Conclusions Tatiana G Dolgopyatova, Ichiro Iwasaki, and Andrei A Yakovlev In this book, we reported our main research findings from the Japan–Russia joint research project entitled “Corporate Governance and Integration Processes in the Russian Economy” conducted from 2004 to 2008 Using a unique dataset of Russian joint-stock companies, we investigated the structure of governance mechanisms and their impacts on corporate governance and managerial behavior in Part I of this volume In Part II, we empirically examined the relationship between Russian business groups and their affiliate companies In Part III, we focused on the role of the banking sector, business associations, and the state in the corporate governance of Russian nonfinancial corporations In this sense, this book is an attempt to provide readers with a comprehensive view of the Russian contemporary business sector In this concluding chapter, we evaluate the research achievements in this book and discuss the further research agenda Major findings First of all, our examination of the results from the enterprise survey gives firm confirmation to the following two predominant views of the Russian business sector in transition: (a) the high level of ownership concentration in business enterprises and (b) the remarkable progress in business integration among them in the form of holding companies and other types of business groups At the same time, however, we also found three new trends, to which we should give considerable attention if we want to grasp the reality of the Russian corporate system The first trend is the wider use of corporate governance instruments in strategic decision-making It is broadly believed that the attempts made by Russian companies to disclose company information, to employ outsider and independent directors, to pay dividends on a regular basis, and to launch initial public offerings (IPOs) on international stock markets in the early 2000s were measures that aimed at improving their image in the world business but were irrelevant to actual strategic decision-making Our firm-level 307 9780230_217287_15_c dd 307 5/12/2009 5:40:00 PM 308 Organization and Development of Russian Business analyses, however, showed that there are factors other than image factors or the pressure of minority shareholders influencing the adoption of the current best practices of corporate governance Russian companies resort to the use of corporate governance mechanisms for the solution of agency problems between shareholders and managers In many cases, Russian firms rely on internal instruments, including boards of directors and incentive provisions to managers according to company performance The chapters in Part I of this book support this view The second trend is the beginning of the separation of management from ownership In the 1990s, top managers, such as CEOs, company presidents, and general directors, were capable of acting as key proprietors in their companies; however, as the scale and complexity of the Russian businesses continued to grow, this traditional corporate model became problematic for many medium and large-scale enterprises Contrary to the fact that most of these top managers are no longer able to effectively run and control their companies under their ownership, the newly emerged holding companies and other business groups gained ascendancy over these independent firms, especially in terms of corporate governance and asset management Three chapters in Part II empirically verify this point Now, Russian business groups actively hire professional managers to run their affiliate companies, and this movement makes exciting progress in the separation between management and ownership in the Russian corporate sector The third trend, which is logically related to the other two, is that there is substantial renewal of management and establishment of the linkage between managerial turnover and firm performance This fact is applicable not only for top managers but also for board directors and senior ranking managers, such as heads of economic departments There is a firm belief that Russian managers are relatively more insensitive to poor performance than managers in developed countries due to their greater ownership and stronger entrenchment Some argue that this is the reason for the difficulty in detecting a statistically significant relationship between managerial turnover and firm performance in Russian firms Nevertheless, the empirical analyses based on our dataset show that, distinctly from the majority of earlier studies, a company’s bad performance is becoming more and more often the reason for the replacement of company executives in that company (see Chapters and for more details) Our analysis of personnel changes in the surveyed firms is clear evidence in favor of a team-type management in Russian jointstock companies (see Chapter 6) These trends cited above are especially typical for group member firms Therefore, we report that business groups, the business model of which is designed for the protection of rights and interests of company owners in imperfect institutional environments, can be regarded as better corporate governance actors in the current Russian business sector 9780230_217287_15_c dd 308 5/12/2009 5:40:01 PM Conclusions 309 Future research Overall, our firm-level study strongly suggests that the Russian corporate model is gradually but surely evolving against the background of remarkable changes in business circumstances inside Russia and within the world market As we report in Chapter 1, very typical of the Russian economy in the 1990s was the phenomenon of a firm in transition run by managers who were virtually