Who Manages Finances in Russia
Dengi once again publishes the rating of the most influential entrepreneurs of the Russian economy. As we predicted six months ago, the rating of the top 100 finance managers is being assailed by new company leaders.
Who was hundred and first?
We apologize to the readers for the several months’ delay in publishing the rating. This is the third time we have compiled the list of 100 entrepreneurs who have maximum influence on the sales of the largest Russian companies. This one presents the data of the first six months of 2002 (see the table). The reason for the delay is quite simple: we decided to reform the rating calculation method on the go, since at some point we found that the old one was no longer suitable.
First let us remind you that initially it was a list of Russia’s 100 most influential managers, determined
by experts’ own ideas about the influence of one or another person in his management team. Experts estimated the claimant’s “share in the decision making that resulted in the company’s sales”. These estimates were then averaged out and multiplied by the company’s sales volume: the resulting “amount of earned money” was the factor that defined the manager’s position in the rating.
However, as time went by we were no longer content with this method. For one thing, experts’ estimates of a company’s influence differed more and more. The rating of such figures as Anatoly Chubais, President of RAO UES of Russia, or Sibneft’s co-owner Roman Abramovich, or even one-third of the whole list lost all meaning: some experts attributed control over 100% of the company’s sales to them, while others reduced this control to zero. But all of them gave a carefully reasoned explanation of their conclusions. There was no sense in averaging out their estimates.
This comes as no surprise: all of the previous year, Russian business was undergoing a process of corporate management adjustment, and as more and more managers were authorized to make decisions in various economic structures, there appeared more people known in their professional business circles. Moreover, investment company analysts believe that managers responsible for working out a company’s strategy are the ones gaining corporate influence, not executive company managers.
Insiders of most market sectors think that managers
have become more influential, while owners, who initiate large-scale activities in most companies, have shifted to the background. Integrity and a unified technique for evaluating a manager’s role in a company have virtually outlived their usefulness : each expert estimated the position of Victor Vekselberg, for example, in his own way; some even considered his role in managing Tyumen Oil Company and SUAL inessential.
In addition, we were no longer satisfied with the limitation of the list. The rate at which changes in the corporate world take place, including the role of certain company managers, made the situation paradoxical. The first half of the list had always been made up of people whose names are familiar to everybody, for example, the top managers of Gazprom, RAO UES of Russia, LUKOIL, and YUKOS. These managers do not change too often, and the importance of such companies for the Russian economy will remain extremely high for many years to come. Meanwhile the remaining 50 lines changed like a kaleidoscope – Russian business is too dynamic. The rating has in many ways stopped being a momentary indicator of the alignment of forces in the corporate world. But the main thing is there has always been a desire to see beyond the list to find out what has become of those formerly inscribed in the top 100. As Dengi has written before, corporate finances do not give up their managers that easily.
In order to continue with the rating and compile it using the old method we would have to expand the list of experts (to 300-500) and process the data twice a month at the least, but even in this case it would retain the above-mentioned drawbacks. Thus the method has been changed to a new one, which we believe the readers of Dengi will find more interesting.
The New Method
The new variant of the rating “Who Manages Finances” comprises two fundamental changes. The first one is that we have practically given up on experts’ direct
participation in determining managers’ influence. The estimate will be made by the financial columnists and correspondents of Kommersant Publishing House, who are constantly in touch with company representatives and experts writing surveys on events in the corporate world. Naturally, there is a certain risk in this approach: the objectivity of the experts’ average estimate is replaced by a particular journalist’s voluntary decision. We believe this risk to be justified, since each reader of Kommersant editions takes the same risk in relying on the objectivity and expert knowledge of their authors. Furthermore, the estimates that underlie the rating are made every day taking into account the opinion of insiders, analysts and experts.
The second innovation is that we are not going to limit the list of Russian finance managers. The main criterion for including a manager or entrepreneur in the rating is managerial work in a company whose sales volume is no less than $100 million in the reporting year. The only limitation is the maximum number of representatives from the same company: one person for companies that are part of a holding and three people for structures that do not belong to any holding.
We should note that managers of purely financial structures, i.e., banks and insurance and investment companies, were not included in the list, since their sales volume is incommensurable with that of trade, consulting and industrial companies. There is still another limitation: the editors have official data on the sales volumes of companies; moreover we do know of
structures whose estimated sales volume exceeds $100 million. However, if we do not have reliable confirmation of this estimate, we do not include their representatives on the list. At the moment, we have not gone beyond the basic industries of the economy. However, we pledge ourselves to expand this list.
This time we intentionally confined the rating of >financial managers to 100 people –the method is not yet fully worked out, and we will publish the complete 2002 rating in future.
However, the “abridged” rating for the first six months of 2002 can be compared to the previous ratings, the last one reflecting the results of the second half of 2001. The more so since the discrepancy in the present top 100 list and the rating compiled by the old method is not too serious, so that it lets one see the way the situation in the corporate world influenced the alignment of forces in large companies.
Where Presidents Go
The most interesting modification in the rating of influential entrepreneurs is the abrupt
strengthening of “legislative” rather than “executive” authority in joint-stock companies.
Unlike the previous year, large sales volumes were more often the result of activities of chiefs of the board or board members. This seems to be the result of corporate reforms.
The strange post of joint-stock company president in Russia has almost the same status as that of the country’s president: formally, joint-stock companies (AO) and closed joint-stock companies (ZAO) cannot
have a “head of the company”: the board of directors and its head define the company’s management policy, and he manages the company’s activities within this framework.
In European and American companies, the functions of president and CEO are not necessarily merged. In Russia, however, “president” and “general manager” are virtually synonymous, “president” corresponding to “head of the company”, i.e., a post higher than head of the board of directors (whose foreign analog is chief of the board or simply president).
Reforms of corporate governance make these linguistic inaccuracies insignificant, though formerly they could lead to wars in the companies. Kakha Bendukhidze and Vladimir Kadannikov, chiefs of the boards of United Machinery and AutoVAZ, have not in the least lost their significance. The thing is that large company owners tend to like strategic rather than debugged day-to-day management. We assume that in future “presidents” will leave the list and be replaced by figures standing behind the titles.
Another important aspect is legalization of State Duma Deputies’ business and the withdrawal of executive authority representatives from top positions.
In light of the expansion of government into business and business into government in 2001, the shift of priorities is significant. In fact, the rating reflects the end of this process. Lobbying officials are being gradually dismissed from company management: for large companies, this is an outside function that that they buy. Boris Zubitsky, who has delegated himself into power, has grown more interested in strategic management rather than in lawmaking.
Finally, there is another important change that cannot go unnoticed. This is an abrupt strengthening of the positions of state company and SUE (State Unitary Enterprise) managers. This can be easily explained: the state took an active interest in its assets in 2000–2001 and virtually eliminated the ten-year home rule of general managers: some were given carte blanche to manage the business independently, while others were replaced by the officials’ own people. It took six months to a year for SUE managers to understand the situation and build an executive system. Former power brokers became more public starting in 2001. The state sector of the economy is stepping out of background, and this is reflected in the rating as well.
TOP 100 Leading Russian Businessmen
DMITRY BUTRIN, DMITRY LADYGIN
All the Article in Russian as of Jan. 27, 2003
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Photo: Alexander Potapov
