MILAN, April 10 (Reuters) - Activist fund Elliott has proposed a slate of 10 independent Italian business heavyweights for the Telecom Italia board, betting on growing discontent with the way top shareholder Vivendi has been running the company.
Telecom Italia (TIM) investors are due to vote on a new board on May 4 after several Vivendi-nominated board members resigned last month, triggering a full-scale changing of the guard.
That move was widely perceived as pre-empting Elliott's bid to change the way Vivendi, TIM's top shareholder with a stake of close to 24 percent, manages the former telecoms monopoly.
The activist fund, now TIM's second largest investor with a 9 percent stake, had proposed replacing six of the Vivendi-nominated board members through a shareholder vote this month to improve governance and strategy at Italy's biggest phone group.
TIM's board on Monday decided to ask a judge to rule whether Elliott's proposal should be put to a vote on April 24.
Delaying the stand-off to next month would improve Vivendi's chances of better board representation because shareholders would vote on candidates proposed by both top investors and not just Elliott.
Elliott on Tuesday called the decision to challenge the April 24 agenda "another cynical attempt by Vivendi to avoid accountability and delay a shareholder vote".
Even if Elliott's list secured two-thirds of the board, Vivendi would see at least five of its candidates elected.
Vivendi's chances of securing a board majority are fading, especially after three proxy advisors recommended an April vote in favour of Elliott's candidates, saying the French investor had been damaging for TIM governance and shareholder returns.
TIM's shares were up 3 percent by 1513 GMT, outperforming a 0.6 percent rise in Milan's blue-chip index.
TIM has lost a quarter of its market value since Vivendi first took a stake in mid-2015.
On Monday funds association Assogestioni opted not to present its own slate which could play in Elliott's favour.
"We felt not presenting a list was the best way to improve the company's corporate governance," Assogestioni President Tommaso Corcos said on Tuesday.
Surprisingly, Vivendi did little to allay governance concerns, changing few names on its slate and keeping Vivendi CEO Arnaud de Puyfontaine as candidate for TIM chairman, albeit this time in a non-executive role.
Elliott for its part packed its slate with well-connected executives, including former TIM managers Fulvio Conti and Rocco Sabelli, and others with experience in the sector such as former Facebook and Vodafone manager Paola Bonomo.
The choice of independent candidates shows Elliott is keen to curry favour with other investors and the Italian government, who have objected to Vivendi's growing influence.
Rome used so-called "golden powers" last year to have a say in some strategic decisions at TIM but it did not stop there. Last week Italian state lender CDP said it would buy up to 5 percent in TIM to safeguard Rome's interest.
Elliott and Rome agree on the aim of ensuring TIM is a company where broader shareholder interests are represented.
Both also want to merge TIM's network assets with that of smaller broadband rival Open Fiber to avoid duplication and boost investments.
The trump card in Vivendi's slate remains the inclusion of Chief Executive Amos Genish, an ally of Vivendi Chairman Vincent Bollore who is well respected because of his track record as a telecoms veteran and dealmaker in Brazil.
This may prove a conundrum for some investors who may want to weaken Vivendi's grip but will not want to lose Genish, whose three-year business plan presented last month was welcomed.
Elliott told investors on Monday it was in favour of TIM's current management team, including Genish.
Genish can be named CEO even if his name is not on the list that gets the majority of votes. However, he may decide not to remain, sources close to the matter have said, adding Elliott had already begun scouting for a possible successor.
(Additional reporting by Maria Pia Quaglia Editing by Keith Weir)