independent of shareholders This type of firm is characterized as one (a) having an extremely opaque ownership structure, (b) grossly violating shareholder rights, (c) being hostile to outside investors, and (d) rejecting or neglecting the formal rules and tools of corporate governance Our empirical evidence indicates that this corporate model has now become a thing of the past Namely, the recent development of Russian joint-stock companies is moving toward the classical pathways that are typical of market economies In our opinion, two company models may be feasible and coexist in Russia: many medium-sized companies have a propensity to have a concentration of ownership They will have a limited presence in securities markets and, generally, will maintain some distance from the Russian state On the contrary, we expect that the largest businesses will rely more on informal relationships with their investors and the governmental authorities and establish very specific management and governance systems inside In order to verify our predictions concerning the future of the Russian corporate model, we should examine the possible impacts of the following three factors on corporate governance and management behavior: (a) external competitive pressure, (b) access to available market resources, and (c) potential of capital investment It is very likely that external competitive pressure will become stronger in the Russian economy Russia is now a part of the global market, and, hence, many argue that competition with foreign firms and imported goods will greatly affect the behavior of domestic firms Several questions need to be asked, such as: how much will toughening of the competition be countered with mergers and acquisitions, further expansion of company scales, and the extension of business groups? Will Russian firms incorporate themselves into worldwide value-creation chains in such a manner that present proprietors will be able to retain their ownership rights, while business activities in the chains will be coordinated by the means of contracts? How much will the stronger competitive pressure encourage Russian firms to expand their overseas investments? Will competition give the present Russian company owners sufficient incentives for internal reorganization and streamlining their businesses, which will lead to better management, or will these challenges be met by new, so far unknown owners of these companies? These questions will need to be answered in future research It is also probable that competition for access to available market resources will become more intense Shortage of skilled labor is already one of the 9780230_217287_15_c dd 309 5/12/2009 5:40:01 PM 310 Organization and Development of Russian Business most acute problems for Russian firms What changes will occur, in this context, in internal policies of the firms in such matters as wage administration, rendering of social packages to employees, and raising the level of their skills? How will the companies cooperate with federal and regional authorities in coping with labor shortage? What will be the impact of an aggravating labor shortage on the development of mechanisms and practices of collective actions in the Russian corporate sector? An examination of these questions will be important for a thorough understanding of the major constraints for the future development of Russian business Capital investment is another problem area in the sphere of resources In recent years, economic growth was based on the utilization of idle old facilities inherited by enterprises from the Soviet planned economy At present, use of these facilities has reached its limit, and the facilities themselves are deteriorated beyond repair The industrial sector is facing a need to renew its fixed assets on a large scale, which will call for the massive expansion of external financing contrary to the reliance on internal financial resources, which was predominant throughout the entire postreform era We will need to consider ways to build relationships between enterprises and financial institutions in this situation Furthermore, whether the role of banks as stakeholders and shareholders will grow stronger will need to be determined, as will the need for external financing and whether it will make Russian joint-stock companies more open and transparent In addition to the research subjects outlined above, we should add the following three unanswered issues: First, demographics present an important crossroad in evolution of the organizational pattern of Russian firms In 15 to 20 years, age limitations will force the present generation of Russian company owners and managers to retire It will be interesting to see what they or their heirs will with their equity stakes Will they sell their shares to strategic investors, including multinational corporations, will they launch them on securities market in order to divide these large stakes between many small shareholders, or will they remain in their family businesses? The former and latter variants mean that the present concentrated ownership will remain unchanged The second variant will mean a move to a more diffuse ownership, which will imply different ways of interaction between owners and managers and will call for reliance on the principles of corporate governance Second, the choice of a variant will depend on preferences of present-day owners, but the condition of the external environment and its institutions will be the decisive factor Our study was based on data of financial statements and on opinions and assessments of top managers The survey gave no access to enterprise owners However, the interests of other