Russia's Directors of the Year
from
May/June 2007
by Craig Mellow
Many Americans doubtless envision Russian board members as a Slavic variant of guys in sharp suits caucusing behind Luigi’s Clam Bar. Richard Matzke and David Haines are out to confound this stereotype. The two are co-winners of an unlikely prize: the first annual Russian Director of the Year award, bestowed by Moscow’s Independent Directors Association, a group formed in 2002.
As their surnames suggest, neither Matzke nor Haines is Russian. Indeed, foreigners accounted for a third of the 150 best-director nominees (and about half of the association’s total membership), says Alexander Filatov, a governance wonk who runs the outfit with scarcely contained enthusiasm from a converted groundfloor apartment off Moscow’s historic Arbat pedestrian street.
This year’s winners aren’t short on boardroom qualifications. Matzke, 70, is an American, a retired vice chairman of Chevron Corp. and one of two foreigners on the board of oil giant Lukoil. Haines, 46, who’s British, is a former global marketing manager for the Vodafone cell-phone empire and now CEO of Grohe, a German faucet manufacturer. He is the nonexecutive chairman of cellular carrier VimpelCom.
A high-profile board appointment is an increasingly common perk for expatriate businesspeople who rub shoulders with Russia’s new commercial elite. Matzke took Chevron into the former Soviet Union as director of non-U.S. exploration and production. He met Lukoil boss Vagit Alekperov in the late 1980s, when the oligarch-to-be was a rising young Soviet production manager. Haines spent 1995 through 1998 at the Moscow office of candymaker Mars, helping turn Snickers and Kit Kat into Russian household names. One of his colleagues was Alexander Izosimov, now VimpelCom’s CEO. The award winners insist that they are not windowdressing. VimpelCom, founded by former military scientists in the early post-Soviet years, was the first Russian company to list on the New York Stock Exchange, which it did in 1996, and one of the first to attract a strategic foreign investor, the Norwegian telecom Telenor.
Haines, who joined the board and became chairman in 2005, defines his primary mission as keeping the fastgrowing company from being ripped asunder by a prolonged public fight between Telenor, which owns 30%, and Russian shareholder Alfa, a leading financial-industrial group, which has 28%. Alfa wants the carrier to expand into neighboring Ukraine; Telenor, which already controls a majority of a leading Ukraine cell provider, doesn’t. Lawsuits and invective have flown between the two for a couple of years. “My principal role is to keep management focused on day-to-day operations and not get sidetracked by the shareholder dispute,” Haines says.
Lukoil, which Alekperov melded together as the Soviet state energy monopoly dissolved, has gradually shifted away from habits formed under communism. Matzke counts the main achievement since he joined the board in 2002 as “moving to a very open company from a very tight one.” He frequently represents Lukoil, which earned $2.4 billion in the third quarter of 2006, at financial road shows. And once a month he travels to Moscow to talk global expansion; the company aims to draw as much as one-quarter of its production from outside Russia by 2010.
Good governance, including good directors, is enjoying growing repute among a Russian business class more famous for siphoning profit into offshore personal accounts. Fear is one driver—missing billions are harder to explain away in Vladimir Putin’s betterregulated Russia—but so is greed. Investors and top managers alike have realized that they can make much more on stock exchanges than from pilferage, and are cleaning their stables accordingly. “Companies understand that better corporate governance translates into value in their share price,” says Michael Kuben, managing partner in the Russia practice of PricewaterhouseCoopers, which sponsored the Director of the Year award.
Glasnost does have its limits in corporate Russia. Lukoil’s website, which Matzke describes as “the most informative I have ever seen,” lists only bank nominees as shareholders, with ING Bank Eurasia nominally holding 64% of the shares. Yet the pioneering foreign directors have come to believe in Russia, and with a Moscow stock market that has tripled in value over the past two years, they are not alone. “The management here at VimpelCom could be running any company anywhere in the world,” David Haines avers. “I would even say many Western companies could benefit from their entrepreneurial spirit.”
