the new corporate ethics code of the rf federal financial m

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Corporate Governance Role of Independent
Directors
Astana Speech May 20, 2005
Alexander Filatov Executive Director Independent
Directors Association info_at_nand.ru
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Major Obstacles to Hinder Efficient Corporate
Governance in Developing Markets

• Lack of transparency in company management
• Companys management is not answerable to
  shareholders
• Unfair treatment of minority shareholders
• Inadequate coordination and cooperation between
  shareholders and stakeholders
• Corporate governance culture is underdeveloped

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Role of Board of Directors

• To determine Companys strategic objectives
• To approve or disallow large transactions
• To ensure accuracy of accounting and financial
  reporting systems
• To control performance of executive management
  and to coordinate interests of all shareholders

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Ways to Improve BoD Performance

• To use more prudent approach to appointment of
  BoD members
• To ensure higher level of professionalism of
  independent BoD members
• To introduce independent directors best practice
  

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New Requirements to Companies

• The new Corporate Ethics code of the RF Federal
  Financial Markets Service is approved. According
  to the Code, a Board of Directors must comprise
  minimum 3 independent directors.
• Listing requirements at Russian Stock Exchanges
  are toughened in relation to information
  disclosure and FFMS Code compliance.
• ADR Requirements at international exchanges
  became tougher the notion of independent
  director became stricter, independent directors
  are to comprise the majority of BoDs
• Investors put forward new requirements to capital
  raising companies
• Independent directors became an integral part of
  international best practice

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Role of Independent Director

• To build up shareholder's confidence in the
  company
• To improve relations with investors
• To make coordinated strategic decisions
• To establish effective internal controls
• To resolve conflicts
• To enhance management transparency
• To increase companys value

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Where to find an independent director?

• Highly professional
• Management experience
• Good business reputation
• Knowledge of specifics
• Good track record
• Life experience
• Meeting independence criteria

Companies are looking for professionals . . .
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Independent Directors Association
Mission To improve performance of Russian
joint-stock companies through introduction of
independent directors best practice
Objective To establish professional community of
independent directors
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Independent Directors Association

• Established in 2002 with Ernst Young support
• Non-profit professional organization of directors
  based on self-regulation principles
• Influential institution to improve BoD operations
• Over 150 members

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IDA structure
Board of Directors
Executive Director

• Research center
• Client and membership relations department
• Information Department
• Seminars and Conferences

• Committees
• Membership Committee
• Ethics Committee

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Ethics Committee

• Independent director decides whether his/her
  activities meet ethical standards
• In case of disputes IDA Ethics Committee decides
  whether an independent director violated ethical
  standards
• Ethics Committee may publicly reprimand or expel
  IDA member

breach of ethical standards loss of credit
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General Principles of Activity of IDA Members

• Comply with high ethical and professional
  standards
• Commit to truth, honesty and frankness
• Exercise an independent approach to use of
  expertise and experience for the companys
  benefit
• Display fair attitude to all shareholders
• Ensure transparency of information
• Prevent and settle potential conflicts of
  interest
• From the Charter of Independent Directors

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IDA Activities

• Establishment and compliance with ethical and
  professional standards
• Control over implementation of IDA principles
• Professional education and continuous
  professional development
• Research and surveys
• Publications (manuals, bulletins, articles,
  expert opinions)
• Consulting services to BoDs

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IDA Development Strategy
Advisory council consulting and recommendations
on development strategies for international
companies and corporate governance experts

• IFC
• Rating agencies
• Recruiting agencies
• Consulting companies
• Government bodies
• Investment community
• Leading business associations
• Corporate governance institutions

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Independent Directors Association (IDA) Russia

• www.nand.ru
• or
• www.independentdirector.ru
• E-mail
• info_at_nand.ru
• Tel.
• 7 [phone]