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. Last Updated: 07/27/2016

MMK Board Forfeits Pay in Rare Decision

Board members with Magnitogorsk Iron & Steel Works will forfeit their salaries for the four months from January until their contracts expire, the company said Tuesday.

The move is a rare one in Russia, where company executives have been reluctant to follow the lead of their colleagues in the West in waiving compensation in times of crisis, and it comes after workers at the company complained of being pressured to quit.

"The decision is caused by the need to cut company expenses during the uneasy conditions of an economic crisis that has hit the whole world," Viktor Rashnikov, chief executive and a majority shareholder of Magnitogorsk Iron & Steel Works, or MMK, said in an e-mailed statement.

Rashnikov said the executives had volunteered to forfeit their salaries for their work on the board. An MMK spokeswoman refused to provide salary figures for board members.

The company has lost 3,800 employees since September and is operating at 35 percent capacity.

The MMK board, elected in April for one year, includes Rashnikov, Managing Company Renaissance Capital managing director Kirill Levin, Polymetal deputy chief executive Zumrud Rustamova and BP regional director Peter Charow, among others.

The practice of foregoing salaries and bonuses has become widespread among Western managers as their companies' profits and capitalization sank. But few Russian companies have adopted the practice. "Our top executives still feel they are worth it," said Natalya Orlova, chief economist at Alfa Bank.

Another factor is that trade unions are not as powerful in Russia as in the West, Orlova said.

Several MMK employees complained in interviews last week that they were being forced to resign voluntarily so the company could avoid severance pay.

In October, several Rosneft independent directors -- including VTB president Andrei Kostin and Barclays Capital chairman Hans-Jorg Rudloff -- agreed to forego their annual salaries of $200,000, Kommersant reported.

Troika Dialog, the country's oldest investment bank, paid $180 million in bonuses in 2007. A Troika spokeswoman declined to say Tuesday whether top Troika executives were forfeiting any compensation payments this year.

Norilsk Nickel and Belon, a coal producer, said their executives were forgoing compensation for some responsibilities.

Yevgeny Plaksenkov, chief executive of Miel, a leading real estate company, said many Russian managers were forfeiting compensation this year, including those at his company.

"My subordinates are voluntarily foregoing bonuses," Plaksenkov said by telephone. "I know it is also happening in many other companies in Russia."

He refused to give specific examples.

"When a Russian manager turns down his salary or a bonus, he does it sincerely, with his heart and soul, because he understands that it saves crucial money for his company in times of crisis," he said. "Foreign managers act more under the influence of public opinion."