Wednesday, June 08, 2005

State controlled companies in Russia

This article highlights the problem with state controlled companies in Russia--S&P Slams Politicians' Meddling in Decisions. This is one thing Ukraine needs to avoid.

Russian state-controlled companies tend to keep private shareholders in the dark on key investment issues, particularly if the lack of disclosure stands to benefit people connected to the government, said a scathing report released worldwide on Tuesday by ratings agency Standard & Poor's.

State-owned enterprises "tend to provide very little information regarding how the government's goals and policies influence corporate decision and operations," the report said. "Russian federal or regional authorities might be promoting political agendas through the actions of the firms."

The report -- which surveyed 11 state-controlled companies -- highlights a number of examples of corporate decisions motivated more by the political interests of the
government shareholder than by the long-term profitability of the company. This happens even in state-controlled companies with a significant number of private
investors, the report said.

The problem is not as acute in Western countries with government controlled companies as the article notes because transparency is more of a cultural norm.

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