PLUSH PAST, SUEDE PRESENT
Alexander Livshits: "A really independent director is a free person. He knows his business. His commitment is not to the boss, but to the company."
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Medvedev line is working
VYACHESLAV NIKONOV, President of Polity Fund
March will see a year since Dmitry Medvedev was elected President of Russia. It has been a difficult year.
One often reads that Dmitry Medvedev can become an independent and major political figure only if he sets himself up in opposition to Vladimir Putin. It is not hard to notice that those who speculate on this topic are mainly looking for breaches in Russian statehood rather than being concerned with strengthening it. The game they play is aimed at setting the President and the Prime Minister, the Kremlin and the White House against each other in order to achieve a paralysis of power Ukrainian style.
Medvedev and Putin are indeed very different persons. But they are implementing the same project. Their roles are distributed, first, as the Constitution prescribes. Second, that is what they agreed on themselves without promptings from "well-wishers". And whenever there are differences between them, thank God, they are able to resolve them differently than Viktor Yushchenko and Yulia Tymoshenko, which is good for the country.
Medvedev is a very independent figure indeed. He is gaining experience and political weight, a process that is going very quickly considering the severe trials that befell the country during the last year. It will be recalled that when Medvedev made his bid for power he proposed a massive programme of modernisation based on four i's: institutions, investments, innovations and infrastructure. The tasks of modernisation did not go away, but he had to devote more time to four c's, the four crises: around South Ossetia, in the relations with the West, the economic and gas crisis.
The tandem has acted very much in concert and Medvedev acquitted himself as a mature politician. In August 2008, during the Georgian attack on South Ossetia he, as the Supreme Commander-in-Chief, made the only possible decision: to use force, to coerce the arrogant Georgian adventurer into peace. For all the damage and casualties, it was the most successful operation our armed forces carried out in decades. The West was furious, but for the first time it had to start discussing the issues of concern to us directly with Russia.
The world economic downturn dealt a powerful blow at the Russian economy, and not all the anti-crisis measures have been impeccable. However, the signals emanating from the Kremlin after the start of the crisis have been reasonable and the confidence and a total lack of panic deserved respect. The leaders kept their nerve during the gas war, the result being the first agreement with Ukraine setting coherent terms of gas pricing and transit.
The spheres of predominantly presidential powers have become political reform, personnel, the regions and international affairs. In each of these areas Medvedev displayed his trademark approach. In politics it was careful liberalisation as witnessed by the actual lowering of the barrier for getting into the Duma to 5%, a change of the way the Federation Council is formed, which can now include only the deputies of various levels elected in the regions. The fact that the party that wins elections in a region has a say in selecting the candidate for governor significantly strengthens the institution of political parties. The newly registered Right Cause Party holds out some promise that the liberals will at last unite and will stop tearing the already small liberal electorate between a dozen marginal projects.
A normal personnel policy is being revived in contrast to all the post-Soviet years when it was fairly impressionistic and based on whims. The foremost members of the President's cadre have been appointed to top jobs. For governors objective criteria of their performance have been set and the first foursome fell victim to these criteria last week. Stressing with good reason that the crisis is the best time for testing and renewing the government cadre, Mr Medvedev at the same time did not yield to the calls of many to start looking for scapegoats and crackdown on pockets of resistance.
His international activities are there for everyone to see, and so are the results. The crisis has anything but driven the Russian leadership into isolationism. Yes, things are difficult for us, but they are even more difficult for our neighbours. In the context of the crisis, the Kremlin has been active in the CIS space extending a helping hand to its friends and allies offering to create an anti-crisis EurAsEC Fund and long-term loans. The "Medvedev plan" is reminiscent of the Marshal Plan which the United States offered West-European countries after the war in order to pull their economies out of disarray while forging strong political and economic bonds. Already real steps are being taken to establish a customs union of Russia, Belarus and Kazakhstan; Rapid Deployment Collective Forces have been set up in the framework of the CSTO, which is emerging as a fully-fledged military-political alliance; Bishkek is showing the door to the American military base.
Huge steps have been taken towards the East. The opening of the country's first liquefied natural gas plant and the launching of the Sakhalin-2 oilfield mark a break into the energy markets of the Asia-Pacific region from Japan and Korea to the US and Mexico. China (at the height of the crisis) is extending a $25 billion loan on extremely good terms in order to, among other things, to pay for building a branch from our Far Eastern oil pipeline to the south and guarantee steady supplies of Russian oil for decades ahead. Traditionally we have supplied energy to Europe, which is now the least rapidly developing part of the planet. Today we are opening up an energy market in East Asia, which is the most dynamic part of the world in the 21st century.
