The Corporate Behavior Code is not a panacea.

On October 12, 2001 parliamentary hearings "The role of corporate governance codes in the development of the Russian legislation" took place at the State Duma on the initiative of the State Duma Committee for Economic Policy and Enterprise and the State Duma Property Committee. "We decided to organize Parliamentary Hearings for public discussion of the Draft Corporate Behavior Code, and first of all we want to hear the opinions of issuers, because if the business community does not accept this document - it will not work", - said the Chairman of the Committee for Economic Policy and Enterprise A. Aksakov, opening the parliamentary hearings. Today the quality of corporate governance determines the business climate and the investment attractiveness of the Russian market.

According to the FCSM Chairman I. Kostikov, the final version of the Code will be presented for the Government review in December this year, and the research on the practice of its implementation is scheduled for Autumn 2002, followed by a public discussion.

The Corporate Behavior Code will help to achieve one of the key objective - findign the equilibrium of relationship among various groups: managers and shareholders, large and retail shareholders, enterprise and the State - in other words, the movement from the conflict to the equilibrium. Violation of basic shareholders' rights such as the right for current income (dividend) and the right to participate in the management of the company forces shareholders to participate in the management of the company, which sometimes takes weird forms.

The work on the Corporate Governance Code traced three major problems, exsting in Russia today: imperfection of the legislation, poor enforcement practice and low corporate culture and business ethics on the company level. An open issue is also the watershed between legislative regulation and self-regulation. This opinion was expressed by the Deputy Minister of Economic Development and Trade A. Sharonov. "We already made one step in the wrong direction, by having approved in the first reading amendments to the Federal Securities Market Law in the part of the regulation of securities issuance", - he emphasized. We remind you that the Law establishes criteria of corporate governance quality and envisages the establishment of an Expert Council within a federal authority, which will include issuers into a special list based on their corporate governance, and in fact the State will start performing functions of a rating agency. This brings the danger of corrupting the idea of corporate governance itself because of excessive interference of the State into market-controlled processes. "The State establishes rules of the game through the legislative basis, and the professional community develops higher standards and makes the respect of such standard prestigious", said A. Sharonov.

The Russian Union of Industrials and Entrepreneurs (RUIE) made the suggestion during the hearings to create a special institution which will monitor the compliance with norms of corporate behavior on the market and would control the observance of the Code. For example, such functions could be endorsed by the RUIE.

A. Kolesnikov, member of RAO UES Executive Board, believes that it is impossible to apply a common tool to companies with different interests, while the achievement of the key objective of the Code - to find the equilibrium of interests among different groups - requires individual approach.

Speakers expressed different opinions about the presented document, and were probably unanimous in one view - the Corporate Behavior Code must be recommendatory, and shall not be a regulatory document. Overall, the Russian business community demonstrated a positive attitude towards the presented Draft Code, seeing it as an important step towards better corporate governance culture and improved investment climate in Russia.

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