Faculty of Economics and Business
IB&M MASTER THESIS
National Diversity
In Russian Business Elite:
Is Russian Top-Management
Globalizing?
Author: Mayya Tarasova
Supervisor: Kees Van Veen
Co-assessor: Bram Neuijen
National Diversity In Russian Business Elite:
Is Russian Top-Management Globalizing?
CONTENTS
ABSTRACT 4
CHAPTER 1 INTRODUCTION 5
CHAPTER 2 THEORETICAL BACKGROUND 8
2.1 Business elite in developed countries 8
2.1.1 The Netherlands 8
2.1.2 The US 10
2.1.3 France, Germany and the UK 11
2.1.4 International business elite characteristics 13
2.2 Evolution of Russian business elite 14
2.2.1 Soviet past and transition 18
2.2.2 Yeltsin’ s era 21
2.2.3 Putin’ s era 28
2.3 Modern Russian business elite characteristics 32
2.3.1 Characteristics summary 32
2.3.2 National composition of business elite 33
2.4 Russian business elite realities 34
4.2 Operationalization of the variables 40
4.3 Data sources 43
4.4 Administration of the data 44
4.5 Method of analysis 45
CHAPTER 5 RESULTS AND DISCUSSION 46
5.1 Descriptive results 47
5.1.1 National diversity 47
5.1.2 “Portrait” of a foreign director 48
5.1.2.1 Country of origin 48
5.1.2.2 Age 50
5.1.2.3 Years of company and board entry 51
5.1.2.4 Gender 54 5.1.2.5 Industry 54 5.1.3 Board size 55 5.2 Testing hypotheses 57 5.2.1 IPO 57 5.2.2 International activities 57 5.2.3 Size 58 5.2.4 Board structure 60
5.3 Multiple regression results 61
5.3.1 National diversity 62
5.3.2 True national diversity 62
CHAPTER 6 CONCLUSIONS AND FUTURE RESEARCH 64
CHAPTER 7 LIMITATIONS 72
REFERENCES 74
APPENDIX A 78
APPENDIX B 80
ABSTRACT
Current research examines the level of national diversity in Russian business elite in 2006 primarily. Moreover, it tries to reveal the factors, which have the most influence on the presence of foreigners in the Russian companies’ boards and top-management teams. The research enjoys quite detailed historical overview of the Russian business elite evolution process, as well as a short excursus in the international backgrounds of the issue. The findings reveal that the level of national diversity in Russia is quite similar to the average European indices and that the major effect on the dependent variable has the percentage of non-executive directors in a board. Finally, some conclusions on the evolution of Russian business elite role as compared to the position of state power are made.
CHAPTER 1 INTRODUCTION
The word “globalization” has become one of the most widely used ones in the academic field since the end of the 1980s when the concept became popular among economists all over the world. The global territorial ambitions of Portuguese and Spanish Empires, that actually boosted globalization processes (Raudzens, 1999), are now just part of the history. Modern forms of countries’ globalization are more comprehensive and include, for instance, globalization of goods and services, financial capitals, technologies and labor. Apart from countries, companies are nowadays even more subjected to globalization: multinational enterprises and transnational corporations are, probably, the most important business models that “phenomenon” of the last century gave us. These corporations introduce new globalised and even more often internationalized products, (meaning those made to satisfy the international consumers); apply global sales and marketing strategies, negotiation techniques, internationally recognized financial reporting instruments, etc. As those companies expand, enter new markets and gain more information about the new target consumers, the content of their global goods and services changes in the attempt to suit the needs of a new audience. In general, most procedures in a today’s competitive European or American company, operating in more than one country, have been subjected to globalization and internationalization processes.
top-managers into their boards (Lublin, 2005). Some curious researchers of that time decided, however, to check the actual level of national diversity in the companies’ boards.
One of the first papers made on this topic was one by Gillies and Dickinson (1999), who studied eighty largest MNCs in the world and concluded that only 36,3% of these companies had at least one foreign member in 1993. The process of internationalization turned out to be slower than it had been anticipated to be. However, the research results of the next fifteen years show the increasing degree of boards’ national diversity all over the world. Eight years later, after the first work by Gillies and Dickinson, Staples (2007) came up with the similar study, witnessing the ongoing multinational boards’ national diversity increase in about 75% of the companies. Another group of researches was concentrating on national diversity particularly in European companies. Heijltjes, Olie & Glunk concluded that the number of foreigners in the complete boards was 10,1 % in Sweden and 11% in the Netherlands in 2003. And the results of one of the latest studies on the boards’ internationalization in Europe (fifteen EU-member countries were analyzed) undertaken by the Van Veen and Marsman (2007) show that the percentage of foreign managers in the boards in question amounted to 14,9%, which was still low, as compared to the authors expectations.
This paper will make a contribution to the field of top-management teams’ studies in the field of national diversity in the geographical aspect. The article will focus on the companies’ boards in the Russian Federation (never touched upon in this connection) and will explore their level of national diversity, thus answering the main research question of whether the Russian top-management is globalizing, meaning “following the global pattern of internationalization”.
origins and shedding some light on the circumstances of its development and consequential maturation. Every phenomenon in our lives happens as a consequence to the processes happened before. So, the goal of this part will be to explore the past in order to find some patterns, traditions, or historical facts that would help to explain the current state of affairs. This research paper will mainly focus on the past of business elite and will try to reveal the origins of the actual situation with national diversity in Russian top management teams. Due to the absence of a profound theory base on “upper echelon perspective” in Russian academic field, the concept of “business elite” has been introduced as one being closely connected with the top-management theory. Thus, the first part of the country characteristics study will concentrate on the national diversity in Russian business elite mainly. Second, some company characteristics, that could also influence the actual level of national diversity in Russian top management teams, will be discussed1.
The general paper design will look as follows. The paper will start will a theoretical background part that will, in its turn, consist of four sub-parts. First, a literature review on the business elites formation processes in some developed countries will be made. Second, the part on evolution of Russian business elite through three main eras will follow. Third, some summary conclusions, including those on national diversity, in the form of today’s Russian business elite characteristics, will be presented. And fourth, Russian business elite realities, that give the reasoning to expect some visible national diversity in top-management teams in Russia, will be discussed. (The theoretical background above will constitute the country characteristics part.) Finally, some propositions, concerning the reasons for the actual level of national diversity in 100 Russian firms, will be formulated. (This part will form the company characteristics part.)
