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The above-named features of the present stage of reorganisation in many Russian holdings are obviously directly connected with the owners' strategic ideas on the prospects of their further transformation. Consequently, two development scenarios are possible in the context of the groups' business globalisation.

1) The forming, on the basis of consolidated Russian assets, of really multinational corporations (lack of a single base country, registration of the parent (holding) company outside Russia, broad international membership of influential shareholders).

In future it will evidently be possible to contemplate creating a consolidated international industrial group (members: SUAL International, coal assets of Access Industries in Russian and Kazakhstan, tantalum works in Mozambique and ferronickel works on Cuba owned by Fleming Family and Partners and FFP's investment liabilities worth cca. US$ 3 billion). From the point of view of SUAL, such an alliance significantly increases the efficiency of the group's access to international stock markets (the IPO will presumably take place in two years) and means, in particular, real internationalisation of the company. In fact, the new company is created on the basis of SUAL-International, and FFP's share should in future achieve 25 percent. Contrariwise, the Russian Aluminium, SUAL's direct competitor, does Lindert P.H. International Economics, IRWIN, 1986. E.g., a company overprices products or services delivered from a country with beneficial taxation to its branch in a country with a high level of taxes. As a result, the net amounts of taxes paid by the multinational corporation are reduced. It is assumed that it is possible to prove the tax evasion by comparing intercompany prices and market prices but there are ways to disguise the transfer pricing. In the 1980-s a single tax was introduces in a number of states (California, Montana.); according to this tax, a the portion of total declared profits received by a multinational corporation on the territory of the state equals the portion of its total assets, paid salaries and sales falling to the share of this state; profit statements presented by the corporations were a priori recognised inadequate.

RUSSIAN ECONOMY in trends and outlooks not consider entering international stock markets and / or selling a share of its business; obviously, it counts on its internal economic and political reserves.

It is quite possible that a number of Russian oil companies boosting their capitalisation and creating a favourable corporate image can take this road in future, too. According to a number of estimates, some of the companies do not position themselves in their statements as Russian companies any more23. In our viewpoint, this development scenario is not going to be widespread (even when other Russian companies, now at the stage of asset consolidation and tightening of management control, have 'matured').

2) The multinational expansion version (the headquarters are in Russia, foreign assets are acquired as part of vertical or horizontal integration of the group's companies, group assets are transferred to foreign profit centres etc.) was typical of many Russian industrial and extractive sector companies and groups already in the 1990-s. Numerous examples include the Russian Aluminium (alumina processing plants in the Ukraine, in Guinea etc.), Lukoil, YUKOS, Norilsk Nickel, the MAIR Group etc. This is also true for the companies that have been private from their inception. E.g., in 2002 it was announced that Mobile TeleSystems would purchase 57.67 percent of the Ukrainian mobile communications operator UMS (deal amount: US$ 194 million).

Thus, on the whole, one may say that in 2001 - 2002 the largest Russian groups started to look for their place in the system of international economic relations. Still, the fundamental issue that we rose back in 2001 (to what extent will the current reorganisation of the big Russian business correspond to the aim of achieving its competitiveness at the international level24) has retained is vital importance. Whether the selected strategy is appropriate depends to a large degree on the owners' aims (strategic development of a competitive group or going out of business with fixation of profits) and can be confirmed only in future.

These processes have to a certain extent been reflected in the discussion on the aims and principles of the potential industrial policy in Russia that livened up in 2002. The gist of the discussion lies in talks over two fundamental interconnected aspects: 1) more general alternatives of Russia's long-term economic development: either preserving the status-quo25 or rejecting the orientation towards production of raw materials, tightening export taxation so as to level profitability in the raw materials and in the processing sectors; 2) absolute government support to 'integrated business-groups' (according to the Russian Union of Industrialists and Entrepreneurs) or 'limiting the absolute power of national financial-industrial groups'.However, in reality, at the present time the notion of industrial policy represents a mutating symbiosis of lobbying efforts by the largest industrial and financial groups, on the one hand, and ambitious statements by political groupings, on the other hand. Obviously, for the indus Tremasov K., Industrial Policy. Why there are No Investments. // Vestnik NAUFOR, 2002, Issue # 3, page 9.

See: Russian Economics in 2001, Moscow, IET, 2002, Volume 2.

An extremely clear position has been formulated in an economic report by Brunswick UBS Warburg, one of the leading broker firms in Russia (published 31 January, 2003): "In a post-industrial world, a nation's prosperity is determined by the country's integration in the global economy by concentrating on its relative advantage. Such an advantage for Russia is exports of raw materials and energy carriers (as opposed to capital- and labourintensive industrial products)".

Mau V.A., Results of Year 2002 and Specific Features of Economic Policy in the Election Year/ Kommersant, 2003, Issue # 15, Page 20; Tremasov K., ibid.; etc.

As regards the issue of oligarchic capitalism against the background of decreasing rates of the economic growth and a sharp deceleration of structural reforms, see also: E.T. Gaidar's Speech at the Council of the Party "Union of Rightist Forces" on 22 December, 2002. (www.iet.ru).

INSTITUTE FOR THE ECONOMY IN TRNSITION http://www.iet.ru trial policy to be really efficient it requires not just a formal document of general nature, but a series of concrete measures based on clear aims in the field of tax policy, economic concentration (according to the definition of the Ministry for Antimonopoly Policy, stock market, enforcement and the foreign policy of Russia.

And, finally, one can point to certain rather contradictory changes in the market's approach to corporate governance issues on the whole.

The redecoration started in many large corporations relating to the improvement of corporate governance('codes of corporate governance', 'independent directors', 'departments of shareholder relations', ensuring 'transparency' etc.) will hardly be able to delude anybody.