agents may not coincide with the interests of top management, while the former 9780230_217287_15_c dd 310 5/12/2009 5:40:01 PM Conclusions 311 may have much stronger potential for influence on corporate governance For this reason, the interests and behavior of strategic and portfolio investors, minority shareholders, banks and pension funds, and participants of securities markets, including auditors, stock exchanges, and brokerages, could become important aspects of research Finally, the relationships of large- and medium-scale Russian enterprises with the state will remain one of the key issues in the years to come The quality of public institutions lags far behind the improved quality of management in the private sector, but interference of state administration in the economy is expanding Will state-owned corporations enjoying preferential access to resources become efficient, or will they become an impediment to competition and an obstacle to evolution of the private sector? How capable will the state be of dividing the functions of a proprietor from the functions of a regulator and arbitrator, including a provision of guarantee for real independence of the court system? These questions are also of great importance to predict the possible development in the management system and governance mechanism in Russian companies The issues listed above warrant new research We are optimistic that our research and other international collaborations will solve the problems discussed here and lead to a better understanding of the Russian economy and its corporations 9780230_217287_15_c dd 311 5/12/2009 5:40:01 PM Appendix Outline of the Japan–Russia Joint Enterprise Survey Tatiana G Dolgopyatova, and Ichiro Iwasaki Underlying this volume is a Japan–Russia joint research project launched by the Institute of Economic Research, Hitotsubashi University, and the Institute for Industrial and Market Studies, State University – Higher School of Economics (SU–HSE) The core of this research was a large-scale enterprise questionnaire survey conducted all over the Russian Federation in 2005, the results of which were used as the common basis for the empirical analyses performed in this book The survey was designed to gain an understanding of the evolutionary process of firms’ organization and the business environment in transforming Russia and to shed light on corporate governance in the former socialist enterprises In this appendix, we first briefly describe how the survey was designed and implemented, and then explain the basic characteristics of the surveyed firms.1 Organization of the survey To assess the realities of company management and corporate governance in Russia, we planned to interview the executives of more than 800 corporations, or about 0.5% of all working joint-stock companies (JSCs), at the beginning of 2005.2 The focus of our enterprise survey was on the industrial and communications (except for postal services) sectors This is because, in these two sectors, joint-stock companies account for the largest share of sales and because most of the corporations that have issued stocks or bonds in the capital market belong to these sectors Among industrial sectors, we chose the eight most important branches of the Russian industry: (a) fuel and energy, (b) metallurgy, (c) machinery and metal working, (d) chemicals and petrochemicals, (e) wood, paper, and wood products, (f) light industry, (g) food industry including flour-grinding and the mixed fodder industry, and (h) construction materials The interview survey targeted Russian JSCs with more than 100 employees This criterion was set to exclude small businesses, for which the issue of corporate governance is largely a secondary matter Random stratified 312 9780230_217287_16_a dd 312 5/12/2009 5:40:45 PM Appendix 313 samples of large and medium JSCs in the industrial and communications sectors were constructed by taking into account three attributes: the branch to which they belonged (for the industrial sector); their company size (i.e., total number of employees); and their legal form (open versus closed joint stock company).3 In addition, as there were only about 160 Russian companies in the surveyed sectors that had issued stocks or bonds in domestic or foreign securities markets, we asked the executives of all of these companies to answer our questionnaire and interviewed all who agreed to our request The share of communications enterprises in the total surveyed firms was set at 10% The share of open JSCs was expected to be more then 60% of the sample This limit was defined based on official statistics, according to which open joint-stock companies made up nearly 61% of all JSCs in 2005 (Rosstat 2007) The survey was carried out by the Levada Center, one of the best-known social research institutions in Russia Its forerunner is the USSR Public Opinion Poll Center, established in 1988 as an affiliate of the Ministry of Labor The Levada Center stratified and sampled the firms to be surveyed in reference to the official data on Russian enterprises and commercial organizations in accordance with our survey design reported above Lists of enterprises to be surveyed were created on the basis of the SKRIN EMITENT (issuers) and “Biznes-Karta” (Business Map) databases and website information about Russian firms that issue their stocks and/or bonds in exchange markets in Russia, New York, London, or Frankfurt The fieldwork was carried out by professional interviewers of local divisions of the Levada Center from February through June, 2005, in 64 federal constituent entities (autonomous republics, regions, and autonomous areas) throughout Russia The number of surveyed