Activist groups raise concerns over governance at Italian oil giant Eni ahead of ESG presentation

Concern grows over Karina Litvack’s removal from board committee

Leading activist groups have said the recent replacement of corporate governance expert Karina Litvack at Italian oil and gas giant Eni’s Control and Risk Committee was “worrying and troubling”, calling on investors to demand a “clear rationale” for her removal.

Litvack, the former Head of Governance and Sustainable Investment at F&C Asset Management, who joined the board of Eni in 2014, was removed from the company’s board-level Control and Risk Committee earlier this year, though she remains on the board.

The company cited “ongoing investigations related to alleged conspiracy against the company, reported by the press”. Earlier this month, the company appointed Diva Moriani, an executive with Milan-based industrial group Intek, to take Litvack’s place on the committee.

“Eni’s zeal in replacing Litvack is astonishing, considering that both the company’s CEO Claudio Descalzi and its chief development officer Roberto Casula are under investigation, since September 2014, in a case of alleged international corruption in Nigeria for the acquisition of the (Nigerian oil field) OPL 245 concession and for which an alleged bribe of as much as $1.1bn would have been paid”, said Mauro Meggiolaro of Fondazione Banca Etica, the group for Italian ethical banking.

Eni denies any illegal conduct in the matter and says it is cooperating with the Milan prosecutor’s office; it has said it is “confident that the correctness of its actions will emerge during the course of the investigation”. In May last year Eni said an audit by an independent US law firm into the OPL 245 case found no evidence of illegal conduct.

Meggiolaro noted that Eni’s chief upstream officer Antonio Vella had also been sent to trial for alleged bribery in Algeria on July 27. Eni said at the time that it “continues to deny any illegal conduct and is confident that this will be ascertained in court proceeding”.

Meggiolaro said: “Nobody in the company has been proposed to replace him. Eni’s behaviour in the Litvack case is even more worrying if we consider that so little is known about the investigation in which Litvack would be involved, while we know much more about the investigations on Descalzi and Casula and on the trial involving the chief upstream officer Vella.”

UK-based group ShareAction said investors will be troubled by the lack of information given on Litvack’s removal, “particularly in the context of investigations into senior executives at the company.”

Chief Executive Catherine Howarth said: “Ms Litvack was elected by shareholders, no doubt in part because of her own strong track record on corporate governance; her removal is clearly a concern, and investors should demand a clear rationale for this decision.”Separately, Eni was this week removed from the Dow Jones Sustainability Indices (DJSI) following a yearly review process in which its score was deemed “not good enough” for staying in the indices, said a spokeswoman for RobecoSam, the Swiss company that develops and updates the indices. The Italian group has been removed from both the global and European indices, she confirmed, calling it a “normal deletion”.

RobecoSam said while companies could choose not to respond to the questionnaire which forms the basis of the indices, it could not choose to not be a part of the indices. In such cases, RobecoSam would analyse the company based on publicly available information.

Standard Ethics, a London-based independent sustainability ratings agency, said it was also in the process of reviewing Eni’s rating. Director Filippo Cecchi added: “We need to understand if they followed the procedures in line with the best practice in governance.”

According to reports in the Italian media earlier this summer, Litvack is one of Eni’s independent directors being investigated by the Public Prosecutor’s Office of Syracuse in Sicily for defamation of Descalzi. As previously stated, Responsible Investor is in contact with the Italian authorities and is currently attempting to substantiate these reports.

Litvack is a non-executive independent director nominated by a group of Italian and foreign institutional investors.

Massimo Menchini, director of corporate governance at Assogestioni – the Italian asset management industry body – said: “The corporate governance of the Italian listed companies and the role of the independent minority directors are very important for both Assogestioni and the Italian Investment Managers Committee.”

“In line with the Italian Stewardship Code and the EFAMA [European Fund and Asset Management Association] Stewardship Code, the Italian and foreign institutional investors are monitoring the situation and its evolutions,” he added.

Eni declined to comment, directing queries to the “judicial authority”. Litvack herself also declined to comment.

Meanwhile, Eni is livestreaming an ESG presentation on sustainable energy from Paris tomorrow at which Descalzi and other senior managers will present the firm’s ‘Integrated Model’ to investors.

It comes as Eni has agreed
on a series of renewable energy projects in North Africa. In Egypt, its first project will be a 50 MWp photovoltaic plant in Sinai “in line with Eni’s vision for a low-carbon future”. In Algeria it has reached a strategic agreement with state-owned Sonatrach; the first fruits of this will be a 10MW photovoltaic plant in the Bir Rebaa North (BRN) field.