Pyramids and the separation between direction and control of non-financial Italian family companies

This paper uses a multiple case study analysis of ten Italian business groups controlled by families to answer the following research questions: Does the controlling shareholder, through the parent company at the top of the pyramidal group, always exercise the direction activity of the subsidiaries? If not, why does the parent company not exercise that activity, delegating it to its subsidiaries? What is the degree of separation between control and direction within the group? A high percentage of our sample declares not to be directed by the parent company. However, the presence of family members on the subsidiaries’ boards and the low boards’ independence makes the separation between direction and control more apparent than real. The credibility of the separation is questioned mostly for those non-directed subsidiaries that operate in the same sector. Our analysis suggests some elements, in order to understand in which cases the direction activity by the parent (or its delegation to the subsidiaries) should be interpreted positively or negatively in terms of controlling shareholder expropriation, by proposing to use the degree of separation between direction and control as a proxy to assess indirectly the degree of that expropriation.