companies in these federal entities fluctuates between and 47 The survey posed great difficulties One of the most difficult problems was that the executives of Russian companies were reluctant to spend their valuable working time talking with the interviewers for such surveys; another was that they were hesitant to provide information concerning ownership relations and business activities due to the risk of disclosure One in three companies that we initially made contact with refused to participate in the research The other impediment to the survey of certain businesses was their remote locations One in ten companies that we selected for the survey was in a remote location, making the transportation costs prohibitive within our budget In addition, about 9% of the candidate firms had been excluded from the research, since they were under reorganization (bankruptcy proceedings or being reorganized into a limited liability company) We completed the survey questionnaires through interviews with 859 company executives The questionnaires were carefully checked before the data was entered As a result, replies from 822 companies were considered to be 9780230_217287_16_a dd 313 5/12/2009 5:40:46 PM 314 Appendix valid and finally adopted According to Iwasaki (2007b), between 1992 and 2003, at least 50 interview surveys on companies were carried out in Russia, and the average number of companies (mostly joint-stock companies) surveyed was 184 (median: 107) This suggests that our survey is the largest interview survey of joint-stock companies that has ever been conducted in Russia by 2005 and that it is comparable to those that have been carried out by international financial institutions, such as the World Bank and the European Bank for Reconstruction and Development (EBRD) The surveyed firms As Table A.1 shows, one-third of the total 822 surveyed firms were represented by their CEOs (i.e., company presidents or general directors), and more than 60% of the JSCs, by the first deputy of the CEO or deputies in charge of economy, finance, sales, or corporate governance matters A small number of JSCs were represented by their board chairmen and heads of corporate governance departments.4 The average length of service of the respondents was 13.5 years (median: 9), and that of service in their current position was 6.2 years (median: 4) The rate of response reached 97–100% for the majority of the questions One optional answer, “difficult to answer,” was provided for a number of questions, and it may have had a negative effect on the share of welldefined answers As a rule, respondents selected this option in 1–2% of cases, but sometimes “difficult to answer” was used for 8–10% of the answers It was typical for a number of questions concerning ownership composition The sample distribution by federal district is shown in Table A.2 This indicates that the regional proportion of the samples of this survey was very close to that of the actual proportional distribution of Russian companies, except for the fact that the number of surveyed firms based in the Privolzhsky (Volga) Federal District was relatively higher Figure A.1 shows the composition of the surveyed firms according to the sectors and branches of industry The largest share belongs to the Table A.1 Composition of respondents by their position in a company Number Total respondents CEO (company president or general director) First deputy of director (first vice-president) Deputy director (vice-president) Head of department on corporate governance Chairman of a board of directors 9780230_217287_16_a dd 314 822 277 85 417 30 13 Share (%) 100.0 33.7 10.3 50.7 3.6 1.6 5/12/2009 5:40:46 PM Appendix 315 Table A.2 Geographical composition of the surveyed firms: Comparison with offical statistics The joint survey Official data on January 1, 2005 (Rosstat 2005) Number of surveyed firms Russian Federation, total Central Federal District Northwest Federal District South Federal District Privolzhskii Federal District Ural Federal District Siberian Federal District Far East Federal District Communications 9% Share (%) Number of registered enterprises, thousands Share (%) 822 265 97 71 197 83 85 24 100.0 32.2 11.8 8.6 24.0 10.1 10.3 2.9 509.5 181.8 72.1 55.0 76.2 40.1 58.4 25.9 100.0 35.7 14.1 10.8 15.0 7.9 11.5 5.1 Fuel and energy 8% Metallurgy 4% Chemical and petrochemical 4% Food industry 21% Light industry 6% Construction materials 9% Machinery and metal working 31% Wood, paper, and wood products 8% Figure A.1 9780230_217287_16_a Composition of the surveyed firms by sector and industry dd 315 5/12/2009 5:40:46 PM 316 Appendix machinery and metal working businesses The food industry follows, and other industries range from up to 10% of our sample The share of the communications sector was equal to 8.6% We can compare the composition of companies by branches of industry with official data, i.e., the number of industrial enterprises (all legal forms) reported in 2004 to Rosstat (Table A.3) Fuel and energy companies were presented more often, which is clearly justified because the sample included many companies with securities traded on stock markets The wood, paper, and wood products industries were represented less than in the population This can be easily explained by the remote location and the large share of small and medium enterprises and limited liability companies in this industry, which could not be included in the sample The same could be said for light industry As is reported in Table A.4, 52% of the surveyed firms are medium-sized, with fewer than 500 workers About 8% of the companies had 5,000 or more Table A.3 Sectoral composition of industrial firms surveyed: