Director training improves governance procedures, boosting Russia’s global trading status

A couple of days ago at a Kazakh friend’s celebration of his newborn son, I found out that he and his two friends – top managers at Russian companies – had enrolled in an IoD Chartered director training course in Moscow.   

A few years ago, when I was CEO of the Russian Independent Directors Association, we imported this programme from the UK – a move supported by the late Neville Bain, the former IoD Chairman, who was a real enthusiast and great supporter of expanding the training and expertise into Russian and Kazakhstan markets. Since then, hundreds of senior delegates from Russian and Kazakh companies have undertaken such courses.

The training has a very important component that other professional courses do not have, and that is governance, which includes resolving any directorial conflicts of interest and identifying fiduciary duties.

After launching the course into the Russian market, my colleagues and I created the Russian director professional qualification standard. We also started the process of director certification based on OECD corporate governance and IoD Chartered Director principles.

The UK Chartered Director course supports improved professional standards and will help raise the quality of the boardroom work in Russia and Kazakhstan vital if our economy is to take advantage of the rapidily globalizing market for capital, products and labour.  What’s more, opportunities are now opening up within our economy that could provide a greater foothold for professional, trained, independent directors.

The rapid crash of the Soviet system 20 years ago and implementation of the market reforms by Egor Gaidar under President Boris Yeltsin, started the era of privatisation, which led to the establishment of capitalism in Russia. Up until 2008 many larger private Russian companies acquired stakes in overseas companies. However, during the crisis of 2008-2009 the Russian government was forced to support bigger businesses by providing additional finances through the state-owned banks, which increased government stakes within businesses. 

Now, there are moves afoot once again for mass re-privatizations.

President Dmitry Medvedev and his administration have initiatives in place to replace state officials on the boards of state-owned companies, which will include the removal of some very senior people. This announcement opens the door for Russian IoD Chartered Directors to be appointed as independent directors to those boards. Owners of private companies have also started to think about the introduction of professional directors. 

All these issues are helping to drive our emerging need for better boards and qualified directors and I believe the training should be extended to Russian state officials and their advisors. Currently, for example, in state-owned companies, directors who represent the government on boards are obliged to vote in accordance with instructions issued by various ministries and state offices. This practice clearly contradicts with good governance, the concept of director fiduciary duties and could even end up harming the company. 

The UK IoD Chartered Director training directs government officials to eliminate voting instructions, empowers boards to run the business, encourages the wider use of independent directors to make board activities more effective and will give confidence to foreign investors and trading partners.

All of these developments highlight the fact that boards, both in private and in state-owned Russian companies, need skilled, knowledgeable and reputable director-level candidates.

Alexander Filatov is IoD C. Director of Russian Home Mortgage Lending Company and former MICEX Stock Exchange Advisory Board Member.

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