transparency in corporate reporting · togliattiazot w w75 — 3.8 russian

TRANSPARENCY IN CORPORATE REPORTINGAssessing Russia’s Largest Companies“Transparency International-Russia” Report

ASSESSING RUSSIA’S LARGEST COMPANIES

“TRANSPARENCY INTERNATIONAL—RUSSIA” REPORT

This report was produced by Transparency International Russia as part of a project led by the Transparency International Secretariat with fund-ing from the Siemens Integrity Initiative. The Transparency in Corporate Reporting assessment conducted in Russia uses the same methodol-ogy as the Transparency in Corporate Reporting: Assessing the World’s Largest Companies which is produced periodically by the Transparency International Secretariat. The latest edition of the global report, pub-lished in 2014, included Siemens as one of the 124 companies that were assessed.

© Bureau Verstak, design, 2017

Printed in Tara-Tut print shop (Moscow)

Project coordinator Anastasiya Ivolga

Project team Anton Pominov, Ekaterina Sukhareva, Ilya Shumanov, Maria Maria Shigreva

Project interns Alisa Velmiskina and Svetlana Ivanova

2 CENTER “TRANSPARENCY INTERNATIONAL—R”

TABLE OF CONTENTS

Introduction 9

The Overall Results 10

Recommendations 12

Methodology 20

1. Anti-corruption documents 26

2. Organizational Transparency 38

3. Country-by-country reporting 44

Annexes

1. List of evaluated information 50

2. Data per companies 52


TRANSPARENCY IN CORPORATE REPORTING

SCALE FROM 0–10, WHERE 0 IS THE LEAST TRANSPARENT, 10 IS THE MOST TRANSPARENT. THE INDEX IS BASED ON THE AVERAGE VALUE FOR ALL THREE PARTS OF THE STUDY.

COMPANIES ARE LISTED FROM THE HIGHEST VALUE OF THE INDEX TO THE LOWEST.

ACP — ANTI-CORRUPTION PROGRAMS OT — ORGANIZATIONAL TRANSPARENCY СВС — COUNTRY-BY-COUNTRY REPORTING

COMPANY % ACP OT СВС INDEX

Magnet w58w100— 7.9

Sberbank w85w88w64 7.9

Kazanorgsintez w81w75— 7.8

Rosseti w50w100— 7.5

Nizhnekamskneftekhim w62w81w60 6.8

Udmurtneft w54w75— 6.4

MTS w88w88w12 6.3

RUSAL w88w75w21 6.2

Megaphone w77w88w16 6.0

ALROSA w92w75w13 6.0

Tactical missiles Corporation w42w75— 5.9

Nordgold w73w75w25 5.8

NLMK w92w75w8 5.8

Evraz w85w56w29 5.7

VimpelCom w73w88w9 5.7

Rostelecom w81w88w 5.6

Mosvodokanal w35w75— 5.5

RZD w81w81w 5.4

Akron w88w75w 5.4

NCSP w31w75— 5.3

Zarubezhneft w85w75w 5.3

Inter RAO w54w88w14 5.2

MMK w73w75w8 5.2

RusHydro w65w88w 5.1

NOVATEK w77w75w 5.1

RussNeft w77w75w 5.1

RTI Systems w77w75w 5.1

Bashneft w77w75w 5.1

Rusagro w50w50— 5.0

Nornickel w73w75w3 5.0

Gazprombank w62w88w 5.0

KRET w23w75— 4.9

Uralvagonzavod w23w75— 4.9

Rosneft w73w75w 4.9

DIXY Group w73w75w 4.9

PhosAgro w69w75w 4.8

Polymetal w77w31w32 4.7

Globaltrans w46w75w20 4.7

Tatneft w54w81w2 4.6

Binbank w62w75w 4.6

VSMPO-AVISMA w62w75w 4.6

Sovcombank w62w75w 4.6

Rosta w77w13— 4.5

USC w27w88w20 4.5

Megapolis w81w6— 4.4

Gazprom w50w81w 4.4

KAMAZ w58w75w 4.4

Severstal w58w75w 4.4

UAK w58w75w 4.4

T Plus w58w75w 4.4


Surgutneftegas w42w88w 4.3

Ilim w54w75w 4.3

Aeroflot w50w75w 4.2

SIBUR w38w88w 4.2

Uralkali w50w75w 4.2

Saint Petersburg Bank w50w75w 4.2

LUKOIL w42w75w4 4.1

LANIT w92w31w 4.1

ODK w42w75w 3.9

TNS Energo w w75— 3.8

Togliattiazot w w75— 3.8

Russian Helicopters w27w88w 3.8

Credit Bank of Moscow w38w75w 3.8

Detsky Mir w77w38w 3.8

Promsvyazbank w77w38w 3.8

Gazprom Burenie w12w63— 3.7

Sakhalin Energy w73w — 3.7

Rosselkhozbank w58w50w 3.6

Pochta Rossii w69w38w 3.6

INK w69w — 3.5

Mosinzhproekt w69w — 3.5

Slavneft w27w75w 3.4

TMK w27w75w 3.4

Lenta w15w50— 3.3

TAIF-NK w65w — 3.3

RUSENERGOSBYT w65w — 3.3

LSR group w15w75w10 3.3

VTB w23w75w1 3.3

Metalloinvest w23w75w 3.3

O’Key Group w27w38— 3.2

NNK-Aktiv w8w81w6 3.2

Power machines w19w75w 3.2

Vnesheconombank w15w75w3 3.1

Mechel w19w75w 3.1

Mostotrest w12w75w 2.9

Polyus w19w38— 2.8

URALCHEM w4w75w3 2.7

Industrial Metallurgical Holding w w75w3 2.6

GAZ Group w4w75w 2.6

UTair w4w75w 2.6

R-Pharm w77w w 2.6

M.Video w w50— 2.5

Ruselectronics w w50— 2.5

Pulse w31w19— 2.5

Transneft w w75w 2.5

Otkritie Holding w w75w 2.5

PROTEK w w75w 2.5

AvtoVAZ w w75w 2.5

Rosgosstrakh w w75w 2.5

ChelPipe w w75w 2.5


Transmashholding w w75w 2.5

Sovcomflot w w75w 2.5

Ingosstrakh w w75w 2.5

RESO-Guarantee w w75w 2.5

Cherkizovo w w75w 2.5

Siberia Airlines w w75w 2.5

EuroChem w35w38w 2.4

X5 w54w19w 2.4

UIMC w8w38— 2.3

Volga-Dnepr w58w13w 2.3

AlfaStrakhovanie w w44— 2.2

PPF "RGS" w15w50w 2.2

High Precision Systems w4w38— 2.1

Neftetransservis w50w13w 2.1

SOGAZ w w56w4 2.0

Yandex w42w19w 2.0

PIK Group w w38— 1.9

Rolf w w38— 1.9

Bank Rossiya w w56w 1.9

Rosatom w19w38w 1.9

Tele2 Russia w23w31w 1.8

OMK w27w6— 1.7

PPF "Blagosostoyanie" w w25w20 1.5

Katren w8w19w20 1.5

CPC w38w6w 1.5

Neftisa w4w38w 1.4

Finance&Construction Corporation "Lider" w w25— 1.3

Russian Standard Bank w w38w 1.3

SUEK w19w19w 1.3

PPF Future w8w25w 1.1

Salym Petroleum w19w — 1.0

Siberian Generating Company w w19— 0.9

Transoil w w19— 0.9

StroyTransNefteGaz w4w13— 0.8

UMMC w w25w 0.8

EuroSibEnergo w w25w 0.8

Sds-Ugol w w13— 0.6

Agro-Belogorie w w13— 0.6

Neftekhimservis w w13— 0.6

Genser w w13— 0.6

Voentorg w w13— 0.6

Eldorado w12w — 0.6

Svyaznoy w12w — 0.6

EUROCEMENT w4w13w 0.5

Sportmaster w15w w 0.5

Sedmoi Kontinent w8w — 0.4

UNICONF w w13w 0.4

STROYGAZMONTAZH w w6— 0.3

NCC w w6— 0.3

State ATM Corporation w w6— 0.3


Techmash w4w — 0.2

Element-Treyd w4w — 0.2

Holiday Group w4w — 0.2

UCL w w6w 0.2

Metallservis w w6w 0.2

Aston w w6w 0.2

DNS w w — 0

Red&White w w — 0

Alkor and Co w w — 0

Intertorg w w — 0

Retail K-1 ("Maria-RA") w w — 0

MERLION w w — 0

SNS Group w w — 0

Almaz-Antey w w — 0

Tomskneft w w — 0

SeverEnergia w w — 0

Avtotor w w — 0

Neftegazindustriya w w — 0

Miratorg w w — 0

LUKOIL-Garant w w — 0

Moskovsky Metropoliten w w — 0

LocoTech w w — 0

EFKO Group w w — 0

CSC Group w w — 0

Major-Auto w w — 0

Uralo-Sibirskaya Metallurgicheskaya Kompaniya w w — 0

Oboronstroy w w — 0

YUNPK w w — 0

Pipe Innovation Technologies w w — 0

Novoshakhtinskii Zavod Nefteproduktov w w — 0

Krastsvetmet w w — 0

Trans Nafta w w — 0

SIA International w w — 0

GAZFOND w w — 0

Ulmart w w — 0

Metallokomplekt-M w w — 0

RIF w w — 0

Alfa Bank w w w 0

New Stream Group w w w 0

Tashir w w w 0

Forteinvest w w w 0

Sodrugestvo w w w 0

Drilling company "Eurasia" w w w 0

Velesstroy w w w 0

Euroset w w w 0

Best price (Fix Price) w w w 0

Avtomir w w w 0

Transaero,Spetsstroyinzheniring,Morton

——— —


HIGHLIGHTS

41companies

did not receive a single point based on the results of the study

32companies

received either 5 or higher points out of 10 possible points

5companies

have a confidential commu-nications channel for reports on corruption offenses, allow-ing them to establish two-way communications with the informant

2multinational companies gained more than 50 %1 in all three parts

4the largest com-panies by revenue do not have a cur-rently operating web site

1 Hereinafter, the percentage of information disclosed by the company in open source

28 %

80 %

14 %

166companies

companies do not regulate contributions for political activities

of companies do not disclose any information about their subsidiaries and associates where they operate in Russia and abroad

of companies have not introduced the ban on facilitation payments

of companies publish CEO’ message in sup-port of the anti-corruption policy pursued by the company

9TRANSPARENCY IN CORPORATE REPORTING

INTRODUCTION

The study “Transparency inter-national — R” “Transparency in Corporate Reporting” assesses the disclosure of the 200 larg-est Russian companies by rev-enue from the RBC-20162 rat-ing on their official websites3. Most companies in the survey sample are included in the list of the so-called “backbone enterprises” of the Russian Federation4. Their profits form more than 70 % of the total na-tional income, and tax deduc-tions to budgets of all levels are an essential source of the revenue side of the Russian budget. The economic, political and social influence of these companies is enormous. What information do they disclose about themselves?

