Central bank moves to ban ‘golden parachutes’ for bankrupt insurance companies
The Russian Central Bank and Finance Ministry have prepared a bill that would ban senior executives of insolvent insurance companies being rescued by the state from receiving large compensation payouts, known as ‘golden parachutes’.
At the recent insurance conference ‘Year’s Challenges 2017’, deputy head of the Insurance Department of the Russian Central Bank, Svetlana Nikitina, said that the draft law on bailout of major insurance companies will be similar to the existing law regulating the bailout of banks.
In particular, the new bill would introduce “a ban on certain financial operations preventing the insolvent company’s managers from pulling the funds out of their corporations at the very last moment” and qualify any attempt to do so as embezzlement, Kommersant reported.
In addition, the bill contains an amendment to the Labor Code that directly bans ‘golden parachutes’ for heads of insolvent insurance companies, Nikitina said. The bill will be presented to the government in early October, she said.
Nikitina also told the conference that if the bill is passed, the state would bail out only TBTF (‘too big to fail’) insurers, the bankruptcy of which would send shockwaves through entire regions. She said the preliminary list of such organizations is comprised of about 20 companies, but did not give any particular names.
The largest Russian scandal involving a ‘golden parachute’ took place in 2013-2014 after the former president of the state corporation Rostelecom received over 200 million rubles (over $6 million at 2013 rates) as a retirement bonus. Minority shareholders sued the executive demanding the money be returned, but he chose to do so voluntarily before the court verdict was pronounced.
