Is the “new” parmalat model of corporate governance a best practice in Italy?

DOI: 10.5176/2251-1997_AF51

Authors: Fabrizio Bava and Alain Devalle

Abstract:

This paper presents an analysis of corporategovernance of the “new” Parmalat, born in the aftermath of theinfamous financial scandal, and aims at verifying if this newmodel of governance can be considered a best practice for Italianlisted companies. Many papers have already highlighted that theParmalat scandal was facilitated by bad governance which didnot have an efficient system for the safeguarding of creditors andminority shareholders in presence of a family corporation.This paper presents the results of the comparison between the“old” and “new” rules of Parmalat corporate governance,highlighting the considerable differences in the composition andfunctions of the various company bodies. Moreover, an in-depthanalysis of the efficacy of the external and internal controlsystems is also provided. The main points of strength which makeit possible to consider the new Parmalat as a model of bestpractice in Italy are identified, although critical aspects are alsopointed out (e.g., the internal control officer reports directly tothe Chief Executive Officer instead of reporting to the wholeBoard of Directors or to the Chairman of the Board of Directors).The paper concludes by making suggestions aimed atstrengthening the model of corporate governance of Italian listedcompanies.

Keywords: corporate governance, public company,Parmalat.

LinkOut:    ScienceDirect