Oao Yukos Company

600 Words3 Pages
Corporate Finance Governance : Case n°2 : OAO YUKOS COMPANY 1. What type of risks did corporate investors face in Russia in the late 1990’s? We find risks in risks in Corporate governance in Russia in 1990’s due to historical and sociological factors. Let’s remind the period : the End of the Soviet World and what we called the Mass Russian Privatization. Russian Privatization was the reform consisting in privatization of state-owned industrial assets that took place in Russia in the 1990s, immediately after the dissolution of the Soviet Union, where private ownership of enterprises had been illegal for a long time. The privatization enabled Russia to shift from the deteriorating Soviet planned economy towards market economy, but as a result a good deal of the national wealth fell into the hands of a relatively small group. It was described as "Catastroika". Firstly, to make acceptations faster within managers and employees, the government gave “enormous incentives”-namely majority block of shares. A new class of “owner managers” was born from the sea of old directors. A great deal of big companies were now controlled by employees and managers without any experience in Corporate governance. Were they able to manage efficiently and improving the business? Or they were to steal all the value that had been created. Secondly, Russia was very corrupted and investors’ right were absent. It goes without saying that before the Mass Privatization, the Corporation world and the market were not regulated since “everything” was controlled by the state. Therefore a solid regulatory and legal framework were essential for investors so as to safety and stability remained. This framework came late in 1994 with the Russian Federal Commision for Securities Markets (FCSM) which can be compared to the S.E.C. The episod called Loans-for-Share describes very well the
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