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Otherwise there may be a return to the earlier privatization stages in Russia with fast and uncontrolled enrichment of the management in cases where a shell of a holding head company became a subject of corporate governance or privatization deprived of its valuable subsidiaries with their expensive production or financial assets.

In the sixth place, one should understand that stimulation of the privatization process as such is not a sufficient condition for changing the corporate control market situation. Much depends on the regulation of participation of companies with the government stake in mergers and acquisitions. The focus here should be placed on restricting the acquisition of non-core assets, better selection of decisions that require the agreement of the state both as the owner and the market regulator.

Thus the degree of real submission to the state control of the management of those companies in which the state participates, the degree of manageability, loyalty and the vision of the place and roles of particular assets through the lenses of long-term development of various integrated entities including state corporations moves to the forefront. This makes the task of improving corporate and strategic governance in the companies with the government involvement more urgent and up-to-date.

facilities for cultural, utilities or transportation services, or termination of their use; (4) f rehabilitation, repair and other works on the facilities of cultural heritage and of social, cultural and utilities designation.

Section Institutional Problems In this context rolling out the practice of attracting professional directors1 to the management bodies of such companies could play a certain role.

The Federal Property Management Agency jointly with the RF Ministry for Economic Development began doing some work in execution of the assignments of the President of Russia set as a follow-up of his meeting with representatives of the Russian Union of Industrialists and Entrepreneurs held in April 2008.

For this purpose general provisions and normative acts regulating both the process of attraction of independent managers to the board of directors of joint-stock companies with the stake of the Russian Federation in their charter capitals and the issues of their activities2 were developed; changes were made in the RF Government Regulation of December 3, 2004 No 738 On the management of federally owned shares of open joint-stock companies and the use of a special right of the Russian Federation (golden share) to participate in the management of open joint-stock companies regarding election of independent directors to the management bodies of those joint-stock companies which shares are owned by the Russian Federation. Early 2009, the Federal Property Management Agency by its order established a Commission for selection of independent directors, representatives of the interests of the Russian Federation and the auditors for electing them to the management bodies of joint-stock companies and approved the respective Regulation3.

The RF Government performed certain actions to secure the conclusion of contracts with the members of the board of directors who are professional directors; also joint-stock companies with the state involvement and professional directors on their boards of directors have been monitored with the subsequent evaluation of the implementation efficiency of this institution.

At the first stage of work in this direction, professional directors were selected in nine joint-stock companies that are in the specialized list approved by the RF Government Resolution of January 23, 2003 No 91-r, which 100 % shares belong to the Russian Federation Following the established tradition of corporate governance of joint-stock companies with the state participation, board of directors members elected by votes according to shares owned by the federal government as a shareholder can be grouped as follows: (1) government officials who represent the interests of the federal government are obliged to vote according to the owners instructions; (2) representatives of the government interests who are proxies are obliged to vote according to the owners instructions on the limited range of 5 issues while on other issues at their own discretion (this mechanism of securing the government interests emerged in but has not been widely applied since then); (3) independent directors who vote being guided by their personal professional experience and opinion and meet the established selection criteria. According to the Federal Property Management Agency, the persons in the second and third groups may be called professional directors.

Among others, were defined:

- criteria of professionalism and independence of BoD members applied to individuals proposed by the federal government for their selection and further engagement as independent directors in joint0stock companies;

- the list of joint-stock companies which BoDs should have professional directors;

- the number of independent directors and professional proxies determined in relation to the size of the RF government stake;

- the selection procedure of professional directors and the principle of creating a list of candidates for election into open JSC management bodies as independent directors and professional directors-proxies;

- criteria of referring a board director to independent directors and the development of the respective requirements to the candidates.

Does not apply to JSC that are included in the specialized list in relation to which the position of the state as a shareholder on a number of important issues is defined by the decision of the RF Government, the RF Government Chairman or the RF Government Chairman Deputy in the name of the Chairman. Initially approved by the RF Government.

RUSSIAN ECONOMY IN trends and outlooks (OJSC Agency for Mortgage and Housing Crediting, OSC Joint-Stock Company for Oil Transportation Transneft, OJSC Zarubezhneft, OJSC Corporation Roskhimzaschita, OJSC International Airport Sheremetievo, OJSC Russian Railways, OJSC Rosselkhozbank, OJSC SG-Trans and OJSC Modern Commercial Fleet).

At the second stage of the implementation of the objective to increase the number of professional directors on the boards (Supervisory councils) of the joint-stock companies which shares are owned by the Russian Federation, extraordinary general meetings of shareholders were held, and new management bodies were elected with participation of professional directors in another seven companies: OJSC Airoflot Russian Airlines, OJSC Russian Fuel Company Rostoprom, OJSC FSK Unified Energy Network, OJSC Rosagroleasing, OJSC RusHYDRO, OJSC Holding MRSK and OJSC RAO Energy Networks of the East1.

According to the Federal Property Management Agency, by autumn 2009 the BoDs (Supervisory councils) of 253 joint-stock companies had 563 professional directors while at the end of 2008 their number was about 50)2. Thus we can state that early 2009 this institution was implemented in 7.6% of the companies with the federal government stake of their total number. This institution has been most widely applied in the electric energy and communications sectors.

