Milton Friedman Society
The sorry state of CDP’s influence in major Italian businesses
By Marco Tonin
In a country like Italy where according to the media a widespread phenomenon of neoliberalism is forcefully acquiring more and more pieces of the economy, in this article, we will discuss political parties appointing people in some of the country’s most important companies.
A trend has emerged in recent years among political parties, whereby they divide board nominees between themselves based solely on personal relations, without showing any concern for managerial or economic factors. Every three years the same people get shuffled around companies; CEOs and board members with unproven backgrounds appointed to unrelated businesses with the only credential being having sympathies for the party in charge.
As of 2022, CDP boasts €478 billion in assets and is mainly financed through Poste Italiane certificates of deposit. Among CDP's equity holdings are some of the largest Italian corporations, including utility and energy giants such as Terna, Snam, Eni, Enel, Saipem, and Ansaldo Energia; building companies like WeBuild; payment processing platform Nexi; and telco companies like OpenFiber. In addition to these holdings, CDP has investments in hotels, real estate, fintech, highways, and other industries through proper closed funds.
That is just a sad description of the omnipresent Italian government, with a stake in almost all the major Italian industries. CDP plays a vital role in key sectors of Italy and is instrumental in implementing MEF’s decisions regarding the economy.
With this introduction out of the way, we’ll talk about its role concerning the latest board proposal: the need to strengthen government influence in major Italian businesses. Taking as an example Enel, ever since former Enel CEO Mr. Francesco Starace's appointment back in 2014 under former Prime Minister Renzi, Enel has increased both net income and dividend figures. But as he laid down plans to incentivize renewables transition and energy efficiency, which contraposes the view of certain political figures who are now at the helm of government, now there is a complete turnaround of the company management: Starace out, and in comes Flavio Cattaneo as CEO and Paolo Scaroni as Chairman. There is nothing wrong with the appointment from a professional standpoint, as both are highly competent figures, even though concerns have been raised about the newly appointed Chairman’s decisions regarding Russian gas back when he was at the helm of ENI.
The problem lies in the appointment process itself, as every three years all of the companies typically see a complete shakeup in their management positions. This creates a pressing issue of economic efficiency, as prioritizing stakeholder value and political issues over profits and efficiency can ultimately lead to value destruction, with nobody held accountable for it.
To sum it up, Italy is effectively governed by an omnipresent government with a stake in almost all major Italian industries. Nominations for executive positions are generally based on political proximity, resulting in a high disregard for shareholder value creation.