Foreigners in the management of Russian companies: is it good or bad?

Victoria Pavlova

At the end of January, the FAS proposed to increase the punishment for violation of Federal Law 57 “On the procedure for making foreign investments in business entities of strategic importance for ensuring the country's defense and state security” and introduce mandatory approval from the state commission for the purchase of more than 50% of the voting shares of a strategic enterprise. If the increase in the share occurred without the consent of the government, then the investor will have to return the shares. That is, we are talking about the confiscation of property of foreign investors. Foreign capital will not work. But high-ranking foreigners in the top managers of the most important companies in Russia, as it turns out, are easy. Moreover, there are very dubious personalities in the leadership.

Cargo-cult of foreigners in Russian companies

Gerhard Schroeder has been heading the board of directors (BoD) of Rosneft for 5 years. In general, Rosneft can be called Russian only from a formal point of view. Of the eleven members of the council of Russians, only three are: Igor Sechin himself, Deputy Prime Minister Alexander Novak and presidential adviser Maxim Oreshkin. Relatively recently, Briton Bernard Looney and Austrian citizen Karin Kneissl joined the board of the oil company. And, if Looney really has rich management in the oil and gas sector (since 2013 he has held senior positions at BP), then Karin Kneissl is a politician, like Schroeder. From 2017 to 2019, she served as Minister of Foreign Affairs of Austria. It was to her that Vladimir Putin went to the wedding a few years ago.

Foreigners can be found in almost any large Russian company, both private and state-owned. The Supervisory Board of the state bank VTB includes the Frenchman Yves Thibault De Silgy (responsible for audit, personnel and remuneration) and Matthias Warnig (responsible for strategy and sustainable development). The latter is generally a “multi-machine” - it is also included in the Board of Directors of Rosneft and Transneft.

The Supervisory Board of Sberbank includes the former Prime Minister of Finland (1991-1995) Esko Tapani Aho, British Nadia Christina Wells, American Natalie Alexandra Braginsky-Munier. All of them are members of the Audit Committee and control the activities of the bank.

There is also a representative of Europe in the transport sector: the former Federal Chancellor (2016-2017) of Austria Christian Kern is on the board of directors of Russian Railways.

Private companies are also not left out. In order to get out of the US sanctions, Oleg Deripaska was forced to transfer the management of Rusal to independent foreign directors. So, since 2019, the Dutchman Bernard Zonneveld has been the chairman of the council. The company is also managed by Christopher Burnham, former deputy head of the US Department of State, Candoliza Rice , and American Christopher Jordan, brother of Boris Jordan , who in 1993-1994, during privatization through the Credit Swiss First Boston bank, bought up every eighth voucher issued by the State Property Committee. Now the US authorities are issuing a work permit to the largest domestic manufacturer of buses and trucks, the GAZ Group. Moreover, in January 2022, the US Treasury reduced the validity of a license to work in Russia from 1 year to 90 days.

The largest petrochemical complex in Russia, SIBUR, owned by Leonid Mikhelson and Finnish citizen Gennady Timchenko, also distinguished itself. In December last year, Francois Fillon was included in the board of directors of SIBUR, who from 2007 to 2012, under President Nicolas Sarkozy, headed the French government. Fillon 's departure from politics can hardly be called smooth: in June 2020, in his homeland, he was sentenced to three years of probation, two years of real life and a fine of 375 thousand euros for embezzlement of budget funds. He simply fictitiously arranged for his wife to work in the apparatus of parliament. For several years, without showing up for work, she earned about 800 thousand euros. He has yet to serve a real sentence... All this resembles a cargo cult among the tribes of Melanesia, who build straw models of aircraft in the hope that this will allow them to lure real transport with humanitarian aid.

Generous gifts for overseas guests

Political scientist Sergey Markov explains that there may be quite good reasons for the appointment of foreigners:

- There are common projects with these countries. And therefore it is logical to include representatives of these states. Since both Rosneft and Gazprom have common projects with Germany, and much of their business is based on supplying energy to the Germans, it is logical enough to include German representatives on these boards of directors. There is another model - when they include in the board of directors a representative of a large financial structure that makes investments, and which is, in fact, a co-owner of this company. In order for this financial structure to better control the Russian corporation in which it has invested a lot of money, these representatives are included. The third option arises when there are some major technology partners, for example, a mining and processing company that processes the raw materials of the first company. The fourth model is when a very prominent public figure who is well versed in all the pitfalls and so on is included. Schroeder also fits this model, because he has a lot of experience, great connections and so on. There is a fifth model - it is on the verge of corruption, but is not corrupt - when some politician receives a highly paid post for some major services. This model was often used by the Americans. It happens to us too, but not as often.

