ACTION 1: PUBLIC CO.

We believe the ideal model is that of a public company or a widely held shareholding structure as proposed by IRI President Romano Prodi in 1992 during the privatization of the strategic companies that formed the backbone of Italian industry. These included banks, energy companies, telecommunications, IT, raw materials such as steel and basic chemicals, transportation, agribusiness, and other major enterprises of national interest. This model, however, was never implemented. Almost all of the large companies of national interest were subjected to judicial scrutiny, leading to their sale to foreign lobbies after multiple ownership transfers, and many were subsequently relocated abroad. It is deemed appropriate, after a quarter of a century, to recreate numerous mini-IRIs on a multi-regional basis, composed of what we term the “Territorial System”: companies working together, owned and managed by Regions, Metropolitan Cities, Provinces, and Municipalities. An Integrated, Collaborative Network The companies would collaborate in a network and form a vertically integrated system in sectors such as energy, water, waste management, and data networks. Upstream production services must be established to complement downstream distribution, including technical design know-how, manufacturing capabilities, and installation and maintenance expertise. Expansion could occur through both: Organic growth, by strengthening technical departments. Dimensional growth, through mergers and acquisitions of existing companies. As the scope of operations expands, a key question arises: Should Bologna remain the operational “brain” and hub, as it was in the past, or would a polycentric solution be preferable, considering the existence of four distinct business units? Public majority ownership and oversight with a public majority ownership, as exemplified by Hera (where over 111 municipalities and public entities currently hold more than 57% of the share capital), and with control over tariffs and the balance between economic returns and investments regulated by a public authority (previously AATO, now redefined as ATESIR), there should be reasonable assurance that activities are conducted in the interest of 99% of citizens, users, and shareholders, minimizing risks of shirking or opportunism by the non-owner top management. Increasing Internal and External Transparency To further enhance transparency, the following measures are proposed: Stock distribution plans for employees, giving them a stake in the company. Employee representation on the Board of Directors: One employee per business unit would be elected as a Board Member by their colleagues, based on a presented mandate program. Governance Structure and Industrial Policy Under this model, corporate governance would rely both on the management of the top executives and on industrial policy guidelines provided by public ownership. The industrial plan should be approved by a shareholders’ meeting predominantly composed of public shareholders, encouraging the participation of small, dispersed shareholders, who almost always represent over 99% of total shareholders in number.

Germany has developed a virtuous model of integration between the banking system and industry that has proven highly successful for the economic development of its regions. Many large companies are financed by cooperative banks and savings banks with a strong territorial focus, as described in the architecture of the German banking system. For this reason, we believe that the public political entities holding the relative majority of the Hera Group could work within their respective political parties to promote legislation aimed at implementing this model in the regions served by the multiutility. The system could leverage both: cooperative credit banks, savings banks, and regional entities, and Cassa Depositi e Prestiti (CDP), the Italian Ministry of Economy and Finance’s development bank.

To prevent takeovers by large private groups that could influence decisions, it is proposed to amend the bylaws to introduce a rule limiting voting rights to 3% for any single private shareholder or private corporate group. This sterilization of decision-making power for private entities beyond the 3% threshold would: 1. Enable the public entity to retain full control of the company. 2. Prevent shirking behavior by the top management.

Typically, members of the Board of Directors are co-opted from outside the company. These individuals, often holding other prestigious positions, have limited time to delve into the company’s operations, which they only understand indirectly. Moreover, the Board’s activities are generally confined to meetings that occur about once a month and last approximately two hours. To address and balance this gap, it is deemed appropriate to allow employees to run for positions as Board members. Who better than an employee knows the company, its strengths, and its weaknesses in their respective area of expertise? The proposal includes the election of four employees as Board Members, one for each business area. Employees would be elected based on their electoral program, which outlines the issues they have identified and their proposed solutions. Elected employee Board Members would: – Provide a detailed report of their activities on the company’s official website to ensure transparency and clarity about their contributions. – Receive compensation equal to or not less than that of other Board Members, which would not be cumulative with their regular salary. This initiative aims to leverage the expertise of employees to enhance decision-making while fostering accountability and inclusivity within the company’s governance structure.

The Directive 2007/36/EC of July 11, 2007 (Shareholders’ Rights Directive) introduced significant changes to the functioning of shareholder meetings. The directive governs the rights attached to voting shares issued by companies with their registered offices in an EU Member State and shares listed on a regulated European market. It promotes shareholder participation in corporate life, particularly the exercise of voting rights, including cross-border voting. Listed companies like Hera S.p.A. have the option to adopt this directive but are not required to do so. However, the directive was designed in the interest and protection of minority shareholders, establishing rules that include: Dividend rewards for shareholders who hold shares for a specified period. These rewards may be paid in cash or through the allocation of additional shares of equivalent value. Voting rights regulations for those holding shares on behalf of others. Shareholder rights to ask questions at meetings. Facilitation of shareholder participation in meetings via electronic means. A Deliberative Shareholders’ Meeting would be broadcast via online streaming, allowing shareholders to follow the proceedings and vote on agenda items online. Voting by Correspondence and Proposed Improvements Since 2015, an agreement with Computershare has enabled shareholders to vote by correspondence. However, this procedure remains complex and not user-friendly. To address this, the following measures are proposed: a. Simplification of the procedure to make it more accessible. b. Integration of the simplified voting procedure into the Civic Networks of the Municipalities that are shareholders of Hera S.p.A. c. Communication by Municipalities of informative prospectuses regarding their publicly listed companies, to promote the culture of publicly held companies with public golden shares. These measures aim to enhance participation and ensure that shareholders, particularly minority shareholders, can fully exercise their rights and engage in the company’s decision-making process.