Negotiating and implementing economic reforms in Russia.
The case of corporate governance regulation in comparative perspective

Funded by a Fedor-Lynen-Grant from the Alexander-von-Humboldt-Foundation, Duration: September 2005 - August 2007, Contact: Heiko Pleines. The project is being conducted in cooperation with Prof. Dr. Andrei Yakovlev (Higher School of Economics, Moscow).

 

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The project analyses the political processes of negotiating and implementing corporate governance regulation in the Russian case. In order to get a better understanding of decision making processes in the legislative and implementation process, the interests, strategies and successes of all relevant actors will be examined. The guiding question is which actors have an interest and the means to promote or block specific regulations in legislation and practice. As none of these actors can exert decisive influence unilaterally, this includes the analysis of strategic interaction between the relevant actors. This analysis will have a comparative dimension, considering other policy fields in Russia as well as the policy field `corporate governance regulation´ in other countries.

Since the wave of corporate governance scandals in Western countries, started by the Enron case, deficits of corporate governance regulations are again one of the major concerns of economists, investors and politicians alike. In transition countries like Russia the urgency of the topic is even bigger. Many analysts claim that Russia can achieve sustainable growth only after a far reaching reform of enterprise behaviour, based on sound corporate governance principles.

 As the focus here is on the role of corporate governance regulation in shaping company behaviour towards open competition in line with market principles, it makes sense to apply a broad definition of corporate governance which covers all relevant mechanisms which enable investors and creditors to control a company's management. 
There already is a huge amount of literature on different models of corporate governance and on the corporate governance regulation needed in specific countries and situations. However, the question of how the adequate corporate governance regulation can be embodied into legislation and enforced economy-wide has so far been neglected.

If the research on corporate governance is to have a policy impact, research concerning the related policy making process is of vital importance. As Scharpf argues: "Once the problem has been analysed and potentially effective solutions identified, the specific contribution of political science and political sociology, for which I use the label 'interaction-oriented policy research', comes into its own. [...] Political scientists and sociologists should be interested in the fact that many or most of the well-designed policy proposals will never get a chance to become effective. The reason is that public policy is not usually produced by a unitary actor with adequate control over all required action resources and a single-minded concern for the public interest. Rather it is likely to result from the strategic interaction among several or many policy actors, each with its own understanding of the nature of the problem and the feasibility of particular solutions, each with its own individual and institutional self-interest and its own normative preferences, and each with its own capabilities or action resources that may be employed to affect the outcome."

Accordingly the proposed project focuses on the actors responsible for the design and implementation of legal corporate governance regulation in Russia. The design of corporate governance regulation, which is negotiated in the legislative process, involves a number of competing actors both on the side of the state and on the side of business. Important actors on the side of the state are the economic ministry, the Federal Commission for the Securities Market (FCSM) and the relevant commissions of the Duma (lower house of parliament). Relevant actors on the side of business are big internationalised Russian companies, managers of old uncompetitive companies ("red directors"), business associations and investors' associations like the National Association of Stock Market Participants (NAUFOR), foreign investors and global rating agencies. The law-making process is also influenced by international organisations like the IMF, the World Bank, the OECD or the WTO. 

The analysis will focus on four legislative acts related to corporate governance: The adoption of the law on stock companies in 1995, the adoption of the new bankruptcy law in 1998 and the changes to the laws in 2000/01. This allows to examine the changes over timer in actor constellations. In the mid-1990s international organizations were especially influential in shaping policy decisions, while the red directors formed the main opposition. Since the late 1990s the responsible Russian state actors, mainly the FCSM and the economic ministry, are the main - though conflicting - actors. They now deal with a much more disperse group of business interests. In recent years the most important business actors have consolidated into organized interest groups. It will be examined how the strategic interaction and the balance of power between these actors has influenced legislation and with that the corporate governance model chosen for Russia.

In order to make regulation work the implementation process is as important as the legislative process. A World Bank paper concludes: "Enforcement more than regulations, laws-on-the-books or voluntary codes is key to effective corporate governance, at least in transition and developing countries." In the Russian case official rules often seem to contradict the incentive structure faced by managers. This poses a considerable enforcement problem in an environment still marked by arbitrary controls and corruption. This problem is not specific to corporate governance regulation but typical for business regulation in Russia. 

In order to get a better understanding of decision making in the legislative and implementation process, the interests, strategies and successes of all relevant actors will have to be examined in the proposed project. The guiding question is which actors have an interest and the means to promote or block specific regulations in legislation and practice. As none of these actors can exert decisive influence unilaterally, this includes the analysis of strategic interaction between the relevant actors, as suggested by Scharpf.


Project publications

Heiko Pleines (Hg.): Corporate Governance in post-sozialistischen Volkswirtschaften, Stuttgart (Ibidem) 2008

Andreas Heinrich, Aleksandra Lis, Heiko Pleines: Factors influencing corporate governance in postsocialist companies: an analytical framework, William Davidson Institute Working Paper No. 896 (2007)

S. Avdasheva, T. Dolgopyatova, H. Pleines: Korporativnoe upravlenie v AO s gosudarstvennim uchastiem (Corporate governance in Aktiengesellschaften mit staatlicher Beteiligung), Higher School of Economics Preprint WP1/ 2007/01

Heiko Pleines: Corporate Governance-Regulierung in Russland zwischen Regelimport und Wirtschaftskultur, in: Osteuropa Wirtschaft 3-4/2006 (Jg.51), S.266-283

Andreas Heinrich, Heiko Pleines: Factors influencing the corporate governance of post-socialist companies. Examples from the oil industry, in: HSE Economic Journal 3/2006 (Jg.10), S.402-419

Andreas Heinrich, Julia Kusznir, Heiko Pleines: Prozračnost' v rossijskoj neftjanoj promy'lennosti. Me'dunarodnye standarty i praktičeskie rekomendacii, in: Andrej Makaryčev, Olga Paleevaja (Hg.): Energetičeskij sektor Rossii. Prozračnost', bezopasnost', regional’nye variacii, Nishnij Nowgorod (RusExpertTransit/TRACC) 2006, S.32-47 

Andreas Heinrich, Aleksandra Lis, Heiko Pleines: Corporate governance in the oil and gas industry. Cases from Poland, Hungary, Russia and Ukraine in a comparative perspective, KICES Working Papers No.3 (2005), 49 S.