The study evaluates the transparency of companies in three areas underlying the index with respect to:

> their anti-corruption programs > organizational transparency of company holdings > the disclosure of key financial information on

a country-by-country basisThe objective of the study, on one hand, is to increase the overall level of transparency and public accountability in the private sector, and on the other hand, to record the degree of disclosure practices of the commercial sector in Russia before introducing changes to domestic legisla-tion within the framework of the programs to combat the erosion of the tax base (Base Erosion and Profit Shift-ing — BEPS). The study is not aimed at incriminating those or other companies in dishonest business, its main purpose is to draw attention to Russian big business representatives, state authorities, investors and citizens to the overall level of transparency of companies with re-spect to their anti-corruption programs, subsidiaries and countries of operation.

Transparency and accountability are the two main tools for combating corruption in all sectors of the economy. In the current Russian reality, companies should not be afraid to take responsibility for establishing fair and trans-parent rules of the game. The existence of an anti-cor-ruption policy positively influences the reputation of com-panies, mitigates the risks of corruption violations both for employees of the company and for its management, bears evidence of the overall effective management of both auditors and investors, as well as ordinary citizens. Numerous detailed recommendations of this report focus on the segment of anti-corruption programs. The detailed disclosure of all controlled entities and the willingness to release financial information for countries where the com-pany is represented directly or through subsidiaries will help to identify all the structures of the company that it is represented in the world, thus making it more transparent to the public. In addition, transparency will be an effective tool in the fight against tax evasion whenever companies use territories with a special tax regime to register their legal entities.

The study “Transparency in Corporate Reporting” has examined exclusively Russian companies for the first time — before that, Transparency International has paid attention to some of the companies examined in this re-search. We sincerely believe that these recommendations will be considered by representatives of the business community, and these suggestions will help improve ac-countable governance, foster transparency and account-ability to fight corruption.

2 www.rbc.ru/rbc500 3 for more details, see page 20 4 https://goo.gl/rvLq7B

10 11CENTER “TRANSPARENCY INTERNATIONAL—R” TRANSPARENCY IN CORPORATE REPORTING

THE OVERALL RESULTS

The overall result for the index average rate 2.6 / 10The largest Russian companies by revenue have a low level of transparency. Thus, 41 companies considered in the study did not receive any points on any of the criteria of the study, only 32 companies received 5 points or more (out of 10 possible points). The most transparent area of business activity was telecommunications industry, the most opaque ones were infrastructure construction, agriculture and foodstuff manufacturing. Country-by-country reporting, which is examined in the third part of this study, is the dimension showing by far the weakest results.

Anti-corruption documents average rate 27 % > Only 115 companies have at least some anti-corruption provisions which are publicly

accessible on their official website > 42 % of companies from the survey sample publicly declare their intolerance for

corruption. > Political contributions are not transparent enough. Only 16 % of companies prohibit

or disclose payments for political purposes. > The support of the company’s anti-corruption programs by the company’s manage-

ment is also small, there are only 14 % of, companies which have CEO’s official mes-sage supporting the anti-corruption strategy of the company on their website.

> There are only 20 % of Russian companies which prohibit facilitation payments > 26 % of companies extend their anti-corruption policies to agents and consultants,

which is a particularly common corruption risk. > The situation with communication channels for informants ois unsatisfactory: only

five companies have hot anti-corruption lines which allow to anonymously report on corruption in the workplace which suggests a feedback procedure. Sixty percent of companies do not have an anonymous public hot line.

> 73 % of companies do not declare commitments to review and update their anti- corruption policies regularly.

Organizational Transparency average rate 41 % > 28 % of the largest revenues of the Russian companies do not disclose any information

about their subsidiaries and associates / joint ventures. > Most companies disclose only a list of their major subsidiaries and associates.

Country-by-country reporting average rate 4 % > Least of all are companies are willing to disclose the amount of public contributions in the

countries of their operation, most often companies release financial information for the selected country only.

> From 115 sample companies operating in more than one country in the world, 87 do not disclose any financial information at all on the countries of operation.

> No company discloses information on all countries where it conducts its operations on all the evaluated parameters.

> Only two companies in this segment of research have scored higher than 50 %, and they are “Sberbank” PJSC and “Nizhnekamskneftekhim” PJSC

> The positive trend towards the disclosure of any financial information on the > countries of operation are most evident in the metals and mining industry and it is illus-

trated by such companies as “Polymetal”, “Evraz”, “Nordgold”, “Rusal” that do release at least some information. It is worth noting that all listed companies are registered under the jurisdiction of other countries.

On Legal Forms

> 86 Public joint stock companies (open joint-stock companies) represented in the sample by 86 companies have an average index of 3.9, which is higher than the average rate for the whole survey sample. The average value for all three parts of the study for PJSC is also significantly higher than companies with other organizational and legal forms.

> 59 Joint Stock Companies (closed joint-stock companies) represented in the survey sample have a very low index of disclosure of anti-corruption documents, it is below the average rate for the entire survey sample and it is equal to 21 %.

> 44 LLC (Limited Liability companies) companies have the average index was 0.7

By Industries > Disclosure of information on anti-corruption documents of the financial sector, represented

in the survey sample by 24 companies, is below the average rate for this part for the entire survey sample.

> The most transparent sector is telecommunications. For five companies in the survey sample, the average index is 5.0. They also lead in terms of disclosure of anti-corruption policies and organizational transparency.

> The trade and food sector represented in the survey sample by 22 companies, and the infrastructure construction sector which is represented by four companies, are the most opaque: for all parts of the study, such companies gained below the average rate for each of the three parts, and the average index for them was below 1.5.


RECOMMENDATIONS

General recommendations to companies 1 Publish as much information about company’s operations as possible in

publicly available sources.Regardless of the organizational and legal form, the fact of the company enter-ing the stock market as an issuer, operating in one or one hundred countries of the world, revenue, structure and scope of activities, companies should strive for greater transparency and public accountability. Out of 200 largest Russian com-panies in 2016, four do not have an official website at all, and only 115 publish some anti-corruption information or regulations. Things are even worse with the public disclosure of the exhaustive list of subsidiaries and associates in the country of registration and at the international level. Few companies reach the level of transparency and publicly disclose information about corporate structures and countries where they operate — most companies on the list do not disclose such information at all.

2 Comply with the latest standards in anti-corruption legislation and regularly update company’s own programs.While companies approach anti-corruption regulation as a formal procedure, it will be impossible to talk about the transparency of the commercial sector in Russia. Out of the examined companies, less than a quarter (23 %) commit themselves to regularly review and update internal anti-corruption documents. Effective anti-corruption legislation requires regular updating of company’s own practices not only due to the change in the current anti-corruption legislation, but also in compliance with the latest international practices and the appropriate ap-plication of certain procedures in each company. The annual audit of the results of anti-corruption application and the revision of the existing anti-corruption policy will allow the company to develop an individual Anti-Corruption Strategy that will substantially mitigate the corruption risks for the enterprise.

3 Regulate and disclose all political donations.Business is one of the key sources of financial support for political parties around the world. Often, political donations are used by companies both for conscientious lobbying of their own interests and for corrupt purposes. Public disclosure of the annual cost of political funding or a complete ban of these activities for all employ-ees of the company, including top-managers, agents, consultants and other per-sons connected with the company, will assist corporations to protect themselves from situations in which political parties financing can be interpreted as a tool of obtaining or maintaining unfair advantages in business.

Companies should either regularly and publicly disclose donations on political ac-tivities or ban contributions to political parties and individuals for elected posts, for all employees, including top-managers, members of management bodies, com-pany’s agents, lobbyists and other intermediaries.

4 All employees including top managers and members of the company’s management bodies should be liable for compliance with the anti-corrup-tion programs.By introducing bans on bribes, participation in corrupt interactions, making politi-cal donations on behalf of the company, making facilitation payments and ob-serving corporate standards of conduct only for employees, the company does not extend anti-corruption policy on members of the upper management body (Board Members and Board of Directors). In case a corruption crime is commit-ted by a top manager or a member of the management body, the damage to the company’s reputation would be irreparable.

Therefore, companies need to extend all anti-corruption corporate policy and rules not only to employees, but also on members of the board and the Board of Directors to consolidate their commitment to comply with these rules.

Among the examined documents of the Russian largest companies, we have come across Codes of Ethics and anti-corruption policies dat-ing to 2003–2008, their relevance has not been updated for more than a decade. Over the years, the Federal Law “On Combating Corruption” was adopted, which defined the legal meaning of the term “corrup-tion”, not to mention that new international standards have been adopted too.

In addition, the texts of anti-corruption policies of several companies almost literally duplicate each other, which made one think about a formal approach to developing an anti-corruption policy within the company.

Most Russian companies are approaching the issue of regulating political donations from one of the following positions:

> they introduce the ban to finance political parties which does not ap-ply to top-managers, agents and consultants;

> they prohibit political donations to obtain unfair advantages in busi-ness, and the ban is often accompanied by a non-compliant obli-gation to publicly disclose charitable and political payments. Such wording is a bar not for political donations, but for obtaining unfair advantages in business by such financing, which means that such companies should disclose direct or indirect contributions to political parties, organizations or individuals, engaged in politics;

> the ban to finance political parties excludes political nominees.


5 Extend the provisions of anti-corruption policy to persons who are authorized to represent the company.The fundamental standards of integrity under which the company operates should not vary depending on the position of employees. The anti-corruption policy should apply to all employees, who are authorized to act on behalf of the company, such as agents, lobbyists and consultants. Otherwise, the company’s risk of being involved in the corruption situation will increase. The company must be certain that agents and other actors acting on behalf of the company perform their work in compliance with the company’s corporate anti-corruption principles.To ensure compliance with this policy the company ought to organize a proper training on Anti-Corruption program to familiarize all persons authorized to repre-sent it, and the Executives should provide employees with any support in explaining the provisions of these programs. Anti-corruption policies and procedures should be communicated to all the employees.

6 Extend corporate liability, anti-bribery and anti-corruption compliance rules on third parties acting on behalf of the company, including contractors and sub-contractors.Due diligence should be carried out before engaging with a business partner to identify existing problems, potential risks, and mitigate them.Companies are required not only to check their contractors before signing agree-ments with them, but also to monitor their performance during the entire dura-tion of the contractual relationship to mitigate the risk of committing a corruption offense.

All arrangements with third parties should be subject to clear contractual terms including specific provisions of the contractor anti-corruption clause6 requiring them to comply with standards and procedures in relation to bribery and corruption. We recommend develop-ing a specialized Code of Conduct for the supplier, which clearly identifies anti-corruption provisions. Appropriate due diligence should be undertaken before any third parties are engaged.

