Transparency

Illegal, uncompensated, forceful takeovers of Russian companies — the practice known as reiderstvo — are rooted in a mentality of corruption that pervades the country’s worlds of business and government. 

Transparency International highlighted the problem in the corporate world by releasing a report in 2018 on the lack of transparency at a whopping 84 percent of Russia’s top 200 public companies.

Its findings painted a discouraging picture for foreign companies considering entering the Russian market by investing in established enterprises there.

The median score of the companies that Transparency International assessed was 2.6 on a 10-point scale — a D on an A-through-F grading system. Only 32 of the enterprises, or 16 percent, had a score of 5 or higher.

The team that compiled the report looked at three practices — the companies’ public disclosure of taxes and other payments to the government, the information they made available to the public on their subsidiaries and overseas operations, and their anti-corruption programs.

The most disheartening finding was that 41 companies scored zero on all three criteria.

The kind of mentality that prompts publicly held companies to hide key information from the public is the same kind that encourages reiderstvo. A combination of a climate of secrecy and a public-be-damned attitude is a major reason that many Russian enterprises avoid paying their fair share of revenue and refuse to be held accountable to the rest of society. The same thought process allows raiders to plan and pull off uncompensated, forceful thefts of companies ranging from the very small, with a handful of employees, to multi-billion-dollar behemoths.

The companies that Transparency International studied account for more than 70 percent of Russia’s national income, which means their taxes are crucial to the state budget.

But the vast majority’s climate of secrecy ensures that many pay a lot less tax than they should.

It is easy for companies that lack a conscience to move from ducking taxes and avoiding public accountability to stealing other people’s operations, with or without the help of authorities and in many instances with the use of force.

So any program to combat reiderstvo needs to include efforts to address the mentality of corruption that pervades Russia’s corporate world.