However, in the West too Medvedev had a hand in the fast-changing situation in the wake of the "Georgian aggravation". The President proposed an approach which is at once firm and constructive: proposals to review the whole concept of energy security outside the Energy Charter, which is unfavourable for us and is not workable, a new treaty on European security, the start of practical dialogue on the long-suffering Partnership and Cooperation Agreement with the EU. These proposals are sinking in, if slowly.
The latest Munich Conference was rather symptomatic. Routinely, in the past it became a rostrum for anti-Russian rhetoric. This time only one anti-Russian speech was made (by the Estonian President), and Saakashvili was not given the floor at all, while Tymoshenko spoke about friendship with Russia, Sarkozy about the lack of threat on our part and CITA Vice President Joseph Biden urged the need to "reset" the Russian-American relations.
The Washington envoys who visited Moscow recently also spoke about normalisation, stressing that the Obama Administration had no intention to push ahead with NATO in expansion or deploying missile defence elements in Eastern Europe and about the growing interest in cooperation on Afghanistan, the Middle East and so on. This is still a far cry from "eternal friendship" but anti-Russian "Sabbaths" are going out of fashion.
So, there are no grounds for saying that Medvedev has not proved himself as a President. His policy is bringing results. And not because it runs counter to Putin's policy.
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"The opening of the first liquefied natural gas plant in the country and the launching of the Sakhalin-2 oilfield mark a break into the energy markets of the Asia-Pacific region from Japan and Korea to the US and Mexico."
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QUOTE OF THE DAY
"We will force business to sell the housing it has built. If businessmen do not sell the floor space during the first quarter we will confiscate it and give it to those on the waiting list to receive government flats. They should consider themselves to be lucky if we pay them at the actual construction cost."
Alexander Lukashenko, President of Belarus (addressing journalists during a visit to Minsk Motor Plant, Minsk, February 24).
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Independent directors: six questions
ALEXANDER LIVSHITZ
For six months now I have been writing about nothing but the crisis. I am sick of it. Especially since many interesting things are happening in the economy. The boards of directors of state-owned companies will soon have independent members. This is an absolutely correct decision and a long-awaited one. Evil tongues threat that this is nothing but PR designed to make us look as good as the West. In real life, they claim, everything will remain as before... The implication is that our First Deputy Prime Minister engages in window dressing. Doesn't he have more important things to do? I for one think that everything is serious. If so, the first question is, what is the aim? The aim is to make the work of state-owned enterprises effective. Their money is provided by the state, so it is our common money. It must be spent reasonably. The majority of them have to gird themselves for being on their own when they won't be able to count on anyone's help. At present they have the backing of the Government, which is ever ready to help. In future they will have to deal with rivals who are looking to push them out of the market.
So far government officials sit on the boards of directors. Granted, they are knowledgeable people. They know a thing or two about macroeconomics, but not about business. It is like in sport: someone can run fast and someone is good marksman. A top-class sprinter is not necessarily a good sniper and vice versa. Besides, bureaucrats are overloaded with their government duties. They treat their membership of the board of directors as a chore, something like party or trade union committees or going to unloading vegetables in the Soviet times. But the most important thing is that they are not free. Each of them has his boss who tells him how to vote.
A genuine independent director is a free person. He knows business. His loyalty is not to the boss, but to the company. He will scrutinise the finances, he will put uncomfortable questions to managers. About handsome bonuses, incredibly generous charitable activities, the buying of football teams and acquisition of dubious assets. He will make them very busy and can even sack them. This is the kind of person who should head up all the committees of the board of directors, for audit, strategies, human resources and remuneration.
Question two: what about the state? Its interests will be protected by a special representative with a power of attorney from the Government. It is important that he does just that and no more, that he does not bring pressure and push his weight about. He shouldn't think that he alone knows the right answers. Otherwise there will be no independent directors left. They will say: "You know all the answers? Govern alone. We have other things to do".
Question three: what should not be done? Appoint one and the same person to several boards. The economy is like a large village where everybody knows everybody else. He would know too much about the neighbours and inevitable will cease to be objective. Even the most decent ones would be biased. They would offer jobs to former civil servants. In that case restoring personal pensions would be a cheaper solution. In addition, it would reduce corruption. Failing that they would be saying: "Come on, do me a friend's turn. Don't be afraid to be fired. There is always a place for you on the board of directors. You will like it." Such things, by the way, happen in every developed country. I am afraid that we too will not be spared scandals. Hiring directors from private shareholders if there are any in the state-owned company. They will start catering to their masters, regardless of business interests. They will take the queue from managers and bring along amenable directors. But we need efficient directors.
