- Исследования Национального совета по корпоративному управлению
- Исследовательские проекты при поддержке НСКУ
The National Corporate Governance Council and the Deloitte CIS Center for Corporate Governance submitted the results of a joint research survey, “Contemporary Corporate Governance Practices: the Views of Investors and Issuers”, which was conducted in March-April 2014.
This survey gauges the current status of corporate governance in Russia and defines the key areas for its further development evolution. It is based on professional opinions of leading practitioners and analysts. The research was conducted in the form of a survey that covered heads of investment funds and investor relations departments of leading Russian issuers, as well as representatives of the expert community and relevant infrastructure organizations.
Two-thirds of the respondents (66%) agreed that corporate governance’s role in corporate/banking strategy and development priorities grew following the 2008 crisis. A tangible minority of experts (20%) were convinced of the opposite – that corporate governance’s role declined or at best remained unchanged. It is worth noting that 14% of respondents view corporate governance as not playing a significant role in defining business strategy, either currently or previously. Experts were divided as to the importance that Russian senior executives place on corporate governance as a part of business development strategy: 46% believe that corporate governance is currently considered a significant area but is far from a priority, while almost 40% rate its role as insignificant.
According to the survey, executives and representatives of major shareholders consider the following as the most important elements of corporate governance: maintaining constructive relationships with investors, disclosure of financial and operating information and the participation of the board of directors in setting a company’s strategy. Among the other important areas, proper independent internal audit, regular dividend payment practices as well as the board’s involvement in the development of an effective executive incentive plan and in succession planning were mentioned.
Experts believe that the potential of the traditional corporate governance mechanisms is far from exhausted. In their opinion, the main areas for improvement include increasing the effectiveness of the board of directors, increasing the share free float and liquidity, increasing management liability, expanding shareholder and investor rights and protecting their interests, as well as communicating the goals and responsibilities of major investors. Remarkably, only one respondent mentioned the need to expand the authority of the board of directors. As for corporate governance’s potential contribution to increasing a company’s market capitalization, a fifth of respondents optimistically rated it in the range of 50%-100%, a third was more down-to-earth placing it at 25%-50%, and around half of experts were even more restrained, placing its influence at 10%-25%.
In the respondents’ opinion, in the near term risk management will become one of the priority areasin corporate governance. Recently risk management has become the weakest link in both Russian and foreign corporations. We also found that the main corporate governance risks that investors most often encounter include the following according to our respondents: absence of reliable and timely information for decision-making, and management making inept decisions or taking actions that run contrary to the company’s strategy. Among other risks frequently mentioned are management violating shareholder rights, as well as declining share prices and share liquidity.
Survey participants were virtually unanimous in viewing the adoption of a new version of the Corporate Governance Code, as well as the new listing rules and the Moscow Exchange’s initiative to launch a premium segment as realistically able to increase the investment attractiveness of domestic business. Respondents highlighted the key innovations of the Code to be the assignment of wider authority for boards of directors over the control of management and subsidiaries, along with bringing the criteria for director independence closer to international standards.
Only a third of respondents believe that many Russian companies already display a reasonable balance between the interests of issuers and portfolio investors; 45% of experts accept the possibility of such a balance in principle, however, in their opinion, in practice there are imbalances on either side. Finally, 35% of respondents are convinced that investor rights to information are infringed upon in practice. None of them made note of investors misusing their information rights. Experts cited examples of corporates and banks where management has the most constructive relations with shareholders and investors as MTS, Sberbank, Severstal and Magnit. Also noted among the leaders of this “nomination” were Gazprom, Rosneft, Transcontainer, NLMK, VTB Bank, Sistema, Norilsk Nickel, Uralkali, Megafon, M-Video, MMK and Kuzbass Fuel Company (KTK).
Respondents offered a wide variety of recipes for issuers to enhance their interaction with investors and to align the interests of management and shareholders. They placed particular importance on improving dividend policies and executive incentive plans, linking the pay to the company’s financial results. Further, according to our respondents, an open dialogue with shareholders, including on the companies’ objectives and plans, as well as robust oversight of strategy implementation and the executive’s conduct were mentioned among the important tools for harmonizing the issuer-investor interaction. Shareholder interests can be addressed through balanced selection of boards of directors and expanding the practice of appointing independent directors.