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. Last Updated: 07/27/2016

S&P Rates Corporate Openness

Least Transparent
CompanyScore in 2005Score in 2004
Rambler Media2-
Source: Standard & Poor's

Major state-owned companies and politicians must take the lead in making Russian's corporate culture more open, ratings agency Standard & Poor's said Wednesday as it released its annual report on transparency.

In the study of Russia's 54 largest companies, S&P awarded Russian business a transparency rating of 50 percent, up from 46 percent in 2004 and from 34 percent in 2002, the first year of the study.

In comparison, S&P's 2003 study of 127 British companies rated them 71 percent transparent on average. The agency declined to give a more recent figure for that region.

The agency attributed this year's improvement to the "catching-up of the worst, rather than a breakthrough by the best," said Yulia Kochetygova, one of the study's authors.

For real progress in improving transparency there would have to be more action "on the part of major state-owned companies and politicians," said Kochetygova.

"Until this happens, we will observe caution on the part of privately held companies," she added.

Russian companies remain guarded about their ownership structure, the report says.

In the companies under review, the ownership of $205 billion worth of stock is unknown. The companies reviewed had a total market value of $376 billion, the report says.

"Many oligarchs and individuals still prefer not to disclose their actual ownership in the companies," said Mikhail Galkin, an analyst at Trust Investment Bank. "Often we see just layers of shell companies that are nominal holders of shares, but we don't know the ultimate beneficiaries and shareholders."

A total of 41 percent of companies have a private owner with a holding of more than a quarter, according to S&P.

Two other key issues are the use of international or U.S. accounting standards and the timely release of annual reports. Less than half of the 54 companies published their reports before the legal cutoff date for annual shareholder meetings, the report says.

By tackling these issues, steelmaker Mechel took the third position in this year's survey, up from 42nd place last year.

The companies with the highest transparency ratings include those who are seeking financing on the international money markets.

"They can rapidly increase capitalization by coming to the market, and that means, among other things, becoming more transparent," said Ronald Nash, head of research at Renaissance Capital.

The market is becoming "the single major disciplining institution in the Russian economy, more so than the government and the bureaucracy," said Nash, offering a contrasting opinion to that of Kochetygova on encouraging greater transparency.

The telecom sector is Russia's most transparent industry with an average rating this year of 72 percent, unchanged on last year.

Most Transparent
CompanyScoreRank in 2005Rank in 2004Rank in 2003
Wimm-Bill-Dann Foods77%421
Golden Telecom75%5179
North-West Telecom71%7820
RosBusiness Consulting69%81415
Southern Telecom67%10166
Source: Standard & Poor's