Besides, the Federal Property Management Agency also applied the practice of engaging managing companies that acted as sole executive bodies of the joint-stock companies, but this practice has been even less popular than the institution of professional directors (as of the end of 2009 only six managing companies had been involved in management of the joint-stock companies with the government stake).

A most important area of activities of professional directors to improve performance and efficiency of the joint-stock companies with the government interest should be their work on three specialized Committees at the management bodies of these companies (Strategic Planning Committee, Audit Committee and HR and Remuneration Committee); it is proposed to elect as Chairmen of these Committees those board members who are not government officials (but independent directors or professional proxies).

5.2. Government Support of strategic companies: key instruments, specifics and practical implementation challenges 5.2.1. Specific measures and approaches to the support of backbone enterprises in crisis situation To correctly evaluate government support of strategic companies it is important to understand specific economic conditions in which government anti-recession instruments and measures were developed and the approaches underlying government support to strategic companies were defined3.

Federal Agency for Federal Property Management. Progress report for 2008, M., 2009.

T. Zykova.To replace civil servants// Russian Gazette, September 16, 2009. Federal Agency for Federal Property Management. Progress report for 2008, M., 2009.

This section is based on part of the deliverables of the project implemented by the Academy of National Economy under the RF Government focused on evaluation of various instruments of government support to strategic companies. The project was implemented by a group of experts in the end of 2009 in the interests of the Expert Council with the Government Commission for improving sustainable development of Russian economy.

Section Institutional Problems Russian banking system was the first to be hit by global economic crisis. In September 2008 certain efforts on behalf of the monetary authorities were already in demand to support the liquidity of the banking system. In October such support was already provided on a bigger scale allowing for avoiding the financial system collapse, but not capable of improving the credit terms for the real economy entities. By October 2008 the crisis has already affected the manufacturing industry as well, though recession examples at that time were mainly of local character: significant drop of production was evident in metallurgy (milled products reduced by 21% versus October 2007, steel casting by 19%), in mineral fertilizers production (14% reduction), cement production (20% reduction), in certain mechanic engineering subsectors (materials handling, construction and road engineering, commercial vehicles).

However by mid-end November it became clear 2008 that the crisis might affect a broader range of sectors. Several factors were pointing at that. First of all, drastic decay of external environment: FTSE/S&P indices slump, fall in oil prices, growing challenges for global financial system. Secondly, despite the efforts of the Bank of Russia and of monetary authorities to support the banking system, the credit terms for Russian companies continued to deteriorate with regards of both loans accessibility, and borrowing prices. Thirdly, a steady trend for unemployment rate growth became obvious: the number of registered unemployed increased by 4% in the end of November 2008 (vs. October). In the fourth place, negative monetary trends accelerated: forex/gold holding decrease, ruble devaluation.

It is worth noting that recession, unemployment and other indicators were critical per se, but the main problem was in highly uncertain development outlook, in significant concerns of all market players including the government with regards of possible scale and length of crisis.

It was no longer possible to view the crisis as just financial one associated with insufficient liquidity. Moreover, it was not possible to view it as the crisis affecting mostly major financial and industrial groups with high external debt. It became clear: global energy markets fall and decrease of export is going to affect a significant number of major Russian exporters; inevitable disinvestment and lending reduction jeopardizing all sectors of the economy will have a chain effect leading to material deterioration of market situation and of financial positions of companies across all industries and sectors of Russian economy. Collapse and bankruptcies of major companies in any sector were quite possible; and in the environment when the business community was close to panic, any announcement about suspension of production or about insolvency of just one company could have caused significant growth of mutual distrust among market players and provoked knock-off effect along the cross-sector links.

In the situation of vague economic outlook due to the specifics of Russian banking system the possibilities for effective support of real sector businesses solely through monetary policy instruments turned out to be quite limited: support of bank liquidity was not backed by maintaining the credit terms for real economy. In particular, during late 2008 early 2009 when ruble was devaluated, it much more profitable and less risky to invest into buying currency rather than to issue loans to enterprises. In other words, high uncertainty generated total collapse of confidence between banks, banks and borrowers, suppliers and consumers. Those were credibility gap and high risks that impeded restoring normal credit terms for enterprises.

Concerns about rapid growth of unemployment in case companies start mass layouts were also justified, and that could lead to extremely negative social consequences, especially in mono cities and in certain regions highly dependent on a limited number of major cityforming enterprises.

RUSSIAN ECONOMY IN trends and outlooks It became obvious that anti-crisis measures cannot be completed with just support to major banks. Prevention of bankruptcies or shutdowns of major enterprises due to inaccessibility of funding requires other pinpointed instruments of government policy focused on resolving the problems of selected, the most valuable businesses. It is worth noting that most of serious concerns had not come true, but they looked quite realistic by the end of 2008.

However, at that point of time the Government did not have any better fine-tuned pinpointed support instruments, or more or less adequate action list.

This, Strategic Actions and Strategic Companies List1, first of all, is focused on other objectives, mainly on special procedure for privatization and/or incorporation; secondly, it includes only government owned enterprises and joint-stock companies with government holding blocking or controlling interest. Other officially approved lists (e.g., the Register of Business Entities with market share of 35%+) turned out to be not instrumental for defining the priorities for support, the latter, in particular, contains several thousand organizations, not all of them being real majors.

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