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Russian Corporate Governance Study: Accomplishments and Recommendations Discussion

Detailed discussion of the adoption and implementation of the Russian CCC, benefits, problems, and recommendations for improvement. Key insights from surveys and assessments from various stakeholders. Recommendations for government, banks, investors, and exchanges to enhance corporate governance practices in Russia.

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Russian Corporate Governance Study: Accomplishments and Recommendations Discussion

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  1. The Igor Belikov Study on the Adoption and Implementation of the the Russian CCC : Accomplishments and Problems Discussion notes by Leo Goldschmidt Chairman, Corporate Governance Committee APCIMS-EASD Moscow, 2 October 2003

  2. Survey of accomplishments • Summer 2000 Work starts on CCC • Nov 2001 Government approves CCC • April 2002 CCC presented to community • Apr 2002-Jun 2003 FCSM + Exchanges, Ministries conduct 10 regulatory events • Aut 2001-Sum 2003 RID + S&P and others conduct 9 surveys, polls and analyses

  3. Benefits Surveys, by their existence • Provide quantitative benchmarks enabling evaluation of past and measurement of future progress • Improve discriminatory abilities of investors • Should create investor expectations • Should prompt improvement by companies • Should initiate a virtuous circle

  4. Overall • Comprehensive, factual • Lucid, not complacent • Clear, striking • CG Assessment : 2 Groups • Major companies : interested but application uneven Motivation : raising capital but West more than Russia • Other large + SME : little interest, less application Capital markets no motive (no liquidity, alternatives)

  5. Problems • Is CG economically reasonable for SMEs (84) (see de-listings in the West) • Lack of monitoring instruments and resources (FCSM low, exchanges nil - caution needed) • Extreme inefficiency in sanctions • Government representatives on boards weak in fostering compliance • Banks no CG interest in credit due diligence • Investor organisations : no efforts to monitor

  6. Recommendations • Recognise company differences and prioritise • Focus on OJSC top 200, exchange traded, sector leaders, IPOs- increase their disclosure • Facilitate reorganisation of smaller OJSCs, reduce their CG obligations • FCSM to compel CG observance and disclosure and tighten sanctions • Exchanges to liaise with FCSM in enforcing • Distinguish between shares and bonds issuers

  7. Recommendations (2) • Government reps to include CG in oversight and reporting, appraisal for renewal of post • CG observance = condition for public sector contracts • Banks to include CG as element of credit due diligence • Investors/rating agencies to proclaim CG as important investment criterion

  8. Recommendations (3) • Carry out international comparisons • New NCGC with business associations to promote observance and give incentives - e.g. awards for best CG section in report • Regular upgrading of CCC

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