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Low Level of Corporate Governance Remains the Major Barrier for Investments in Russian Company

April 2, 2003

"Russian companies can increasingly claim improved operational efficiency and better strategic management, however, current corporate governance practices often remain at the box-ticking level and act as a main barrier to attracting investments," Sebastian Molineus, Project Manager of the Russia Corporate Governance Project (IFC), said at yesterday's press conference announcing the results of a study called the 'Top 100 Emerging Companies of the Russian Consumer Market'. The study was conducted by Interactive Research Group (IRG). Molineus continued, "This is particularly true for mid-cap companies in Russia's regions, where awareness of the imperative to achieve real transparency is growing at a slower pace."

Molineus also said that this project's objective was to identify the truly successful Russian companies that might be of interest to the broad base of western investors and companies that are looking for new opportunities for developing businesses in Russia. Another main goal of this research was to deeply study the corporate governance practices in Russia. According to Molineus, close to 70 percent of the companies with activities in the regions think that for successful work in the market, it is necessary to improve corporate governance. However, only six percent of the companies have special training programs on corporate governance.

The majority of the companies included in the list of the 'Top 100' plan to find sources of financing for future growth. The main portion of the companies will use traditional financing with the help of Russian or foreign banks. IRG specialists forecast that the average sales growth of the Top 100 companies will be 20-25 percent in 2003.

"The goal is to bring attention to some of Russia's most sophisticated, successful and rapidly growing companies which are not currently discussed in the international press or investment banking publications," said Greg Thain, the chairman of the IRG Board of Directors. "The management of these companies are certainly a 'Who's Who'of Russia's future business leaders."