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Nearly All Russian Officials Obey President's Order To Leave State Companies

Empty Corporate Conference Room With Large Conference Table and Plush ChairsMoscow, 1 October: The deadline for President Dmitriy Medvedev's instruction demanding that all high-ranking officials should leave the boards of directors of state companies expired on Friday (30 September).

Most of the officials complied with the instruction, but some did not and, interestingly, head of the Kremlin administration Sergey Naryshkin is among them. The campaign to remove state officials from the boards of directors has produced such a unique phenomenon in the Russian corporate history as a "director against his will", - for instance Communications Minister Igor Shchegolev, who, thanks to his ill-wishers, continues on the board of directors of Rostelecom. On the other hand, former Finance Minister and Deputy Prime Minister Aleksey Kudrin could have stayed on the boards of the VTB (Vneshtorgbank) and Alrosa if his conflict with the president had happened a bit earlier.

Who has left

Under the president's instruction issued after a meeting of the commission for modernization and technological development in Magnitogorsk at the end of March, deputy prime ministers and ministers engaged in regulating the areas in which partly state-owned companies operate should have left the boards of directors (supervisory boards) before 1 July, and their places should have been given to independent directors or professional attorneys. This instruction was carried out in full.

All deputy prime minsters, ministers, heads of federal executive bodies and employees of the presidential administration were supposed to leave the boards of directors, regardless of whether they are involved in the regulation of the areas in which state-owned companies operate or not, before 1 October.

As a result, before 1 July, Aleksey Kudrin left the boards of directors of the VTB and Alrosa, First Deputy Prime Minister Viktor Zubkov - the RAB (Rosselkhozbank), Rosspirtprom and Rosagroleasing, Deputy Prime Minister Igor Sechin - Rosneft (RTS: ROSN ), Rosneftegaz and Inter RAO UES, Defence Minister Anatoliy Serdyukov - Oboronservis, Energy Minister Sergey Shmatko - RusHydro (RTS: HYDR), Gazprom (RTS: GAZP) and Zarubezhneft, Transport Minister Igor Levitin - OJSC International Airport Sheremetyevo and Aeroflot (RTS: AFLT), Agriculture Minister Yelena Skrynnik - the United Grain Company, and Minister of Communications Shchegolev - OJSC Svyazinvest and OJSC Channel One.

By early October, Deputy Prime Minister Aleksandr Zhukov left the board of the JSC RZhD (RTS: RZHD), and on Friday 30 September First Deputy Prime Minister Igor Shuvalov was expected to leave the board of directors of the All-Russian Exhibition Centre. The supervisory board of Sberbank was left by Economic Development Minister Elvira Nabiullina and presidential aide Arkadiy Dvorkovich. Energy Minister Sergey Shmatko left the board of directors of Transneft (RTS: TRNF) and the Federal Network Company of the Unified Energy Systems.

Deputy head of the presidential administration Aleksey Gromov, just as Shchegolev, left the board of directors of Channel One.

Who has stayed

Exception was made for First Deputy Prime Minister Viktor Zubkov. Replying to a question whether he would stay chairman of the board of directors of Gazprom after 1 October, he said: "Yes, I am staying."

Commenting on the situation, Arkadiy Dvorkovich said: "There are large public companies, where such procedures (the re-election of board members - Interfax) take a long time. And there are other issues that have appeared while the president's instructions are being put into practice. This concerns companies in which one needs special access to top secret information, and in which it is difficult to find independent directors," the presidential aide said. In addition, he made ??it understood that Zubkov is probably not planning to work in the new cabinet which will be formed in the spring. "Taking into account the current political cycle, some people's plans to leave the government are already clear, so there is no rush to push them out of the board of directors," Dvorkovich said.

There is an explanation why Igor Shchegolev is still on the board of directors of the state-owned Rostelecom. The official was included in the list of candidates for the board of directors before the annual meeting of shareholders thanks to the voices of the former head of Svyazinvest, Evgeniy Yurchenko, who shortly before that had left the state holding in a row.

When elected, the minister immediately said that he would not take part in the work of the board. As a result, the name of the head of the Communications Ministry on the site of Rostelecom is accompanied by this unique commentary: "In accordance with Shchegolev's request, he is not notified about the meetings and / or absentee voting of the board of directors, or receives documents from the board of directors".

Head of the presidential administration Sergey Naryshkin has not fulfilled the president's instruction either: he continues to head the board of directors of the state-owned Sovkomflot. At least on Friday evening (30 September), he was mentioned as the chairman of the company on its website and there were no reports about his possible successors. However, when the sole owner of a company is the state, a shareholder's decisions are presented as Federal Property Agency instructions, and they can be easily "backdated" if there is a need.

For the same reason it is too early to rank the state-owned United Shipbuilding Corporation as a rule breaker. Deputy Prime Minister Igor Sechin is still formally listed as chairman of the board, however he has been almost succeeded by Novolipetsk Steel owner Vladimir Lisin. The board of directors held a meeting by corresondence, but the protocol has not yet been signed, Interfax was told on Friday evening by the United Shipbuilding Corporation's president Roman Trotsenko.

There are still two high-ranking officials in joint-stock companies partly owned by the state. However, their position can be easily explained, since it is difficult to imagine independent chairmen in these companies. Presidential aide Sergey Prikhodko is chairman of the board of directors of OJSC Tactical Missiles Corporation. Deputy head of the presidential administration Aleksandr Beglov is chairman of the board of directors of the OJSC Almaz-Antey PVO (Air Defence) Concern (according to information on the sites of these companies).

Top officials left, deputies stay

The purpose of the president's instruction about the resignation of high-ranking officials from the boards of directors of companies partly owned by the state was to improve the competitive environment. Officials, especially those who regulate the relevant area, are a huge lobbying resource, and their presence in the management gives an artificial advantage over private companies. Deprived of some of their administrative tools, the companies, according to the authors of the idea, should offset their losses by bringing in competent professional directors.

However, even after the first "purge" there are still many deputy ministers and other officials in the board of directors of many companies.

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