ITALY: No More Godfathers

Where is Camilla Crociani? Until February, the sleek and personable Crociani, 55, was chief of a state-owned holding company called Finmeccanica. Now he is the subject of a man hunt by Italian police and Interpol. They want to question him about charges that one of his privately owned companies laundered part of a $1.6 million payoff when Lockheed Aircraft Corp. sold 14 C-130 transport planes to Italy’s air force in 1971. Just before the scandal broke, Crociani emptied his penthouse in Rome and his two lavish country homes of all personal documents—and vanished.

What troubles Italians as much as the alleged payoff is Crociani’s inept handling of the public’s business. Finmeccanica is one of Italy’s many ventures in “mixed capitalism.” With this system, which started under Mussolini in 1933, the state buys or creates firms to promote broad social goals—and make a profit. Today the government controls or has interests in companies that account for about 50% of Italy’s industrial output. Finmeccanica owns pieces of about 50 enterprises that had combined sales of $1.5 billion last year. Crociani took over in 1974; in just one year he tripled the group’s losses to an estimated $450 million.

No Accounting. Had the Lockheed scandal not surfaced, this dismal performance might have gone unnoticed. Traditionally the top managers of state-owned corporations have formed a sottogoverno (subgovernment) that runs their enterprises with so little supervision that they do not even bother to keep the public or the official government up to date on what they are doing. Earlier this month, for example, the giant Institute for Industrial Reconstruction (I.R.I.), which controls 15% of all Italian industry, got around to releasing its consolidated balance sheet—for 1974. If the manager of a state-owned enterprise blundered, the government would quietly come to the company’s rescue with grants and loans.

But last year recession hit the Italian economy especially hard, and the Christian Democratic Party, which has been in power for 30 uninterrupted years, found that it was losing votes. So the government stopped playing economic godfather. Refusing any longer to bail out ailing companies, the Christian Democrats also decided that they had to let the managers face the consequences of their business decisions.

Heads soon began to roll. In May 1975, Mario Einaudi, freewheeling chief of a state-owned mining and textile conglomerate, was forced to resign after he highhandedly tried to gain control of a Genoa shipping, insurance and newspaper group without informing the government. Next to go was Raffaele Girotti, chairman of ENI, who had led the big state petroleum company to a $95 million loss. Camillo Crociani, apparently recognizing that his job was shaky, chose not to wait for the ax.

His flight has drawn even more attention to the woes of the state corporations. Just a few weeks ago, for example, Finsider, a state group of 24 steel-producing companies, came under fire for continuing to roll out steel all last year despite a global glut. The reason was to keep employment high, but the result was staggering losses that no private company could afford.

Critics of the sottogoverno are now sounding off in the press and Parliament. No one has suggested that mixed capitalism cannot work. Quite the contrary: widely supported legislation is being prepared to provide some $5.2 billion in state grants to the companies so that they can do more to stimulate Italy’s still sagging economy. But public pressure is forcing new ground rules. A special parliamentary commission recently recommended that state corporations stop obscuring their operations by setting up new financial holding companies. Instead, they should start reporting directly to a new parliamentary committee with broad supervisory powers. In addition, their accounting practices are to be reviewed and, if necessary, revised. Meanwhile, the sottogoverno’s ineptitude fans public discontent, which cannot help working to the advantage of Italy’s increasingly powerful Communist Party.