The authors of the political telegram channel "Kremlin mumkoved" have a different point of view:

- Inviting expats to leadership positions is the norm for commercial enterprises. Skills and qualifications are more important than marks in the passport. This was the case, for example, with Bu Anderson, who was able to launch the production of the popular Gazelle Next at GAZ , and Lada Vesta at AvtoVAZ . But the boards of directors of key companies often take "non-handshaking" people like Fillon, who will find it very difficult to establish already spoiled contacts with Western business partners. Corruption and a favorable attitude towards Russia are not held in high esteem there.

Alexey Kurinny, a State Duma deputy from the Communist Party faction, believes that the main reason for the dominance of foreigners is an attempt to show their loyalty to the West:

- Firstly, the fact that we include their representatives in these structures is a nod to our Western partners. Secondly, this is a kind of sinecure for some political leaders who in the past, in one way or another, maintained good relations with Russia. This is a payment for some former merits that were - open or unspoken: as a guide to business circles, it is very difficult to imagine a person convicted in his native country for corruption crimes. In general, this is a bad practice. Therefore, in strategic Russian companies, I think only citizens of the Russian Federation and people responsible for the fate of these companies and for their development should work.

This position is confirmed by the fact that last summer the head of Gazprom, Alexey Miller, promised to include Angela Merkel on the board of directors and give her a 0.04% stake in companies (now such a share is estimated at about 3 billion rubles) “for an outstanding contribution to the implementation of Russian- German economic projects.

Our assets are no longer ours

Aleksey Kurinny notes that entire industries have come under the complete and undisguised control of foreigners. Sometimes this state of affairs is not hidden, as in the case of Deripaska, who agreed to cooperate with the American authorities, but more often they try not to advertise:

- Naturally, such options when it comes to the GAZ Group, when it comes to our aluminum industry, which is actually also under external control, about retail, if we talk broadly, which is also 80% controlled from abroad and is of strategic importance - this, in my opinion, is unacceptable. This needs to be corrected.

The “Kremlin Mamkoved” points out that such appointments can be part of a large global politics and bargaining between countries:

- The appointment of foreigners to board members sometimes coincides with the intensification of conflicts between Russia and the West. Even though many of these people do not own shares in state-owned companies, but as independent directors, members of commissions and committees, they can influence decisions. And pay attention: in almost all cases (except for the representatives of Qatar in Rosneft), the BoD of strategically important enterprises includes representatives of Western Europe and the United States, and there are absolutely no specialists from Asia who have made a breakthrough in recent decades.

Representatives of completely unfriendly states are so firmly entrenched in the management of Russian enterprises that Sergey Markov compares this phenomenon with the corruption of traffic cops:

- This is not normal from the point of view of understanding the norm for granted, but it is normal from the point of view of understanding the norm as being. There are two understandings of the norm - is it normal when a traffic cop takes a bribe? This is not normal in terms of the fact that it should not be so, but it is normal in terms of the fact that this often happens. It is the same here - this is not normal from the point of view of what should be, but it is normal from the point of view of being. American financial structures are so huge and influential that it is very difficult to ensure that they do not influence anything at this stage.

Experts also point out that such a situation carries certain risks for Russia. "Kremlin Mamkoved" points out that independent directors can work not for the benefit of companies, but in the interests of states that represent:

- As a rule, people appointed to the board of directors already have considerable capital behind them and do not work for a salary. Increasing the company's profit may not be their main goal. The example of the GAZ Group clearly shows how the US authorities dictate their will, but neither the company's management nor the beneficiaries even speak out against such a situation .

Sergey Markov sees a whole bunch of various serious risks that weaken Russia's position:

- First of all, there is a leak of information, since politics in recent years has largely been of the nature of a special operation. Secondly, the possible damage lies in the fact that Russia still does not look very good when, it turns out, it pays representatives of states hostile to Russia. This reduces the overall potential of Russia. When they see that the bigger the fight, the more Russia pays representatives of foreign countries, they rub their hands and say - let's beat Russia again.

Aleksey Kurinny is trying to discern the positive behind a series of negative factors, but it will not be easy to implement them:

- Here are a few points. The first is a trade secret. The second is strategic factors. The third is the possibility of external influence, not always positive, on the activities of a particular state-owned company. There is no strategic good in this, but I do not rule out some separate narrow areas, when this or that place is occupied by a real professional, who, for example, does not exist in Russia today. Such a peculiar way of attracting specialists, just as it was after the revolution for some time, when they had to be attracted, because there were none of our own. And they were brought up, but gradually the whole thing was continued by domestic specialists.

It turns out that the FAS initiative to protect strategic enterprises from the influence of foreign capital is just a window dressing. We fence ourselves off from the West only for appearances, but in fact we voluntarily give up control over the most important assets.