Economist Mikhail Delyagin Presents Results of a Corporate Governance Study for Russia Featuring Norilsk Nickel as Example

MOSCOW, April 20, 2011 /PRNewswire/ -- Mikhail Delyagin, a prominent Russian economist and the head of the Globalization Institute, presented his report "Why Corporate Governance Is Back On The Agenda Today, And Why Russian Corporations Need It." In his report, the author delves into the business and operations of Norilsk Nickel, one of Russia's industrial giants.

Delyagin says that one of the key problems affecting the competitiveness of many national industry players in Russia, especially when compared to their direct international competitors, is very poor corporate governance. The case is further aggravated by the global economic downturn.

Norilsk Nickel was selected for this study not randomly: the author states that the appointment of the executive team and its CEO Vladimir Strzhalkovsky, who originally worked in the national tourism supervision agency, is "the latest example of the twisted and contorted Russian corporate model."

"In today's Russia, the so-called 'large corporation' is, quite often, a cooperative shop, an 'old school chums' network, which is very far away from the well-tested Western model that the Russians wanted to replicate. In this regard, Norilsk Nickel may be a regretful but equally excellent example to look at," says Delyagin.

"I was astonished to discover that the real standards of corporate governance in the company I have always considered a flagship of the Russian economy [were so poor]. The growing practice of appointing persons with no professional skills or experience to the senior positions in areas of business that are strategic for the country has fatal or even destructive consequences for both -  the companies and the regions where these companies are located."

In his report, Delyagin states that some Norilsk Nickel executives who have no professional experience in the industry have driven the company into a very complicated situation. Most of those executives support Vladimir Potanin, the owner of Interros Holding and one of the key shareholders of Norilsk Nickel.

Delyagin cites figures and facts, which, according to the author, indicate that the management is either helpless or reluctant to contribute to further growth of Norilsk Nickel's plants: based on the experts' estimates, current sales practices alone produce an annual shortage of $400 to 500 million in profits that could have been received otherwise. The management's attempts to expand internationally faced several failures, and, as Delyagin states, they were based on "the enthusiasm of a rather unprofessional executive team."

Delyagin also negatively views Norilsk Nickel management's stance on environmental protection and social responsibility. The city of Norilsk has become an environmental disaster, and the situation is only getting worse. Most of the actions aimed to preserve the environment, including alleged investments, resemble a PR campaign. According to Delyagin, the environmental problems resulted in important investors' withdrawal from working with Norilsk Nickel. For example, the Norwegian State pension fund has excluded the company from its investment portfolio. Delyagin concludes: "It would be naive to believe that the incompetence of the management would not affect their corporate governance practices."

Delyagin recommends to try and 'normalize' the company's corporate culture. "This means that the values shared by the civilized international business community should not just be proclaimed but must be followed in every managerial decision made by the company. These values are quite simple if company managers believe in and share them. And if they don't believe in them and do not want to share them, then the top managers must be replaced however loyal they may be... There's only one alternative; devaluation of the business and regress of a company that was created, and this must be remembered, not by the genius of a handful of business people (who, in theory, can do as they please with their creation) but by the labour of many generations of Russian people," concludes Delyagin.

The full report is available at www.delyagin.ru

SOURCE Russian Business News Network