Then, the methodology part will follow, where the sample and the variables used, data sources, and the method of analysis will be explained. After that, empirical results will be introduced and discussed. Finally, combining all country and company characteristics the final
answer to the question of whether and how Russian top-management is globalizing will be given, plus the reasons for the answer.
CHAPTER 2
THEORETICAL BACKGROUND
The concept of “business elite” is not new and was quite thoroughly explored by different scholars ahead of this paper. So, before some new contribution to this field will be made, it sounds reasonable to make a short overview of several previous works and to cover the aspects of business elite emergence and maturation, scale of its domination, patterns of reproduction, and, of course, national diversity in countries, other that Russia. Everything is known in comparison, so in order to make a good base for the Russian business elite analysis, it is worth looking at some international examples. Not to mention the fact that as examples some most developed countries in the world have been chosen.
2.1 Business elite in developed countries
The following section will disclose some particularities of business elites in Europe and the US. Where the information is available, the paper will also throw the light on the world practice of foreigners’ incorporation in TMTs.
2.1.1 The Netherlands
Dutch business elite historically has been developing from the “old boy network” – aristocratic families, tracing back their wealth and titles to the eighteenth century, when the newly installed monarch awarded many powerful families of those days with the titles of nobility (Dronkers and Schijf, 2004).
were standing bankers, who formed the majority of the inner circle of Dutch business elite at that time (Heemskerk, 2007).
Nowadays the “old boy network” in its traditional form is considered to be gone: the aristocracy belonging is no more a barometer for the inclusion in the high business power echelons as it used to be in the past. Moreover, present tendencies of the decline of corporate community have lead to the loosening of connections between executives, and business elite itself became smaller.
According to Heemskerk (2007), modern Dutch business elite is not anymore a status group: people “are related to each other not because of heritage, family background, and shared social circles, but because of a common occupation” (p. 156). As a result, people at the top of corporations nowadays behave more like individuals and less like members of organized business elite as they used to be.
As for national diversity aspect, traditionally there were quite many in the upper echelons of corporate power in the Netherlands (Heemskerk, 2007; p. 136). Such initial conditions as small home market, supply base, and the difficulties in negotiating the low wages with the labor led to the situation when the Dutch companies had to go global. And even taking into consideration that soon the sales outside the country were accounting for almost 80% for some corporations (Heemskerk, 2007), the real integration of foreigners in corporate boards only started in the 1990s with the Netherlands showing the way. Other global players of the US, Japan, France, Italy, Germany and other countries were more reluctant to follow this tendency of TMTs national diversity. And if in 1996 only one forth of the board members of the twenty-five largest Amsterdam Exchange Index firms were foreign; in 2002 twenty-four of these firms had at least two non-Dutch board members (Heemskerk, 2007).
multiple positions and thus are diluting the formerly strongly existing community of interlocking directors, who used to form the traditional business elite in the Netherlands.
2.1.2 The US
According to Useem (1980), “corporate business elite – are the men and (the few) women who are in a position to exercise major influence over the decisions and policies of large corporations”. Useem (1980) assumes three types of people to have such an influence: people, having a large part of a corporation’s stock; people on its board of directors and top managers. Thus business power in the US has been generally divided between two main groups: the founders of the corporations and the hired management (Berle and Means, 1932). As the share of the initial owners was diluting and as the corporation obtained more and more dispersed individual owners, the share and influence of the incumbent management rose, sometimes even allowing them to determine the board of directors. In the XXIst century, the principal-agent problem has aggravated: top-managers could even for some long time conceal the fact that they were acting quite oppositely the interests of the company’ owners. The notorious examples are, of course, Enron or WorldCom downfall (Zahra et al, 2005).
The tendency of old boy network disappearing in the Netherlands turns out to be not the single case. According to Useem (1984) this trend can also be seen in the US, where the traditional upper class - the capitalist owners - have lost their influence on the corporate governance due to their passive ownership roles and falling control of the corporate policies.
2.1.3 France, Germany and the UK
The top executives in the leading economic powers in the UK, Germany and France have always been receiving the great deal of attention from the scholars all over the world. The questions of elite social reproduction, cohesion, and the mechanisms of domination have been the central ones in many studies. As for the question, concerning the main characteristics that a person should possess in order to be accepted in the business elite, onу can consult the Bourdieu’s (1994) identification of four types of capital (economic, cultural, social and symbolic); having the same importance at the beginning of the career as well as at the top of the career ladder. And even that Bourdieu recognized that application of his mostly French-grounded model into the international context could be problematic, the time showed that most of his points were relevant even in the foreign setting.
With the evolution of the large business structures into stock corporations with a dispersed ownership, the classe dominante of French business elite has started to pay more attention to other types of capital, such as cultural or social, instead of focusing only on the economic one in order to guarantee their children the top positions succession. Thus the obtaining the exclusive educational degree has become an essential part of the new business leaders development.
In Germany, educational institutions were far more liberal: the share of students coming from gehobenes Bürgertum was hardly reaching the 40% mark (Koehler, 1992), whereas in France the majority of the students adhered to the French bourgeoisie. And even if there was a considerable amount of upper-class Germans in the national boards, an academic degree in Germany had no such exclusivity as it had in France. Besides, German institutions also have some kind of social selection, however, not to the extent when only a really small inner circle of the business elite is formed, as it is in France (Hartmann, 2000).
The process of the German graduates’ recruitment in business elite, consequently, differs from that of a French one, where the diploma is seen as an entrance ticket. Personal characteristics like self-confidence, broad knowledge base, a high degree of entrepreneurial thinking, proper gestures, good articulation, optimism, and even the right choice of clothing – are all seen as the qualities to assess and to make a decision upon. Frankly speaking, the upper class offspring are more likely to be aware of the issues mentioned above. Thus, the difference in the selection process for business elite does not really seem so striking anymore: the mechanisms are various, but the gist is more or less the same – those, having been born in the upper class, have better opportunities.
As for the national diversity in TMTs of these countries, Hartmann (2000) declares that successful candidates for the highest levels in the largest organizations are often “citizens of the country in which the company has its central office”. However, the findings of Van Veen and Marsman (2008) paper reveal more promising results: the percentage of foreigners in France and Germany were respectively 12,7% and 21,4% in 2005.
the top. The discriminating procedure was reformed in 1964, although a considerable number of grammar schools have survived with just little bit weaker means of selection (Maclean, Harvey, and Press, 2006).
