Support Global Action on Aging!
Market Watchdog on Patrol
as Pension Fund Flood Nears
By Victoria Lavrentieva
Federal Securities Commission head Igor Kostikov
The nation's stock market watchdog is
racing against time to improve the corporate behavior of publicly traded
companies before a flood of federal Pension Fund money hits the markets.
"The market has to achieve maximum
transparency [as soon as possible]," Federal Securities Commission
head Igor Kostikov told a conference co-organized by the FSC, the New York
Stock Exchange and MICEX, Russia's biggest bourse.
"Though we have already achieved a
lot, today the issue of corporate behavior has become even more important
because we are approaching the moment when Pension Fund money will be
invested in the stock market," Kostikov said.
Under the government's new pension
system, some $3 billion to $5 billion in pension money is expected to
enter the stock and bond markets annually from Jan. 1.
Tuesday's conference coincided with the
one-year anniversary of the introduction of the FSC's corporate governance
code, the nation's first, which, although voluntary, has been widely
hailed for inducing better behavior in market participants.
Despite some successes, Kostikov said
the lack of adherence to the code is still a problem -- and a recent study
by the International Finance Corp., the private lending arm of the World
Bank, sheds some light on just how much of a problem it is.
Less than half, or 47 percent, of the
307 public companies in four regions polled by the IFC had even ever heard
of the code. Overall about a third of the companies polled said they had
implemented the code.
Bruce Misamore, chief financial officer
of Yukos, which was the first company to adopt its own corporate
governance code in 2000, said the successful implementation of accepted
international business practices is only possible if the initiative is
supported at the corporate level: "Corporate governance dialog can't
occur without the support of the business."
While some companies, such as Unified
Energy Systems, Sibneft, Lenenergo and Magnitogorsk have adopted their own
codes, they are still in the minority.
In an effort to improve market
practices and the quality of company listings, MICEX is developing its own
code with the help of the New York Stock Exchange.
MICEX president Alexander Zakharov said
the largest listed companies on MICEX have been invited to participate in
drafting the code, which would include new listing requirements.
"We will use the FSC's code as a
guideline, but we also understand that as soon as we approve our own code
we will be responsible for imposing sanctions on companies that do not
meet the standards," Zakharov said.
Richard Bernard, general council and
executive vice president of the New York Stock Exchange, which is
struggling with corporate governance issues of its own (see related story
on page 9), said stock exchanges the world over have a very strong
interest in making sure issuers provide honest information.
"Stock exchanges act in the
interests of both shareholders and corporations, so if a company does not
provide honest information, we have the right to delist them,"
Kostikov welcomed the MICEX initiative,
saying market organizers needed to play a more active role in the process.
In line with the efforts to make the
market more transparent, the FSC is also requiring the RTS, Russia's No. 2
and only dollar-denominated bourse, to clearly distinguish between
on-market and off-market transactions.
The RTS, which
risks losing its license if it does not meet the requirement, could not be
reached for comment.