7 Dealing with anonymous reports/ confidential communication channel for whistleblowers, and providing feedback to the informant.While there is a trend in largest corporations to use information received from report-ers as an effective tool to counter corruption, the interaction with such individuals in Russia is very formal and reports are not always treated privately and non-publicly which excludes the possibility of getting a message from outside sources. When considering a report about a breach of anti-corruption policies, companies should

consider that the critical factor in identifying such crimes is the ability to report anon-ymously. By blocking the possibility for external informants to report on the breach of anti-corruption laws, the company limits sources of obtaining valuable information which is essential for the company’s reputation and overall sustainability.

Anonymous contacts regarding alleged corruption and fraud within the corporation are important. A hotline offers an opportunity to voluntarily provide information about fraudulent actions and breaches of ethics directly and anonymously to the company.It is crucial that companies have effective whistleblower hotlines as part of their corporate compliance programs so that they are effective in preventing and iden-tifying unethical or potentially unlawful activity. However, the hot line for informants in most Russian companies means reporting to a mail address or calling a phone number in the company. This model of interaction, cannot guarantee full confidential-ity / anonymity of the informant even if the principles of confidentiality and anonymity are declared. Whistleblower hotlines should be managed by independent third-party providers and, if used by a company, should be well publicized to its employees.

The proper modern practice is creating a specialized electronic form for a corrup-tion whistleblower, which would provide each informant an individual pin code and forward his/her report to an external independent agent (for example, an audit com-pany or a non-profit organization).

8 Introduce special ban on facilitation payments.Despite the fact that the Supreme Court of the Russian Federation has defined facilitation payments to speed up routine government actions as bribes, Russian companies ought to pay attention to such type of prohibited payments, first of all, due to the fact that facilitation payments are officially permitted in some jurisdic-tions, and second, the ban may not be properly interpreted and understood by company’s employees, which may cause significant reputational risks for the company itself, when employees or agent сomit corruption offenses due to their unawareness.

9 Disclose a full list of subsidiaries and associated companies, joint ventures and other entities controlled by the company.Companies should disclose the full list of the structures of their operations. The disclosure of corporate financial data only of major affiliates, joint ventures and as-sociates leads to the fact that external actors cannot identify the relationship of one legal entity with another. The desire to hold back the information of the controlled organizations’ business operations seriously hampers the overall level of trust. In ad-dition, do not forget that even if the subsidiary is not the major one, from the point of view of the whole group, its economic contribution in the region of its activities can be substantial for the local population and the economy of the country / region.

An extremely small number of organizations disclose data on the countries of opera-tion of their affiliates and associates: it is worth remembering that the country of registration is not always exclusively identical to the country of business, because the company can operate in several countries at the same time. Therefore, it is nec-essary to specifically point out to the coincidence of the country of registration and the country of business operations, and in case of their mismatch, we recommend indicate the countries of business operations separately.

In 2010, the general contractor of the Russian subsidiary of the Swed-ish company IKEA, “IKEA MOs”, made an illegal payment5 to connect to the power supply of the “MEGA” shopping center in St. Petersburg. Top managers of the Ikea MOs Russian division were aware of the contractor’s intent to give the bribe; however, they did not prevent the crime. The con-sequences followed, top-managers Russian division were dismissed, and company’s reputation was severely damaged.

5 https://goo.gl/eAgqvn 6 http://www.iccwbo.ru/blog/2016/antikorruptsionnaya-ogovorka/


10 Extend anti-corruption policies and Codes of Ethics to all affiliates.Companies need either to extend the provisions of their anti-corruption policies to all members of the group, including affiliates or make sure they design their own guidelines. Company employees, irrespective of the country where the company operates, are required to comply with the Code of Ethics and its regulations. Often the anti-corruption policy commitments are imposed exclusively on the company itself, and its legal entities are not liable to it.

11 Disclose financial data in all countries of operation.Information on income, capital expenditures, pre-tax profits, income tax and the amount of public contributions for each country in which the company conducts business will provide information of the company’s influence in each specific region where it is represented either directly or through its subsidiaries. This material will also allow to get an idea about the company’s use of offshore zones.

12 Ensure whistleblowers’ effective protection.Whistleblowers often face retaliation or unfavorable personnel action from employers and individuals who have committed corruption offense. Whistleblower protection is essential to encourage the reporting of misconduct, fraud and corruption. Providing effective protection for whistleblowers supports an open organizational culture. For effective implementation of Anti-Corruption Programs, informants must be protected from discrimination and disciplinary actions. Companies should provide and guaran-tee protection against discrimination and retaliation to all whistleblowers, employees of the company, including management (including members of the board of direc-tors, supervisory board, audit committee, etc.), as well as counterparts and persons who are not staff employees of the company but act on its behalf.

13 Conduct anti-corruption training.Less than 10 % of companies in the survey sample regularly conduct anti-corruption training for employees and top-managers (including members of the Board of Directors, Supervisory Board and audit committee), and only a small part also holds these sessions with contractors and persons acting on behalf of the company.At a time when anti-corruption legislation is subject to constant changes, compa-nies should conduct such trainings on a regular basis. The practice of organizing mandatory training for new employees, regular training for the whole staff, and specialized training programs for employees who occupy the most corrupt risk positions (for example, Procurement Officers) is recommended. In addition, regular consultations on any issues for employees and other individuals whose activities are related to the application of the company’s anti-corruption policy should be organ-ized.

14 Regulate giving / receiving gifts and hospitality policy.Even though the Russian legislation imposes restrictions on giving/receiving gifts among commercial organizations, as well as bans officials and employees in certain organizations, such as medical and educational institutions, to receive gifts, pre-sents are often used to obtain or retain unfair advantages in business. It is difficult to draw the line between acceptable and unlawful conduct, therefore, companies should include guidelines in the anti-corruption programs that stipulate the terms under which giving /receiving gifts are allowed, as well as the goals of giving gifts, their acceptable form and threshold cost, the procedure and their record in the ap-propriate register.

Technical recommendations to companies 1 Establish communication channels with external actors.

While preparing this study, we have tried to reach out to those companies which are listed in the survey sample. First, we wanted to inform the companies about the start of the TRAC study in Russia, and to share the material which we have gathered.

The process of creating a dialogue with companies in the commercial sector was com-plicated by the lack of an effective communication channel for companies. Most compa-nies have only one common e-mail address on their website and very few corporations responded. Obviously, this problem is due to the protection of electronic boxes of the company and its representatives from spam and other unsolicited letters. We doubt that the information which we have provided did indeed reach the interested persons.

2 Publish information on anti-corruption policies in a specialized section of the web-site.The search for corporate anti-corruption policies, Codes of Ethics or any other docu-ments on combatting corruption in the company is complicated, as there is no unified standards for publishing such information on the official website of the organization: some companies have a specialized section on anti-corruption, others place anti-corruption policies and Codes of Ethics section dedicated to CSR, the third publish it in the section of internal documents for investors, the fourth keep them in the archive of documents or news.

The absence of any standards regarding publishing of such information on companies’ websites makes it very difficult to search for stakeholders of any level: from clients to investors, from whistleblowers to the regulator.

We recommend companies have a specialized section on the site in which all public cor-porate documents that regulate the anti-corruption policy of the company of any kind will be gathered and published: staff Code of Ethics, Anti-Corruption Programs and policies, supplier codes and company gift policy, conflict of interests, and a hot line channel for reporting corruption. It is necessary to dwell in more detail on the last two instruments for combating corruption.

Often, the hot line electronic address or telephone number is only written in the text of the organization’s anti-corruption policy, or on the pages of the Code of Ethics and in the text of the annual report. Sometimes a hot line for whistleblowers can be found in the con-tacts section or in the footer of the site. Coupled with the problem of finding this informa-tion on the company website, a potential corruption reporter faces difficulty in providing valuable information directly to the company.

3 Lay out documents in the pdf format with the possibility of performing a machine search of the document.It is necessary to pay attention not only to the content of the document, but also to its technical characteristics. Searching for information of interest is difficult if the company’s reporting is laid out, for instance, in 400 scanned pages or in a file of a poor quality.

4 For companies registered in foreign jurisdictions and carrying out their busi-ness mainly outside of Russia, it is important to present publicly reports, including in Russian.


To state authorities and regulators 1 Large companies are required to have internal anti-corruption guidelines to

prevent and combat corruption in public access.Large companies have a significant impact on the economy and the social sphere in the regions of their presence, and that is why it is especially important that their business conduct is ethical.Now, not all the large companies realize the importance of running a transpar-ent business and they do not take any anti-corruption measures. The legally imposed obligation to have internal anti-corruption policy open to public could change the situation for the better and increase the level of transparency and ethics for both the largest companies and the business community. Despite the fact, that Clause 13.3 of the Federal Law “On Combating Corruption” stipulates that organizations should develop and take measures to prevent corruption, there is no effective government control institution for monitoring compliance with this rule.

2 We recommend the introduced bill to the State Duma of the Federal As-sembly of the Russian Federation on the protection of persons who report corruption-related offenses be adopted. This law provides state protection for whistleblowers who have reported breaches of anti-corruption policies committed by government, municipal authorities or organizations to the employer’s representative or an employer, prosecutor’s office, and other state bodies.

To participants of the financial market 1 Take into consideration Anti-Corruption Programs and ethical codes when

deciding whether to make a deal.When making decisions, investors should not only pay attention to the availability of Anti-Corruption guidelines, but also evaluate the content and effectiveness of such programs.

2 Assess the degree of disclosure of information provided on official web-sites of companies when deciding whether to strike a deal.While taking decisions investors should evaluate the degree of disclosure of information by companies on their official websites. Well-executed due diligence process will identify compliance weaknesses and structural risks. The lack of information about the structure of the company and the main indicators of its activities, ethical and anti-corruption practices implemented by the company, or lack of an official website at all, indicates to the opaque business conduct and risks for investors.

To non-profit organizations 1 Disclose information in case financial and other support has been received

from other companies.Corporate reporting of non-profit organizations does not always reflect support from business. Nevertheless, information about these donations is of impor-tance: first, often companies do not fulfill their obligations under CSR; second, financial support for non-profit organizations can be used by businesses to get unfair advantages from the local authorities in cases when the NGO relates to the authorities.

We recommend non-profit organizations receiving support from business dis-close the amount of the financial aid and sources of its financing to ensure its own transparency and that of the source.

2 Strengthen the transparency of non-profit organizations by regular moni-toring and researching companies.Citizen groups united in the legal form of public or non-profit organizations can be an effective tool to increase the level of transparency of companies. Such or-ganizations should strengthen control over the transparency of the business by conducting regular monitoring and research of companies to check their compli-ance with the anti-corruption laws. This activity reflects the society’s demand for socially responsible and ethical business, and it also increases the effectiveness of interaction between business and the civil society.


