Benetton Family: Redefining Corporate Governance

The Benetton family has revised the governance of their investment holding, Edizione S.p.A. (Edizione), to facilitate the transition to the third generation. This new setup aims to balance representation from the family branches while fostering an ownership culture based on responsibility and stewardship. The purpose is to preserve family wealth and seek a path towards satisfying personal, family, and social goals.

The agreement allows descendants of the founders—Luciano, Gilberto, Carla, and Giuliana—to hold governance roles, provided they have the necessary skills and qualities to contribute to a modern and professional governance system. This setup supports effective interaction with the governance bodies and leadership of affiliated companies (which are often industry leaders and publicly traded) adhering to international best practices in governance and sustainability.

Edizione: An Active, Entrepreneurial, and Sustainable Investor

Edizione is an investment holding company fully owned by the four branches of the Benetton family (equally stakes)—comprising 22 direct or indirect family shareholders across three generations, with the second generation holding controlling ownership.

As of the end of 2023, Edizione reported consolidated revenues of €9.5 billion, 80% of which were generated outside Italy. The gross asset value (GAV) of its portfolio of holdings stands at €12.9 billion—with a net asset value of €11.7 billion, 41% of which are represented by listed investments.

Under the leadership of Chairman Alessandro Benetton (second generation), Edizione has focused its portfolio strategy on investing most of its capital in a limited number of companies that are leaders in their sectors and have a strong international presence.

The primary investment (49% of GAV) is in Mundys, a global leader in transportation infrastructure and mobility payment systems, with a 57% ownership stake. The second most significant investment (19% of GAV) is in Cellnex, a leading European wireless telecommunications and broadcasting infrastructure operator, holding a 9.9% stake. The third investment (11% of GAV) is in Assicurazioni Generali, one of the world’s leading insurance companies, with a 4.83% stake.

The historical business of clothing and textiles—the legacy business—now accounts for only 1% of Edizione’s GAV, but it remains a focus, despite facing challenges. In early 2024, Edizione wrote down the value of its stake by approximately €560 million but pledged continued financial backing to support the Benetton brand’s revival—an entrepreneurial story that began in the 1950s and grew internationally, becoming synonymous with Italian success and Made in Italy.

Strategically, Edizione distinguishes itself as an active investor with a long-term vision, acting with an entrepreneurial mindset and paying particular attention to the economic, environmental, and social impact of its investments. Additionally, Edizione often prefers strategic partnerships with other long-term investors, not only to benefit from coinvestment policies but also to exert greater influence in appointing governance bodies and making leadership decisions in the main entities in which it invests.

New Corporate Governance Rules

Outlining Edizione’s market approach and its portfolio of holdings, it is essential to recognize the relevance of the key innovations introduced in the governance model, which are described below.

Monistic governance model

A significant change is the shift from the traditional or dualistic governance model—where the board of directors and the board of statutory auditors are both appointed at the shareholders’ meeting—to a monistic governance model, also known as a one-tier board.

This model, widely adopted in Anglo-Saxon systems, requires only a board of directors responsible for both management and monitoring functions. The board includes executive and nonexecutive directors. The nonexecutive directors play a crucial role by offering constructive challenges, contributing to the development of proposals, and participating in the audit committee. Thus, one of the challenges of this model is selecting suitable and motivated nonexecutive directors.

The primary reasons for adopting a one-tier system include entrusting all directors with the same responsibilities and duties, streamlining decision-making processes without sacrificing accuracy, and introducing ex-ante controls rather than the traditional ex-post controls of the two-tier system.Role of the board of directors

Another significant governance innovation is the enhanced role of the board of directors. Now, the board holds the full authority to approve the strategic plan and significant operations, a responsibility previously shared with the shareholders’ meeting. This choice better defines the role of ownership in groups with many nonoperational shareholders who may lack the expertise for business decisions.

Shareholders continue to have the right to approve financial statements, determine dividend payouts, and appoint the board. They also retain the reserved power to appoint the CEO, but this requires a two-thirds majority. This provision ensures that two family branches cannot appoint the leadership on their own. They always need the support of a third branch or members from the other two branches to make the decision.

While unanimity in choosing the CEO is ideal, the introduction of strengthened decision-making quorums ensures that family differences do not impede business priorities.

Transfer of shares

Regarding the transfer of share rights, the Benetton family adopts a system commonly used in large families. If a shareholder wishes to sell all or part of their shares and finds a buyer, the other shareholders of their branch have a preemption right. If none exercises this right, the shares will be offered to the other branches, and if they also do not exercise their rights, the company can buy the stake through a share buyback operation. Only as a last resort can the shares be sold outside the family group.

Essentially, the inter vivos transfer rules allow for maintaining ownership balance between branches in principle and entrust the investment holding with the task of intervening if the shareholders lack the financial resources to purchase the stake offered by the selling shareholder, preventing the entry of unwanted shareholders. This system is referred to in family business literature as the "internal market for shares."

Composition of the board of directors

Another governance innovation concerns the composition of the board of directors: each branch can appoint two directors, one of whom must be independent, while the second can be a family member.

This arrangement envisions a governance body made up of both family and nonfamily directors (who can be either executive or nonexecutive), preserving the culture of the family branches while avoiding a board comprised solely of family members.

Criteria for appointing family directors

A final governance innovation is the criteria for eligibility to become a family director. The Benetton family, looking to the future, has decided that for the third generation, those wishing to run for a board position must meet the following criteria:

• hold a university degree,
  

• have completed postgraduate studies (MBA or PhD) at a prestigious university in economics, engineering, law, or international relations, and
  

• have at least five years of external experience in companies operating in investment banking, corporate finance, strategic advisory, private equity, or sectors where Edizione has primary investments.

This choice greatly rewards professionalism and meritocracy and aims to provide Edizione with a modern, talented, and high-calibre governance structure. In this structure, family representation is not viewed as a dynastic right but is welcomed as an opportunity to actively and responsibly contribute to managing one of Europe’s leading investment holdings.

_____________________

“If we don’t respect the past, we will find it harder to build our future.”

— Chairman of a Family Business able to reach the 5th generation. 

Photo credit: iStock #467550384

Source - Edizione company web site and Corriere della Sera