Russian President Dmitry Medvedev plans to submit orders this week to remove government officials as chairmen of state companies in industries they regulate, said Arkady Dvorkovich, his chief economic aide.
The personnel changes, which apply to competitive sectors of the economy, may be made at the next set of board meetings, Dvorkovich told reporters today in Moscow.
“The chairman decides almost everything” on state companies’ boards, Dvorkovich said. Replacing government officials with independent directors may “improve governance and eliminate preferential treatment for state companies in competitive industries.”
Medvedev, who said on March 21 that foreign direct investment was at an “unacceptably low level,” has sought to lure capital by promoting Moscow as a financial center and creating a private equity fund to allow the government to share risks with foreign investors and help “modernize” the economy.
The proposal to remove officials as directors on corporate boards in the industries they regulate was announced by the president yesterday in Magnitogorsk. It’s one of 10 points Medvedev plans to implement this year to improve Russia’s investment climate.
The changes would apply to Finance Minister Alexei Kudrin, who chairs VTB Bank’s supervisory board, and Deputy Prime Minister Igor Sechin, chairman at OAO Rosneft, Dvorkovich said.
Dvorkovich also said Transportation Minister Igor Levitin should be replaced at OAO Aeroflot and Sheremetyevo airport, while First Deputy Prime Minister Viktor Zubkov should leave the post at Russian Agricultural Bank, known as Rosselkhozbank.
“In many cases these companies’ boards of directors are led by the deputy prime minister or minister who is responsible for regulating the industry,” Dvorkovich said. Independent directors may include “former government officials with good reputations,” as well as business leaders and academics.
The program is not part of Medvedev’s pre-election campaign, Dvorkovich said. The next nationwide parliamentary vote is due in December, followed by presidential elections early next year.
Medvedev wants to run again in 2012, Dvorkovich said last year. Prime Minister Vladimir Putin, who handed over the presidency to Medvedev, his protege, in 2008 because of a constitutional ban on three consecutive presidential terms, also hasn’t ruled out running for the top position again.
“We are thrilled with anticipation” about the program, which has “hard and tight deadlines,” Alexey Zabotkin and Aleksandra Evtifyeva, analysts at VTB Capital in Moscow, wrote today in an e-mailed research note. “Success would mean a major boost to Russia’s investment case.”
The board of OAO Russian Railways, which is chaired by Deputy Prime Minister Alexander Zhukov, is working “effectively” because his duties in the government don’t overlap with the state railway’s business, Dvorkovich said.
Russia’s central bank, the majority shareholder of OAO Sberbank, is independent of the government and won’t fall under the new rule, Dvorkovich said. Central bank Chairman Sergey Ignatiev presides over Sberbank’s supervisory board, which includes Economy Minister Elvira Nabiullina and Dvorkovich.
Conflict of Interest
Nabiullina, who is also one of six government representatives on the board of OAO Gazprom, the nation’s gas exporter, said the move, once clarified, will help avoid conflicts of interest on issues such as implementing the mineral extraction tax on natural gas.
“It’s too early to speak about any concrete companies and names,” she told reporters in Moscow today.
The state has also reduced the number of items that require the so-called directives, or recommendations, to its board representatives, Nabiullina said.
“We will look at these issues again,” she said. “In my opinion, the directives should remain.”
A five-year extension of Gazprom Chief Executive Office Alexei Miller’s contract required a directive from Putin for the March 22 board meeting.
Medvedev is concerned that the government’s plan to sell state assets over the next three years is becoming less clear, Dvorkovich said.
“The program should be flexible, but not so flexible that we’ll be rethinking whether to privatize” stakes included in the plan, Dvorkovich said.
Medvedev plans to discuss the “first results” of his 10-point program at the St. Petersburg International Economic Forum in June, Dvorkovich said.