As a French one, British education system was called for reproducing the patterns of inequality across generations (Scott, 1982). British most prominent universities, like Cambridge and Oxford, not surprisingly have been for ages filled with the “sons of gentlemen” (Maclean, Harvey, and Press, 2006). Later on former students were occupying the highest positions in the British business elite. In the 1998 50% of top executives in the UK were holding the Oxford and Cambridge degrees (Maclean, Harvey, and Press, 2006). Time passes by, but to become a top business leader in the elite, one should, as many years ago, possess a wealthy family (that will give an initial cultural capital) and a prestige education (that will add a needed social network and professional knowledge).
To conclude, Maclean, Harvey, and Press (2006) mention that even if the recruitment of business elite has become more liberal in the recent years, the social selection machine still functions and elitism still exists.
The national diversity in the UK boards is quite high, according to Van Veen and Marsman (2008), 25,2% in particular. The results are rather interesting, taking into consideration the information above. However, the Cambridge, Oxford, Eton, etc. education has always enjoyed the great popularity, even among foreigners. So the author may not be surprised if the foreign directors in the UK boards were once British universities graduates.
2.1.4 International business elite characteristics
system. In the Netherlands, however, these patterns have gradually become weaker: nowadays people of different origins and, which can be even more important in the context of this research, of different countries of origins, can be the members of the same company’s board. Elitism and social selection machine has been also quite active in the UK and Germany. The latter case is, however, the least “severe” from those mentioned above, meaning the country’s liberal approach to the access of people of different backgrounds to education and subsequent career development.
The issues of social or racial (nationality) selection in the US are more topical than ever. However, the attention for this matter has been attracted by the history itself, as the through the whole story of the country’s maturity its very different people were learning how to live together in peace and understanding. This resulted in the fact that some of non-discrimination principles were even included in the national law. So, having taken the principal decision on this topic, the business field has switched to another question. In recent years, the most discussed part of business elite field in the US, has been the principal-agent problem and the rise of the top-management power.
So, having summarized the issues of concern of different countries’ business elites, it is now worth looking at the case of Russia and to find out what characteristics adhere in this country’s circle of top corporate leaders.
2.2 Evolution of Russian business elite
Although there are many ways to describe a “business elite” concept, for the sake of unity and transparency in this paper it will be in general determined as “the group of board of directors’ members and top-managers that are in the position to exercise major influence over the decisions and policies of large corporations”2. According to the Russian Code of Corporate Conduct there are two main ruling organs in the large Russian organizations: Executive Bodies and Board of
Directors3. In other words, duties under company law apply only to members of the board of directors and members of the company's executive organs (which can be a one-person or a collegial organ). Executive bodies include managerial board and the head of the managerial board – Director General (Table 1), who, if “translating” it into the Western terminology, could be referred as top-management and the CEO, respectively. Executive bodies are “responsible for everyday operations of the company and their compliance with the financial and business plan of the company, and should act timely, efficiently and in good faith to fulfill resolutions passed by the board of directors and the general shareholders meeting”4. Board of directors, in its turn, are called for “determining the development strategy of the company, providing efficient supervision of the financial and business operations of the company and its executive bodies, safeguarding and protecting the rights of shareholders as well as facilitating resolution of corporate conflicts”5. Technically, boards of directors of large Russian companies consist of two categories of directors: executives and non-executives (Table 1). The former ones at the same time are holding positions as members of the managerial board, however, their number may not exceed one-fourth of the total number of members of the board of directors of the company.
Table 1. Russian Business Elite according to the Russian Code of Corporate Conduct
3 As the Russian Code of Corporate Conduct has a recommendation and not a compulsory character, in some companies these two organs can be united in one. Other companies, guided by the Western patterns can name these two bodies differently: for example, Board of Directors was called a Supervisory Board in a number of cases. However, the same name of a ruling body does not imply the same set of functions it is to perform under the Western standards.
4 The Russian Code of Corporate Conduct, Chapter 4 http://www.ecgi.org/codes/code.php?code_id=102 5 Russian Code of Corporate Conduct, Chapter 1 http://www.ecgi.org/codes/code.php?code_id=102
Russian Business Elite according to Russian Code of Corporate Conduct
Executive Bodies
Managerial board (Top-management) Director General (CEO)
Non-executive directors in the Russian setting were split into “insiders” and independent directors. The latter were quite recently introduced in the Russian setting as it was recognized that the inclusion in the board of directors of only those persons who are not members of the managerial board (only “insider” non-executives) does not in itself guarantee adequate protection of the interests of shareholders. Thus, a new cohort of Russian business elite – independent non-executive directors – appeared. According to the Russian Code of Corporate Conduct, they should be “independent from the officers of the company and their affiliated persons and from major business partners of the company, and should not have any other relations with the company that may affect the independence of their opinions”6.
Besides, the Russian Code of Corporate Conduct does not introduce the notions of one- and two-tier boards in its text. But in this paper, such a distinction will be made on the basis of the German corporate governance model (many aspects of which have already been adopted by the Russian Code), that indicates the presence of a two-tier system in a company, when the upper, or supervisory, board contains only outside directors and is elected by shareholders, and the lower, or management, tier contains company executives, who are appointed by the supervisory board. Thus, in the current research, the two-tier board will also be indicated when the real outside (in the Russian terminology “non-executive independent”) directors, elected by the shareholders, will be present in the company. “Insider” non-executive directors, consisting predominantly of former executive directors or major Russian shareholders that are anyway connected with the company, can not be regarded as the real “outsiders” and real “non-executive” directors due to their insider knowledge and often personal concernment. So, in this context, only independent non-executive directors can be called the real non-executive directors, that tend to have a completely “outsider” status in Western economies. Taking that into account and for the sake of subsequent easier research’s comparison with the Western studies, current paper will only address the independent non-executive directors as non-executive directors7; others will be treated as executives.
Now, when the technical structure of Russian business elite is clear, another issue, important in the context of elite formation and evolution is worth to raise: this is the relationships between elite, state’s power (mostly meaning the supreme power of the President) and politics. Russian large business has always been associated with politics. On the other hand, politics-making has always been the prerogative of the state’s power. The interesting part is that, at some point in Russia, the inclusion of big business in politics reached enormous scale: large businessmen started to take part in the strategic decisions and became something more than a “pressure group” – quite a normal role of business establishment in the developed countries. The scale of business elite interference in politics and its “interlacing” with state power was quite enormous in the 1990s8 in Russia, and hardly comparable to the situation in other countries, at least developed. It is from those times that Russian business elite term has started to be used meaning the group of large businessmen, who, due to their great financial power and possession of the economic resources, are engaged in the decision- and policy-making not only on the corporate, but also at the national level. Have these patterns, that were relevant for the Russian business elite in 1990s, preserved till present? The answers for this question will be given in the following sections, which will trace back the process of Russian business elite formation and evolution though three main periods: Soviet past and transition, Yeltsin’s era and Putin’s era. The story of the state’s power change, change of business elite and its interference in politics will be told. For the sake of clearness the timeline (Figure 1) with the major recent historical events in Russia will be introduced:
Figure 1. Timeline of historical events in Russia, meaningful for the development of Russian business elite.
