Rosimushchestvo strengthens positions at state-owned companies

30-09-2016

Russia’s Ministry of Economy is set to enhance corporate discipline at state-owned companies, with a related draft government decree published for public debate. The document suggests increasing the role of the Federal Agency for State Property Management (Rosimushchestvo) in the management of public joint-stock companies; in particular, it is proposed that Rosimushchestvo have the right to shape the agenda when documents for general shareholders’ meetings addressing, among others, dividends are delayed. Facing a budget gap, the Government intends to receive 50% of the profits earned by its assets in 2016 dividends next year. The companies promise to obey, but remind there may be no profits earned in 2016.
 
The problems related to manageability of state-controlled legal entities caught the public eye after the 2015 dividend campaign when the Ministry of Economy showed discontent with actions of the Government’s representatives on the Boards of Directors of state-owned companies over delays in submitting draft instructions for shareholders’ meetings to the Ministry. These instructions, in particular, have decisive influence on the results of voting on dividends. 'Consequences’ for the financial motivation of the Government’s representatives were announced then; according to a statement made for the Kommersant by Oksana Tarasenko (head of the Ministry’s corporate governance department), the Ministry of Economy is already developing a “procedure for linking the top managers’ remuneration to meeting key performance indicators."
 
Given the tough 2017-2019 budget, Rosimushchestvo’s control over state-owned companies is of primary importance: the Government wants to have 50% of public joint-stock companies’ profits in the public purse. A document prepared by the Ministry of Economy on the instructions of Vice Prime Minister Arkady Dvorkovich requires that the Ministry and Rosimushchestvo develop criteria for selecting candidates to Boards of Directors of state-owned companies and modifies the AGM agenda formation procedure at state-owned JSCs providing for fixed deadlines and specific content requirements. In particular, JSCs must submit to the Government the “voting position on the proposed agenda items,” well-grounded statements of resolutions on them, and information on candidates for election to the management bodies.
 
The reporting deadlines are different depending on the state-owned company’s status. JSCs included in a special list (Gazprom, Rosneft, Aeroflot, AHML, etc., for which instructions are subject to direct approval by the Russian White House) are to submit the required information until November 1, companies with private shareholdings until 1 December and only wholly state-owned companies until March 1 of the following year. Rosimushchestvo will consider proposals and take decisions “of advisory nature” for specially listed companies and of mandatory nature for all the others. The ministries authorized to deal with state-owned companies will also be required to submit their agenda-related proposals to Rosimushchestvo, at least when the company in question is found to face a negative economic and financial situation, losses, or debts exceeding 10% of its net assets, as well as tax debts or wage arrears. If Rosimushchestvo does not receive the documents in time, it shall be entitled to form the Government’s position on a stand-alone basis.
 
“The idea is to improve the 'two keys system’ to clear the responsibilities of each authority, which will ensure higher control over JSCs and increase transparency of their management,” Oksana Tarasenko explained to the Kommersant adding that the drawing-up of amendments is not directly related to the Ministry’s discontent with the 2015 dividend campaign but the project implementation is expected to improve efficiency of the next one, among other things.
 
The state-owned companies will comply with the decisions made by their controlling shareholder, the Kommersant says referring to responses from Zarubezhneft JSC and PAO Sovcomflot. Rosneft noted that the changes would not affect specific aspects of its dividend policy and that its documents were submitted on time. A source close to the Board of Directors of Aeroflot reminded that dividends were payable out of the IFRS net profit. “In 2015, we did not earn profit in terms of IFRS or Russian GAAP and had every reason to pass dividends,” the source said adding that Aeroflot’s instructions were submitted to Rosimushchestvo on time and that the proposed innovations would make “no change in Aeroflot’s life”. However, at yesterday’s meeting with Russian President Vladimir Putin, Aeroflot CEO Vitaly Saveliev estimated the company’s 2016 profit at RUB 20 billion promising to pay “about 50%, if we get through all corporate procedures.”
 
Oleg Sapozhkov; Anna Pushkarskaya, St. Petersburg; Elizaveta Kuznetsova, Anastasia Vedeneeva, Dmitry Kozlov
 
For details. see:
http://www.kommersant.ru/doc/3102319?utm_source=kommersant&utm_medium=ec...

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