METHODOLOGY

The study “Transparency in corporate reporting” is based on the methodology developed by the international movement Transparency International. This methodology has been used since 2008 to evaluate both the world’s largest com-panies and companies operat-ing at the national level or in specific sectors. A selection of previous TRAC studies was found by some of the Russian companies, but such a large-scale study of the exclusively Russian business sector is being conducted for the first time. However, we do not rec-ommend comparing the results of previous TRAC studies with the results of this research, since the method of assess-ment of this study differs from that of previous years.

The study methodology consists of three parts:

Anti-corruption documents The first part includes 13 questions about corporate Anti-Corruption Programs and documents. Each question has the same weight, respectively, the maximum score that the company could receive was 13 points. We have assessed the company’s adher-ence to the principle of the so-called “zero tolerance” for corruption, the commitment to comply with anti-corruption laws, the applicability of anti-corruption provisions of company internal documents not only to employees but also to top managers, persons author-ized to work on behalf of the company or represent it, as well as to its contractors and suppliers. In addi-tion, we have evaluated the gift and hospitality policy, guidelines for political contributions and the ban on making facilitation payments. Attention was also paid to the protection of whistleblowers, the availability of the channel to report corruption offenses (hot line), keeping anti-corruption documents up to date and organization of regular trainings for employees and directors.

These evaluation parameters of companies with regard to internal anti-corruption documents are in compliance with the Principles against Bribery7 for the Business Community, developed by the Transparency International8 movement which in turn summarizes the leading standards of anti-corruption policy in the private sector from the World Economic Forum’s Partnering Against Corruption Initiative (PACI), Interna-tional Chamber of Commerce (ICC), and also include provisions from the Guide to the 10th principle of the UN Global Compact9.

Organizational Transparency The second part of the study has eight questions of equal weight which are devoted to the disclosure of information about company’s subsidiaries, associates and joint ventures. We have assessed the company’s full disclosure of the names, ownership interests, countries of registration and countries of operations for its subsidiaries and associates. The maximum score that the company could receive was 8.

In terms of organizational transparency, the parame-ters were selected based on the minimum information necessary to form the idea of subsidiaries and associ-ates, joint ventures through which the company oper-ates in the country of registration and other countries.

Country-by-country reporting In this study, the country of operation is defined as the country in which the company works either directly through branches and representative of-fices, or through affiliates, associated structures and joint ventures. This part of the study applies only to multinational companies operating in more than one country, that is, outside of Russia. For the integrity of the study, the information provided by the companies whose main country of operations was Russia, was not considered.

With respect to the countries of operation, the evaluation parameters were designed in such way as to provide the most exhaustive information on revenues and costs in each country of operation. In particular, for each country, such criteria as disclo-sure of income, capital expenditure, profit before tax, income tax, and a size of public contributions were assessed. Each of the five questions in the third part of the study has an equal weight and is calculated as

The country-by-country reporting initiative was proposed10 by the OECD in the framework of the program on combating the tax base dilution.

The methodology has some limitations.

First, the study is based on the assessment of information provided by the company on its official website in public, that is, it is absolutely open for everyone. Thus, all the conclusions drawn from the results of this study refer only to publicly available corporate documents and reports.

Secondly, the purpose of the study is not to compare the information presented on the official website of the company with the actual activities of the company. For example, if a company writes about its Code of Ethics for regular and manda-tory anti-corruption training for all employees and directors, the researcher trusted such information without verifying it.

Third, a huge amount of information that the re-searchers have worked with poses the risk of being

inaccurate and erroneous. To avoid this, all the ma-terials have been submitted to the companies for the review prior to publication.

Each part of the methodology has the same weight in the final index, calculated as the average rate for all three parts. For companies that operate only in the Russian Federation, the third part of the methodol-ogy is not applied, and the index is calculated as the average rate for the first two parts of the study.

Since the TRAC study was conducted for the first time by Russian companies, a softer approach for assessing companies has been chosen.In particular, changes have been made while evaluating organizational transparency. Compa-nies which submit quarterly reports regularly have received high scores. Corporate report-ing obliges issuers to disclose statistics on legal entities in which they own more than 5 % shares. Although this reporting does not release information about affiliates (indirect control), it allows to understand the primary structure of the company’s assets and under-stand how it controls the next level of related subsidiaries.

The facts from the issuer’s corporate reports together with the list of affiliated persons and the register of vitally important subsidiaries, records from the annual consolidated state-ments, as well as other information from the website provide exhaustive information about the company’s assets.

This approach was chosen because most of the companies which we have examined, release, at least, some information about the affiliates, in their consolidated statements and indicate the list of only those subsidiaries that are essential for the company’s revenues. According to the assessment methodology, questions for companies that reveal significant structures were scored at 0.5 points. Due to the absence of the law in Russia to disclose the ownership structure of affiliates, issuers are the most transparent in their statements, disclosing the full extent of their holdings.

7 https://goo.gl/QXKpjy 8 www.transparency.org 9 https://goo.gl/r76U8Y 10 https://goo.gl/KaSZ3C


Data collection and analytics

The background material has been gathered from official websites of companies and verified by re-searchers between March 20th and June 1st, 2017. This means that the information about the websites of the examined organizations, which was updated after the specified period, has not been considered.

All the material was double-checked and in August 2017 we forwarded it to companies for the review. Depending on the date of the receipt, each compa-ny had three weeks to review the information and to provide additional material and/or comments. From all the companies, only eleven were able to revise the material, and most of them increased their score by submitting additional sources of informa-tion and publishing supplementary documents on their official website.

Survey Sample

We have selected the top 200 biggest Russian com-panies from the RBC’s 2016 rating11. A complete list of companies is available in Annex 2.

Parent companies of 19 holdings that were in the sample were registered abroad.

The approach for assessing these companies was identical to the approach of evaluating companies registered in the Russian jurisdiction. Moreover, we have not included these companies in the third part of the study which evaluates the disclosure of financial in-formation those companies which conducts their core business in the Russian Federation, and are registered under the jurisdiction of another country. That is, the company was assessed as a Russian company, which operates in Russia. This was done to reduce the likeli-hood of overstating the evaluation of such companies. We have excluded these companies in the third part of the study for the integrity of the research, otherwise Russia would have been evaluated as an additional business country, different from the country of registra-tion, and it could have brought additional scores to the companies.

In addition, such companies as “Morton”12 CJSC and “Spetsstroyengineering” FSUE under “Spetsstroy of Russia”, as well as “Transaero” OJSC, acting as separate

legal entities at the time of the start of the research have been included into the survey sample. Their websites be-came inaccessible for examination in the process of the data collection, therefore, in fact, this study includes the analysis of 197 Russian companies’ websites. All calcula-tions have been based on this number.

We would like to mention the following companies “Fuel company “Transnafta” LLC (175th place in the RBC rat-ing), “Southern Oil Refining Company” LLC (160th place in the RBC rating), “Ural-Siberian Metallurgical Company” LLC (151st place in the RBC rating), “Severnergiya” LLC (83rd place in the rating of RBC) which do not have a valid current official website.

According to the organizational and legal form among the companies included in the sample of this study, the majority (86 companies) have the form of PJSC, 59 com-panies — JSC, 44 companies — LLC, 2 companies — state corporations, 2 companies — FSUE:

Companies registered in jurisdictions of other states

Organizational and legal form

Jurisdictions Quantity Companies

British Virgin Islands 2 "Sakhalin Energy" (Sakhalin Energy Investment Company Ltd.), "Lenta" (Lenta Ltd.)

Great Britain 2 Nordgold (Nord Gold SE), «Evraz» (Evraz plc.)

Crown possession of Jersey 1 «Rusal» (United Company RUSAL Plc.)

Cayman Islands 1 "Eurasia" Drilling Company (Eurasia Drilling Company Limited)

Republic of Cyprus 4 GC "Rolf" (Delance Limited), Polymetal (Polymetal International Plc.), Globaltrans (Globaltrans Investment Plc.), "Rusagro" (Ros Agro Plc.)

Grand Duchy of Luxembourg 2 "O'Key" (O’Key Group S.A,), GC "Sodrugestvo" (Sodrugestvo Group S.A.)

Kingdom of the Netherlands 6Х5 (X5 Retail Group N.V.), GC "Megapolis" (Megapolis Distribution B.V.), UCL (Uni-versal Cargo Logistics Holding B.V.), GC "Volga-Dnepr" (Volga-Dnepr Logistics B.V.), "Salym Petroleum" (Salym Petroleum Development N.V.), “Yandex"(Yandex N.V.)

Swiss Confederation 1 "Eurocement" (Eurocement Holding AG)

“Rusal”, “NLMK”, “MTS”, “Sberbank”, “Promsvy-azbank”, “Rostelecom”, “Detsky Mir”, “Rusagro”,

“Lanit”, “Surgutneftegaz” and Bank “Saint Peters-burg” have provided their feedback, while nine of them shared their detailed comments them. Most of these companies managed to improve their score as far as the Anti-Corruption Programs were concerned.

“Fuel company “Transnafta” LLC is one of the largest donors of the political party “The Com-munist Party of the Russian Federation”: in 2016,

“Transnafta” donated 43 million rubles for the activities of the party.

86PJSC (OJSC)

1NO

59JC (CJSC)

1SUE

44LLC

1NPC

2FSUE

1GC Association

11 www.rbc.ru/rbc500 12 https://goo.gl/RZaJzj

2State Corporation


0%

100%

92%ALROSA, NLMK, LANITHighest performing

0%82 companiesWorst performing

27%ANTI-CORRUPTIONDOCUMENTS

Average

Photo: www.istockphoto.com


1. ANTI-CORRUPTION DOCUMENTS

Corruption and bribery represents a major threat to rule of law and sustainable development all over the world. It has a disproportionate, destructive impact on the poor and most vulnerable, but it is also sim-ply detrimental for business. Without developing a comprehensive anti-corruption strategy, the compa-ny cannot guarantee its integrity as an organizational structure. High-standard anti-corruption policy is one of the key factors of the effective management of the company and it demonstrates an open and honest approach to doing business. It safeguards against corruption, protects the corporate image as well as the interests of investors, employees and customers. Do not forget that anti-corruption docu-ments should be publicly available to a wide range of people: from a low-level employee to a manager, and a Board Member candidate, from a consumer to the largest supplier and from a dissatisfied cus-tomer to an investor.

