| Evgeny Shvidler | ||||||
Evgeny Shvidler, president of Russia’s sixth largest oil company Sibneft, talks here to Euromoney about corporate governance and strategy. Shvidler was educated in the US and worked at Deloitte and Touche in New York in the international tax group. He returned to Russia to be finance director of Runicom, an oil trading company that is one of Sibneft’s owners. In 1998 he became president and CEO of Sibneft. Following the privatisation of the mid-90s, Sibneft was part owned by oligarch Boris Berezovsky. Although Berezovsky says that he no longer owns any part of the company, Roman Abramovich, another oligarch and now governor of the Chukotka region, is still a shareholder.
Sibneft is criticised for its opaque ownership. Why don’t you want to say who your owners are?
There will never be a full disclosure of the owners of the company. There is a consensus that it is not in their interests – if the share price is penalized for their not disclosing their names then that is their business.
In this respect western companies are not too much different. There is no full disclosure of ownership, all that is disclosed is the names of the nominees.
Roman Abramovich has already gone on record to say that he owns between 40% and 45% of Sibneft through various trusts; 44% is in the hands of management and the remaining 12% is free float. In Russia you will not be able to find another company that is more transparent than this.
Is transparency increasing?
Transparency is important and if I invest in a different company I will check first as I would want to know what I was investing in.
In the oil sector, the people know this very well. The situation is much clearer. Next year it will be even better as managers are beginning to realize that they will get more value out of their companies if there is transparency.
Another factor is that managers don’t want to run the business and increasingly have the attitude of outside management – they are becoming more like shareholders than managers. This means their perspective is more aligned to that of the outside investors.
Two years ago companies didn’t think like this. When it was privatized, Sibneft had one subsidiary that was bankrupt and another close to being bankrupt. The objective was simply to fix the companies and get them going again. No-one worried about what was happening outside the company as all the attention was focused inside. It was a time of very intensive work and effort.
What effect did the 1998 crisis have on this process?
Now the business is running more or less OK. We have been through the crisis and life is more or less stable. People are beginning to think beyond operational things as the market has become more civilized. The rules have changed and this is driving the sector – not oil prices. The crisis accelerated the process and was like a natural filter. If yours was not a good business it died faster than otherwise would have happened and so concentrated resources in fewer, better-run companies.
What is the role of the foreign investor and the capital markets?
From our options to grow our company, selling stock to raise money is the last option and the most expensive. The company is already well financed by the banks. The capital markets are expensive, but it is something we are thinking about – it is all a question of price.
We want to develop the company and become an energy company, rather than just an oil extraction company – this means gas, but not electricity.
I think that to be an oil company by itself is not a bad option as it means oil and gas and the full refining cycle. In this we are well ahead of our competitors such as TNK [Tyumen Oil Company].
We are not looking for partners for the sake of having partners. We are looking for alliances to share risk and expertise. But there is cash in the oil industry so finances are not a problem. Even before the crisis we had a very conservative business plan, so we have never been very dependent on international oil prices as we were always very conservative when it came to estimating average oil prices. We have been assuming $16 a barrel and only after Brent was at $30 a barrel for almost a year did we revise our estimates up to $16.50.
How do you compare the Russian approach to corporate governance to that in the west?
I am very against hypocrisy. I hate to see western companies owned by managers even though they have never paid for the stock or done anything to acquire it like the Russian companies have. But western companies have numbers of shareholders running into millions.
It makes a difference. Russian managers are very different in their approach to corporate governance. The oil industry is the most progressive in these terms.
Look at what we were doing three years ago and compare it with today. Five or six of the leading companies are all doing the same thing – improving transparency and their attitude to investors as well as the increased competition. The question being asked in boardrooms is: do you see these people as partners?
There is a clear alignment between management and shareholders. Management now wants to grow in a normal way as the companies solve their problems and the managers themselves get older.
What are the main corporate governance problems that Russia faces?
There are many problems. The problem we have is that you don’t get extra dividends for being good through all this time. Sibneft has been one of the first companies to introduce many of the improvements that you see going on today, but it barely seems that we have been given any credit for this at all. The market is developing and corporate governance is part of this development. It is a natural development, a natural process.
It wasn’t possible before. The country was collapsing, the banks were collapsing and the people were starving. If you talked about corporate governance in this environment you looked stupid. Now it is 2001 and if you are not talking about corporate governance then you will also look stupid. If there is another crunch then corporate governance won’t fall to pieces but it won’t be a priority either. We don’t want to go backwards as there is no reason to go back.
Is it going fast enough?
It is a matter of time. If we rush too much it is not a natural process – you can’t force the pace. It would look artificial if all around you there are more important problems that need addressing.
The pace is set by the market and if you are here working in the market then you know what the pace is. You don’t want to feel out of place, so the whole pack is lifted up. Someone has to do something and then the rest will follow. Putin is also a factor. The mere fact that he is young, energetic, and travels also helps to set the pace. He goes around the country and talks to people which makes you reflect and so makes things move faster.
[Economy minister German] Gref and the plan make less of a difference. At the end of the day it is business that will make the change and is already making the changes. There is a constant dialogue among Russia’s leading businessmen and when we meet with Putin and the government, and ask for changes, they act – they could ignore us, but they don’t.