Comparison with offical statistics (% of total) Industrial firms surveyed Industry, total Fuel and energy Metallurgy Chemical and petrochemical Machinery and metal-working Wood, paper, and wood products Construction materials Light industry Food industry 100.0 8.8 4.8 4.4 33.9 8.4 10.4 6.8 22.5 Offical data (Rosstat 2006) 100.0 3.3 2.3 5.7 35.7 17.2 6.8 10.3 18.7 Note: Official data contains more than 138,000 enterprises of eight industrial sectors in 2004 Table A.4 Composition of the surveyed firms by total number of employees (% of total) Surveyed firms Surveyed firms, total 100–299 employees 300–499 employees 500–999 employees 1,000–4,999 employees 5,000–9,999 employees more than 10,000 employees 9780230_217287_16_a dd 316 Industrial firms Communications enterprises 100.0 30.2 21.9 19.0 20.9 4.0 4.0 100.0 29.4 23.0 19.6 21.4 3.5 3.1 100.0 38.0 9.9 12.7 15.5 9.9 14.1 5/12/2009 5:40:46 PM Appendix 317 employees The average number of workers of the surveyed firms was 1,884 (median: 465) This is much larger than that of most Russian companies in the two sectors, according to the official statistics This fact reflects our sampling strategy to focus only on joint-stock companies with more than 100 employees The bias toward larger enterprises is natural when studying corporate governance and business integration The 822 surveyed firms employed a total of 1.5 million people This represents 10.2% of a total of 15.2 million people employed in the year 2004 by the industrial and communications sectors (Rosstat 2005, p 149) The composition of surveyed firms in the sample by legal form of incorporation is as follows: 553 firms or 67% were open JSCs, and 269 or 33% were closed JSCs The latter includes four workers’ JSCs (people’s enterprises), which are a special form of closed company.5 Open JSCs were more often presented in the industrial sector: 68% versus 56% in the communications sector In examining when they were established, it was evident that the majority of them, 570 companies (69.3%), were founded through a privatization process that started after the collapse of the Soviet Union, 124 firms (15.1%) were newly formed in and after 1992, 79 businesses (9.6%) were newly established by a division divested from another privatized or stateowned firm, and 24 enterprises (2.9%) were established by firms that had merged The survey included many companies with securities traded on capital markets: nearly 13% of the JSCs in the sample placed shares or bonds on Russian exchanges, and more than 4%, on foreign exchanges United group with 107 objects with traded securities joined one of ten industrial companies and one of two communication firms One of the aims of our joint research project was to clarify the business behavior that is now rapidly developing among Russian business communities or the processes of business integration through the formation of business groups, including holding companies With regard to this aspect, the respondents to the questionnaire were asked about the interrelationship between the surveyed firm and its business group through ownership It was found that, among the 822 companies, 499 corporations (60.7%) were “independent firms” that had no ownership relationship with any business group, and the remainder, 323 enterprises (39.3%), were “member firms of business groups.” Among the latter, 278 companies (33.8%) were so-called “affiliated enterprises,” and 44 (5.4%) were “core enterprises of their business groups.” The share of member firms of holdings was 2.5 times higher in communications than in industry.6 Lastly, Table A.5 presents a more detailed breakdown of the surveyed firms by location, sector and industry, form of incorporation, and total number of employees To sum up, our sample is representative of large- and medium-scale JSCs in Russia and fits the research objectives of this volume 9780230_217287_16_a dd 317 5/12/2009 5:40:46 PM Sector and industry 9780230_217287_16_a Food industry Light industry Construction materials Wood, paper, and wood products Chemical and petrochemical Machinery and metal working Metallurgy Fuel and energy Industry dd 318 6 15 15 Communications 28 19 Open JSC Closed JSC 77 76 14 17 64 59 17 19 24 100–299 16 34 16 16 248 180 81 54 30 21 21 18 58 48 300–499 0 18 15 24 13 156 172 56 56 21 22 11 14 31 40 500–999 553 265 182 82 62 35 51 20 118 78 1,000–4,999 71 15 10 19 Legal form of incorporation Workers’ JSC (People’s enterprise) 3 33 33 10 10 10 5,000–9,999 751 66 36 255 33 63 78 51 169 250 14 10 81 21 33 18 64 87 33 18 16 66 18 26 178 14 71 13 17 18 28 Total number of employees over 10,000 Russian Federation, total Central Federal District Northwest Federal District South Federal District Privolzhsky (Volga) Federal District Ural Federal District Siberian Federal District Far East Federal District Location Table A.5 Breakdown of the surveyed firms by location, sector and industry, form of incorporation, and total number of employees 318 Appendix 5/12/2009 5:40:46 PM Appendix 319 Notes A more detailed explanation of our sampling method, main results of the survey, and questionnaire is provided in Dolgopyatova and Iwasaki (2006) According to official data released by the Federal Tax Service of the Russian Federation, 168,600 JSCs were listed in the Unified Register of Legal Entities on January, 1, 2005, including 5,500 companies in the process of the liquidation With regard to the legal form of incorporation of Russian JSCs, see Chapter in this book Respondents were selected under strict constraints The list of questions for this survey could be answered only by a president (CEO or general director) of a surveyed firm, its first vice president (first