2004-02-16
On February 13, 2004 The Institute of Corporate Law and Corporate Governance presented an updated Rating of leading Russian companies judged for the quality of their corporate governance at October 1, 2003

The new corporate governance rating of Russian companies (CORE-rating) was disclosed on February 13, 2004 by the Institute of Corporate Law and Corporate Governance. The rating reflects the results of studies of the quality of corporate governance of 25 Russian companies in the 3^rd quarter of 2003.

In October 2003 the new decree of the Federal Commission for Securities’ Market came into force. This decree envisages new information disclosure requirements relative to quarterly reports and material facts of financial and economic activity. Thus, according to the new requirements, the issuers are to disclose more thorough information on securities, including those that circulate as depositary receipts. Some data of the quarterly report, specifically information of shareholders owning 5% or more of the issuer’s charter capital, the dividend history, indexes of financial and economic activity, etc. are to be shown in retrospect (for the latest five years). The mandatory amount of information disclosure in the quarterly report now includes the data on interested-party transactions.

At the same time, issuers no longer have to disclose information of personal remuneration to managers, and the record of the general shareholders’ meeting now ceased to be an obligatory supplement to the report. The list of facts recognized as material in the companies’ financial and economic activity became shorter.

Practically all the joint-stock companies under the rating have presented quarterly reports according to new standards. As a whole, the fact had a positive effect on the dynamics of most companies’ rating grades. Besides, the Institute points out that the number of companies that will disclose information on managers’ aggregate remunerations has grown.

Only three companies under CORE-rating, namely ‘LUKOIL’, ‘AEROFLOT’ and ‘SurgutNefteGaz’, submitted the quarterly report for the 3^rd quarter of 2003 according to old standards. At the same time, ‘SurgutNefteGaz’’ report does not completely meet even the requirements of FCSM of Russia that used to be in force. Besides, the company will go on violating joint-stock companies legislation, among other facts it will not provide the Institute as a shareholder with any information at the latter’s request.

The absolute leader in what concerns the positive tendency of the rating’s value in the 3^rd quarter of 2003 is 'VolgaTelecom' company (+10.52%). The company disclosed information in accordance with the new requirements of FCSM of Russia and in good time provided documents (including records of the Board of Directors’ meetings) at the shareholder’s request. All this let the company rise from the 22^nd to the 12^th position in the rating. Time will tell if the improved rating reflects a real and stable change of the quality of the company’s corporate governance.

Open Joint-Stock Company MGTS improved its rating essentially (+5.77%). The experts pointed to the improved transparency of the company: the company disclosed the accounting according to international standards; information disclosure on material facts of financial and economic activity became more extensive. There were no violations to be discovered in the way the general shareholders’ meeting had been held. Besides, the Institute’s experts mention that the information constituent of the corporate site improved (the company started a section for shareholders).

The analysis of documents (disclosed information) of Open Joint-Stock Company ‘SeverStal’ revealed that in the 2^nd quarter of 2003 Russian companies- ‘SeverStal’s shareholders shifted their shares to an off-shore company for several months. This transfer coincided with the general shareholders’ meeting where shareholders approved interested-party transactions. As it does not seem possible to verify if the off-shore company was interested in the transaction or establish the fact of its participation in (or abstention from) the voting the experts have some doubts as to whether it was really disinterested persons that took part in the voting on these issues. The doubts are also indirectly corroborated by the fact that in the 3^rd quarter of 2003 these shares were called back from the off-shore.

The list of leaders and outsiders in CORE-rating has remained permanent for already a year. The top positions in the rating have been held by ‘VympelCom’ and ‘Norilsk Nickel’, while ‘GAZ’, ‘AVTOVAZ’ and ‘RosNeft-PurNefteGaz’ have been permanently in the bottom lines. This testifies to the stable nature of corporate policies of the cited companies.

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