2.2.1 Soviet past and transition
The roots of modern business elite date back to the 1980s, when the Soviet Nomenklatura was making its first attempts in the field of business by creating so called “Komsomol9 economy”. Before that there was no chance to speak about the business elite in the sense applicable to the current research. First of all, Soviet planned economy didn’t imply any entrepreneurial activity and sole proprietorship. The idea of making money and profit was an alien one in the socialist state. In the USSR citizens opportunities to get extra money were restricted by the amount of their salary plus only 50% more. All other sources of income were considered to be illegal and generally were not many (Dzhavlanov and Mikheev, 1993). Second, all economic issues at that time were resolved within the Communist Party “top-management”. And the whole national elite consisted of party members, not of talented private businessmen. In particular, according to Kryshtanovskaya and White (1996), in the Soviet times the elite consisted of four main groups, including government, parliament, the party and the regional elite. Consequently the highest positions in the state were occupied by Nomenklatura members appointed by the order of the Party’s Secretariat. In addition, the national elite of those times was very hierarchical, and thus there was no place for nepotism: it was impossible to enter some high position without going through the Nomenklatura hierarchy. Since the Stalin era, all Nomenklatura positions were divided into 14 ranks. Thus, Nomenklatura cadres who, first of all, should have been staunch defenders of Communist Party, were raised from the childhood. In the primary school all good studying children were granted “an honor” to join “Octyabriata”10. Then, at the end of the secondary school, young people were accepted selectively, based on their grades and activity in social and public life, into Komsomol, youth wing of the Communist Party of the Soviet Union. From Komsomol people could move further up the Party career ladder. Not to
9 Komsomol (Russian: Комсомол) is a syllabic abbreviation word, from the Russian Kommunisticheskiy Soyuz
Molodiozhi (Коммунистический союз молодёжи), or "Communist Union of Youth". Komsomol served as the
youth wing of the Communist Party of the Soviet Union (CPSU) and played an important role as a mechanism for teaching the values of the CPSU in the young, and as an organ for introducing the young to the political domain (Wikipedia).
mention the fact, that if one wanted a good promotion anywhere, he/she had to be the Party member. Thus, the recruitment process took place as follows: for the highest positions in the organizations there were hired people, who, having gone through numerous (at least 10) obligatory consequent Nomenklatura ranks, reached some of the highest.
In 1985, Mikhail Gorbachev took the office. His presidency has been mainly associated with the collapse of Soviet Union and general decline in the economy: under Gorbachev within six years the Russian gold funds decreased by 66,7 % and external debt grew by 37% (Grachev, 2001). However, a set of his reforms - perestroika11 and glasnost12 - could be regarded as liberal
and aimed at the increasing of economy openness. Moreover, he introduced a “new thinking” towards Western countries: being incumbent president he tried to improve relations, to increase the trade turnover with West, to reduce Cold War tensions. One of the most radical economic reforms of Gorbachev era was probably the so-called “Law on Cooperatives” that was approved by Soviet Parliament in the middle of 1988. The new law allowed young people, mainly, members of the Komsomol organization, to establish a new kind of firms (cooperatives). The Law revealed the entrepreneurial activity of Russian people and led to a dramatic transformation in Russia that followed in 15 years (De Vries et al, 2004). Originally these firms were called for occupying the young people in spreading innovational R&D solutions across the country’s main manufacturing firms; they had to serve as intermediaries between science and production. These new enterprises got some privileges, including independence in determining the prices for their services and also tax advantages for customs clearance when the new technological products were imported from foreign countries.
Young and creative Soviet people, having got such an opportunity to enrich, haven’t, certainly, missed it. In several years a huge network of “speculation” has already been formed: foreign video- and audio- gadgets, as well as computers and cars were bought abroad and resold in the USSR at the overestimated prices. Moreover, at that time “cooperatives” were engaged in
even more illegal activities, for example, monetization or money cashing. The point was that in the Soviet Union government used restrictions for money cashing as an instrument for the inflation curbing. Thus organizations even having money on their accounts could not use it, for instance, to make simple reparation in the building: they did not have cash to give to the workers (Kryshtanovskaya, 2005). Co-operatives were allowed to be intermediaries also in this process: allegedly, to control and monitor the procedure. But co-operative members quickly realized that the heads of the enterprises were ready to pay generously for cashing their money and converted this activity into very lucrative one.
The Komsomol authorities realized the situation too late, and there was no other way as to close most part of these firms. However, young businessmen already developed their taste for money and didn’t hurry to quiet it. One of the most famous heads of one of the most successful co-operatives in the USSR, by the way, was Mikhail Khodorkovsky, the president of YUKOS Corporation in the subsequent years.
multinational country should have represented all the republics of the Soviet Union and thus the country elite in Soviet times was very diverse in terms of nationalities (Shanin, 1989).
In short, the period of Gorbachev‘s presidency witnessed the rise of market relationships in the society and could be actually characterized as the “cradle” for the present Russian business elite leaders. In terms of national diversity, the composition of top positions in the country was very multinational in those times. However, the nationality diversity was restricted politically by the borders of USSR.
2.2.2 Yeltsin’ s era
Under Boris Yeltsin – the first nationally elected president of the Russian Federation - some of crucial events, that have formed the today’s Russian business elite, took place; the most significant of which was, of course, mass privatization in 1992. As during that privatization process members of board of directors and top management, who form today’s business elite, did appear.