Obviously, this renovation is predominantly a redecoration that does not affect the system of relations established in the Russian corporate sector in the 1990-s. This has been caused, above all, by lack of serious conditions for fundamental improvements in this field (especially within the context of equal treatment of all shareholders and of shareholder rights) lack of serious conditions in the structure of ownership and control, in the field of funding sources and business organisation charts, in the outside environment (taxes, politically engaged selective enforcement etc.)27.

In this connection, it would hardly be wise to take seriously declarations made in 2001 - 2002 by a number of large Russian companies on the problems that the business faces due to the lack of civilised ethical business norms. Such declarations partly expressed in the socalled Charter of Corporate and Business Ethics of the Russian Union of Industrialists and Entrepreneurs adopted on 25 October, 2002. The advocates of 'generally accepted moral rules and ethical norms' that put their signatures on the Charter include participants of the notorious 'loans for shares' deals of the mid-1990-s and initiators of many corporate conflicts and scandals of the late 1990-s - early 2000-s. The Slavneft deal in December, 2002, does not inspire any optimism in this connection, either.

At present there exists one more factor that supports the above statement. In reality, initial interest in corporate governance appeared only upon the mass privatisation of 1992 - 1994, although a number of economists had recognised the importance of its long-term nature for Russian companies earlier. The Law "On Joint-Stock Companies" (No. 208-FZ of December, 1995) became a legal landmark, but one can contend that the discussion on corporate governance (or, to be more precise, on the discrimination of outsider rights) shifted into the sphere of practical application against the background and as a result of the stock boom in 1996 - 1997. The most notorious conflicts of that period (Noyabrskneftegas, YUKOS, Yugansknefegas, Samaraneftegas, Sidanco, Nosta, Varyeganeftegas, Chernogorneft, the Vyksun Metallurgical Plant, Magnitogorsk Metallurgical Enterprise, Baltic Shipping Company, Leningrad Metallurgical Plant, Akron, numerous telecommunication and power industry companies etc.) became a joint signal testifying to the problem's mass and chronic nature. The discussion was to a large extent initialised by foreign investors not yet accustomed to the Russian corporate standards. The financial crisis of 1998 brought about another wave and created new tools of property redistribution, which made the discussion only more intense. This occurred primarily owing to and in the course of strengthening of the management's property positions and to appearance of new shareholders that bought out For details see: Radygin A. Corporate Governance in Russia: Limitations and Prospects // Voprossy Ekonomiki, 2002, Issue # 1, Pages 101 - 124; Radygin A., Sidorov I. Russian Corporate Economics: One Hundred Years of Solitude // Voprossy Ekonomiki, 2000, Issue # 5, PAGES 45 - 61.

RUSSIAN ECONOMY in trends and outlooks property positions and to appearance of new shareholders that bought out blocks of shares in the post-crisis period at a low price.

While in the mid-1990-s the calls for reforming corporate governance norms were generated rather by Western portfolio investors, at present the factor of 'pressure from the West' is losing dwindling.

Let us take the survey of investment fund managers carried out in 2002.28 While several years ago the p/e ratio was a reason enough to buy the shares of a Russian company, at present to make an investment decision it is necessary to perform an independent due diligence by such significant parameters as the company's management profile, presence of independent directors on the Board, ownership structure (preference is given to investments in companies with foreign strategic investors and no government share), transparency (business plans, management accounting, IAS / GAAP financial accounting, listing at RTS or MICEX). Most of the largest Russian companies interested in capitalisation growth already formally comply with these requirements.

Apparently, at present one may speak of adaptation of the Western business community to the specifics of corporate relationship organisation in Russia: above all, conducting business through a groups of formally unconnected companies reporting to one owner or a number of partners, and the corresponding structure of financial flows29. Thus, one could assume that many Western partners have found creation of a formal image of the company (group) with elements of civilised corporate governance standards sufficient and taken the fundamental system of business organisation (including non-dividend sources of income and transfer pricing) as a matter of course.

Undoubtedly, there are a number of objectively positive trends in the development of corporate governance standards applied by Russian issuers. According to the Institute for Corporate Right and Governance (ICRG), corporate transparency has been increasing in the course of the past year (information is disclosed in greater detail and quicker, in particular, in issuers' quarterly reports and on the web-sites), the contents of the companies' constituent and internal documents have considerably improved.30 These shifts are reflected, in particular, in the ICRG corporate governance ratings. E.g., during the 12 monthperiod (Quarter II, 2001, to Quarter II, 2003) out of 23 companies that account for 90 percent of capitalisation of the Russian stock market, corporate governance improved in 18, deteriorated in four and remained unchanged in one. The data for Quarter III confirm this trend, too. Certainly, the companies in question are the largest Russian companies, therefore it is so far impossible to speak of large-scale changes in the corporate sector in relation to the corresponding standards.

The new revision of the Law "On the Securities Market" ought to have a positive influence on the quality of corporate governance in Russian companies. In particular, the Law introduces new requirements as to the contents of information disclosed in the form of quarterly reports (on financial and administrative operations, on members of the management, on the issuer's members, on transactions involving interest etc.) Criteria for Investment Decisions. 2002 Fund Manager Survey on Russian Investment. Ernst & Young, Moscow, 2002.

E.g., I. Rozinski gave this assessment of the present situation at the conference of the Higher School of Economics "Modernising the Russian Economy: Results and Prospects" (Section 2, "Institutional and Structural Reforms"), 3-4 April, 2002.

E.g., in a number of cases the authorities of the general director signing the deals had been illegally extended.

It is quite obvious that the possibility of declaring such a deal void increases shareholder risks.

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