* Corporate governance improving in Italy
* Companies need to be more transparent to attract investors
* New PM Renzi looking to modernise business world
MILAN, April 16 (Reuters) - Eager to attract foreign investors as it slowly emerges from its longest recession in 70 years, cash-strapped Italy Inc. is taking the first steps to end decades of opaque management and shoddy governance.
Drastic overhauls this week at big state-controlled companies such as Eni and Enel are just the latest of a series of changes - some induced by lawmakers, some by investors - that are gradually transforming the way Italian corporations function.
In three years, Rome has enacted legislation that ended the long-standing practice of allowing directors to sit on multiple bank boards. Listed companies have been asked to reserve a third of their board seats to women in Italy, which has the largest employment gender gap of all EU countries bar Malta.
The web of cross-shareholdings that was central to Italy's business world is melting after Mediobanca - the pillar of this system - announced in June it was exiting all holdings except insurer Generali, parting from unprofitable investments to focus on its banking business.
In another big shift of corporate governance, minority investors forced core investors at Telecom Italia to name a slate of independent directors. The change is set to free up Chief Executive Marco Patuano to focus his attention on improving returns.
"The crisis has accelerated the need for Italian companies to seek external financing from investors more attentive to corporate governance," said Enzo De Angelis of executive search consultant and government advisor Spencer Stuart.
These investors include giant money manager BlackRock, the top shareholder in banks Monte dei Paschi, UniCredit and Banco Popolare. BlackRock also has large stakes Telecom Italia and motorway operator Atlantia.
China's central bank last month bought 2 percent of Eni and Enel and buyers from France, Qatar and the United States have snatched key portions of Italy's fashion empire.
According to the World Bank's Ease of Doing Business Index, Italy now ranks 52 in the world in terms of investor protection compared with 57 in 2009, better than fellow Group of Seven members France and Germany but lagging the best performers such as Canada, Britain and the United States.
Last year, construction company Salini seized control of Italy's largest builder Impregilo from rival Gavio after a public proxy battle staged at shareholder meetings, a rare event in a country where dealmaking takes place behind the scenes.
In a sign of corporate renewal, data from Spencer Stuart and investor lobby Assonime showed the number of independent and first-time directors has increased in the past three years.
Female board members, previously a meagre 5 percent of the total, have doubled in number between 2010 and 2012.
But there is more to be done to reinforce investor confidence in Italy, where large listed companies are routinely embroiled in judicial probes of corruption and financial crimes.
For a start, boards in Italy do not have the power to throw out their CEO without the approval of controlling shareholders and pay is not always linked to performance. Italian shareholders cannot vote down management pay packages.
In Italy, independent directors make up about half of board members, better than in Spain and Belgium but well below participation levels seen in Britain or the United States, and only 7 percent of directors are foreigners.
Despite a law encouraging female participation, women only make up 10.6 percent of board members against 18 percent in Britain and the United States and higher levels in Scandinavia.
To help more women climb up the corporate ladder, Renzi named three prominent businesswomen at the top of large state-controlled corporations, though none was appointed CEO.
"In the past, these appointments were made through political horse-trading. This was a very negative element that helped fuel prejudices against Italy among foreign investors," said Arturo Albano from corporate governance consultancy Talete.
"The answer is to base the appointments on real competence."
(Editing by Tom Pfeiffer)