«Golden parachutes” should not be limited for the private sector, experts say

Moscow, May 20 – PRIME. The experts questioned by PRIME believe that the limit on “golden parachutes” for top managers of state-owned corporations is justified, but it should be employed strictly within the law and not extended to include private businesses.

The draft law limiting “golden parachutes" – benefits paid to the top managers of state-owned companies at dismissal – was submitted for consideration by the State Duma Monday. The deputies from the “United Russia” faction, who authored the draft, believe that, should the law be adopted, it would allow for more social justice without cancelling the principle of remuneration for the work achievements.

The document stipulates “golden parachutes” in the amount of three to 12 monthly salaries to be paid to the management of state-owned corporations and of three to 18 salaries – to the management of companies with state-owned stock.

STATE-OWNED COMPANIES SHOULD BE LIMITED

Alexander Brechalov, head of the NGO “Bulwark of Russia”, believes: “This is European and international practice, and I am of the opinion that correction is certainly needed, as in Russia there is a large gap in the income of an average citizen and a top manager of state-owned corporations. The amounts are astronomical, and in most cases they are paid no one knows what for”.

Alexander Osipov, Vice-President of “Business Russia”, agrees. He said: “I support limitations for state-owned corporations. It is clear that they are in favourable conditions as compared to the other participants, they are not objects but “makers” of the public policy, and their activity requires limitations”.

The Law Firm "YUST" believes that the initiative to limit the maximum amounts of the “golden parachutes” appears to be related with the cases of such payments, which have recently gained much media coverage. Advocate Anna Kotova-Smolenskaya, Associated Partner of the Law Firm "YUST", is convinced: “It would appear that the State is interested in fixing a unified approach to the matter of benefits for managers of state-owned companies”.

The suggestion to limit “golden parachutes” was voiced at the UNF Conference in Rostov-on-Don in March. President Vladimir Putin agreed with the National Front’s suggestions and charged the Government with the preparation of the draft by July.

A.Kotova-Smolenskaya reminds: “Note that most of these cases concern the so-called “companies with state-owned stock”, the activity of which has lately been more and more regulated at the legislative level – in particular, a special law was adopted governing the general principles of purchase activities of such companies”.

Meanwhile, Sergey Kalugin, the new president of Rostelekom RTKM -0,54%, who headed the company in March, said he would refuse compensation in the event of early dismissal. Alexander Provotorov, former head of Rostelekom, 55,17% of which is state-owned, received a “golden parachute” of 200,88 million roubles when he was dismissed in March, as well as 32,3 million roubles of bonuses. However, he declared that he intended to donate the major part of the sum to charity.

BUSINESS DECIDES FOR ITSELF

The experts are unanimous that owners of private enterprises should define themselves the amounts of payments to the dismissed top managers, and the State should not dictate its conditions on the matter.

Brechalov said: “This matter should be treated reasonably. In no event should this practice be extended to private companies, because the private business can and should evaluate the bonuses of its top managers and co-owners”.

A.Kotova-Smolenskaya: “In our opinion, it is a matter of debate to what extent such regulation is necessary for the companies that belong only to individuals, who decide on the issues of remunerations to the company management”.

She is convinced that, in all probability, such regulation regarding private companies would be justified in order to provide for more protection of rights and interests of investors, who purchase companies’ shares on the open market and do not directly influence the decisions of the corporate bodies on payments to the management.

There is no doubt whatsoever that the payment of a “golden parachute” to the general director should not involve significant losses to the company’s assets, even those earned by the dismissed manager, the expert says.

However, many private companies currently include in their internal documents and agreements with top managers detailed and economically founded conditions and procedure of making certain payments.

For example, Vladimir Strzhalkovsky, pursuant to an amicable agreement between the main shareholders of Nornikel GMKN -1,42%, for his resignation as general director of the company, received a lump compensation of 50 million USD, and the company is to pay him two more increments of 25 million USD within the year. However, V.Strzhalkovsky said on Monday that he leaves Nornikel, where he is currently vice-president, altogether on July 1^st.

The source of the publication – see here.