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The Problem of Effective Property management in the Period of Surmounting of the Crisis
Kurbatov Y.A., Chief Executive Officer of the Federal Council of the Russian Federation
Board of the Federation received information about conflict situation that started with bankruptcy of the Public Limited company "Krasnoyarskaya Ugolnaya Kompania" ("Krasnoyarsk coal company"). Over 70% of the company's shares are invested in state property. The situation reflects economic problems in our country.
Common situations are in many regions because of insolvent companies.
After "privatization" State property became private. Characteristic of most regions is the situation when big, strategically meaningful companies for both regions and the country as a whole are losing state control. It often happens that control over those com-panies turns out to be in the hands of a certain group of persons who have much less shares than the state. Big companies are often managed by middlemen's firms, which are founded by criminal structures or by relatives & friends of joint-stock companies' top managers.
Of course, under such conditions the industry works for a narrow group of people; both federal & regional budgets lose tremendous sums of money, and workers do not get wages.
The main point of using state property for the good is creating effective manage-ment system. It is not a secret that today this system practically does not exist. Besides, the State share management system in joint-stock companies is considered from the point of getting dividends. State control over the companies through effective stock manage-ment is poor.
There is a vicious practice when the same representatives from the Finance Minis-try, the State Property Ministry, Economic Ministry, etc represent the State in 10-15 joint-stock companies at the same time. Sometimes the State representatives do not have enough time to be at all managers' meetings of the biggest country's companies. So they cannot effectively influence the company's activity. Many stocks invested in federal property are not managed at all because they do not timely appoint representatives of the State interests.
Lack of legislation that regulates federal property management explains the situa-tion. It is necessary to use normative documents better.
According to the Decree №1200 of the Russian Federation President, June 10, 1994 "Ways to manage The State economy" State workers can be appointed as state rep-resentatives in joint-stock companies according to the decision of the President or The Government of Russia. Other citizens of Russian Federation (excluding those who were elected to be in the House of State Authority Representatives or in The Local Self-Government) may represent interests of the state in joint-stock companies according to the agreements signed with The State Property Ministry and registered in a notary.
The agreement have to contain:
- Regulations about rights & responsibilities of the state representatives;
- An amount of recompensation they will receive;
- Regulations about the material responsibilities for breaking the rules of an agreement.
The Government stated that join-stock companies' reports were to take a specific structure. These reports are to be presented to either the government representative or the appointed signee. This is to occur every six months.
Joint-stock company's balance for the past period must be enclosed with the ac-counting.
Besides, the state representative in the company must send a report on economic & financial activity of the company to the State Property Ministry annually.
In October 1994 The Government signed the Decree "Ways of consideration the interests of people in State Property Management" in which both The State Property Ministry & Russian Federal Property Fund were suggested to include official persons from the regional executive authorities in a group of state representatives. The official person is to be from the region where the company is situated. Other citizens might be included in a group of representatives after consideration it with the Regional Executive Authorities.
The Governmental Decree №625, May 21, 1996 "Representing The State interests in the sphere of management of joint-stock companies (all kinds of proprietorships) which shares are invested in federal property" confirms an approximate structure of a contract, its order of signing & registration. According to this Decree the Finance Minis-try finds the sources to finance expanses & to pay recompense to those who represents the state interests in the sphere of management of joint-stock companies.
The Governmental Decree № 685, June 30,1998 "Ways of getting revenues from using of federal property by the federal budget" says The Finance Ministry finances real expanses on managing the stocks, invested in federal property, in the amount of no more than 10% from the stocks' dividends that go to the federal budget.
In July 1998, The Russian Government confirmed The Legislation about federal Property Calculation & about up-dating its lists. Both Regional Executive Authorities & Local Self-government were recommended to work out The Legislation about Regional &Local Property Calculation.
The legislation that regulates state property management is being improved. So, in November 1998 "Board of the Federation confirmed the Federal Law about changes & inputs to the other Federal Law" property Privatization in Russian Federation" and Local State. The Law sets the participation order of State, Regional & Local Representatives in management of Public Limited Companies. However, the Russian President vetoed the Law because of its contradictions with the constitution. Effective State Property Man-agement is still very important. That is why The Russian President will soon give the new version of this law.
Unfortunately, the existing legislation is not thoroughly used. It leads to the situa-tion when Property management concentrates in hands of shareholders who have the ob-jective to get maximum profit from the work of joint-stock companies.
"State Property Management Conception & Privatization in Russian Federation, September 1999. It is a Multiplan document that defines objectives, priorities & mecha-nisms of state property management. (For more information read other articles in this magazine).
Russian Calculation Chamber's accounts on checking the activities of both the Russian Federal Property Fund &the State Property Ministry shows the great number of law violations. The activities of the institutions have to do with federal budget revenues from managing using & selling federal property.
Terms of buying shares violations lead to the lawsuits on breaking State Property Privatization's deals. Those violations are: shares' selling before following the invest-ment terms, giving the rights to the third party, uncompleted & untimely Buyer's invest-ments, giving non-liquid bills of exchange & commercial credits to an emitter instead of gratuitous financing the investment program, giving the investment sum to cover emit-ter's debts in the federal budget.
However, Federal & Regional Executive Authorities address to the court only in case of a crises situation in one or another company.
The Government doesn't protect strategically important companies from Bank-ruptcy; it doesn't liquidate federal budget debts it needs to pay companies.
Today the problem to prepare specialist to representing the State interests in lim-ited companies stays unsolved. The specialists could stand against private sector's repre-sentatives and could apply state policy in companies.
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