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. Last Updated: 07/27/2016

Factory Dilemma: Must Old Bosses Go?

The Bolshevik Biscuit Factory, which in December was the first Russian state-owned firm to be privatized, posted another first this week when it held the first shareholder's meeting of a big privatized firm.

The 13-hour gathering was a noisy and stormy affair, but it produced a clear signal that will soon be heard throughout Russian industry: strong calls from hard-nosed accountants and investors for Russia's factory directors to make profits or face the sack.

A group of shareholders led by Alfa-Kapital, an investment fund that has taken a big stake in the company, started a move to replace Bolshevik's director, Oleg Shimanov, and bring in its own team.

In the event the move failed, but the controversy from the meeting - which ended at 11 P. M. Wednesday - has not died down.

Mikhail Aleksandrov, Alfa Kapital's director for investments, said Thursday that he would be challenging in court the vote that confirmed Shumanov.

"We think we could find someone else better equipped to do the job", he said.

Selling off state firms like Bolshevik and making their directors responsible to investors like Alfa-Kapital is at the heart of President Boris Yeltsin's reform plans for the Russian economy. If Yeltsin wins, another 5, 000 big firms will be sold off this year.

Parliament opposes such rough, market-oriented reforms and has given notice that it will make fundamental changes to the shape of privatization when it meets next week.

Bolshevik, a popular seller of cookies and cakes that employs 2, 500 workers at a factory on Leningradsky Prospekt, was the first factory to sell its shares for privatization vouchers at an auction in December. The auction brought in a flood of outside investors but most of the shares were given straight to the factory's workers.

According to one independent observer, 70 percent of registered shareholders came to the meeting on Wednesday, a huge turnout that created administrative confusion.

The door to the meeting hall was locked 15 minutes before proceedings started. Angry shareholders were left on the street for an hour demanding to be given their rights. They were eventually admitted after they threatened to call in the television cameras.

Once inside, officials struggled with the new procedures for organizing the meeting. Voting arrangements were a particular problem and each time a point of order required a vote, it took half an hour to count the numbers.

Alfa-Kapital's Aleksandrov was highly critical of the procedure.

"They did not check the numbers of shares each voter owned", he said. "They just counted by a show of hands. It was like a Communist Party meeting".

At the center of the controversy was the vote on who should sit on the company board.

Alfa-Kapital's director, Andrei Kosogov, said before the meeting that his company wanted new managers because the factory's old management had, no plan for installing a new Italian production line for which it had obtained foreign credits.

The shareholder's meeting apparently thought differently. Bolshevik's director, Oleg Shumanov, was reappointed, and sympathizers of the old management retained control.

The result is not surprising since workers at Bolshevik still have a majority of shares, but Alfa-Kapital has sent a strong message to directors Shumanov could not be contacted for this article, but his office said he was talking to Italian suppliers about the controversial production line.