and politics or the end of "relational capitalism". Still others even see the return of the state with a "new IRI" [Institute for Industrial Reconstruction, a New Deal-style public entity created by Mussolini's fascist government in 1933] seen in a new guise with the Italian government's decree that the Cassa Depositi e Prestiti [CDP - state-controlled savings and loan institution] be allowed to hold shares in companies of national interest, as well as the increasingly-central and -growing role of banking foundations.

Recent cases - the Lactalis attempt to acquire Parmalat, the new governance of Telecom and Assicurazioni Generali and the new role of the Cassa Depositi e Prestiti - unquestionably mark an acceleration towards capitalist frameworks aimed, on one hand, at obeying the laws of the market and, on the other, also moving towards a new industrial policy accompanied by both new rules of governance (e.g., recent changes in the rules regulating public acquisition and exchange offers - OPA - approved by the Consob), as well as legislative action affecting the system as a whole (identification of key sectors to buttress and possibility of intervention from the "sovereign fund" - new role of the CDP - to safeguard the country's strategic interests).

But where in all this can the much-hoped-for modernization in the structure and strategic approach of Italian capitalism be seen? I have dealt with this a number of times recently in some of my writings (Le Banche e la crisi, Sviluppo e Stabilità). Here I want to mention a number of facts and concepts that help us understand the always-difficult interaction within the economic/financial balance of power.

In Italy, we do not have institutional investors such as pension funds or Anglo-Saxon-style "private" investment funds. Just banks and foundations. It is no accident that the role of bank foundations is still fundamental and a stabilizing force in the stock holdings in both major Italian banks and, predictably, in insurance companies. Of fundamental importance in providing stability is the homogeneity of purpose which helps in aiming towards development and not just the desire to hit and run in order to realize more-or-less rapid capital gains. An approach which the foundations have certainly never had and are not likely to have in the future. Just as important, the role of Mediobanca, the only real merchant bank that can stand up to the competition from similar American, British and French investment banks.

But at the same time, and this is the real change, we are also seeing significant share holdings by international investors in major companies, such as Assicurazioni Generali, Mediobanca and Telecom. So significant that they make their voices heard in the governance of these companies and they certainly do not tend to consider untouchable the power of shareholders with minority control in the companies.

Without question, this poses a problem of new contendibility for the quoted companies in which the practice of modern-day international markets imposes also within the stockholder meetings a close examination of a company's governance and strategic development choices.

Let's be clear. Sometimes, the approach of foreign funds is not always that of a guardian angel or "knight in shining armor", galloping to the aid of companies in distress. Their decisions are often dictated more by a short-term gain in profits than any long-term strategic logic. But they are certainly an added element of comparison for our brand of capitalism based on relationships and involvement between a range of subjects that may have different interests and, therefore, also be in conflict with the goals of the company and the managers running it.

Just to avoid any misunderstandings or false hypocrisy, it should also be equally clear that relational capitalism or, to put it better, from my point of view, "system"-oriented capitalism, also represents a positive approach to management from a country-wide standpoint. Isn't this what the French do, after all? The French, for example, aim to acquire in Italy because we are weak in terms of size and family control. Theirs, on the other hand, is a sophisticated system that goes well beyond a single protectionist law. Their decisions are the result of a coordinated effort between authorities, political and economic forces and banks part of the "national system" that operate with the sole objective of safeguarding the interests of France, and for this reason they are able to maneuver more easily. In Italy, we have no national system. We lack a concept of economic cohesion and what prevails is a way of operating that is too personalistic.

One road to finding the way to respond with a system-based initiative to the hostile foreign incursions is that of greater aggregation of Italian companies which are smaller than the real major foreign players, including through the role of the so-called "system banks" or, more precisely, in the Anglo-Saxon approach of "house banks".

The Italian model certainly feels the weight of the old problem of capitalism without capital which wants to make acquisitions by borrowing money from others or through debt leverage. This is an important knot to untangle for our corporate owners. Those who invest must provide support for corporate growth with the proper amount of their own capital.

The scenario is changing on the global market and, therefore, within corporate governance systems. And, in this case, a typically-Italian obsession with "controlling" a company at all costs, even without venture capital, must be overcome. The problems of Italian companies, whether large-, small- or medium-sized, are strategic and structural and are tied to profits, management, market share and competitiveness.

Naturally, this must also be reflected in a good governance structure. For example, in large quoted companies, the public company model could be valid since only broad-based shareholding provides for gradual, constant growth, stability and a good reputation.

Broad-based shareholding also provides a guarantee of separation of ownership and day-to-day management. This all becomes complicated if a single shareholder (already characterized by overlapping and correlated interests) has a controlling share.

To conclude, between State and Market, between "national champions" and the shareholder base, in the end it is the balance of power between shareholders and the true sense of "accountability" of those called upon to run companies that is the key factor in a true process of modernizing capitalism.