But before 1992, the year of notoriously-known privatization in Russia, the latent part of privatization started in 1988. According to Kryshtanovskaya (2005), that process was hidden from the eyes of the exterior observers and had as its main aim - privatization of the economic infrastructure: banking system, distributions channels, and the most efficient production enterprises. In general the latent stage of privatization was undertaken as follows: the old Ministries were destroyed and abolished and on their ruins some new government concerns were founded. More likely they were organized in the same buildings with the same furniture and people. Then, the Minister resigned and the control stake of concern’s shares passed over to the new owner, who most likely was the second of the third person from the abolished Ministry management. According to such a scheme - on the basis of abolished Soviet Ministry of Gas Industry (Kukolev, 1995) – Russia’s biggest oil company Gazprom was founded.
that time in a very bad condition and few individuals dared to put their eye on it. New owners of the banks, taking advantage of their high positions in government, invested budget funds and other government earnings in their own financial structures. Generally the tendency of business elite formation of that time could be characterized as the swap of intangible political power asset for tangible financial property.
In 1992 the era of mass privatization began. The era, during which the modern business elite was born - a group of owners, that emerged from the Soviet Nomenklatura and that reached a huge financial and political power due to the unprecedented economic privileges.
The role of the (latently) privatized financial institutions rose at that time: by 1992 they had already accumulated enough funds to fight for the industry enterprises and thus were buying the shares of almost all available production concerns. First, the character of acquisitions was chaotic. But time passed and gradually some industry preferences started to be seen in the new firms purchasing logic. In 1993 when the first wave of mass privatization was over, a term for these newly created large organizations appeared: financial production groups or holdings (FPGs or FPHs). On the basis of these FPGs the new business empires have started to being built. Those empires actually initiated the development of Russian oligarchy later on.
able to repay the credit. These auctions were actually held in the run-up to the election of 1996, when Yeltsin and his supporters urgently needed funds for the campaign.
If before 1995 the Russian business elite was almost identical with the group of bank owners, from that time, the new integrated business groups (IBGs) started to be formed: from then on they comprised financial, as well as production component. Before 1995, quite small group of business elite, which controlled up to 80% of Russian financial resources, was not interested in the real economy sector. They didn’t want to buy poorly performing manufacturing enterprises and to invest in them. The businessmen were at any moment ready to put their money in suitcases and leave the Motherland (Kryshtanovskaya, 2005).
In 1995 when “loans-for-shares auctions” scheme was put into practice “unpunished”, businessmen understood that production was a good investment of money and an excellent instrument to legitimate their fortune, as well as to strengthen their position in the economics and politics. By organizing IBGs bankers could convert from the virtually powerful into the really powerful groups. And they did not miss the chance. Finally, a typical IBG conglomerate comprised: management group of businessmen, parent company, financial structure, security structure, production enterprises and mass media company.
However the rise of the oligarchs in Russia was not unusual, if one would refer to the “iron law of oligarchy”, formulated by Michels already in the beginning of XXth century: “in order to preserve itself and achieve a degree of stability, a young democracy (which, of course, Russia has been) is obliged to separate out a more active minority element - oligarchy” (Michels, 1959; p. 7). The most active element in the Russian setting at that time was obviously a group of ardent businessmen, who made great efforts to make their way out of the ruined country (USSR) to the desired prosperous future. The pity part is that their methods were questionable. However, even Henry Ford was saying that he could disclose the origins of all his millions, excluding the first one.
Kryshtanovskaya and White (1996) conceptualized the national elite of the mid-1990s as a “three-layered pie”. On the top there were politicians and their supporters, then followed the business elite - businessmen that actually acted like sponsors to the former group. And, finally, at the bottom there were security forces that started to gain power in those very unstable and even dangerous times of property redistribution. It was in those times when former KGB employees started to find there ways to the companies top-management, where they were used as a means of influence and contracts enforcement. It was in those times when the powerful Yeltsin’s “Family” appeared; it mainly included representatives of those three “elite-pie layers” mentioned above: politicians (Yeltsin’s supporters), businessmen-sponsors, and security forces officers.
The possibility for such a coalition (“Family”) emergence was given by the president himself, whose health and general condition prevented him from taking part in the every-day government work. As the power cannot stand the “vacuum”, Yeltsin’s function of preparing and making decisions started to be performed by his close allies, who gradually were becoming more and more powerful. A new form of temporary rule appeared in Russia – “regency13” (Toshchenko, 1999). Of course, the regency was not legitimate, however, everybody new who was the real power in the country. At that time the most influential people were: Yeltsin’s
daughter and a businesswoman (Tatyana Diachenko), the Head of the President Administration (Valentin Yumashev), and a Head of the President’s Security Service. Generally the common interest of this “Family” coalition was coming to the power preservation “in the hands of the President”, which should have given, as they might have thought, the stability of their current positions and capitals. Under the conditions of weak power some new informal grouping – klans (Coulloudon, 1999) - had formed around the “Family”. They were taking on the government functions and, of course, were fiercely competing with each other. At that time the scale of cronyism and nepotism in the elite appointment reached enormous scale. The countries economy was suffering, as at the head of the government, as well as at the top of the Russia’s largest enterprises, there were quite often not the business professionals but relatives of the “Family”.
On the eve of the crisis in 1998, many experts (Schroder, 1999; Gill, 1998) were saying that the country was ruled by seven most influential bankers that, of course, adhered in the “Family”: Vagit Alekperov, Rem Vyakhirev, Vladimir Gusinsky, Boris Berezovsky, Mikhail Fridman, Mikhail Khodorkovsky and Vladimir Potanin. Most bankers already at that time were the owners of production enterprises that were delivering natural resources as well to some foreign countries. However, their influence was mainly spread within the country, as neither sales volumes, nor the product quality could let them dictate their will to their business partners outside Russia.
The oligarchy in Russia was formed under the conditions of production regression and the rapid development of speculation sector. Capital concentration has been performed under the leading role of banks. Thus the oligarchy formed was first of all a financial one. Financial oligarchy was striving for the further surviving and development and therefore worked for the political status quo, so eagerly supporting Yeltsin in the election campaign in 1996.
that mainly constituted the Russian export, populist economic policy of the state, and the creation of financial GKO14 pyramid, that fall down due to its speculation character. The crisis consequences had negative as well as positive aspects. The former included the decrease of the Russian ruble exchange rate from 6 up to 21 rubles per dollar within six months; many small and medium sized enterprises were wound up, people lost the majority of their savings and foreign investors – their trust to Russian banks and government. At the same time, national currency devaluation allowed the country’s economy to become more competitive, having made its export considerably cheaper.