The most relevant recommendations on the de-velopment of anti-corruption policies and other anti-corruption measures for companies are to be found in the extraterritorial laws of the UK “On Fight Against Bribery” (UKBA) 2010 and the United States “On Corrupt Practices Abroad” (FCPA), as well as in the OECD Convention “On the fight against Bribery of foreign officials in the conduct of international commercial transactions”, the Russian recommen-dations of the Ministry of Labor and the Anti-Corrup-tion Charter of Russian business.

Since 2013, part 1 of Art. 13.3 of the Federal Law “On Combating Corruption” obliges13 all companies to take measures to counteract corruption. The law recommends the responsible persons within the company or specialized units be appointed to bear responsibility for preventing corruption offenses, developing and implementing procedures to ensure the integrity of the organization, adopt a Code of Ethics, resolve conflict of interests, and prohibit the use of forged documents and informal reporting and cooperate with law enforcement agencies.

Nevertheless, the existing system is not very ef-fective and in practice it does not stimulate the

company to develop internal anti-corruption docu-ments or adopt a Code of Ethics. First, according to UKBA, the availability of effective and exhaus-tive anti-corruption internal guidelines, helps the company to protect itself in case of the litigation, if an employee or a representative commits a breach of anti-corruption laws. However, according to the Russian legislation, the company is held administra-tively liable for corruption-related crimes committed by its employees regardless of the availability or absence of corporate anti-corruption policy. In other words, Russian laws do not consider the fact that the crime may have been committed despite the adoption of anti-corruption guidelines, or despite the fact that the company and its leaders have done everything possible to prevent such violations and that the criminal offense has occurred without the knowledge, participation and coordination of other representatives of the company. In fact, it may have been a specific person’s misconduct and infringement of law which he/she did at his/her own volition.

Second, the mechanism for monitoring compliance with the law is Art. 13.3 of the Federal Law “On Counteracting Corruption” is not yet clear.

Now, draft amendments to the Federal Law “On Combating Corruption” are being prepared, and they will set more specific anti-corruption standards for organizations, and will form the foundation of the National Anti-Corruption Council, which will be set up to develop anti-corruption standards and will monitor the measures taken by the organizations to combat corruption through specialized expert centers. The adoption of these amendments is expected in January 2019.

In addition, one has to bear in mind that since 2016 a legal entity, held administratively liable for commit-ting an offense under article 19.28 of the Code of Administrative Offenses of the Russian Federation (illegal remuneration on behalf of a legal entity), is banned from participation in government procure-ment14 for two years, which may present a signifi-cant financial loss to the company.

Results of companies average result 27 % According to the methodology of the study, we have assessed documents that were available in public access. The statement about the absence of anti-corruption policies and internal ethical documents from other companies will be inaccurate: the pages of the report demonstrate their presence in public access.

Only the 115 largest Russian companies have any provisions or references to anti-corruption guidelines on their websites. The average result for the disclo-sure of information about anti-corruption documents is 27 %. This means that on average, the company scored 3 out of 13 possible. None of the compa-nies received 100 % score, the “Alrosa”, “Lanit” and NLMK received the maximum result for having anti-corruption documents, each one got 92 % score. The following companies have demonstrated lower results: “Akron”, “MTS” and “Rusal” — by 88 % each, as well as “Evraz”, Sberbank and Zarubezhneft — by 85 % each.

ACP 1 point 0.5 points 0 point

The company declares zero tolerance for corruption (1) 82 12 103The company guarantees no response for an allegation of violation of the anti-corruption policy (10) 70 0 127The company guarantees compliance with legislation (2) 67 0 130Anti-corruption policy applies to all employees and directors (4) 57 26 114Anti-corruption policy applies to agents and consultants (5) 51 0 146The company regularly reviews and updates anti-corruption policy (12) 50 4 143The company has the policy for accepting and donating gifts (8) 43 37 117The company prohibits payments for simplification of formalities (9) 39 0 158The company prohibits (or publicly discloses) contributions to political activities (13) 31 0 166Support of anti-corruption practices by management (3) 28 0 169Anti-corruption policy applies to subcontractors (6) 23 49 125The company conducts anti-corruption training (7) 17 51 129The company has a confidential hot line (11) 5 73 119

Among the criteria which we have assessed are the company’s policy towards facilitation payments, the gift policy, donations to political parties, availability of the channel of communication with whistleblowers and their protection. In addition, we have noted that very few companies have CEO’s letter expressing support of anti-corruption activities — only 14 % of companies from the list have an official letter or a statement of the leader about his commitment to combat corruption and encourage compliance with anti-corruption guidelines.

Also, 65 % of companies in the sample do not mention anti-corruption training for employees and directors.

Analysis of issues for 197 companies

13 http://fzrf.su/zakon/o-protivodejstvii-korrupcii-273-fz/st-13.3.php 14 https://genproc.gov.ru/anticor/register-of-illegal-remuneration/


Facilitation payments 20 % The Convention on Combating Bribery of Foreign Public Officials in International Business Transactions (OECD Anti-Bribery Convention) refers to payments to simplify bureaucratic formalities or expedite the performance of a routine or necessary action as illegal actions.

The federal legislation of the Russian Federation does not stipulate or define the concept of “facilita-tion payments”, and it does not directly prohibit them. In fact, until 2013, payments for simplifica-tion of formalities had an undefined legal status and could be treated as an either as a bribe or as a gift, respectively, and were interpreted as gifts. In 2013, the Supreme Court of the Russian Federation put an end to this issue and labeled such facilitation pay-ments as bribes.

A significant number of ethical codes or other similar documents considered in the study include a ban on giving bribes, almost duplicating the provisions of the Criminal Code of the Russian Federation, but we have not been able to find a direct ban on facilita-tion payments. In fact, international companies that do not include a direct prohibition on facilitation payments in their documents allow such practices in the countries of their operation. The situation is complicated by the fact that in some jurisdictions

such payments are legal, although they lead to unfair competition.

In Australia, facilitation payments are legal at the fed-eral level — The Income Tax Assessment Act allows companies to reduce the tax base by the amount of “accelerated payments” and does not set the allow-able amount of such payments, but many Australian provinces are unhappy with this and prohibit facilita-tion payments at the regional level.

In the USA, the 1977 “Foreign Corrupt Practices Act” with the amendments of 1988 does not con-sider “facilitation payments” as bribes. Payments for expediting and facilitation are one of the few exceptions to the legislative prohibitions on bribes in the country.

According to the Principles for Countering Bribery of Transparency International15, “facilitation payment” is a bribe and should be banned. In addition, the prohibition on facilitation payments should be valid in all jurisdictions in which the company operates, including those jurisdictions that do not prohibit such payments or are legally permitted.

The provisions of ethical documents should contain wording expressly forbidding such payments in any form in all countries of operation of the group of companies. For example, the ethical code of “Sberbank of Russia” PJSC articulates the following provision: “...it is prohibited, directly or indirectly, in person or through the intermediation of third parties, to offer, give, promise, request and receive bribes or make payments to simplify administrative, bureau-cratic and other formalities in any form.”

It is a good practice to include in the ethical docu-ments not only provisions prohibiting facilitation payments, but also requirements which define such payments.

For example, the ethical code of GC “Megapolis” contains the following provision: “Facilitation pay-ments,” also known as “gratuities”, usually represent a small amount of money or a small gift made to provide or speed up standard administrative pro-cedures that do not require independent decisions; such functions are usually performed by govern-ment officials of the lower level. Such functions may include: issuance of permits, licenses or other official documentation; issuance of visas, work permits and other immigration documentation; obtaining

In compliance with the Criminal Code of the Russian Federation, a bribe is the offering, giving, receiving or soliciting of material val-ues for influencing an official in the discharge of his or her public or legal duties or through an intermediary in favor of the briber, includ-ing facilitating of such acts, general patron-age or criminal connivance in service, as well as commitment of unlawful actions by an official (failure to act).According to the Decree of the Plenum of the Russian Federation Armed Forces No. 24 of July 9, 2013, “On Judicial Practice on Bribery and Other Corruption Crimes,” such activities as “reducing the time limits for considering a bribe-taker’s appeal, expediting the decision of an official “ are qualified as actions (failure to act).

Anti-corruption documents Results of companies, 100 % maximum

92

88

85

81

77

73

69

65

62

58

54

50

46

42

38

35

31

27

23

19

15

12

8

4—

No companies100 %

82 companies0 %

TNS Energo, Togliattiazot, Industrial Metallurgical Holding, M.Video, Ruselectronics, Transneft, Otkritie Holding, PROTEK, AvtoVAZ, Rosgosstrakh, ChelPipe, Transmashholding, Sovcomflot, Ingosstrakh, RESO-Guarantee, Cherkizovo, Siberia Airlines, AlfaStrakhovanie, SOGAZ, PIK Group, Rolf, Bank Rossiya, PPF “Blagosostoyanie”, Finance&Construc-tion Corporation “Lider”, Russian Standard, Siberian Generating Company, Transoil, Ural Mining Metallurgical Company (UMMC), EuroSibEnergo, SDS-Ugol, Genser, Agro-Belogorie, Neftekhimservis, Voentorg, UNICONF, STROYGAZMONTAZH, NCC, State ATM Corporation, UCL, Metallservis, Aston, DNS, Red&White, Alkor and Co, Intertorg, Retail K-1 (“Maria-RA”), Merlion, SNS Group, Almaz-Antey, Tomskneft, SeverEnergia, Avtotor, Neftegazindustriya, Miratorg, LUKOIL-Garant, Moskovsky Metropoliten, LocoTech, EFKO Group, CSC Group, Major-Auto, Uralo-Sibirskaya Metallurgicheskaya Kompaniya, Oboronstroy, South refineries company, Krastsvetmet, Pipe Innovation Technologies, Novoshakhtinskii Zavod Nefteproduktov, Trans Nafta, SIA International, GAZFOND, Ulmart, Metallokomplekt-M, RIF, Alfa Bank, New Stream Group, Tashir, Forteinvest, Sodrugestvo, Drilling company “Eurasia”, Velesstroy, Euroset, Best price (Fix Price), Avtomir

Transaero, Spetsstroyinzheniring, Morton

ALROSA, NLMK, LANIT

MTS, RUSAL, Akron

Sberbank, Evraz, Zarubezhneft

Kazanorgsintez, Rostelecom, RZD, Megapolis

Megaphone, NOVATEK, RussNeft, R-Pharm, RTI Systems, Bashneft, Polymetal, Rosta, Detsky Mir, Promsvyazbank

Nornickel, VimpelCom, Sakhalin Energy, Nordgold, Rosneft, DIXY Group, ММК

PhosAgro, Pochta Rossii, INK, Mosinzhproekt

RusHydro, TAIF-NK, RUSENERGOSBYT

Nizhnekamskneftekhim, VSMPO-AVISMA, Binbank, Sovcombank, Gazprombank

Magnet, KAMAZ, Severstal, T Plus, Rosselkhozbank, Volga-Dnepr, UAK

Udmurtneft, Tatneft, Ilim, Х5, Inter RAO

Rosseti, Aeroflot, Rusagro, Gazprom, Uralkali, Saint Petersburg Bank, Neftetransservis