vice general director), vice president (deputy of general director) in charge of economics, finance, sales, or corporate governance, or the Chair of the board of directors The heads of corporate governance departments, including those for securities markets and investor relations, were allowed to answer only if their companies had more than 500 employees However, none of the heads of departments of accounting (chief accountants), engineering (chief engineers), personnel, public relations, or manufacturing was allowed to reply For more details of workers’ JSCs, see Iwasaki (2007a: 240–243) See Chapters 7, 8, and in this book for more details of the Russian business groups, including holding companies Bibliography Dolgopyatova, T & Iwasaki, I (2006) Exploring Russian corporations: Interim report on the Japan–Russia joint research project on corporate governance and integration processes in the Russian economy Discussion paper No B35 Tokyo: Institute of Economic Research, Hitotsubashi University (available at: http://www.ier.hit-u ac.jp/English/publication/ier.html) Federal State Statistical Service (Rosstat) (2005) Rossiiskii Statisticheskii Ezhegodnik 2005 (Moscow: Rosstat) Federal State Statistical Service (Rosstat) (2006) Promyshlennost’ Rossii 2005 (Moscow: Rosstat) Federal State Statistical Service (Rosstat) (2007) Struktura i Osnovnye Pokazateli Deyatel’nosti Predpriyatii ( Bez Sub’ektov Malogo Predprinimatel’stva) za 2005 God (Po Dannym Strukturnogo Obsledovaniya) (Moscow: Rosstat) Iwasaki, I (2007a) Corporate law and governance system in Russia In: Dallago, B & Iwasaki, I (eds), Corporate Restructuring and Governance in Transition Economies (Basingstoke: Palgrave Macmillan) Iwasaki, I (2007b) Enterprise reform and corporate governance in Russia: A quantitative survey, Journal of Economic Surveys, 21: 849–902 9780230_217287_16_a dd 319 5/12/2009 5:40:46 PM This page intentionally left blank Index 2SLS, see two-stage least squares estimation/regression 3SLS, see three-stage least squares estimation/regression affiliated company, 43–4, 77, 93, 116, 175–6, 198, 202–3, 205, 207, 210, 216, 317 agency conflict, 122 agency problem, 8, 39, 64, 82, 105, 177, 191, 196, 202, 205, 208–10, 308 agency theory, 64, 90, 101–2, 107, 115 Agroprombank, 243 analysis of variance, 126 ANOVA, see analysis of variance antimonopoly legislation, 20 audit committee, 93, 290 BA, see business association Bank for Foreign Trade, 237, 239, 242, 255, 285 banking sector, 8–9, 46, 235–6, 239, 243, 247, 254–5, 285, 307 bankruptcy, 17–19, 28–9, 68, 73, 84, 106, 200, 285, 313 bargaining hypothesis, 6, 91, 101–2, 107, 115–16 bargaining variable, 90, 101–2, 107–8, 110, 115 barter, 15, 26 BEEPS, see Business Environment and Enterprise Performance Survey bell-shaped distribution, 99 binary logistic estimation/regression, see logit/logistic estimation/regression block share, 28, 160, 162, 204, 269, 270–1 block shareholder, 6, 40–2, 50 board chairman, 91–3, 99–100, 103–4, 106, 114, 116, 122, 155, 163, 179, 270, 274 board composition, 91, 94, 102, 129, 145, 206–8 board independence, 100, 103 board leadership, 91, 102 board of directors, 5–6, 53–6, 89–90, 92–4, 98–100, 115, 117, 122, 130, 168, 177–8, 191, 199, 204–6, 208, 210–11, 269, 273, 290, 292, 302, 314, 319 board size, 6, 91, 94–6, 98, 101–10, 115 business association, 4, 8–9, 258–61, 263–6, 270, 276, 292, 307 business diversification, 104, 107–8 business environment, 5, 62, 72, 149, 158, 260, 287, 312 Business Environment and Enterprise Performance Survey, 260–2, 268, 281 business group, 4, 7–8, 74–8, 82–3, 91, 100, 102–3, 107–10, 114, 116, 131, 140, 161, 174–5, 180, 188, 195–207, 209–11, 213–30, 263, 269, 271, 273, 275, 279, 294–6, 302, 307–9, 317, 319 business integration, 4–10, 12, 41, 43, 46, 99, 173, 177, 179, 181, 183, 185, 188–9, 191, 213, 218, 225, 279, 307, 317 business internationalization, 104, 106–7, 109 business-activity variable, 91, 101–2, 104, 106–8, 110, 114–15 capital investment, 2, 10, 13, 21, 48, 51, 218–19, 264, 269–71, 273–4, 309–10 capital market, 89, 94, 105, 107–9, 111, 312, 317 capital outflow, 28 capitalization, 31, 41–2, 65–7, 71, 151, 155, 168, 284–6, 303 cash flow, 168, 182, 222–3, 229, 295 Central Bank, 237, 239, 244 CEO, see chief executive officer CEO tenure, 102–3, 115, 125 CEO turnover, 123–38, 141–5 CG Code, see Corporate Governance Code CG quality, see quality of corporate governance chief executive officer, 6, 52–3, 79, 89–90, 102–4, 111, 122–38, 140–4, 148, 150–1, 155–6, 159, 167–8, 175–9, 193, 204, 259, 275–6, 292, 314, 319 321 9780230_217287_17_ d dd 321 5/12/2009 5:41:33 PM 322 Index Civil Code, 18, 84, 92, 116, 211, 258 civil society, 259, 264, 268, 270, 278, 281 closed joint-stock company, 6, 42, 59, 62–79, 81–2, 84, 145, 161, 200, 273, 313, 317–18 closely held firm, 32 collective executive organ, 93, 117, 290 command economy, 235 commercial bank, 8–9, 22, 24, 75, 77, 79, 82, 85, 96, 103, 255 company group, 7–8, 43, 48, 50, 57–9, 69, 99, 134, 149, 173–6, 180, 185, 188, 191, 193, 195, 199, 211, 228, 294–5 continental law, 63 controlling shareholder, 22, 40, 43, 47, 52–4, 185, 205, 295 cooperative enterprise, 16 corporate control, 5–7, 24, 39–44, 52, 54, 57, 59, 61, 89, 102, 155, 173–5, 177–8, 181, 192, 196, 199, 209 corporate finance, 6, 9, 19, 65, 83, 114, 235–6, 244, 247, 250, 252, 254 corporate form, see legal form of incorporation corporate governance, 4–10, 19, 28, 30, 39, 47, 52, 55, 57, 64, 68, 70, 73, 91–3, 103, 109, 115–16, 122, 124, 129, 132, 136, 138, 141, 143, 173, 175, 177, 180, 188, 191–2, 195–9, 201–6, 208–11, 219, 223, 225, 258, 262, 284–6, 288–9, 291, 295–7, 299–300, 302–3, 307–12, 314, 317, 319 Corporate Governance Code, 19, 