The August crisis of 1998 substantially changed the business elite itself as well as the character of its influence in the society. As a result, part of the large businessmen went bankrupt, another part – moved abroad, and the rest - fell back in to the shadow. And if before, in the period between 1995 and 1998 the role of oligarchs in the politics was consistently rising, after the crisis the reverse trend could have been noticed. Till the summer of 1998 oligarchs were quite a small and rather cohesive group of businessmen who expressed mostly their group-restricted interests and not really the interests of the business class as a whole. And even their lobbying was aimed at striving for the certain privileges for their own firms, and not at carrying through the government the acts which all Russian business would favor from. Strictly speaking, the idea of oligarchs’ all-powerfulness was a public consciousness myth that was boosted by the mass media. In reality, their influence on the politics was quite restricted. But under the mass media exaggeration there was something real – the growing of the class of Russian businessmen that took place everywhere and in all directions.
In terms of national diversity, Yeltsin’s era can be characterized by the decline of non-Russians (in particular, from former USSR) in the top government as well as business positions. The reasons for that lied in the historical events which took place in beginning of 1990s; they are – the collapse of the Soviet Union and a strong desire of separated countries for sovereignty and
national unity. At that time also, Russian elite also lost its rural origins (Kryshtanovskaya and White, 1996): Yeltsin created a new professional “urban” team around himself, which almost totally consisted of young Moscow economists, lawyers, well-educated businessmen and former scientific workers. Another Russian region, that at that time became a famous “recruitment place” for the highest positions in the state and business elite, was Sverdlovsk - a native city of Boris Yeltsin, where most of his university mates and old friend were living.
However, Yeltsin era can also be characterized by the appearance of foreigners from the Western developed countries in Russia in general. In the beginning of 1990s, a great deal of attention was paid to the Western business practices that could have worked in the emerging market economy. Young and inexperienced Russian businessmen highly demanded foreign financial and other specialists in order to implement unknown business patterns in the Russian setting. In the middle of the 1990s, when the political and economic climate started to improve, some individual foreign investors, like George Soros, for example, started to come to Russia. And along with investors, some foreign nationals started to occupy positions in the Russian companies, mainly in the field of finance and on the advisory principals.
2.2.3 Putin’ s era
Generally, the years of Putin presidency are seen in the positive light by the country’s population. The public debt of the country (plus the debt of the USSR) has been repaid; and the economy, although in the context of high prices for natural resources, demonstrated a good development figures: increasing growth and real wages indices, decreasing inflation rates. Moreover, according to the public opinion polls, 77% of respondents declared that their living standards in the years of Putin’s presidency had gone up (Gazeta, 2008).
As for the positions of powerful businessmen and oligarchs in the Putin’s era, with his advent in Kremlin their positions became visibly weaker, as a new President started to implement his policy of “equal distancing” (Kryshtanovskaya and White, 2005) towards them. Generally the relationship between Russian business elite and the state swung between two extremes within the Putin’s presidency: from “state capture” by the oligarchs in the beginning of his term - to “business capture”, when some of the very powerful oligarchic structures capitulated to the state (Yakovlev, 2006).
The general character of business world interaction with power has changed. With the downfall of individual oligarchs, the business elite certainly did not disappear. Though, under the Putin’s presidency business figures do not actively stand out, but stay in the shadow while representing the most powerful corporations (Gazprom, Lukoil, Alfa-group, etc.). However, in recent years some experts talk about the change of the nature of the oligarchy in some different sense. Treisman (2007), for example, sees business elite having merged with another force – siloviki15 - whose “ascension” on the top-executive positions and in the board rooms of the largest Russian enterprises started already in the Yeltsin era. The combined term will look like “silovarchs”, meaning the fusion of economic and industrial capital with the security forces. Subsequently, silovarchs have become “prisoners” of their own methods, meaning that the security forces practices that they have started to implement in business are not always legal and legitimate. In this case one should take into consideration the system (KGB) – one, quite notoriously famous for power abuse and non-humanistic methods - where most of the security forces officers did come from. So, it is not really in the interests of silovarchs that methods and techniques which they have been using and use up till now (for example, intelligence networks, intimidation schemes of the use of armed forces), are to be known in public, as they can easily be denounced by the wide audience of analysts, journalists and investors and this can negatively affect their companies’ reputation. The way out of this situation is obviously to stay in power and to control the non-leakage of such information. Thus, silovarchs’ desire to stay in power is very severe, as well as the character of the change of the silovarchs in power whenever it happens.
Nowadays, according to Treisman (2007), silovarchs still occupy some very important positions in the Russian defense, gas, oil, nuclear power, and transport sectors. The silovarchs are active not only in government and in the Putin’s close circle; also they could be found at the top of powerful business corporations, like Gazprom, Norilsk Nickel, Aeroflot, Alfa bank, Russian Railroads, etc. Their main goal is “to rebuild an effective state” (Treisman, 2007),
paying a great attention to the following Putin’s line of being loyal to the state. As compared to Yeltsin’s “Family”, present Putin’s network of silovarchs is known under the name of “Corporation”.
In recent years Putin’s “Corporation” has been more and more evidently consisting of the people from St. Petersburg. For example, Finance Journal has recently published its rating of 500 Russian billionaires that mainly consists of board members and top-managers of the country’s biggest enterprises16. Not to mention the fact, that Russian business elite is very young and all major founders and owners are present in the companies’ boards. So, out of 500 richest businessmen, 53 persons are from St. Petersburg and considered to have some kind of connection with Mr. Putin.
The reason for the increasing presence of St. Petersburg dwellers in Russian business elite are as follows. For example, Soloviev (2008) supposes that after Yeltsin had resigned, a new President was surrounded by the people quite hostilely tuned towards him and those waiting to impose their own point of view on the course of the consequent reforms. The precondition to that was Putin’s weak (at the beginning of his presidency) status of Yeltsin’s successor. The Putin’s career at the same time was astonishingly fast and his colleagues from his former places of work could not keep the same pace of going up the career ladder and immediately become his close allies. That is why in the first years of Putin’s presidency there were not many reshuffles in the government. Putin had to work with members of the Yeltsin’s team, even if he did not like them. But later on, after his politics were supported by the electorate and during the years of his second term in office, more and more of Putin’s colleagues from St. Petersburg were invited to Moscow to the highest positions in government as well as to the boards of directors and to top-management teams of largest Russian corporations. As some years ago, the proximity to the President (and now the right origins) helps the companies to obtain some very important privileges.