Globaltrans

Tactical missiles Corporation, Surgutneftegas, LUKOIL, ODK, Yandex

USC, Slavneft, TMK, O’Key Group, ОМК, Russian Helicopters

KRET, Uralvagonzavod, Tele2 Russia, VTB, Metalloinvest

Power machines, Mechel, Polyus, Rosatom, SUEK, Salym Petroleum

LSR group, Lenta, Vnesheconombank, PPF "RGS", Sportmaster

Gazprom Burenie, Mostotrest, Eldorado, Svyaznoy

NNK-Aktiv, PPF Future, Sedmoi Kontinent, UIMC, Katren

URALCHEM, GAZ Group, UTair, High Precision Systems, Neftisa, StroyTransNefteGaz, EUROCEMENT, Techmash, Holiday Group, Element-Treyd

Credit Bank of Moscow, SIBUR, CPC

Mosvodokanal, EuroChem

NCSP, Pulse

15 https://goo.gl/6Dth8A


permission to leave goods from customs; state reg-istration of immovable property or vehicles; provision of communal or other services (for example, electric-ity, gas, water, telecommunications, security). These payments are usually aimed at expediting the imple-mentation of procedures, which in any case must be carried out. For this reason, such payments are not payments that allow the implementation of these procedures, which in the normal situation would not have been performed under any circumstances or would have been ignored. Such payments should not be made even in cases where they represent a small amount or are “normal practice”.

The ethical documents of some companies have provisions prohibiting employees from influencing the decision of state bodies or their representatives. For example, the phrase “you should never try to influence illegally the decisions of state bodies or their representatives” is written in the ethical code of “Lukoil” PJSC. Such veto does not affect facilita-tion payments, since these payments are made to expedite the adoption of any decision by the state body or its representative, and not to change in any way such decision.

The ethical code of “Rostelecom” PJSC has the following provision: “Employees are prohibited from performing” “inadequate payments” that is, payments in any form (money, commissions, gift certificates, services, discounts, loans) for obtain-ing advantages, resolving issues, administrative procedures (including expediting and, simplification); if such actions are not legally specified”. From this provision, it can be concluded that employees may resort to this procedure in jurisdictions where facilita-tion payments are permitted or not regulated.

Gifts 22 % In order to prevent commercial bribery in compliance with the Transparency International Bribery Princi-ples16, developed for the business community, ethical documents of companies should include gift and hospitality policies.

Russian legislation imposes restrictions on receiving gifts while doing business with commercial organi-zations, and it bans officials and workers of certain

groups of organizations, including medical and edu-cational institutions, from receiving any gifts.

In compliance with Part 1 of Art. 57517 of the Civil Code of the Russian Federation, giving gifts which cost more than 3,000 rubles while dealing with com-mercial organizations is now allowed, and in the case of giving gifts to officials due to protocol procedures and other official events, gifts cost of more than 3,000 rubles are recognized as state / municipal property (and must be given by an official in which the said person replaces the post under the act).

In order to counteract bribery and extortion, in com-pliance with Cl. 7, Part 3, Art. 12.1 of the Federal Law from December 25, 2008, No. 273-FZ “On Counteracting Corruption”18, Cl. 6, Part 1, Art. 17 of the Federal Law of July 27, 2004 No. 79-FZ “On the Civil Service of the Russian Federation”19 and Cl. 4 of Part 1 of Art. 575 Civil Code, it is illegal for public officials while executing their official duties to receive gifts.

Thus, to counteract commercial bribery and extor-tion, the business community is required to clearly articulate the gift and hospitality policy in its ethical documents.

Those gift and hospitality policies that clearly and in reasonable detail, articulate values, policies and procedures to be used to prevent bribery may be effective. The guidelines should include provisions that define the conditions where giving and receiving gifts are accepted, the purpose of giving gifts, their acceptable form and threshold, the procedure and conditions for making gifts in the appropriate register.

Positive experience demonstrates that articulation of not only the permissible value of a gift, but also its admissible form is advisable. For example, the policy of “United Aircraft Corporation” PJSC bans giving gifts “in the form of cash, both cash and non-cash, regardless of the type of currency, as well as gift cer-tificates, loans, shares or stock options, etc. regard-less of their cost”.

It is worth noting that the “Severstal” PJSC gift policy, includes all the necessary elements, and requires keeping a register of all gifts given to of-ficials, and gifts that cost more than the fixed amount received or offered to the company’s employees: “Information about any gifts, services or participation

in recreational activities offered or received by Com-pany employees from third parties and whose cost exceeds $500 (or equivalent in another currency) must be entered in the register of gifts (a sample of the register of gifts is given in Annex 1). Regardless of the cost, the register of gifts should also reflect information about all the gifts (except for promotional gifts) issued to officials”.

In order to prevent corruption risks, the policy should require keeping a register of all gifts received and given, regardless of their cost.

Most of the ethical documents examined within the framework of this study do not include requirements for reporting gifts, they do not set an acceptable cost of gift or do not have a policy on receiving or giving gifts in general.

Channel for reporting allegations of corruption and feedback from the informant 3 % According to the Transparency International Bribery Principles20, Anti-Corruption Programs of companies should be operational and include tools to effectively combat bribery and other corruption manifestations.

These tools include setting up a communication channel that allows employees to report on corrup-tion offenses and shortcomings of the Anti-Corrup-tion Program, provide protection to employees who have reported unlawful conduct, regularly monitor the Anti-Corruption Program, educate and inform employees and the company’s management about its anti-corruption policy.

Companies should establish effective internal and external communication channels and provide public access to them. It would allow employees and/or any other persons to report alleged corrupt offenses and violations of the Anti-Corruption Programs anonymously and privately.

The enterprise should establish feedback mecha-nisms. The most effective way is a form that

ensures complete confidentiality and / or anonym-ity, as well as two-way communication with the informant in case any further necessary actions related to the disclosure of the information should be undertaken.

Most of the communication channels of the companies examined in the study allow anony-mous or confidential messages about the alleged facts of corruption to be reported, but they do not provide two-way communication with the reporter. About a quarter of companies do not provide any opportunity for the messages about the alleged facts of corruption to be privately or anonymously forwarded and they do not have any communica-tion channel for such letters.

It is a good practice to attract a third, independent party to organize such a communication chan-nel. Participation of the third parties guarantees impartial examination of reports about suspected acts of wrongdoings and corruption offenses. PC “Yandex” has established such channel”: “The line is organized by a third party independent of “Yan-dex”. Each application is assigned a number during registration, after which it is possible to find out the decision or provide additional information”. A similar tool is used by GC “Megapolis”: “Gathering and processing of information is conducted by an independent auditing company which guarantees confidentiality and anonymity”.

According to the annual EY study (Ernst & Young21) survey of 4,100 people from 41 coun-tries and dedicated to the assessment of cor-ruption level in Europe, the Middle East, India and Africa, only 21 % of company employees are aware of the ways to report corruption of-fenses. When deciding about reporting wrong-doings and misconduct, most employees are concerned about the possibility of disrupting their future careers (51 %) and putting their personal safety in danger (46 %). Also 73 % of respondents are ready to provide information to external factors, such as law enforcement agencies (57 %), regulators (49 %), journalists (15 %) and NGO (10 %).

16 https://goo.gl/fmqiDn 17 https://goo.gl/VmoTEw 18 https://goo.gl/g1ja58 19 https://goo.gl/XgdTev 20 https://goo.gl/917tyz 21 https://goo.gl/YFsvVb


Whistleblower Protection 36 % In 2010, during the Seoul G20 Summit, Russia assumed the obligation to develop a mecha-nism to protect whistleblowers, but in fact these obligations were not met. In recent years, bills on whistleblowers’ protection have been prepared by the Public Chamber and the Ministry of Labor of the Russian Federation, but they were not included in the State Duma of the Federal Assembly of the Russian Federation.

Even though whistleblowers’ protection from workplace reprisal is a prerequisite for conduct-ing a successful investigation of corruption crimes and implementation of anti-corruption policy, we can acknowledge now that there are no legal safeguards in Russia which ensure whistleblowers’ protection against retaliation and threats.

In compliance with the Anti-Bribery Principles, effective Anti-Corruption Programs companies should guarantee employees, who report in good faith and on reasonable grounds, on unlawful ac-tions and suspected acts of wrongdoings protec-tion from retaliation, demotion, fines, discrimination and other discriminatory or disciplinary action.

It is a good practice to extend protection meas-ures to all employees of the company, including management (including members of the Board of Directors, Supervisory Board, audit committee, etc.), as well as third parties and non-employees of the company, but acting on its behalf.

Thus, “Lukoil” PJSC guarantees that “for a bona fide employee, a member of the Board of Direc-tors, the Management Board and the Audit Com-mission of the Company who reported a violation of the provisions of this Code or decided to stop the violation, there will be no negative conse-quences (including discrimination and other har-assment from someone else” by either side)”. Ac-cording to the ethical documents of “NK Rosneft” PJSC, “no reprisal will be applied to any employee or counterparty of the Company”.

Companies also need to ensure that there are no negative consequences for bona fide whistleblow-ers, in case the fact of a corruption offense has not been confirmed or led to financial losses of the company. We have identified very few protec-

Support of leadership in the fight against corruption 14 % According to the Principles for Combating Bribery Transparency International23, one of the important points of successful implementation of the Anti-Corruption Programs is public demonstration of the commitment to fight against corruption by the company’s board of directors or equivalent body.

The existence of such a statement is important, as the Board of Directors is the main governing body in the company, and, in fact, it establishes a certain ethical level of doing business.

Application of anti-corruption policy to directors 29 % Company’s management team (Directors, including members of the Board of Directors, the Supervisory Board and the Audit committee), should demon-strate its commitment to combat corruption, and take an active part in anti-corruption policy.

Members of the company’s management team should strictly comply with the provisions of the Anti-Corruption Program and ethical documents adopted by the company.

It is impossible to consider anti-corruption policies and ethical documents that are mandatory for com-pliance only by employees, or individual groups of employees (“HC ‘Metalloinvest’” JSC: “Distributed to all staff members”) and / or managers as successful.

We consider “Alrosa” PJSC provisions of the ethical documents to be successful. According to them, the anti-corruption policy” is applicable to any em-ployee, including the top managers and its subsidi-aries and affiliates, regardless of their position in the performance of their duties and / or representation of the interests of the Company or its subsidiaries and affiliates in any countries of the world.”

tion safeguards on ethical behavior in the reviewed documents.

