Corporate governance is a broad term incorporating such ideas as transparency in management, protection of minority shareholders’ rights and instruments to prevent companies from diluting shares — procedures for which most foreign and local investors in Russia have been lobbying for years. Although the need to adopt firm corporate-governance standards is clear, the methods of implementation are not. The Organization for Economic Cooperation and Development charged a specifically created commission with the task of producing a uniform corporate-governance code. The Leader sat in at a recent roundtable on the proposed code.

There is no doubt that corporate governance plays an important role in a company’s performance and its ability to attract investors. Vowing to improve the country’s dismal corporate-governance record, the Russian government has created a special commission responsible for modifying the Corporate Code, which aims at protecting the interests of shareholders and, consequently, improving the investment climate in the country and perking up the overall economic situation.

The Organization for Economic Cooperation and Development is in charge of the task of bringing together the best practices in corporate governance worldwide.

Russian law already incorporates the majority of the fundamental principles of corporate governance; however, the implementation of these principles still lags behind.

The roundtable “The Corporate-Governance Code: The Real Needs of Russian Business,” which recently convened in Moscow, attempted to solve some of the issues still dogging the corporate arena and to help unearth the potential problems embedded within the new code, a user-friendly document that contains general guidelines for company behavior. Just ahead of the session’s opening, Alexander Dinin, deputy executive director of the Research Center of the Managers’ Association, who worked on the new code, said the commission consists of representatives of the biggest companies in Russia.

“We wanted to have representatives from all kinds of industries and from all the regions [taking part], not just Moscow,” Dinin said. “Moscow-based companies constitute only about a quarter of the total number of participants,” he added.

The Managers’ Association and the Russian Institute of Directors organized the roundtable as an opportunity to hear numerous opinions, including criticism, about the new code. Dinin said it is essential to hear the opinion of business leaders, who will be affected by the new corporate-governance code, once it is adopted.

Although the existing law covering open joint-stock companies includes some guidelines for corporate conduct, it has been poorly implemented and lacks specific suggestions for key situations.

Sergei Litovchenko, executive director of the Managers’ Association, said that, unlike the currently proposed code, the joint-stock company law was narrow and limiting.

“We are not talking about how to manage processes within a business; we mean to work out a strategy for companies’ interaction with their environment, including shareholders, the local community, managers working in the company, employees — all kinds of bodies existing around business, like competitors, for instance,” he said.

“We all understand that for things to change, we have to push the new ideas actively; we have to make the people and the corporations understand why they need the code. The code is ready, but it is not clear how it should be implemented. Our country has a lasting tradition of coercive implementation, but, due to the complexity and the intricacy of the subject, the code should by no means be forced [on people],” Litovchenko added.

During the roundtable, participants examined the results of research conducted by the Managers’ Association. The results showed that existing laws and regulations do not meet the requirements and interests of corporate participants. The mechanisms for self-regulation in the business sphere are still very weak. The business community still has to ask the government to set the rules of the game, while a tendency toward self-regulation is growing. The results presented by the commission proved the perceived need for a new corporate-governance code.

A thematic discussion that followed the presentation of the research results asked the participants to suggest practical ways of implementing the regulations for business and the state. The discussion was led by Igor Belikov, head of the Institute of the Stock Market and Management, who encouraged the participants to contribute to the code’s development: “We have the text of the code posted on our Website at www.rid.ru, so please come and submit concrete ideas. We want this process to be fruitful. We do not need just talking about the code’s importance — we need definite input.”

Some participants seemed agitated, calling for an immediate implementation of the code. Others proposed detailed and scrupulous reviewing of the proposal, arguing that the code should be adopted not as a law, but, rather, as a set of recommendations.

After the discussion, Konstantin Zuyev, deputy president of Russia’s Federal Commission for the Securities Market, shared his impressions. “I have a very positive feeling now. Such things have to be discussed. All in all, it is great to have businessmen discuss and influence the corporate governance code, which will help us come closer to a civilized society.”