Moreover, according to some scholars (De Vries, 2004), Putin’s era is also prominent for emergence and development of new “global” business leaders in Russia. The state policy of an open state (Yakovlev, 2006), which has started to be implemented when Putin took the office, the one with more liberal requirements for the foreign companies and capitals, favored the development of the new generation of business leaders. In comparison with the totally “Russian” executives, who retained quite cautious and denouncing attitude to the Western counterpart, new “global” top-managers recognize the importance of the international interaction and active work with their foreign colleagues. After the hard 1990s with their property redistribution “wars” and financial crisis of 1998, the new century has started with the general recovery of the economy under a new President and with the help of Russian highly-qualified and hard-working people. Since 2000s organizations, governed by the new Russian “business” leaders, has benn successfully attracting foreign investments and shareholders globally.
Some Western journalists are very sound in claiming that Putin is very hostile towards foreign participation in the Russian economy and in Russian corporations in general. However, foreign investment figures are showing quite the opposite trend17. Moreover, it is under Putin’s presidency that the laws on greater opportunities (in terms of ownership) for foreign investors has been passed and international corporate governance directives concerning shareholders rights, including those of foreigners, have been ratified. Of course, some industries and companies still seem quite closed for non-nationals. But that is why they are called “strategic”, and to allow the participation of foreigners there or not – is a question of country security and not a business one. As for non-strategic enterprises, national diversity – a percentage of foreigners from former Soviet republics and Western countries - has definitely increased during the Putin’s presidency. The exact numbers will be disclosed in the RESULTS part.
In short, one of the Putin presidency’s main achievements is the product of “equal distancing” policies that Putin started to implement in the beginning of his first term, and which
17 Foreign Investments in Russia. Source: Federal State Statistics Service.
aim was to get the political issues out of the Russian business elite’s sphere of influence. Besides, Putin’s era can be characterized by the inclusion of another force (siloviki) in politics, as well as in business. In the latter sphere it resulted in the introduction of intelligence service techniques and some security forces methods, what, consequently, has put the people using it in the weak position in case of the regime change. On the other hand, Putin’s reforms have led to the improvement of the country’s investment climate and general economy boost and development. First, under these conditions, a new generation of Russian global business leaders emerged. And second, the country has started to actively attract foreign specialists from all over the world in order to proceed with the country’s inclusion in the international economic and business community. Thus, the national diversity level theoretically should have risen significantly, as compared to Yeltsin’s era.
2.3 Modern Russian business elite characteristics
The sections above presented the evolution of Russian business elite through three main stages (Soviet past and transition, Yeltsin’s era, and Putin’s era), paying particular attention to the degree and dynamics of national diversity among the country’s top business leaders during each period. Now, it is worth summarizing the main characteristics of Russian business elite, as well as the national diversity issues.
2.3.1 Characteristics summary
First of all, it is important to mention that present Russian business elite is historically quite young and does not consist of “the old boy network” that has been forming, for example, in the Netherlands for ages. The aristocratic elite of the society was destroyed in Russia during the revolution of 1917, thus cutting all the possible roots of present business elite with the past.
Those, who already had saved funds, when the privatization of large production enterprises began.
Furthermore, modern business elite is strongly connected with the security forces: many of the former KGB officers have recently been employed by the companies. These people are believed to be closer connected with the ruling power in the face of Putin, who is also a former KGB agent, as well as many of his allies. The St. Petersburg origins also have lately got some unexpected spread among the present business elite members. Those who served and worked in the “second Russian capital” or probably had a dacha18
somewhere in the St. Petersburg region, as Putin did, nowadays are “welcomed” in the elite boards, meaning are easily recruited and have a quick promotion. Still important in the business circles is personal loyalty as well as personal acquaintance with Putin. The last paragraph points emphasize importance of belonging to the so-called Putin’s “Corporation”.
Finally, modern Russian business elite, nevertheless, has “nursed” new Russian business leaders who recognize the importance of international cooperation, global business practices and are very well educated.
2.3.2 National composition of business elite
National composition of modern business elite will be presented at the end of the paper, after the data gathered will be analyzed. Here is some information on the situation in this field in the past.
Soviet business elite was naturally very diverse in terms of nationalities: almost all of the existing Republics were represented in the Communist Party Secretariat. Not to mention the fact, that for many years the head of the country was a Georgian citizen (Stalin). In Gorbachev times, before the collapse of Soviet Union, the national representation, coming from the rural elite origins, has remained. Moreover, feeling the rising desire of some Republics to separate, Gorbachev was trying to engage more of their representatives in the country governance. But as
the collapse tool place, all newly emerged countries, including Russia itself, were striving to get as much independence as they could and to separate not only geographically, but also nationally. Thus in the 1990s the Russian government and business elite was mainly filled by the Russian nationals. The Russian origins of Yeltsin elite were endorsed by his desire to attract new young politicians and economists, who were predominantly from the Moscow region. In addition, recruitment policies of that time were extremely well-disposed towards Yeltsin’s compatriots from Sverdlovsk. The recent Putin’s policies aiming at more open economy and inclusion of the country in the international business community have let us to assume the considerable rise in national diversity levels that took place through the Putin’s presidency.
2.4 Russian business elite realities
This part will introduce some more of supporting reasons for the assumption on the “should-be” significant level of national diversity in Russian business elite. Russian business elite realities, that will be discussed hereby, were speculated upon by the author for some time already before this master thesis. And actually they became the catalyzing factor for the author’s decision to investigate the actual level of national diversity in Russian top-management teams and companies’ directors’ boards. In short, this part will reveal some realities of contemporary Russia that are considered to be important reasons for the visible globalization of business elite of the country.
diversity is vital for some interest groups in the Russian business elite and its scale should increase.
The second reason appears to be a consequence of a more scaled phenomenon, namely foreign investments in Russia. And if in 2000 foreign countries invested $10958 mln in the Russian economy and business, in 2006 the amount increased by five times and reached $55109 mln19. Under such conditions, the increasing amount of foreigners in the Russian companies’ management seems very logical: foreign investors want to see their representatives in the board.
The third reason for the “should-be” increase in the number of nationally diverse directors in Russian business elite possibly lies in the boosting amount of IPOs in the recent years. According to Evans (2007), in 2006 there were eight IPO deals in Russia with which companies totally raised $14,5 bln. Not to mention the fact, that in 2005 there were even more - twelve deals - raising around $5 bln. Moreover, the year 2006 was called “the year of IPO” by Russian President Putin (Titova, 2007). But according to some research results, the more prestigious are personal credentials and characteristics of the members of top-management team or board of directors of the company coming to the market - the more favorable will be the entering conditions for it (Certo at al, 2007). Thus, not surprisingly, many Russian companies decided to include foreign nationals in their boards just before the important IPO deal. This way they are trying to enhance the image and reputation of their company in the eyes of foreign as well as domestic investors.