For example, “Binbank” PJSC guarantees that “the employee will not be subject to reprisals provided the report about possible facts of corruption of-fenses is made in good faith, but is not confirmed during its verification.” The ethical documents of “Uralkali” PJSC. “MMK” OJSC also guarantee protection from work reprisal, “if an employee reported a suspected corruption, even if as a result the company and / or the companies of the “MMK” OJSC group suffered losses“.

Public statement about the combat against corruption, the obligation to comply with anti-corruption legislation An important task of the business community is active combat against corruption manifestations in economic activity. In addition, due to the active struggle against corruption in the world, the adop-tion of new laws aimed at countering bribery, money laundering, increased pressure from society and the state, doing business using corrupt and unethical practices is becoming unacceptable in an increasing number of countries of the world.

In compliance with the 10th principle of the UN Global Compact22, commercial companies should oppose any form of corruption, including extortion and bribery. Regarding the necessity of implement-ing this principle, developing anti-corruption compli-ance control systems in companies is becoming more widespread.

For the successful fight against corruption manifes-tations, companies should adhere to the principle of non-acceptance of corruption in all forms and mani-festations, not to use corrupt and unethical practices in their activities, and comply with all applicable laws in the countries of operation.

Application of anti-corruption policy to the persons acting on behalf of the company 26 % In order to effectively combat corruption, in compli-ance with the Principles for Combating Bribery of Transparency International24, companies should not make illegal payments, including bribes, “facilitation payments” and commit bribery, including through persons acting on behalf of the company (agents, consultants, representatives and etc.).

To prevent illegal payments in the activities of com-panies, prohibitions and principles of anti-corruption policies (including in anti-corruption training) should apply not only to the company’s employees and its management, but also to the specified persons.

Ethical documents and anti-corruption policies of a significant number of companies reviewed in the study do not apply to the persons acting on behalf of the company, or are advisory in nature.

A good governance is to include provisions in the ethical documents and anti-corruption policy that oblige all persons acting on behalf of the company to comply with the prohibitions and principles of ethical documents and anti-corruption policies in full measure.

As a good example, one may look at the provisions of the anti-corruption guidelines of “TC Megapolis” JSC, according to which, the policy applies in full measure to the persons acting on behalf of the com-pany: “A contractor” means any individual, corpora-tion, partnership, limited liability company, simple partnership, trust company or other legal entity that is not an affiliated party and provides services on behalf of or in the interests of the Company, distributors, dealers, license holders, contractors, consultants and agents. This Policy applies to: (a) “TC Megapolis” JSC and its subsidiaries (hereinafter referred to as “Megapolis” or “the Company”); (b) all Employees and (c) all Counterparties.”

22 https://goo.gl/Z4i8r9 23 https://goo.gl/4Estn8 24 https://goo.gl/ziZYTe


Application of anti- corruption policy to contractors 12 % Interaction of companies with its contractors (suppli-ers and subcontractors) may pose corruption risks if it does not have on a transparent, competitive and fair basis.

In compliance with the Principles on combating bribery, in order to mitigate the corruption component in inter-action with contractors, companies should adopt a set of measures that allow to assess the risk of bribery and compliance of the company’s policy with anti-corrup-tion norms on a regular basis, inform the company of anti-corruption policies, and, if necessary, train contrac-tors re countering corruption and provide appropriate explanations to them.

A good practice is to adopt a set of measures, includ-ing due diligence of contractors for reliability and non-acceptance of corruption, require contractors comply with the Anti-Corruption Program of the company (or its equivalent), and monitor their compliance with anti-corruption legislation and the Anti-Corruption Program on a regular basis.

Most of the ethical documents of the examined com-panies described specific tools aimed at mitigating corruption risks in interaction with contractors, but they did not include the mechanism for regular monitoring of contractors’ activities regarding compliance with anti-corruption policies and anti-corruption legislation.

Implementation of training programs 9 % In compliance with anti-bribery principles, to effective-ly implement Anti-Corruption Programs, companies should organize anti-corruption training of employees, top-managers, including members of the Board of Directors, the Supervisory Board and the audit com-mittee, of all persons acting on behalf of the company and, if necessary, of contractors.

A good practice is the organization of training for all these categories of individuals on a regular basis.

Out of the companies we have examined, less than 10 % regularly conduct anti-corruption training of

that “ the assessment results of the effectiveness of the anti-corruption system” should be performed once a year.

Monitoring Anti-Corruption Programs on an irregular basis or less than once a year cannot be considered as effective.

For instance, the provision of the HС” Metalloinvest”JSC ethical documents, which stipulate that “the Code norms should be reviewed at least once in every three years” cannot be considered as effective at all.

Anti-corruption legislation changes quickly. In addition, corruption can take new forms, and the anti-corruption measures may become futile. For effective fight against corruption, companies should quickly respond to the changes and update their anti-corruption policies.

Thus, to successfully combat corruption, companies should provide mechanisms to ensure that anti-cor-ruption measures are monitored, and Anti-Corruption Programs are examined at least once a year, which includes assessment of the suitability, adequacy and effectiveness of the anti-corruption measures, and the results of such monitoring should be presented in companies’ annual reports.

Contributions to political activities 16 % Business community is not prohibited to make dona-tions to political parties, however, this practice poses corruption risks, as it can serve as a way of obtaining an unfair advantage in business and economic opera-tions of the company.

In compliance with the anti-bribery principles, employ-ees, top-managers, including members of the Board of Directors, the Supervisory Board and the Audit Com-mittee, as well as contractors and persons acting on behalf of the company, should not directly or indirectly contribute to political parties, organizations and indi-viduals involved in politics, to receive an undue advan-tage in their activities.

To mitigate corruption risks, companies should imple-ment an appropriate policy which either completely bans political donations or requires public disclosure of each payment.

employees and top managers, including members of the Board of Directors, the Supervisory Board and the audit committee, and only a small part of them also train contractors and persons acting on behalf of the company.

For example, “NK Rosneft” PJSC organizes “ anti-corruption and bribery training and periodic certifica-tion of all members of the Board of Directors of “NK” Rosneft” PJSC, employees of the Company, and, where necessary and appropriate, contractors, and “MTS” PJSC implements and supports the similar program for members of the Board of Directors, Employees and Representatives where participants familiarize themselves with the principles and stand-ards of anti-corruption legislation.

Most companies analyzed in the study either do not conduct anti-corruption training at all, or organize it on an irregular basis and only for employees.

Regular monitoring 25 % One of the key measures for the successful imple-mentation of anti-corruption guidelines is monitoring of the implementation of Anti-Corruption Programs including assessment of the suitability, adequacy and effectiveness of the anti-corruption measures.

In compliance with anti-bribery policy, companies should develop mechanisms to monitor compliance with anti-corruption measures in the company, and regular monitoring of Anti-Corruption Programs, including all the above-mentioned components. Monitoring results should be presented in annual reports of the companies.

As a good practice, it is possible to consider setting up certain departments / units responsible for regular monitoring of the implementation of Anti-Corruption Programs. We recommend this monitoring be con-ducted at least once a year.

For example, in “Rosset” PJSC, there is a “department responsible for the prevention of corruption offenses and combating corruption”, which “organizes annual meetings on improving anti-corruption activities in the “Rosseti” Group of Companies with heads of anti-corruption units, compliance control”. ANC “Bashneft” PJSC regards that anti-corruption programs should be revised at least every year. “Akron” PJSC also believes

It is a good practice to adopt a policy that prohib-its employees, company management, as well as counterparties and individuals acting on behalf of the company, to support the political activities of parties, public associations, non-profit organizations and individuals involved in politics in all countries of the company’s operations.

Examples include the provisions of the ethical docu-ments of OJSC “Russian Railways”, according to which, the company “does not finance and does not support in any other way political parties and non-profit organizations that carry out political activities. OJSC “Russian Railways” also does not finance, nor does it support in any other way the political activi-ties of any individuals, including employees of OJSC “Russian Railways”. Another example is the ethical documents of GC “Megapolis”, in compliance with them, “the company does not provide donations and does not make contributions to political activi-ties, whether in cash or in any form, anywhere in the world”.

Many organizations impose a ban only on the sup-port of political parties and public associations, without specifying prohibition on support / funding for the political activities of individuals and / or non-profit organizations. Such approach cannot be considered effective, since, although it is used by a significant number of organizations, it poses certain corruption risks.

A significant number of companies examined in the study impose a ban on financing political activities by employees, but they do not extend the ban to the management of the company, as well as persons acting on its behalf, and contractors.

It is important to note that some companies prohibit financing of political activities only in the Russian Federation. Thus, according to the policy of “Mag-nit” PJSC, “the company does not participate in financing political parties and public associations participating in political activities on the territory of the Russian Federation.”

Thus, political funding banning or veto to publicly disclose funds spent on financing a political party or candidate, as well as other measures proposed in this report, should be extended to all legal entities which the company directly or indirectly owns in all jurisdictions. This information should include financ-ing of political actors outside the country of incorpo-ration of the company or its subsidiaries.

36 37

0%

100%

100%Magnet, RossetHighest performing


41%ORGANIZATIONAL TRANSPARENCY

Average


2. ORGANIZATIONAL TRANSPARENCY

Large companies operate in the country of regis-tration and abroad through an extensive network of directly or indirectly controlled affiliates, as well as through associated companies, joint ventures, branches and representative offices. Russian com-panies are not required to disclose a full list of legal entities that are under their direct or indirect control. This makes it very difficult to establish the relation-ship between legal entities and provides opportuni-ties for the commission of corruption crimes.

That is why we recommend that anti-corruption policies be extended to all the company’s subsidiar-ies and these guidelines be publicly disclosed to all entities directly or indirectly related to the company.

Russian legislation does require all legal enti-ties release information about affiliated persons, subsidiaries and associates. Only legal entities are liable to disclose this information, however not all companies adhere to this law. “The Regulation on Disclosure of Information by Securities Issuers”25 No. 454-P, approved by the Bank of Russia from December 30, 2014, requires companies, includ-ing foreign ones, whose circulation of securities is carried out in the Russian Federation. However, this requirement does not apply to issuers of Russian state and municipal securities, as well as to the Central Bank of Russia.

Paragraph 1 of Chapter 10 of the above-mentioned provision determines the list of organizations that are required to disclose information in the form of a quarterly report of the issuer of securities. Informa-tion about organizations under significant control of the issuer, as well as on commercial organiza-tions where the issuer owns no less than 5% of the authorized capital or at least 5% of ordinary shares, is subject to disclosure in a quarterly report. The name, location (registration) of the commercial organization, as well as the issuer’s share in the authorized capital of such commercial organization and the share of the ordinary shares held by the issuer, if the commercial organization is a joint-stock company are to be disclosed, wherein, the release of the exhaustive list of countries in which subsidi-

associated entities and joint ventures in the consoli-dated annual report or in the annual reporting of the company in the form of a table containing information on each of the structures, where we recommend the name, country of registration, share of ownership and country of operation should be indicated.