68, 92–4, 105, 116–17 corporate model, 91, 308–9 corporatization, 62, 285 corruption, 260, 264, 268, 271, 281, 286 countervailing power, 74 creditor protection, 235 cumulative voting, 92, 99, 116 denationalization, 17 disorganization, 16, 213, 302 dominant shareholder, 5–6, 30, 41, 57, 123, 126, 131–5, 137, 140, 143, 174, 204, 295 dual leadership system, 122 Duke–Berkeley occasional papers on the second economy in the USSR, 14 9780230_217287_17_ d dd 322 endogeneity, 79, 83, 91, 101, 109, 114, 145 endogenous board formation, 91, 112 EU, see European Union European Union, 27, 31 FCSM, see Federal Commission for Securities Market FDI, see foreign investment Federal Commission for Securities Market, 93–4, 99, 116 Federal Financial Markets Service, 66, 68 Federal State Statistical Service, 150, 316 FFMS, see Federal Financial Markets Service FIG, see financial-industrial group financial crisis, 1, 9, 12–13, 18, 31, 124, 236, 243, 245, 252 financial sector, 24, 27, 41, 62, 235–7, 239, 247–8, 255, 259 financial support, 6, 83, 265–6, 274, 292, 295 financial-industrial group, 18, 30, 74, 85, 103, 214, 229, 243 five year plan, 14 foreign investment, 1, 4, 10, 17–18, 29, 32, 131, 284 foreign investor, 1, 7, 27, 32, 45–8, 75, 77, 108, 123, 127–8, 131, 133–5, 137, 140, 143, 180, 184–5, 188, 193, 266, 284, 295 foreign ownership, 82, 85, 135, 275 foreign shareholder, 32, 44, 85, 131–2, 135, 140, 294–6, 302 F-test, 78, 207 FTSE/ISS scorecard, 289 GAAP, see Generally Accepted Accounting Principles Gazprom, 243 general director, 7, 9, 111, 144, 148–52, 154–66, 168, 173, 183, 200–1, 205, 263, 266–7, 269–70, 273–4, 308, 314, 319 general shareholder meeting, 63, 89, 92–3, 117, 122, 205, 208 Generally Accepted Accounting Principles, 84 Gosbank, 235 5/12/2009 5:41:33 PM Index 323 governance variable, 90, 101–3, 107–8, 110, 114–15 Guta Bank, 239 Hausman specification test, 113–14 Heckman two-step estimation, 252–3 Hitotsubashi University, 4, 132, 286, 312 holding company, 4, 43, 50, 58, 74, 76, 140, 149, 175–6, 185, 188, 191, 193, 195, 199, 201, 211, 228–9, 294–5 hostile takeover, 69, 73, 105, 131 IAS, see International Accounting Standards IIA assumption, 145 in-depth interview, 39, 41, 52, 173, 182, 193, 259, 261, 280 industrial association, 258, 268, 272, 277–80 industrial policy, 15, 22 information asymmetry, 9, 73, 105, 132 initial public offering, 18, 94, 96–7, 168, 284–5, 307 insider chairman, 100–1, 108 insider control, 125 insider director, 93, 95, 98–9, 103, 105–6 insider ownership, 65, 85, 122–3, 125 institutional environment, 6, 9, 29, 44, 58, 154, 156, 158–9, 165, 196, 210–11, 213–14, 236, 259–60, 262, 264–5, 269, 271, 273, 284, 308 institutional investor, 85, 287 interbank market, 237, 243 internal conflict, 27, 29–30, 140–1, 143, 145, 276 internal control system, 89, 106, 122, 132 Internal Revenue Service, 84 International Accounting Standards, 84 intra-corporate dispute, 43–4, 57, 177–8 investment fund, 18, 45, 75, 77, 85, 235, 246 IPO, see initial public offering IRS, see Internal Revenue Service Japan–Russia joint enterprise survey, 4–5, 65, 68, 74, 83, 91, 114, 123, 132, 236 large shareholder, 32, 40–1, 44, 46, 52–3, 74, 102, 108, 131, 150–1, 154, 9780230_217287_17_ d dd 323 159, 163, 174–6, 191, 204, 220, 227, 267, 269–70, 276, 295 large-scale institutional change, Law on Bankruptcy, 17, 68 Law on Joint-Stock Companies, 18–19, 63, 66–7, 72, 84, 92–3, 116–17, 290 Law on Minimum Wages, 84 legal form of incorporation, 5–6, 59, 62, 65, 72, 75, 83, 132, 193, 317–19 Levada Center, 5, 85, 313 level-shift dummy, 124 loan-for-share privatization, 18, 23, 25 lobbying, 260–1, 279 logistic cumulative distribution function, 145 logistic estimation/regression, see logit/ logistic estimation/regression logit/logistic estimation/regression, 50–1, 86, 126, 132, 135–7, 143, 160, 162, 174, 183, 185–6, 189, 221, 224, 230, 268, 270, 273–5 majority shareholder, 31, 39–40 managerial entrenchment, 73, 82, 123 managerial turnover, 6–7, 89, 123–33, 135, 137–8, 141, 143–5, 150–1, 154–6, 158, 161, 166–7, 179, 193, 308 marginal effects, 79, 136, 139–40, 142, 145 market failure, mass privatization, 6, 8, 17, 21, 24, 62, 64, 67, 69, 71–2, 76, 83, 123, 125, 144 measurement error, 85, 133 ministry of cash, 243 minority shareholder, 20, 22, 30, 42, 44, 53, 55, 92, 99, 116, 143, 159, 177, 288–9, 295, 308, 311 mixed enterprise, 10, 285, 288 MNL, see multinomial logit estimation/ regression MNP, see multinomial probit estimation/regression modernization, 48, 50, 149, 158–61, 165–6, 182 monetary privatization, 18, 21, 62 monetization, 242, 255 multinational corporation/enterprise, 1, 10, 295–6, 310 multinomial logit estimation/ regression, 145 5/12/2009 5:41:33 PM 324 Index multinomial probit estimation/ regression, 132, 135, 137–8, 140–1, 143, 145 national association, 268, 272, 277 nationalization, 41, 158, 285 nomenklatura privatization, 16 null hypothesis, 78, 137, 143, 220 off-budgetary fund, 237 OKONKh, see Russian All-Union Classifier of the National Economy Blanches oligarch, 22, 85, 103, 131, 196, 214 OLS, see ordinary least squares estimation/regression one-factory town, 22 open joint-stock company, 40, 62–3, 65–74, 76–8, 82, 133–5, 145, 162, 180, 184–5, 188, 191, 193, 200, 259, 273–6, 313, 317–18 ordered/ordinary logit estimation/ regression, 221, 224 ordered/ordinary probit estimation/ regression, 50, 85, 288, 297, 300 ordinary least squares estimation/ regression, 126, 144, 224, 226 organizational architecture, 5, 64 organizational choice, 64, 68–9, 72, 75, 83 outsider chairman, 100, 106, 108 outsider director, 6, 90–1, 95–6, 98–102, 104–10, 114–15, 117 ownership concentration, 4, 6, 22, 29–30, 39, 40–55, 57–8, 117, 126, 