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Capital Calls

29 September 2021 By Breakingviews columnists


– Reliance/Saudi Aramco

– Mediobanca

Power play. Reliance Industries has strongly defended its decision to appoint Saudi Aramco’s chairman, Yasir Al-Rumayyan, as an independent director to its board. Shareholder proxy advisory groups have publicly and privately baulked against the move, not least because the $230 billion Indian conglomerate is still trying to close a deal first announced two years ago to sell a large chunk of its oil-to-chemicals business to the global crude giant.

Boss Mukesh Ambani and his related entities own half of Reliance, meaning he can easily push through the appointment that requires a simple majority. The regulator’s tougher rules setting a higher threshold don’t kick in until January. But both parties will be embarrassed if a significant chunk of shareholders go against the appointment. The vote will also test institutional investors willingness to face up to two powerful men: India’s top company parks a lot of surplus cash with mutual funds and other institutions, and Al-Rumayyan is also the governor of Saudi Arabia’s giant sovereign wealth fund. The ultimate size of the investor rebellion will be telling. (By Una Galani)

ESG attack. Mediobanca’s pushy investor Leonardo Del Vecchio is putting his activist clothes on. The eyewear billionaire, who owns a 19% stake, proposed on Tuesday to amend the bank’s by-laws at an Oct. 28 shareholder meeting. He wants to remove a requirement that up to three Mediobanca executives with at least three years of experience at the bank should sit on the board, and give minority shareholders two more board representatives. Both would be an improvement in Mediobanca’s outdated governance and will likely be well-received by other investors.

Yet the move is less innocent than it looks. Del Vecchio, 86, has been critical of Chief Executive Alberto Nagel’s leadership and strategy. He is also not inclined to renew Mediobanca-backed Philippe Donnet’s tenure as chief executive of insurer Generali. Granting more power to minority shareholders might eventually let the veteran entrepreneur on the board, even though it is not due to be renewed until 2023. Yet, the prospect alone is enough to keep Nagel on his toes. (By Lisa Jucca)


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