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Proxy advisers split over vote on Leonardo CEO liability action

Published by Wanda Rich

Posted on May 12, 2022

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(Refiles to clarify board’s position on matter in penultimate paragraph)

MILAN (Reuters) -Proxy advisers ISS and Glass Lewis were split over whether shareholders at Italian defence group Leonardo should vote against a request to start a liability action against CEO Alessandro Profumo, documents showed.

In 2020, Profumo was sentenced in the first instance to six years imprisonment for false accounting in his previous role as chairman of Banca Monte dei Paschi di Siena.

Leonardo later backed Profumo, saying “conditions did not exist” for him to resign as the decision could be overturned by second or third instance courts.

However, activist investor Bluebell Partners in April this year proposed a liability action against the CEO, asking for compensation for reputational damage stemming from the conviction.

ISS recommended shareholders vote against the request saying there was “no sufficient grounds to remove Profumo from his role and undertake any legal action against him”.

The proxy adviser advised however the “company supervises carefully and rigorously the situation and, if necessary, takes the required measures”.

Glass Lewis in turn recommended a vote in favour of the request, saying the conviction has had a “substantial negative reputational impact” on the company.

“While the sentence is subject to appeal, we believe that it serves as a substantial indication that the actions of Alessandro Profumo might harm shareholder value and that a liability action may be warranted,” it added.

When asked for a comment on the proxy recommendations, Leonardo referred to a statement it made in April when it said the board had accepted Bluebell’s proposal for a vote at the upcoming annual general meeting to guarantee maximum transparency and full exercise of shareholder rights but added it considered the arguments put forward by Bluebell as “groundless”.

The AGM is scheduled for May 23.

(Reporting by Agnieszka Flak and Francesca Landini; editing by Jason Neely)