The Fight for Shareholder Rights in Russia

MOSCOW: Abuse of shareholders by managers and majority owners cripples foreign investment in Russia. No surprise, then, that improving corporate governance and protecting minority shareholders is becoming a concern of the Putin government. Refusing shareholders entry to shareholders meetings, or striking their names off share registers – two popular gimmicks of a few years ago – are rarer nowadays. Some “oligarchs” have undergone Damascene conversions and are trying to improve their image among investors. A few companies, such as the oil giant Yukos, even appoint independent directors from abroad. These private sector improvements, however, are nowhere to be seen among large businesses controlled by Government, even though many of these firms have a substantial minority of private shareholders who need protection from managerial abuse. Management in these firms, indeed, has become more arrogant and inventive in violating shareholder rights. As an independent member of the boards of electricity utility RAO UES and the gas giant Gazprom, I know directly of their waywardness.

United Energy Systems (UES) is headed by Anatoly Chubais, a former deputy prime minister with a reputation as a reformer. At board meetings, tame in-house managers usually outvote me. If UES bosses want to buy a skyscraper despite UES’s making a $350 million loss, it is fine with them. In November we were asked to approve – without review – huge overpayments on administration. Sometimes we hear that UES has acquired a TV station or finances a political faction in the Duma via a subsidiary. Extracting information on any of these matters is almost impossible.

After 3 years as CEO, Chubais decided to “restructure” UES, thinking that glib talk about competition and liberalization will garner him continued support from London and New York. He tried to brow-beat investors at a board meeting in the Kremlin where – in good Soviet tradition – everyone was expected to vote unanimously to split the company into small pieces so as to sell them at low prices to cronies, political allies, and friendly oligarchs. When shareholders balked, Chubais sought to neutralize his opponents, unilaterally changing the agreement with the Bank of New York to control the votes of most holders of American Depository Rights (ADRs).

To continue reading, please log in or enter your email address.

Registration is quick and easy and requires only your email address. If you already have an account with us, please log in. Or subscribe now for unlimited access.


Log in;
  1. Television sets showing a news report on Xi Jinping's speech Anthony Wallace/Getty Images

    Empowering China’s New Miracle Workers

    China’s success in the next five years will depend largely on how well the government manages the tensions underlying its complex agenda. In particular, China’s leaders will need to balance a muscular Communist Party, setting standards and protecting the public interest, with an empowered market, driving the economy into the future.

  2. United States Supreme Court Hisham Ibrahim/Getty Images

    The Sovereignty that Really Matters

    The preference of some countries to isolate themselves within their borders is anachronistic and self-defeating, but it would be a serious mistake for others, fearing contagion, to respond by imposing strict isolation. Even in states that have succumbed to reductionist discourses, much of the population has not.

  3.  The price of Euro and US dollars Daniel Leal Olivas/Getty Images

    Resurrecting Creditor Adjustment

    When the Bretton Woods Agreement was hashed out in 1944, it was agreed that countries with current-account deficits should be able to limit temporarily purchases of goods from countries running surpluses. In the ensuing 73 years, the so-called "scarce-currency clause" has been largely forgotten; but it may be time to bring it back.

  4. Leaders of the Russian Revolution in Red Square Keystone France/Getty Images

    Trump’s Republican Collaborators

    Republican leaders have a choice: they can either continue to collaborate with President Donald Trump, thereby courting disaster, or they can renounce him, finally putting their country’s democracy ahead of loyalty to their party tribe. They are hardly the first politicians to face such a decision.

  5. Angela Merkel, Theresa May and Emmanuel Macron John Thys/Getty Images

    How Money Could Unblock the Brexit Talks

    With talks on the UK's withdrawal from the EU stalled, negotiators should shift to the temporary “transition” Prime Minister Theresa May officially requested last month. Above all, the negotiators should focus immediately on the British budget contributions that will be required to make an orderly transition possible.

  6. Ksenia Sobchak Mladlen Antonov/Getty Images

    Is Vladimir Putin Losing His Grip?

    In recent decades, as President Vladimir Putin has entrenched his authority, Russia has seemed to be moving backward socially and economically. But while the Kremlin knows that it must reverse this trajectory, genuine reform would be incompatible with the kleptocratic character of Putin’s regime.

  7. Right-wing parties hold conference Thomas Lohnes/Getty Images

    Rage Against the Elites

    • With the advantage of hindsight, four recent books bring to bear diverse perspectives on the West’s current populist moment. 
    • Taken together, they help us to understand what that moment is and how it arrived, while reminding us that history is contingent, not inevitable

    Global Bookmark

    Distinguished thinkers review the world’s most important new books on politics, economics, and international affairs.

  8. Treasury Secretary Steven Mnuchin Bill Clark/Getty Images

    Don’t Bank on Bankruptcy for Banks

    As a part of their efforts to roll back the 2010 Dodd-Frank Act, congressional Republicans have approved a measure that would have courts, rather than regulators, oversee megabank bankruptcies. It is now up to the Trump administration to decide if it wants to set the stage for a repeat of the Lehman Brothers collapse in 2008.