2002-06-13
The Institute of Corporate Law and Corporate Governance presents an updated rating list of 40 leading Russian companies judged for the quality of their corporate governance practices upon the results of the first three months of 2002.

YUKOS, RAO UES of Russia, and Sibneft Keep Rising in Corporate Governance Rankings The latest corporate governance rating list of Russian companies (CORE-rating) was unveiled on July 10, 2002 at his news conference by D. V. Vasilyev, Director of the Institute of Corporate Law and Corporate Governance. The updated rankings reflect the results of research done by his Institute to judge the quality of corporate governance arrangements at 40 major Russian businesses during the 1st quarter of this year, including reviews of their annual financial statements for 2001. This time the field of the companies thus rated included six newcomers, namely: Tulaenergo, Stavropolenergo, Volgogradenergo, Samaraenergo, Nizhegorodsvyazinform, and Tyumenskaya Neftyanaya Kompaniya. The new CORE-rating has the same front-runner and underdog as before, and the gap between VimpelCom and AVTOVAZ has only grown wider, the result primarily of a rapid deterioration of the quality of corporate governance at companies at the bottom of the table. The overall tallies of points scored in the assessment during the 1st quarter of 2002, for example, fell by 8% at Bashinforsvyaz, 4.1% at Uralsvyazinform, and 3.5% at AVTOVAZ. In contrast, some other companies posted appreciable improvements in their corporate governance practices. These included Norilsk Nickel Mining and Metallurgical Combine (a gain of 7.9%), Southern Telecommunications Company (formerly, Kubanelektrosvyaz) (6.9%), YUKOS (6.1%), and LUKoil (5.5%). When summarizing general trends in evidence in the evolution of corporate governance in Russia in 2001, Mr. Vasilyev singled out: (1) the increasing rift between the “best” and the “worst” companies; (2) the emergence of business ventures geared to steadily upgrading their corporate governance arrangements; (3) better corporate governance shown in the electric power sector and petroleum industry (in which the companies monitored won scores that were on average, respectively, 1.7% and 1.2% higher than during the preceding review); (4) improved information disclosure; and (5) higher-quality financial reporting. “These tendencies are simple to explain”, commended Mr. Vasilyev. “Some of the companies are genuinely concerned about their image and capitalization, while others pursue certain objectives of their own, which are not quite consistent with the interests of their investors and shareholders. Over the 15 months since the issue of our first rating list, for instance, a number of companies have improved their showing quite perceptibly, with the all-round ratings awarded to YUKOS going up 9%, RAO UES of Russia 8.6%, and Sibneft 7.9% as a tribute to their unrelenting headway in corporate governance perfection. Their advances compared favorably with setbacks suffered by Tatneft (whose score has contracted by 13.4%), Irkutskenergo (12.4%), and Uralsvyazinform (10.22%) in the wake of a dramatic loss in their corporate transparency and public openness. When describing those Annual general meetings which were held at many a company under watch in May or June 2002, Mr. Vasilyev said they marked a welcome improvement on last year’s similar events from the standpoint of essential information required to be made available to shareholders. However, such information released at some companies was still incomplete (with YUKOS, for example, failing to disclose certain completed financial report forms), while others (Aeroflot and Surfutneftegaz) allowed only limited access to important data. There were also registered certain procedural irregularities which were at variance with statutory requirements. Some companies (RAO UES and Rostelecom) made it difficult for shareholders to express their will in voting adequately, others (Norilsk Nickel) offered no alternative candidates in voting ballots during elections to their boards of directors, and still others (Krasny Oktyabr) had some nominees of exactly the same names (without any further identification) included on their slates. In breach of the Federal Law “On Joint Stock Companies”, the shareholders’ meeting at VimpelCom failed to approve profit and loss allocations at the company. At Surgutneftegaz, voting to approve interested-party transactions was called without even providing shareholders with essential details of the deals concerned. The resulting decisions, in Mr. Vasilyev’s opinion, may subsequently be challenged and reversed, including their possible invalidation in the courts. CORPORATE GOVERNANCE QUALITY RATING (CORE-Rating) as of April 1, 2002 Ranking * Company Final score ** Change in final score *** 1 (1) VimpelCom 81,14 -2,75 2 (2) Mobile TeleSystems 71,91 +0,00 3 (3) GUM Trading House 67,78 +0,39 4 (5) RAO UES of Russia 66,01 +2,16 5-6 (7) TSUM Trading House 62,67 +0,39 5-6 (8) PTS (North - Western Telecom) 62,67 +2,75 7-8 (4) RostovTelecom 62,28 -2,55 7-8 (-) Tulenergo 62,28 - 9 (9-10) Mosenergo 61,49 +3,53 10 (6) Lenenergo 61,30 -1,37 11-12 (15) Kusbassenergo 59,33 +3,93 11-12 (23) Norilsk Nickel 59,33 +7,86 13 (14) Sverdlovenergo 58,55 +2,56 14 (-) Volgogradenergo 58,15 - 15 (11) Sibneft 57,76 +0,98 16-17 (12) Bashkirenergo 56,78 +0,20 16-17 (-) Stavropolenergo 56,78 - 18 (19) MGTS 56,39 +3,54 19-20 (16) Irkutskenergo 55,99 +0,78 19-20 (-) Tyumen Oil Company 55,99 - 21-22 (24) LUKOIL 55,80 +5,51 21-22 (13) GAZPROM 55,80 -0,59 23 (18) Slavneft-Megionneftegaz 54,81 +1,37 24-25 (26) YUKOS 54,42 +6,09 24-25 (9-10) Rostelecom 54,42 -3,54 26-27 (20-21) Severstal 53,24 +0,98 26-27 (22) Krasnyj Octyabr Co. 53,24 +1,18 28 (-) Samaraenergo 52,06 - 29 (29) South Telecommunications Company (Kubanelectrosvyaz) 51,47 +6,87 30 (28) AEROFLOT 50,88 +4,32 31 (-) Nizhegorodsvyazinform 49,90 - 32 (25) Voronezhsvyazinform 48,92 -0,20 33 (27) Rosneft-Sakhalinmorneftegaz 48,53 +1,38 34 (20-21) Uralsvyazinform 48,13 -4,13 35 (17) Bashinformsvyaz 46,76 -8,05 36 (31) Тatneft 42,44 +0,00 37 (30) Surgutneftegas 41,06 -3,14 38 (33) GAZ 40,47 +0,00 39 (32) Rosneft-Purneftegas 38,90 -2,55 40 (34) AVTOVAZ 36,54 -3,54 * Each company’s position on the previous Rating, recorded at January 1, 2002, is shown in brackets. ** In percent of the maximum possible. *** Change in the company’s final corporate governance score from the previous rating at January 1, 2002 (in percentage points).

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