183, 185, 204–9, 288, 295, 307, 309 ownership redistribution, 29, 40, 58, 180–1 ownership structure, 4–6, 9, 22, 40–1, 44, 46–7, 59, 65, 77, 79, 82–3, 90, 101, 122–3, 125–9, 131–2, 137, 140, 143, 148, 159, 199–200, 239, 267, 291, 309 parameter, 145, 296–8, 300 parent company, 8, 43, 117, 152, 155, 174–5, 180, 184, 188, 191, 195, 197, 200–2, 204, 206, 210, 216, 227, 295 people’s enterprise, see workers’ joint-stock company 9780230_217287_17_ d dd 324 planned economy, 1, 13–14, 16, 20, 22, 24–6, 193, 310 planning horizon, 14, 156, 160, 162, 165–6, 258, 262, 269, 270–1, 273–5, 290 Poisson estimation/regression, 50–1, 59, 221 politically connected CEO, 149, 159, 168 politically connected firm, 10, 287, 291, 299 price control, 15 price liberalization, 12, 20, 24 privatization, 1, 6, 8, 17–24, 27, 32, 39, 41–2, 52, 59, 62, 64, 67, 69, 71–2, 74, 76, 83, 116, 123, 125, 144, 148, 150–1, 156, 180 probit estimation/regression, 50–1, 75, 79, 83, 85, 129, 132, 135, 137–8, 140–1, 143, 145, 248, 252, 288, 297, 300 Promstroibank, 243, 255 property rights, 7–8, 10, 27, 32, 39, 57, 90, 115, 148, 158, 167, 174, 180, 188, 191–2, 208, 210, 214, 264, 266–7, 282 proxy fight, 73 public company/enterprise, 21, 23, 42, 44, 63–4, 122, 148, 151, 168, 287–9 quality of corporate governance, 47, 286–9, 291, 295–300, 302–3 quasi-outsider chairman, 100–1, 108 red director/executive, 28–30, 39, 52, 125, 149–50, 167, 192 regional association, 261, 268, 272, 277–8, 280 regression analysis, 50–1, 59, 79–80, 108, 111, 114, 124, 126–7, 129, 132, 135–8, 140–1, 160, 162, 174, 183, 185–7, 189–90, 220, 223, 225–6, 248–50, 253, 268, 270, 273–4, 288, 291, 293, 296–7, 300, 302 relational contract, 197, 199, 202, 206, 228 rent seeking, 9, 20, 30, 261, 280 resource-dependent theory, 90 restructuring, 1, 6–8, 18, 20, 24, 26–7, 29, 31, 47–8, 50–1, 58–9, 103, 125–7, 148–9, 158–62, 165–7, 181–2, 185, 188, 191–3, 203, 209, 213–23, 225, 227–30, 261, 278, 280 5/12/2009 5:41:33 PM Index 325 Rosneft, 241, 285 Rosstat, see Federal State Statistical Service RSFSR, see Russian Soviet Federative Socialist Republic RTS, see Russian Trading System Stock Exchange Russian All-Union Classifier of the National Economy Blanches, 108, 111 Russian Saving Bank, 9, 236–7, 239–55, 285 Russian Soviet Federative Socialist Republic, 17, 19, 84 Russian Trading System Stock Exchange, 3, 23, 149 S corporation, 68, 84 sampling, 5, 149, 168, 214, 230, 317, 319 Sberbank, see Russian Saving Bank second-best institution, 22, 288 securities market, 67, 236, 309–11, 313, 319 separation of ownership and management, 52, 64, 148, 162, 165, 167, 174–5, 177, 180, 183, 191, 196, 209, 263, 270, 276, 279, 318 share capital, 67, 71 share transferability, 63–6, 72–3, 82 simultaneous equations bias, 127 simultaneous-equations model, 109, 114 single executive organ, 93, 117 single factory model, 13 single-equation model, 109, 114, 118 SKRIN, 5, 92, 108, 111, 117, 222, 313 social asset, 22 social distrust, 102 socialist enterprise, 12–14, 20, 62, 130, 143, 193, 214, 312 SOE, see state-owned enterprise/ company soft budget constraint, 20, 26, 286 SPARK, 5, 92, 108, 111, 222, 225 staggered board, 92 stakeholder, 40, 55, 84, 199, 202–3, 280, 310 Standard & Poor’s, 42, 44, 289 standard normal distribution function, 145 state capture, 20, 27–8, 287 state corporation, 285, 303 9780230_217287_17_ d dd 325 State University – Higher School of Economics, 4, 40, 58, 132, 150, 211, 229, 259, 280–1, 286, 312 state-owned enterprise/company, 16, 20–3, 25, 27, 62, 66–7, 71, 76, 91, 99, 104, 125, 144, 148, 214, 285–7, 302–3 stewardship theory, 90 stock market, 1, 33, 41–2, 180, 184, 191, 284, 289, 307, 316 stock ownership, 39–41, 43–4, 47, 51, 53, 55, 57, 59, 60–1, 85, 99, 150, 160, 262–3, 267, 269, 273 strategic industry, 62 SU-HSE, see State University – Higher School of Economics supermajority resolution, 93 takeover, 29, 69–70, 73, 102, 105, 129, 131, 196, 216–17, 226, 229, 285 tax arrears, 26, 29 Tax Code, 18, 84 tax evasion, 25, 74, 285 TFP, see total factor productivity theory of property rights, 90 three-stage least squares estimation/ regression, 114 tobit estimation/regression, 126 total factor productivity, 8, 214, 225–8 transaction cost, 73, 260 transformation rent, 24, 26 transformational recession, 106 transition firm, 12, 20, 26, 31, 33 transparency, 22, 44, 70, 84, 106, 180, 188, 191, 193, 199, 200, 272, 281, 289, 303 trust, 116, 122, 149, 155, 161, 168, 177, 260, 281 t-test, 78, 126 two-stage least squares estimation/ regression, 112, 114, 126 two-stage probit estimation/regression, 79, 83, 85 two-step estimation method, 253 UES, see Unified Energy System Unified Energy System, 230, 240, 243 Union of Soviet Socialist Republics, 5, 14–17, 19, 33, 258, 313 USSR, see Union of Soviet Socialist Republics 5/12/2009 5:41:33 PM 326 Index vote-counting analysis, 127–8, 145 voucher privatization, 17, 21, 42, 69, 180 VTB, see Bank for Foreign Trade White estimator, 79 Wilcoxon rank-sum test, 78, 94 workers’ joint-stock company, 132, 145 Welch test, 78 Yukos, 19, 277, 285–6 9780230_217287_17_ d dd 326 5/12/2009 5:41:33 PM ... intense Shortage of skilled labor is already one of the 9780230_217287_15_c dd 309 5/12/2009 5:40:01 PM 310 Organization and Development of Russian Business most acute problems for Russian firms... sector and industry, form of incorporation, and total number of employees To sum up, our sample is representative of large- and medium-scale JSCs in Russia and fits the research objectives of this... What will be the impact of an aggravating labor shortage on the development of mechanisms and practices of collective actions in the Russian corporate sector? An examination of these questions will