and another: guido rossi
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The troubleshooter
Dec 7th 2006
From The Economist print edition
Guido Rossi has made a valiant but largely fruitless effort to clean up Italian business
AP
SOME people call him “Guidone”—big Guido. Large in both physical stature and reputation, Guido Rossi, who took over as Telecom Italia's chairman on September 15th following the surprise resignation of Marco Tronchetti Provera, has stood out from the Italian business crowd for more than three decades. Mr Rossi, who attended Harvard law school in the 1950s and wrote a book on American bankruptcy law, made his name as a corporate lawyer keen on market rules and their enforcement. He has since worked in both private and public sectors, including stints in the Italian Senate and as one of the European Commission's group of company-law experts. As well as running a busy legal practice, he also has a reputation as a corporate troubleshooter and all-round Mr Fix-It, and is often called upon to clean up organisations in crisis.
His role at Telecom Italia marks a return to the company he headed for ten months in 1997, during its politically tricky and legally complex privatisation. Before that, Mr Rossi had been sent in to sort out Ferruzzi-Montedison, an agri-business and chemicals group, which had collapsed after magistrates uncovered tangentopoli (“bribesville”). Last year his legal scheming was crucial in ABN Amro's victorious bid for Banca Antonveneta. Most recently, he acted as special commissioner at Italy's football association, where he was drafted in to sort out the mess after a massive match-rigging scandal exploded earlier this year.
Alas, his efforts to bleach football's dark stains produced the same meagre results as his other efforts to get Italian business and finance to change its ways. “Like Italians when tangentopoli burst, fans wanted justice when the scandal broke; but enthusiasm for legality quickly waned,” sighs Francesco Saverio Borrelli, Milan's former chief prosecutor, who headed the city's assault on corruption during the 1990s and was appointed by Mr Rossi to dig out football's dirt. The political muscle of the clubs prevented tough measures being taken against them, reflecting Italy's two-tier justice system in which the rich and powerful can do what they like. “Economic interests in football far outweigh sporting interests,” remarks Mr Borrelli. The rottenness in football shocked even the unshakeable Mr Rossi. “Football did not want rules, it just wanted me to solve its problems,” he says. Despairing of being able to change much, he resigned in September and turned his attention to Telecom Italia.
The telecoms giant was in turmoil after a fight with the government over its plan to spin off its mobile-phone unit caused its chairman, Mr Tronchetti Provera, to resign. One of Mr Rossi's first moves after taking over was to ask one of his predecessors' close associates, Carlo Buora, to choose between his job as the company's executive deputy-chairman and his managing directorship at Pirelli, a tyre company where Mr Tronchetti Provera's family is the largest shareholder and which is also Telecom Italia's biggest shareholder. Mr Buora chose to stay at Telecom Italia. “He understood my point,” says Mr Rossi, who believes this has finally cut Telecom Italia free from the influence of Pirelli.
That looks like wishful thinking, however. Just over a month after resigning, Mr Tronchetti Provera and other investors in Telecom Italia registered a shareholders' pact with Consob, Italy's stockmarket watchdog. This ties Pirelli's stake to those of the Benetton family, Mediobanca, a Milanese investment bank, and Assicurazioni Generali, a large insurer in which Mediobanca is the biggest shareholder; together they hold 23% of Telecom Italia. “Italian business works in an intricate system where many company boards rubber-stamp decisions made by secretive, external pacts. The law allows this,” explains Mr Rossi. Such pacts have long been his pet hate, together with chains of nested stakes that allow businessmen like Mr Tronchetti Provera to control listed companies while owning only tiny shareholdings in them.
In 1982, when he was Consob's chairman, Mr Rossi published a book entitled “Transparency and Shame”. Although transparency has increased a little, shame is still largely absent from Italian business. “When I became Consob's chairman, I hoped improvements in accounting transparency and companies' communications would help widen Italy's stockmarket, but there has been little progress,” he says.
The good guys don't always win
A leftist senator between 1987 and 1992 and a trustee of Libertà e Giustizia, a lobby group set up in 2002 to champion the cause of Italian democracy, Mr Rossi is unafraid of controversy, takes stands on matters of principle and always speaks his mind. John Andrew, chairman of Eidos Partners, a boutique investment bank, who has worked with Mr Rossi on various deals since the late 1980s, says he is “a good straight guy with a first-rate brain, although he sometimes goes over the top”. (Mr Rossi once remarked, for example, that the only difference between the Italian prime minister's office and a merchant bank was that bankers can speak English.) Intelligent, honest and willing to speak out in a country where many stick to omertà, the Mafia's code of silence, Mr Rossi sounds too good to be true. In Milanese circles, some accuse him of being a prima donna. But even if that is so, the sin of vanity would be minor alongside his clear merits.
The wider problem is that at 75, Mr Rossi is a member of a small group of smart, principled but now greying Italian lawyers. In New York, notes a Milanese insider, you can find many lawyers who think like the Harvard-educated Mr Rossi. But not in Italy, which badly needs such people. Earlier this year a former director-general of Italy's industrialists' association, and one of Libertà e Giustizia's first trustees, complained that Italy had just endured five years of lawmaking merely to legalise illegalities. “This country's worst maladies are the rejection of rules and an aversion to change,” laments Mr Rossi, whose own attempts to cure the disease have so far been thwarted.
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