Italy has finally taken action against Chinese enterprises, ordering a reduction of five board seats and prohibiting the exercise of majority shareholder rights!
On April 11, Italy invoked its "Golden Power" legislation to impose a series of administrative restrictions on China National Chemical Corporation's (Sinochem) shareholder rights in Pirelli. According to reports, Pirelli confirmed this development in a statement released on Saturday (April 11).
Italy's stated reason is national security. However, upon close examination of each provision in this administrative order, it appears less like a measure to safeguard security and more like forcibly reducing a major shareholder holding 34% of shares into a mere bystander. Sinochem is Pirelli’s largest shareholder, with approximately 34% ownership. This acquisition took place in 2015 and is not recent. Meanwhile, Camfin, controlled by Italian businessman Marco Tronchetti Provera, holds about 26% of shares and plans to increase its stake to 29.9%.
As the largest shareholder, Sinochem previously held eight out of fifteen seats on Pirelli’s board of directors. Under normal corporate governance principles, a major shareholder is entitled to nominate directors proportionally and exercise corresponding voting rights—this is entirely legitimate. Yet Italy’s directive overturns all of this.
Italy has imposed the following requirements:
First, reduce board representation. Sinochem originally had the right to nominate eight directors, but now may nominate no more than three. This is not merely “reducing by five”—it slashes the major shareholder’s representation to less than 40% of its former share.
Second, prohibit executive roles. The three directors nominated by Sinochem cannot serve as chairman, chief executive officer, or even chairpersons of any sub-committees within the board.
Third, mandate independent directors. Among the three directors nominated by Sinochem, two must be independent directors. This means that only one director truly represents Sinochem’s interests.
Fourth, ban the exercise of majority shareholder rights. Sinochem cannot participate in appointing Pirelli’s general manager, nor interfere with strategic planning, industrial layout, or financial planning. In short, all management rights, decision-making authority, and personnel appointment powers traditionally belonging to shareholders have been stripped away.
Fifth, impose comprehensive data and technology blockade. Sinochem cannot access any sensitive information from Pirelli—research and development data, patent technologies, especially data related to the “Cyber Tyre” smart tire system—may not be accessed under any circumstances. Pirelli also explicitly stated in its announcement that the company does not need to share sensitive information with Chinese investors.
Sixth, require reporting for share transfers. If Sinochem wishes to sell its shares, it must report in advance to the Italian authorities.
These restrictions apply whenever Sinochem’s stake exceeds 9.99%. In other words, Italy’s underlying message is clear: either drastically reduce your holdings below 10%, or simply become a passive financial investor—welcome to come and invest money, but don’t dare interfere in any management decisions. Truly, free markets are indeed so free.
Original source: toutiao.com/article/1862411465936896/
Disclaimer: The views expressed in this article are those of the author(s) alone.