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Who Manages Finance in Russia
Before preparing the “Who Manages Finances in Russia” rating, based on findings for 2003, we expected the main intrigue to be the competition between two main ideas in corporate management. The first one is “correct corporate management” the way the whole world understands it. The second one is “management in the context of the corporate state,” the principle of government dirigisme in the economy on the micro-level. However, the changes in the rating are paradoxical: it looks like corporate Russia in 2003 has set a goal to combine both ideas.
Corporate Management by Mussolini
There is probably nothing amazing in the idea of corporate management being attractive to supporters of the idea of the corporate state. Let us remind you that that the term “corporate state” first appeared in Italy in the 1930s in Benito Mussolini's regime, when ideologists combined the interests of government and business. Definitions of the corporate state at the microeconomic level in Russia in 2003 do not substantially differ from Mussolini's: a company's management must orient its activity to combine its own interests with political, social and religious interests of the state. The state has the right to set goals for private business. In Russia, for instance, it is “attaining social responsibility” and “doubling the GDP.” In Italy in the 1930s, the goals were not quite so high – they wanted to provide water and energy for large cities, improve the railroads, and increase prosperity in villages in the south. Business had no right to refuse.
However, fulfillment of such goals demands precision and high quality of corporate management, financial transparency, professionalism of managers, and brilliant qualification of the highest financial leadership from private business.
The idea of the corporate state, born during the Fascist regime, remained alive in countries that, in the 1970's, then felt a need for “corporate management” as well, the way it appears today and the economies of Italy, France and Scandinavia, and it began to resemble socialism. Nevertheless, there the idea of corporate management, with the assumption that the management of a company works only in the interests of its shareholders, replaced the practice of “corporate management in a corporate state.”
In Russia, this picture looks different. Most companies, managed by their own indirect owners at their own risk, can be divided into those who prefer the “corporate state” and those who prefer “corporate management.”
The best confirmation of the competition of these two ideas is the recent suggestion by head of the finance policy department of the RF Finance Ministry Aleksey Savatugin to give state officials the right to become independent directors of the boards of private companies. It is not likely that Savatugin meant this practice to become mandatory – he simply called into question the practice of prohibiting officials from becoming independent directors However, numerous commentators, in supporting the Finance Ministry official, took his opinion in the context of “corporate state”:
the board of directors has nothing to lose by considering the interests of the government and society when it makes certain decisions. In practice, however, this thesis directly opposes the role of independent directors in the concept of corporate management as it is understood in the West: the independent director must defend the interests of shareholders and not of society, state, or even, say, Martians.
Judging by the “Who Manages Russia's Finances” rating for 2003, the process of dividing the Russian corporation by these two ideologies is at its peak. The top of the rating is clearly divided into three parts. The first group consists of managers who in some way represent the interest of the state in business.
Mainly, they are managers of companies controlled by the government. The second group is professional hired managers.
Finally, the third group is the real co-owners or beneficiaries of large business, who so far have not made up their mind as to what side to take. They are in the hardest situation. The term “oligarch,” turning the businessman into a candidate for trouble with the state (from the troubles experienced by Mikhail Khodorkovsky in pretrial detention, to the troubles of Vladimir Potanin, whose vacation at the seaside with his children was spoiled by rumors of his arrest) in practice is applicable to any one of them. So far, it is more dangerous to be an oligarch in Russia than to be a supporter of corporate management and independence from the state.
The Chimera of Management
Is the gap between corporate management and corporate state so wide indeed? Most participants in the rating by Dengi do not think it exists at all. In a paradoxical way, representatives of private companies, who are, in fact, in a much more vulnerable position in relation to possible attacks from the government compared to the state business, show more enthusiasm on this issue.
Anatoly Chubais and Aleksey Miller, Vladimir Yakunin and Sergey Bogdanchikov can afford to doubt the necessity of forcefully uniting the interests of society, business and state at the call of Mikhail Fradkov,
and Viktor Rashnikov, Taimuraz Bolloyev, Vladimir Busygin, Vyacheslav Kantor “must have no doubts.” The managers who own their companies have even fewer options. They can keep quiet on these subjects, following the example of Evgeny Shvindler and Vladimir Lisin, or stay within the limits of Russian Industrialists and Businessmen Association (RSPP), or, during meetings with Vladimir Putin, to give hot support to the views of the president (who usually is not too domineering in his opinions on this subject), or to get an entirely new life, like Kakhe Bendukidze, who left to head up Georgia's Ministry of Economy.
Dengi estimated that at least 10% of those being rated have had criminal cases started against them in the last five years. .
At least 40% of the managers listed in the rating have suffered from threats of criminal investigations.
By the way, a similar figure would appear if criminal threats to large business representatives were counted No offense to the General Prosecutor's office, but in 2003 consequences of threats from a “person with a gun” coming for them by far exceeded threats from the person with a “sniper rifle.”
Let us emphasize that, in general, there are no large changes in the rating compared to last year. The long-term process that determines the place of the manager in the rating is still going on. As before, the “percent of sales volume” determined by Dengi experts for each company manager,
has tendencies to gradually decline. The number of the owner managing the finances gradually decreases, although they have a tendency to become co-owning managers with new partners. In general, though, the sum volume of money managed by the participants rated remains more or less stable because it is compensated for by sales volume growth.
In light of the victory of the corporate state idea over that of corporate management and the observation of the dynamics of ranks will probably lose all sense in the results of 2004. In practice, combination of corporate management principles with the idea of the “corporate state” is impossible, and the fact that key managers of state enterprises lately have been excluding “state” rhetoric from company internal documents, leaving it for “external” appearances,
is highly indicative. Cooperation of the state, society and business is attainable, but outside the “corporate state” concept. Private business oriented to receiving privileges in competition and refusing certain privileges for the benefit of society, government or anything else, loses its effectiveness. To be exact, the effectiveness of business, as determined by competition, is what determines its value.
That is why it is easy to predict further changes in the “Who Manages the Russia's Finances” rating. In 2004, there will more managers of Russian branches of Western companies, managers of state-owned companies and outstanding figures, representing private business.
100 Largest Financiers of Russia >>>
Dmitry Tatarinov
All the Article in Russian as of Aug. 02, 2004
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