On December 23, 2004 the Standard & Poor’s international ratings agency lowered Russia-based telecom operator OAO Uralsvyazinform’s corporate governance score (CGS) from CGS-6 to CGS-4+. The move followed company’s BoD decision not to renew the contract with its CEO.
On December 24, 2004 Standard & Poor’s Governance Services also lowered CGSs on other mega-regional companies (MRCs):
The CGS on OAO CenterTelecom was lowered to CGS-4+ from CGS-5+;
The CGS on OAO Dalsvyaz was lowered to CGS-4+ from CGS-5+;
The CGS on OAO North-West Telecom was lowered to CGS-5 from CGS-5+;
The CGS on OAO Sibirtelecom was lowered from CGS-5+ to CGS-4+;
The CGS on OAO South Telecom Company to CGS-4 from CGS-5
The CGS on OAO VolgaTelecom was lowered to CGS-5 from CGS-5+
Svyazinvest management sees no grounds for the review of the scores, as Standard & Poor’s substantiation does not stand up to any criticism.
Namely, the factor of Svyazinvest’s dominant influence on adopting strategic decisions at its companies had already been taken into consideration by Standard & Poor’s when assigning ratings to the companies, which was reflected in the agency’s reports. Thus, it cannot be regarded as the reason to deteriorate the scores by the assessment component ‘Ownership structure and external influences’. Neither the former, nor the latter has changed.
‘Board structure and effectiveness’ component decrease also puts many questions, as one mega-reional BoD’s decisions do not allow to judge others, because of the differences in their structures.
Furthermore, agency’s analysts incorrectly indicate lack of consultation with independent directors, as the issue of OAO Uralsvyazinform CEO dismissal was thoroughly elaborated with the minority shareholders in the scope of ‘Svyazinvest BoD Staff and Remuneration Committee’ performance.
On January 17, 2005 Svyazinvest representatives held a meeting with the management of S & P Russia’s division but could not receive any distinct comment. Head of Svyazinvest’s Information Department, Oleg Mikhailov says: “We regret to note that the procedure of monitoring the rating of corporate governance is still not transparent enough for the issuer. We have not been presented any data on reviewing the scores by subcomponents. Moreover, S&P’s experts explained the abovementioned as the review of weights of separate components in the final score of the rating, compared with the ones used before. We do not think it correct, because, in this case, we lack ratings comparability in the historical perspective. We understand that ‘assessment’ is, to a certain extent, subjective and creative notion, but at the same time, consider that Standard and Poor’s had no objective reasons to lower the scores of Svyazinvest mega-regionals.