And finally, the last reason for the existing national diversity can be seen in the desire of Russian companies to learn foreign expertise and new business practices. As, apart from the company image, its actual profit and efficiency is, certainly, crucial. Russian companies have recently started to actively engage themselves in the international business and trade. But still they have some problems in implementing and adjusting international standards and best-practices in their every-day life activities. For this reason, I believe, foreign managers are invited
19 Foreign Investments in Russia. Source: Federal State Statistics Service.
to the Russian boards: to share expertise, to help to implement international standards, for example, in accounting or corporate governance, or to introduce some foreign best-practices approaches in the Russian environment. Besides, foreign nationals (meaning those from developed countries) are more likely to denounce corruption and bribery (Expert, 2004). Thus, the national diversity policy in the Russian corporations will be very much in line with the government initiatives to fight corruption.
CHAPTER 3 HYPOTHESES
The aim of this research is to reveal and to analyze the level of national diversity in Russian business elite in 2006, plus the reasons for that. This part will focus on the company characteristics important to study the presence of foreigners in the Russian companies’ boards. In order to analyze it, several hypotheses, which study the relationship between national diversity in 100 Russian firms and some other variables, have been formulated. Hypothesis has been grouped according to four main constructs used: IPO, International activities, Size, and Board structure. 3.1 IPO
3.2 International activities
It is not so easy for a company to be active in many different countries in the world simultaneously. Every place has its own specificity and it is more than ever true in the field of business. So when coming to the new country, companies often try to engage native specialists in the work, thus striving for optimizing the costs and increasing the productivity of operations. Not surprisingly, having the knowledge and experience with local market, native managers frequently climb the career ladder quite fast and reach the top positions in the company. This lead to Hypothesis 2: The more international activities is a company engaged in - the more nationally diverse is its board. And some particular sub-hypotheses:
H 2. a. The more countries a company is active in – the more nationally diverse is its board. H 2. b. The higher annual sales of a company outside Russia – the more nationally diverse is its board.
The relevance of a company’s involvement in M&A deals in the context of its international activities is recognized. However, due to the lack of sufficient and reliable information on this issue, the hypothesis on M&A influence on the variance of national diversity variable has been omitted.
3.3 Size
companies to have at least three independent directors in their boards20. And as independent directors are often foreign citizens, larger companies, which can offer them quite considerable compensations, are more prone to hire foreigners as compared to their smaller counterparts. Moreover, larger companies are generally more known in the world job-market and thus seem attractive not only for the national, but also for the international candidates. Subsequently, if some considerable number of foreigners is working for a company, the chances of a foreign national to be appointed on a top position in management or in the board are also quite high (Van Veen and Marsman, 2008). This leads to Hypothesis 3: The larger is the company – the more nationally diverse is its board. And sub-hypotheses:
H 3. a. The more employees has a company – the more nationally diverse is its board. H 3. b. The higher are company’s annual sales – the more nationally diverse is its board. 3.4 Board structure
As mentioned above, the Russian Code of Corporate Governance recommends companies to include at least three independent directors in their boards. Certainly, it does not state the nationality of a possible candidate, but it clearly says that a person should be “independent from the officers of the company and their affiliated persons and from major business partners of the company”. Russian business elite, as it is known from the previous section of the paper, is quite young and in present conditions it is very difficult to find a sound specialist who will be prominent in the particular industry and also not anyhow connected with the company. Thus, the chances to find a good professional in the same sphere with high records and reputation are higher if one would search for an expert abroad.
In addition, the amount of non-executives themselves can be quite crucial to the level of national diversity in a company. It can be the case that the more executives there in the company’s board in general, the more foreigners can be included in their rows. This can be explained by the proposition that Russian companies are still quite cautious about the access of
20 The Russian Code of Corporate Conduct, Chapter 3, Section 2.2.3
foreigners to the actual decision-making and try to dilute their influence by the number of nationals among non-executives. So, it is hypnotized that the greater is the number of independent directors in a board, the more foreigners can be appointed in it.
Moreover, it is supposed that specialists hired from abroad will be more spread among executive, rather than executive directors. This can be justified by the nature of non-executive directors’ work, who are required to spend less time busy in corporate affairs than their executive colleagues. Thus, it might be easier for a foreigner to have a status of a non-executive in a Russian company and to fly only several times a year to a foreign country to the meetings of the board. Executives group, that, on the contrary, has more responsibilities and are meant to be present at work much more often, if not daily, performing their functions, is supposed to consist mainly out of the national directors.
This leads to Hypothesis 4:
H 4. a. The more non-executive directors will be in a company – the more nationally diverse will be its board.
H 4. b. The company having a two-tier board, as compared with one having one-tier, will have more nationally diverse board.
H 4. c. Foreigners are mostly present in the non-executive, rather than in the executive board of a company.
CHAPTER 4 METHODOLOGY
4.1 Sample
In order to study national diversity in Russian companies’ boards, the sample of 100 Russian largest organizations in terms of annual sales for 2006 has been chosen. The list21 of companies has been provided by the Expert RA Rating Agency, first independent rating agency in Russia founded in 1997 by Expert magazine, which, in its turn, is a very respectable and popular financial journal in Russia.
Foreseeing the possible questions about why the choice of the sample did not fall on the companies listed on the national Stock Exchange, the following remark should be made: the majority of the companies in Russia are still not on the market. (And as for the sample itself, the distribution of companies between listed and non-listed ones is almost halved). That is why to make a choice towards solely companies listed on the Stock Exchange would mean a priori biased results, as it is known that companies which are already in the financial market are more likely to comply with international standards, including the inclusion of foreign nationals in their boards. Still the companies in the list are the most successful and strongest in their financial and other aspects organizations in Russia. The results for national diversity in their boards will be certainly overestimated as compared to the whole pool of companies in the country.
The study on the national diversity of Russian business elite will mainly focus on the Russian companies’ boards of directors and top-management teams. The words “board” and “top-management team” are often used as synonyms, meaning Russian business elite.
4.2 Operationalization of the variables
As for the variables, they were operationalized as follows. “Company country of origin” was the same for all 100 companies - Russian Federation. The company should have had its headquarters in Russia and registered by the national authorities as the Russian one. Information for the variable “Industry” was taken from the rating of the largest Russian companies by Expert RA Rating Agency and got 22 different values. “Last name and initial of corporate board member”
21 The list of the largest Russian companies by Expert RA Rating Agency -
