4.5.7 Who are the supervisors of the compliance with the national corporate governance code and the comply or explain principle, and by what means do they perform supervision?

"The task of verifying the suitability of the choices made and the extent of the Code s application is entrusted to the institutional fora for the confrontation between companies and main actors interested in good Corporate Governance; it is therefore reserved to shareholders meetings and encounters with institutional investors." (Italian Corporate Governance Code 1999, p. 26). The Italian corporate governance committee thus clearly assigns the supervisory role regarding the contents of the corporate governance statement to the shareholders (supervision of formal and above all material code compliance - see section 1.2.2). The Italian code does not rely on enforcement mechanisms. The market should impose reputational sanctions on non-compliant or insufficiently compliant issuers (Bianco, Ciavarella et al. 2010, p. 6). Regarding the formal code compliance (whether a corporate governance statement is published in the manner prescribed by regulation), the CONSOB (Commissione Nazionale per le Societd e la Borsa - the public authority responsible for regulating the Italian securities market) has an important supervisory role and can impose disciplinary measures: "Without prejudice to the fact that such omission constitutes an offence, the directors, members of control bodies and general managers of companies listed on regulated markets failing to issue disclosures pursuant to article 123-bis (...) shall be punished by means of a financial penalty ranging from ten thousand to three hundred thousand euro. The disciplinary measure shall be published, at the expense of the offender, in at least two daily newspapers having a national circulation, including one ofa financial nature" (article 192-bis of the Consolidated Law on Finance).

The external auditor - as is the case in the other countries under research -performs formal supervision of code compliance. Through the implementation of Directive 2006/46/EC (Gazzetta Ufficiale delle Repubblica Italiana 260, 2008) this task of checking whether the corporate governance statement has been provided is laid down in article 123(a)(3) of the Consolidated Law on Finance.

To be comprehensive here, the listed companies association Assonime annually assesses the code compliance (Bianco, Ciavarella et al. 2010, p. 6). These analyses are discussed in more detail below under section 4.5.8. The publication of these analyses contributes to and facilitates the supervision by markets, but cannot be regarded as an actual supervisory task. The Borsa Italiana (the Italian Stock Exchange) cannot be considered a supervisor either, although according to literature, as a regulator itself it indirectly monitors the implementation of the code as well as the ongoing development of the regulatory framework (EStandardsForum Financial Standards Foundation Report 2010, p. 4 on Italy) (Centre for Financial Market Integrity 2009, p. 48).

To conclude, in Italy supervision of the actual material code compliance ought to be performed by shareholders during shareholders' meetings and through the share market by imposing reputational sanctions to issuers that do not or not sufficiently comply with the code (Bianco, Ciavarella et al. 2010, p. 6). Enforcement mechanisms in case there is no formal code compliance are regulated and prosecuted by the CONSOB.