20 April 2004 20:51
S&P places VolgaTelecom on GovernanceWatch negative
MOSCOW. April 20 (Interfax) - Standard & Poor's Governance Services said today it placed its Corporate
Governance Score (CGS) of CGS-5.8 on Russia-based fixed-line telecommunications service provider VolgaTelecom on
GovernanceWatch with negative implications.
--The attempt to appoint a new CEO without preliminary
consideration by the newly established board nomination and
The GovernanceWatch placement reflects concerns relating to the departure of the company's CEO and the
likelihood that the board will adhere to the majority owner's choice of replacement without seeking meaningful
input from independent directors. The majority shareholder, Svyazinvest, has responded to the requests of independent
directors for a delay to the formal approval of the already selected candidate, but this development reinforces several
concerns relating to Volgatelecom:
compensation committee;
--The nomination of only one candidate by Svyazinvest without any alternatives;
--The lack of clear criteria for selecting candidates, including the rationale for the new candidate proposed by
Svyazinvest;
that a key management-related decision may be made without the
company's independent directors having any ability to provide
--The lack of transparent succession planning in the company and Svyazinvest; and
the board's nomination and compensation committee, which was an
important step in the improvement of the company's governance."
--The lack of transparency regarding the reasons for the retirement of the CEO, whose ability to balance the
influence of the majority holder was one of the positive governance features of the company.
"This situation is an example of the overwhelming influence of Svyazinvest, the majority shareholder, on the
company's board of directors. This is a risk factor we have highlighted for all Svyazinvest companies," said
Julia Kochetygova, director of Standard & Poor's Governance Services. "At VolgaTelecom we see the
possibility
meaningful input. We view this as inconsistent with the company's recently approved Code of Corporate Conduct
and the establishment of
Standard & Poor's will resolve the GovernanceWatch on Volgatelecom when the issue of the CEO's
replacement is concluded. It will monitor the extent to which the independent members of the nomination and remuneration
committee are involved in this key corporate action. [RU EUROPE ASIA EEU EMRG TEL AAA] rd <>
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