© Reuters. FILE PHOTO: Giorgio Armani appears at the Emporio Armani Spring/Summer 2024 collection fashion show during Milan Fashion Week, in Milan, Italy September 21, 2023. REUTERS/Claudia Greco/File Photo
By Élisa Anzolin
MILAN (Reuters) – Giorgio Armani has always kept tight control over the company he founded, and the Italian fashion king’s attention to detail extends to clear rules on how it should be managed after death.
Armani, 89, remains CEO and sole shareholder of the company he created with his late partner in the 1970s, and which had sales of 2.35 billion euros last year.
Without children to pass it on to, speculation has been made about the long-term future of Armani’s empire and his ability, in an industry dominated by luxury conglomerates, to maintain the independence he cherishes .
But a previously obscure document from 2016, held by a Milan notary and reviewed by Reuters, sets out future governance principles for those who inherit the group, while another details issues such as job protection at the within the company.
The first document explains how his heirs should approach a possible stock market listing – but not until five years after his death – and any potential merger and acquisition activity.
For the Armani look itself, the document commits them to “seek an essential, modern, elegant and unostentatious style with attention to detail and visibility.”
The document is the product of an extraordinary meeting that Armani called in 2016 to adopt new statutes for the group that would take effect upon his death.
Armani’s heirs are expected to include his sister, three other family members working at the company, longtime collaborator Pantaleo Dell (NYSE:)’Orco and a charitable foundation.
The articles of association divide the company’s share capital into six categories with different voting rights and powers, and were amended in September to create some without voting rights.
The Armani Group, which represents, in addition to the CEO, the family members mentioned in the document, declined to comment on the document or its contents.
The document does not specify how the different blocks of shares will be distributed, but corporate governance experts say the guidelines should ensure a relatively smooth transition by giving the board a central role.
“It is an organization that reduces the margins of disagreement between the heirs,” Guido Corbetta, professor of business strategy at Bocconi University in Milan, told Reuters.
Armani has a younger sister, Rosanna, two nieces, Silvana and Roberta, and a nephew, Andrea Camerana. Dell’Orco is also considered part of the family.
All are currently members of the board of directors and, with the exception of Rosanna, all work for the Armani Group.
Silvana and Dell’Orco are at the helm of design and have worked closely for decades with Armani, who called them his “style lieutenants.”
The 2016 statutes set out the process for the board of directors to nominate future directors of women’s and men’s style in a company known for its classic tailoring.
Roberta is responsible for entertainment and VIP relations, while Camerana is general manager of sustainability.
Other fashion groups, including LVMH, Europe’s most valuable luxury company, also have succession issues, with the five children of LVMH CEO and chairman Bernard Arnault all holding key leadership positions within marks of the empire.
A LASTING LEGACY
Armani also established a foundation in 2016 which currently holds only a small symbolic stake but is intended to play a central role in protecting the business he created with Sergio Galeotti before striking out on his own upon death from his partner in 1985.
Its goal is to reinvest capital in charitable causes and sustain Armani’s influence over the group.
The foundation’s statutes, also seen by Reuters, require it to manage shareholders with the aim of creating value, maintaining employment levels and pursuing the company’s values. The Armani group has nearly 9,000 employees.
This arrangement echoes that adopted by Rolex founder Hans Wilsdorf, who left the brand to a foundation in 1960 that still owns the luxury watchmaker.
Armani has always defended the independence of his house and ruled out any merger, particularly with French groups which have swallowed up Italian brands like Gucci, now owned by Kering (EPA:).
The group’s statutes provide for a “cautious approach to acquisitions aimed solely at developing skills that do not exist internally from a market, product or channel perspective.”
They also provide for the distribution of 50% of net profit to shareholders.
Any possible IPO requires the favorable vote of the majority of directors “at the end of the fifth year following the entry into force of this statute”.
The Armani group refused to comment on a possible listing in the medium term.
“The founding principles show Armani’s desire to transmit and extend its idea of business, of enterprise, there is a desire for eternity,” said Corbetta, professor at Bocconi.
Despite his meticulous planning, whether Armani’s goals will outlast him will ultimately be beyond his control.
“They (the rules) could restrict the business a little and become incompatible with drastic changes in the market,” Corbetta said.
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