In Parmalat's wake, Italians crack down.

• Author: Marshall, Jeffrey
• Position: Governance

The U.S., famously, had Enron. Italy had Parmalat. And now the fraud scandal at the international dairy and food conglomerate has spurred tough new reform in corporate and securities laws in Italy, based in large part on the Sarbanes-Oxley Act (see page 15 for Italy's response to the law).

At least on paper, the new rules put Italy on a par with other developed financial markets. But, the Italians still have a long way to go, according to Matteo Tonello, a corporate governance expert at The Conference Board. "The recent reforms may provide a false sense of security to the investment community, because for each important advancement in governance legislation, much progress still needs to be made on the enforcement side."

The Conference Board notes that Italian companies still have much lower governance ratings than their counterparts in North America or the U.K. Indeed, Parmalat spA had been at the very bottom of 69 Italian companies rated by Institutional Shareholder Services (ISS)'s Corporate Governance Quotient in 2003, when the Parmalat scandal broke.

The Italian company, best known in the U.S. for its long-shelf-life milk, "had abandoned a sound expansion strategy for an...