News

08.12.2009

Top directors meet to increase the effectiveness of Russian boards

Photo: Alexander Landia, Chairman of the Board, SUEK; Paul Ostling, Non-Executive Independent Director, MTS; Richard Matzke, Independent Director of the LUKOIL Board of Directors debate the role of independent directors at the LSE

On 8 December 2009 the International Business Leaders Forum (IBLF), PricewaterhouseCoopers and the London Stock Exchange carried out a forum for Non-Executive Directors (NEDs) on Russian boards. Following the financial crisis – and the perception that a failure of corporate governance played a key part in it – it is likely that boards will come under greater scrutiny in the months and years to come, if not from regulators, then certainly from investors. In light of the current need to restore trust in the markets, this initiative is of even more relevance today. IBLF’s CEO Adam Leach said: “Such strong representation by so important gathering of business leaders is testament to the commitment and leadership attached to achieving effective corporate governance in Russia. BRIC countries are making an increasingly significant contribution to global GDP and leadership values in business and government are urgently needed to enable Russia to become more competitive in global markets.” The growing number and significance of Non-executive Directors on the boards of Russian companies is an important sign of Russia’s integration into the global economy. This integration would have been inconceivable without the adoption of corporate governance standards that ensure transparency and protect shareholder rights. The executive forum allowed directors to address the issues of transparency, management culture and the compatibility of business traditions with international standards. These are all crucial factors in contributing to the effectiveness of directors on Russian boards, influencing decision-making, minimising risks and enhancing reputation for both the company and themselves. Peter Gerendasi, Managing Partner, PricewaterhouseCoopers Russia said: “We recognise the role of the NED as a potential key driver of change and this event is a part of our desire to develop a dialogue that allows NEDs on Russian boards to share experiences and best practices that they encounter. It is important that NEDs draw from experiences of peers in Russia and other jurisdictions and thus maximise the impact of their own position.” A significant number of Russian companies have not yet recognised international business practices and law, and may be unfamiliar with the tools for effective operations of boards. Other companies may engage in business practices that would normally be unacceptable elsewhere. Commenting on the interactive panel discussions that took place at the forum, Nick Langford, Head of UK and International Business Development, London Stock Exchange said: “The discussion held at the forum and exchange of opinion helped to add colour and relevant background to the rules and guidelines that we as an exchange espouse. This was the kind of engagement that our principles-based system of regulation aims to support. A better appreciation of the value which NEDs can bring to the board table will only help to engrain corporate governance best practices within the business culture and that was clearly on view in today's gathering." Stock exchanges, investors, investment banks and funds are now making their expectations regarding corporate governance clearer. In turn, this is having a considerable effect on corporate governance mechanisms in Russia going forward.

Reducing Risk of Corruption in Russia Initiative (RRCR)