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Russia corporate laws needs enforcing-expert
By Samantha Shields
MOSCOW, Nov 13 (Reuters) - A draft code which sets standards for transparency and treatment of shareholders by Russian firms could lead to better corporate governance but existing legislation needed enforcement first, an expert said on Tuesday.
Russian companies, including leading blue chips, have long been criticised for ignoring minority shareholders and for being less open than Western firms. The new code, which had been in the pipeline for a year, was handed to investors in September by watchdog the Federal Securities Commission. It has no predecessor in Russia.
Dmitry Vasilyev, the former head of the local stock market watchdog and now chief of a corporate governance ratings agency, said the new code was overall welcome, but needed some changes.
"In general I support the idea of the code, but the main problem in Russia is not introducing new rules but enforcing existing ones," Vasilyev told Reuters on the sidelines of an American Chamber of Commerce gathering.
"A lot of the provision in Russian legislation is not enforced at all, for example nobody has ever been prosecuted for asset stripping and transfer pricing," said Vasilyev, who now runs the Institute of Corporate Law and Corporate Governance (ICLG).
Vasilyev said the draft was far too complicated and long and needed to be shortened and simplified.
He told the Chamber of Commerce that the code, despite its length, fails to define some key roles, such as that of a company secretary, who in the West makes sure a firm sticks to corporate procedures and complies with company law.
It also recommends that each company should have three independent directors on its board, something which is unrealistic in Russia as there are not enough independent, qualified directors to fulfil such a role, he added.
A short code which companies can adapt to their own needs would be much more valuable than a long and overly detailed one.
He also said the code should be voluntary as opposed to mandatory once its guidelines were clearly set out.
Vasilyev said his agency rates Russian companies on a quarterly basis according to corporate governance practices, which he said investors tended to undervalue.
He also pointed out that only one of the top five in ICLG's list of top 25 companies, electricity giant UES (EESR.RTS) at number five, was a blue chip. Gas group Gazprom (GAZP.MO) was at 11 while top oil producer LUKOIL (LKOH.RTS) was down at 21-22.
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