Corporate governance and sustainable success

Particularly in recent years, after a long period of relative stability, the debate on corporate purpose has suddenly flared up, and various influential figures have put forward proposals in favour of so-called stakeholder capitalism.

In his 2018 annual letter to CEOs of large companies, Larry Fink (chairman and CEO of BlackRock, the world's largest investment firm) stressed to top executives the importance of combining the pursuit of profit with the pursuit of community well-being. After stating that national governments can no longer directly manage all social and environmental issues, he called on businesses to actively contribute to solving the significant challenges facing our society, moving beyond the goal of maximizing short-term profits in order to create sustainable value in the long term.

In his letter to CEOs the following year, Larry Fink emphasized that profit and purpose are inextricably linked. Purpose - i.e., the fundamental raison d'être of the company - must guide corporate strategy and the pursuit of profit. Indeed, putting purpose at the center of a corporate mindset can yield many positive outcomes: uniting stakeholders, stimulating ethical behavior, governing corporate culture, and fueling long-term value creation.

These two letters are considered a turning point in the debate on the purpose of corporations. The response of U.S. CEOs was short in coming. With the statement released on August 19, 2019, the Business Roundtable (i.e., the association of CEOs of major U.S. companies) moved beyond the previous "Statement on the purpose of a corporation" based on shareholder primacy and embraced a stakeholder-oriented conception of business. This new approach emphasizes, for example, the importance of satisfying customers, investing in employees, treating suppliers fairly and ethically, supporting communities, and generating long-term shareholder value.  

In the encyclical "All Brothers" (2020), Pope Francis called on managers and entrepreneurs to move beyond a liberalist economy in order to build "an economy more attentive to ethical principles" and founded on charity and fraternity.

The European Union has also been encouraging socially responsible corporate behavior for several years. First, it introduced several regulations such as, for example, the Non-financial Reporting Directive (2014/95/EU), which imposes disclosure requirements on companies regarding their environmental and social risk management policies, and the Shareholder Rights Directive (2017/828/EU), which requires companies to establish remuneration policies that contribute to the long-term interests and sustainability of companies. Most recently, it opened a consultation on sustainable corporate governance to understand how best to promote responsible and sustainable corporate behavior.

In January 2020, during the World Economic Forum, Klaus Schwab promoted a Davos manifesto in favor of so-called stakeholder capitalism. According to this approach, private companies are trustees of civil society who, in order to fulfill their responsibilities, must create shared and lasting value. To achieve this, it is critical to meet customers’ needs, treat people with dignity and respect, manage suppliers as strategic partners, support the community and pay fair taxes, and generate a fair return on shareholder investments.

The proposals described above have fueled a discussion on how corporate governance should be redesigned to meet corporations' growing social and environmental responsibilities.

The recent evolution of the Italian corporate governance code is a first step in this direction, calling for the pursuit of sustainable success, understood as "the creation of long-term value for the benefit of shareholders, taking into account the interests of other stakeholders relevant to the company."

To achieve this goal, the Corporate Governance Code:

• gives the board of directors responsibility for the pursuit of sustainable success (Article 1);
• proposes that the compensation of top management be linked to sustainable performance (Article 5);
• emphasizes that control mechanisms must protect against the risks associated with achieving sustainable success (Article 6).

Consistent with the evolution of the external context, Angelini Industries has also innovated its governance model to foster a more inclusive and sustainable capitalism. In particular, the cultural and behavioral approach that characterizes the Group goes in this direction, which is represented by the identification and dissemination within the organization of the purpose, which can be summarized in the constant care for people and families ("unwavering care for people and families"), of the vision, which emphasizes the goal of building a better future through environmental and economic sustainability, as well as the redefinition of the group's values (i.e., Ethics and Responsibility, Performance, Innovation, Engagement), which in turn are declined into specific behaviors that guide the actions of all Group employees.