After the release of a Standard & Poors report showing the Russian business sector is becoming more transparent, Business RT spoke with Svetlana Borodina, Director of Governance Services at Standard & Poor's.
RT: What factors are driving the transparency growth you've identified? SB: “From what we saw in the past year, number one – financial transparency has become more efficient, more companies report their financial results according to IFRS and US GAAP and that is one of our main criteria, they have become more speedy about it. About half of the companies report them by April which is pretty early if you look at the history of our research. Since the reporting requirements of our regulators are also gradually becoming more strict, the companies compiled these results according to IFRS and why not to publish them early if you have them already. The other area which we saw became more transparent is remuneration. After several scandals, after several large loud scandals in the West with bonuses, our companies believe that it is a good practice for them at least to report the system how they remunerate their top executives and their board members. And also the leaders of the growth have become the electricity companies, so the sector of electricity companies, after the completion of UES reform, and after each one of them has found the new owners, finally they have time, energy and probably good reason to start thinking about better management practices about building a better governance system and transparency as a part of it.” RT: Which sectors are the most and least transparent? SB: “Every year we have the same standard picture. Telecommunication sector is more transparent than others and machine building and engineering is the least transparent. Telecommunications are technically more advanced of all sectors and they have a lot of international partners, they are just more used to be more opened. Like one of the largest companies in our market MTS and VimpelCom have international shareholders they are used to it, they don’t see any danger from disclosing what is going on. And machine building historically – this is defense related area so they are more closed and they are usually linking to strategic industries which are least transparent.” RT: Is there a link between the size of a business and its transparency?SB: “It goes both ways. We have large companies which are very transparent and those companies are usually traded in international stock exchanges, like Rosneft is for the second year is the leader of our table. We have companies in the similar industry – big Russian companies – which believe that it is not necessary for them being transparent because they have other leverages to get additional financial resources, while the smaller companies – there is one group of smaller companies that have to rely on international financial market so they have to go and ask international investors for money and to pay for this financial resources by telling the market participants what are they going to do with this money that they are going to raise in the market. But the other group of smaller companies is still in the early phase of their development and they are still inexperienced with communications and also transparency involves costs – if you are hiring an international auditor it cost you money, if you are publishing a report a glossy-nice book of your annual report in English it does still cost you money. So for a small company it is a budget issue as well as your business ethics issue.”