Guido Corbetta Chair AIdAF -EY of Strategic Management in Family Business

1. Governance for Long-lasting Family Businesses Guido Corbetta Chair AIdAF-EY of Strategic Management in Family Business In memory of Alberto Falck Helsinki, 19th September 2014

2. A dynamicvision of family and corporate governance Ownership stage Family office Entrepreneurial family Family foundation Family council Cousinconsortium Family protocol Family meetings Second generation Shareholders’ agreements Ownershiporganization (Family holding) Founder Board of Directors Corporate governance activity - 2 -

3. Corporate Governance as a system The successful governance of a company is a system of “actors” (and processes): • Shareholders’ assembly • Board of Directors • Chairman • CEO • Committees of the Board (Executive, Audit, Human Resources, …) Legal context and group structure are relevant - 3 -

4. Models of Boards of Directors Governing B.o.D High B.o.D in transformation Directors’ competencies Useless B.o.D Dangerous B.o.D Low Relevant Role of the Board within the decision process Limited - 4 -

5. Roles of Boards of Directors The Board of Directors doesn’t have direct managerial tasks, but governing tasks which may be aggregated into legal role strategic role In a “governing” Board of Directors it is necessary to develop both roles - 5 -

6. The outsidedirectors It is difficult (or impossible ?) to organize a “governing” Board of Directors without outside directors who can be: • Affiliated (friends, ex managers, …) • Unaffiliated or independent Outside members can support the company and the owning family - 6 -

7. The roles of outsidedirectorsfor the company In terms of control: • to stimulate self-discipline and a sense of responsibility • to promote the introduction of reporting tools more sophisticated and connectedto management performance • to monitor potentialconfllicts of interest • to secureminorities’ interests • to secureotherstakeholders’interests - 7 -

8. The roles of outsidedirectorsfor the company In terms of strategy • to acquire new experiences and competencies • to have stimulating counterparts during the formulation of goals and strategies • to improve the quality of the decision making process through deep-reaching questions • to improve the quality of people evaluation processes • to improve relations among other stakeholders and the business • to improve the reputation of the company - 8 -

9. Outsidedirectorscan complete the skillsmissing from the board (1/2) According to directors of family-owned and non-family-owned businesses: Are there skills missing or insufficiently represented on this board? Is there a formal process of determining what skills are required for the board and, therefore, for new directors? - 9 - Source: Boris Groysberg and Deborah Bell

10. Outsidedirectorscan complete the skillsmissing from the board (2/2) û What are the skills missing from boards? û û û ü û û ü û ü ü Source: Boris Groysberg and Deborah Bell ü - 10 -

11. The roles of third parties for the family Third parties unaffiliated of the owning family are very useful for family governance because they help: • to define the right rules in the relations among the company and the family • to plan in a professional way the succession process • to manage some “strategic traps” that may happen because of the entrepreneur getting older • to manage with less emotional bias the tensions which may arise among family shareholders, managers and non managers • to train successors - 11 -

12. Zegna case:corporate governance • Board Governance: • Four “independent” Board members out of 8, with age limit rule • Audit Committee and Compensation Committee • Group Governance: • Executive Committee: top management, of which one third is foreign, meets 4 times per year • Zegna Convention: all worldwide executives meet 2 times a year (of which one at our Milan Headquarters) - 12 -

13. Zegna case:family governance • Entry of the next generation: • Admission rules tied to education, competence and passion: university degree, foreign languages and work experience in other companies for at least 3 years • Young Generation Committee: meets twice a year under the guidance of our Chairman Paolo Zegna and with the presence of experts in Family Business to move the fifth generation towards the Group. - 13 -

14. De Agostini case: family governance (1/2) • The Assembly of the shareholdershasapproved the “Rules for the IV generation”. According to theserules, members of this generation couldhavedifferentroles: • Managers: a candidate must reach some significantresults in the managerial career outside, beforeentering in the Group • Part time employees: eachbranch of the family can candidate twomembers for part time employment • Suppliers or consultantsof the companies of the Group (with some limitations). - 14 -

15. De Agostini case: family governance (2/2) • To prepareall the members of the IV generation to theirownershipresponsibilities, a Committee IV Generation hasbeenestablished. • The Committeeiscomposed by 8 members of the IV generation (4 oldersand 4 youngers) and organizesactvities for all the members of the IV generation. • An ImplementationCommitteeis in charge of all the developmentprocess of the IV generation. • The Committeeiscomposedby the Chairman of the Group, the Vice Chairman in charge of the relationships with the owners, the non family CEO, the head of the Committee IV Generation, threeconsultantsexpert in family business and in head hunting. - 15 -

16. Pay attention ! Before asking an outsider to join it is useful to get to know each other independent in his/her judgments motivated a balanced person morally upright used to working in businesses of larger size with experiences in family business - 16 -