FORMER Soviet bloc companies that hire high-profile Western businessmen ahead of a London flotation have been accused of “window dressing” by corporate governance specialists.
A growing number of companies in Russia and Kazakhstan are hiring British peers as advisers and non-executive directors to boost their corporate governance credentials before trying to raise funds on the London Stock Exchange. Russian companies have raised about £15 billion via London listings in the past year.
Oleg Novachuk, chief financial officer of Kazakhmys, which hired Lord Renwick of Clifton as a non-executive director ahead of its initial public offering (IPO), said: “There’s a list of well-known reputable people who one can hire for such positions.”
Many other peers have joined the boards of post-Soviet natural resources companies preparing London IPOs, including Lord Mackenzie of Framwellgate, a director of Oriel Resources; Lord Daresbury, a director of EvrazHolding and chairman of KazakhGold; Lord St John of Bletso, a director of Regal Petroleum; and Lord Lamont of Lerwick, chairman of Unistream’s advisory board.
Peers can hope for pay of up to £200,000 a year. However, corporate governance analysts say that investors should not be lulled into a false sense of security. Julia Kochetygova, director of corporate governance at Standard & Poor’s in Moscow, said: “We’ve seen situations where quite prominent people basically sold their name but didn’t check up on the corporate governance of the companies. One Russian bank, IBC, had two senior American businesspeople on its board, but neither of them had a clue what was going on there, and the bank went bankrupt in 2002.”
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Karina Litvack, of F&C Asset Management, said: “If it’s just a ceremonial appointment . . . it’s pointless.”