#5 - JRL 7215
Gazprom to consider larger board, more independents
By Mikhail Yenukov

UFA, Russia, June 9 (Reuters) - Minority shareholders of Russia's Gazprom sought to loosen the state's grip on world's largest gas firm on Monday, proposing more rights for independent directors and broader disclosure of board decisions.

Minority shareholders offered to amend the firm's charter and boost the number of director seats to 15 from 11, according to documents prepared for a shareholders' meeting and obtained by Reuters during discussions between management and local shareholders in the Urals city of Ufa.

Amendments would also give independent directors at least four seats at the board of the state-controlled firm.

"These amendments were offered by Gazprom's minority shareholder, Hermitage Capital management, but they have now to be approved by the annual shareholders meeting on June 27," a Gazprom official told Reuters.

He declined to say whether the state, which holds a majority stake in Gazprom, would support the proposal, but added that if amendments to the charter were approved, they would come into force in 2004.

Hermitage does not disclose its stake in Gazprom and failed last year to elect its representative on the board with 5.3 percent of votes. It said in April its director of research Vadim Kleiner would run this year for the board seat.

Kleiner, who has repeatedly criticised Gazprom's management for not providing details of construction tenders and board decisions, confirmed Hermitage wanted to amend the firm's charter. He said the vote on June 27 would show whether the state was committed to reforming the giant.

"I think these proposals fully respond to the interests of all shareholders, including the state," he told Reuters.

He said other amendments included greater board control over management's operations and more transparent practices in disclosing the board's monthly decisions.

The Gazprom board, which is not involved in the management's daily activities but has to approve all major decisions every month, is currently controlled by the government and the firm's management.

Independent shareholders are represented only by Boris Fyodorov, a businessman and former finance minister. He is supported by several groups of minority shareholders, including the UFG brokerage, Hermitage's rival.

Another seat is held by Ruhrgas of Germany, one of Gazprom's biggest Western gas importers. The firm holds a 6.5 percent stake in Gazprom, which supplies Europe with a quarter of its gas needs.

However, analysts say Gazprom's management and the government should allow more independent directors on the board, since the state de facto controls only around 51 percent of Gazprom, while the remaining shares are freely traded.