Question four: where to find effective directors? Judging from world practice, they are to be found among retired managers, aged sixty-something. They have typically made their pile, have a solid reputation and grandchildren. They still have some ambitions. They would feel triumphant: "I knew they couldn't cope without me". By the way, it is no negligible resource, and it is not all that expensive. They readily use it abroad. ExxonMobil is an example in point. It is the largest oil and gas company in the world. It has nine old men sitting on its board of directors and another two who are fiftyish.
Question five. How should they be paid? Not less than in America. The authorities seem to be ready to do that, but in exchange they insist on controlling them. They claim the right to get rid of the lazy and the incompetent regardless of their past services, and even claim compensation for damages. That is clearly over the top. Candidates for director are not only highly regarded people, they have high regard for themselves and they would not settle for such terms. They would not agree to be board members. And rightly so. They may make mistakes, but doing harm deliberately is beyond them.
Question six: When will something useful emerge? Counting from here, not very soon. If we continue gabbing, idling and being afraid to make a mistake, never.
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Simple old truths
ANDREI BILZHO
I don't know about you, dear reader, I have a special feeling for old things. For some of them I feel a mixture of attachment, pity and affection. They often contain a mystery, warmth and something very personal. Friends often tell me: "Throw it into the dustbin. This is an old hat". "Into the dustbin?" I thought after another such suggestion and it sent a chill down my spine and sweat on my bald head. And the look of my plush bear cub in which I spied admonition for my wicked intentions.
They dropped the bear cub and his ear fell off. Still, I won't throw him away because he is good. I gave him a promise. I gave him my word of honour. Promises must be kept. Isn't that so, dear reader? The bear cub is just a year my junior. It was given to me for my first birthday by my grandmother, who, after Stalin's death, returned to Moscow from labour camp and eternal exile in 1954. The bear cub wore thick blue pants. I wore exactly the same kind of pants. Initially he lived with us in a communal apartment and then moved together with the family into a Khrushchev tenement block.
My classmates would come to my little room leaving their shoes in the hallway. The little room was filled with the strong male smell. Nothing doing, the boys were reaching puberty, and their sweat and other glands were working as hard as the Soviet factories enthusiastically churning out their products. But hygiene was still at a low level, as it was in fact at many Soviet factories. The first stage of puberty is when children begin to smell like adults. Childish behaviour and adult instincts. In between talk about girls and smoking they beat my little plush friend. They held him up by the ear and used him as a punch bag. He alone knows what he has lived through apart from myself of course. A punch and he goes flying towards the ceiling. His ear goes off and the plastic mug for good measure. The ear would be sewn back on, torn off, sewn back on again until it was lost.
The bruin was eventually exiled to the dacha where all the old rags go. The dacha is a home for old things. There he sat in a corner on an old sofa. But once my parents took pity on him and brought him back to Moscow. Like my grandmother he returned to the capital after exile. The parents sewed back the ear, but it was not made from plush but from suede cut out from some old boots. The pants were made from brown velvet and he got a new white shirt with a red pattern. Just as they were preparing to take the bruin back to the dacha, the dacha burned. It was engulfed by fire and burned with all the old things in it. We ourselves escaped by a fluke. My parents, my son, my dog and myself. We were jumping out of the house early in the morning as burning pieces of wood were falling on our heads. Every bit like in the children's tale "The Cat's House". Meanwhile my plush bruin was safe in Moscow and was spared all these troubles. Otherwise his life would have ended in the early 1990s like many lives have. Later I built a new wooden house on the old foundation and the bruin with his new suede ear moved there. It spent long winters in complete solitude in a summerhouse. Even in the summer we were visiting the dacha less and less often. So I had pity on the bruin and brought him to Moscow a second time. After all, I had promised to him that I would never leave him alone. So he is sitting in my new Moscow flat looking at me as I write this article. How can I throw him into the dustbin? He was my first model when I was learning to draw. He survived my grandmother, father and my two dogs. He will survive me.
All of which makes me think, dear reader. This headlong chase of everything new, when old and important things are thrown into the dustbin, when memory goes and feelings atrophy, when you want ever new things, when new houses are springing up in place of the old ones, when new friends come along instead of old friends and new wives instead of old wives... All this is well and good, but you will never have a new life. Perhaps to some extent this is what the crisis is all about. Well, take care.
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In 2013 Barack Obama promised the Americans to cut the nearly 1.5 trillion budget deficit by half "so that our grandchildren had no debts". Obama's recipe is simple: a drastic cut of spending, including the Pentagon's spending.
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