Giorgio Armani creates his own legacy with a succession plan

Armani He has always maintained tight control over the label he founded, and the Italian fashion king’s attention to detail extends to clear rules about how it should be run after his death.

Armani, 89, remains chief executive and, in fact, sole shareholder of the business he created with his late partner in the 1970s, which had a turnover of 2.35 billion euros ($2.5 billion) last year.

with no children to pass it on to, there has been speculation about the long-term future of Armani’s empire and whether, in an industry dominated by luxury conglomerates, he will be able to maintain the independence he cherishes.

But a heretofore obscure document from 2016, held by a notary in Milan and reviewed by Reuters, sets out future guiding principles for those who inherit the group, while another details issues such as protecting jobs at the company.

the first document explains how your heirs should approach a potential IPO – although not until five years after your death – and any potential M&A activity.

For the Armani look, the document commits them to “the search for an essential, modern, elegant and ostentatious 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 come into force after his death.

Succession plan

Armani’s heirs are expected to include his sister, three other family members who work in the business and his long-time collaborator Pantaleo. Dell‘Orco and a charitable foundation.

the bylaws 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 in addition to the CEO also represents the family members mentioned in the document, did not want to comment on the document or its content.

It is not clear from the document 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 heirs,” Guido Corbetta, professor of Corporate 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 also considers himself part of the family.

They are currently all members of the board of directors and, except Rosanna, all work for the Armani group.
Silvana and Dell’Orco are chief designers and have worked closely for decades with Armani, who called them his “style lieutenants.”

the 2016 bylaws set out the process for how the board will appoint future men’s and women’s style directors at a company known for its classic tailoring.

Roberta is head of Entertainment and VIP Relations, while Camerana is general director of sustainability.

Other fashion groups, including LVMHthe most valuable luxury company in Europe, also has succession problems, since the five children of the CEO and president of LVMH Bernardo Arnault all with key management roles in the empire’s brands.

Lasting legacy

Armani also created a foundation in 2016 that currently has a small token stake, but is intended to play a critical role in protecting the business he created with Sergio Galeotti before going it alone when his partner died in 1985.

Their goal is to reinvest capital into charitable causes and maintain Armani’s lasting influence on the group.

the foundation’s statutes, to which Reuters also had access, require that it manage the shareholding with the aim of creating value, maintaining employment levels and pursuing the company’s values. the Armani group has almost 9,000 employees.

the agreement has echoes of one 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 company and ruled out a merger, especially with French groups that absorbed Italian brands such as guccinow owned by Kering.

the group’s charter includes a “cautious approach to acquisitions aimed solely at developing skills that do not exist internally from a market, product or channel point of view.”

It also provides for the distribution of 50% of net profits to shareholders.

Any eventual listing requires the favorable vote of the majority of the directors “after the fifth year following the entry into force of this statute.”

the Armani group did not want to comment on a possible IPO in the medium term.

“the founding principles show Armani’s desire to transmit and prolong his idea of ​​a company, a business, there is a desire for eternity,” said Professor Corbetta de Bocconi.

Despite his meticulous planning, it will ultimately be out of his control if Armani’s goals outlast him.

“They (the rules) could restrict the company a little and become incompatible with drastic changes in the market,” Corbetta said.