So, there are 55 companies from the survey sample which do not disclose any information about their affiliated and associated structures at all. Here is the list of the companies which provided minimum information about the countries of operation of their controlled organizations: 5% of the companies on the list disclose this information for all their subsidiar-ies, and only 2% for associates and joint ventures. The most transparent companies in telecommunica-tions industry are “Megafon”, “MTS”, “VimpelCom” and “Rostelecom”; from the electric power indus-try — “Rosseti”, “Inter RAO UES”, “RusHydro”; from the banking sector — Sberbank and “Gazprombank”; from the sphere of the OPK — “Helicopters of Rus-sia” and “USC”; from the sphere of chemistry and petrochemistry — “Sibur”; from the oil and gas sec-tor — “Surgutneftegaz”.

In their consolidated statements, most companies prefer to disclose information about their significant or principal subsidiaries:

We suggest the companies review their approach and publish information about all their legal entities. A good example of the Russian company may be the Annual Report of Sberbank26. Even though it discloses information only for major companies, we regard this format of disclosure as being optimal and most effective for all subsidiaries and associ-ated structures.

aries and associated companies operate is not required. Also, there is no obligation to release any information on commercial organizations in which the issuer owns less than 5% of ordinary shares or has a share in the authorized capital of less than 5%.

Public and non-public joint-stock companies that have carried out or conducted public offering of bonds or other securities are to release information about affiliated persons, and non-public joint-stock companies with the number of shareholders ex-ceeding 50, which have carried out or are perform-ing public offering of bonds or other securities should disclose information on the acquisition of more than 20% of the voting shares of any other public or non-public company.

Thus, currently, Russian legislation does oblige legal entities of any organizational and legal form to release a full list of their subsidiaries and associates, as well as a list of countries in which these compa-nies operate.

Results of the companies average result 41 %In this part of the study, we have assessed information disclosed by companies about their subsidiaries and associates, as well as joint ventures. The questionnaire was about the names, ownership interest, registration countries and countries of operation. As already men-tioned above, we have chosen a more lenient approach in this part of the study, to assess the companies. We have evaluated the material from the quarterly and an-nual reports, the annual consolidated reporting, as well as the information provided on the official website of the organizations. Thus, in most cases, corporate insti-tutions which provide financial statements as issuers, have gained highest scores for disclosing information on organizational transparency.

To ensure maximum transparency of the group, it is necessary to include the list of all subsidiaries and

25 https://goo.gl/w34RQ6 26 https://goo.gl/UnVw5a

“As of December 31, 2016, the Group controlled 244 legal entities (as of December 31, 2015–92). The assets, liabilities, revenues and expenses of these entities are included in these consolidated financial statements. Below is a list of the main subsidiaries”.


1 point 0.5 points 0 point Not considered

Names of subsidiaries (14) 99 43 54 1Ownership interest for subsidiaries (16) 97 33 66 1Countries of registration subsidiaries (15) 91 17 88 1Names of associates and joint ventures (18) 84 13 95 5Share of ownership for associates and joint ventures (20) 83 11 98 5Countries of associates and joint ventures registration (19) 79 10 103 5Countries operating subsidiaries (17) 9 22 165 1Countries of operation for associates and joint ventures (21) 4 16 172 5

Organizational Transparency Results of companies, 100 % maximum

2 компании100 %

85 компаний0 %Сахалин Энерджи, ИНК, Мосинжпроект, ОАО «ТАИФ-НК», Русэнергосбыт, Р-Фарм, Салым Петролеум, Эльдорадо, Связной, Спортмастер, Седьмой континет, НПК «Техмаш», Элемент-трейд (торговая марка «Монетка»), Холидей, ДНС, Красное и Белое, Алькор и Ко (торговая марка «Летуаль»), ТД «Интерторг» (торговая марка «7-я»), Розница К-1 (торговая марка «Мария-Ра»), Мерлион, СНС-Холдинг, Концерн ВКО «Алмаз-Антей», Томскнефть, Северэнергия, Автотор, Нефтегазиндустрия, Мираторг, НПФ «Лукойл-Гарант», Московский метрополитен, ЛокоТех, ЭФКО, КДВ Групп (торговые марки «Яшкино», «Бабкины семечки», «Кириешки», «Маяма» и др.), Мэйджор-Авто, УСМК, Оборонстрой, ЮНПК, Трубные инновационные технологии, НЗНП, Красцветмет, Транснафта, СИА, НПФ ГАЗФОНД пенсионные накопления, Юлмарт, Металлокомплект-М, ТД «РИФ», Альфа-Банк, Новый поток, Ташир, Фортеинвест, Содружество, Буровая компания «Евразия», Велесстрой, Евросеть, Бэст прайс (торговая марка Fix Price), Автомир

64 компании75 %Казаньоргсинтез, Удмуртнефть, Аэрофлот, Русал, АЛРОСА, КТРВ, НЛМК, Nordgold, Мосводоканал, Акрон, Зарубежнефть, НМТП, ММК, Новатек, Русснефть, РТИ Системы, Башнефть, Норникель, Роснефть, ДИКСИ Групп, КРЭТ, Уралвагонзавод, ФосАгро, Globaltrans, Бинбанк, ВСМПО-АВИСМА, Совкомбанк, Камаз, Северсталь, ОАК, Т Плюс, Илим, Уралкалий, Банк «Санкт-Петербург», Лукойл, ОДК, Московский кредитный банк, ГК «ТНС энерго», Тольяттиазот, НГК «Славнефть», ТМК, ВТБ, ХК «Металлоинвест», Группа ЛСР, Силовые машины, Мечел, Внешэкономбанк, Мостотрест, Уралхим, ГАЗ, Ютэйр, Кокс, Транснефть, Открытие, Протек, Автоваз, Росгосстрах, ЧТПЗ, Трансмашхолдинг, Совкомфлот, Ингосстрах, РЕСО-Гарантия, Черкизово, Авиакомпания «Сибирь»

Магнит, Россети

100

88

81

75

63

56

50

44

38

31

25

19

13

6—

Magnet, Rosseti

Transaero, Spetsstroyinzheniring, Morton

Sberbank, MTS, Megaphone, VimpelCom, Rostelecom, Inter RAO, RusHydro, Gazprombank, USC, Surgutneftegas, SIBUR, Russian Helicopters

Nizhnekamskneftekhim, RZD, Tatneft, Gazprom, NNK-Aktiv

64 companies

Gazprom Burenie

Evraz, SOGAZ, Bank Rossiya

Rusagro, Rosselkhozbank, Lenta, M.Video, Ruselectronics, PPF "RGS"

AlfaStrakhovanie

Detsky Mir, Promsvyazbank, Pochta Rossii, O’Key Group, Polyus, EuroChem (EuroChem Group AG, Switzerland), UIMC, High Precision Systems, Rosatom, PIK Group, Rolf, Neftisa, Russian Standard Bank

Polymetal, LANIT, Tele2 Russia

PPF "Blagosostoyanie", Finance&Construction Corporation "Lider", PPF Future, UMMC, EuroSibEnergo

Pulse, X5, Yandex, Katren, SUEK, Siberian Generating Company, Transoil

Rosta, Volga-Dnepr, Neftetransservis, StroyTransNefteGaz, Sds-Ugol, Agro-Belogorie, Neftekhimservis, Genser, Voentorg, EUROCEMENT, UNICONF

Megapolis, OMK, CPC, STROYGAZMONTAZH, NCC, State ATM Corporation, UCL, Metallservis, Aston

55 companies0 %

Sakhalin Energy, Irkutsk Oil Company (INK), Mosinzhproekt, TAIF, RUSENERGOSBYT, R-Pharm, Salym Petroleum, Eldorado, Svyaznoy, Tashir, Sedmoi Kontinent, Techmash, Element-Treyd, Holiday Group, DNS, Red&White, Alkor and Co, RIF, Retail K-1 (“Maria-RA”), Merlion, Sodrugestvo, Almaz-Antey, Trans Nafta, SeverEnergia, Avtotor, Neftegazindustriya, Miratorg, LUKOIL-Garant, Moskovsky Metropoliten, LocoTech, EFKO Group, CSC Group, Major-Auto, Uralo-Sibirskaya Metallurgicheskaya Kompaniya, Oboronstroy, South refineries company, Ural Mining Metallurgical Company (UMMC), Novoshakhtinskii Zavod Nefteproduktov, Krastsvetmet, Pipe Innovation Technologies, SIA International, GAZFOND, Ulmart, Metallokomplekt-M, Tomskneft, Alfa Bank, New Stream Group, Intertorg, Forteinvest, Sportmaster, Drilling company “Eurasia”, Velesstroy, Euroset, Best price (Fix Price), Avtomir

64 companies75 %

Kazanorgsintez, Udmurtneft, Aeroflot, RUSAL, ALROSA, Tactical missiles Corporation, NLMK, Nordgold, Mosvodokanal, Akron, Zarubezhneft, NCSP, Magnitogorsk Iron and Steel Works, NOVATEK, RussNeft, RTI Systems, Bashneft, Nornickel, Rosneft, DIXY Group, KRET, Uralvagonzavod, PhosAgro, Globaltrans, Binbank, VSMPO-AVISMA, Sovcombank, KAMAZ, Severstal, United Aircraft Corporation (UAK), T Plus, Ilim, Uralkali, Saint Petersburg Bank, LUKOIL, United Engine Corporation (ODK), Credit Bank of Moscow, TNS Energo, Togliattiazot, Slavneft, TMK, VTB, Metalloinvest, LSR group, Power machines, Mechel, Vnesheconombank, Mostotrest, URALCHEM, GAZ Group, UTair, Industrial Metallurgical Holding, Transneft, Otkritie Holding, PROTEK, AvtoVAZ, Rosgosstrakh, ChelPipe, Transmash-holding, Sovcomflot, Ingosstrakh, RESO-Guarantee, Cherkizovo, Siberia Airlines

2 companies100 %

Magnet, Rosseti

Analysis by questions for 197 companies

42 43

0%

100%

64%SberbankHighest performing


4%Average

COUNTRY-BY-COUNTRY REPORTING

Photo: www.istockphoto.com


3. COUNTRY-BY-COUNTRY REPORTING

This part of the study is devoted to the disclosure of data on financial transactions in the countries of operation and applies only to companies operating outside the Russian Federation. In total, 115 compa-nies which have operations abroad were included in the survey sample. We have assessed such param-eters as the disclosure of revenues, taxes, capital expenditures, pre-tax profits and support costs for local communities in each of the countries in which the company operates either directly, through branches and representative offices, or through subsidiaries, associates and joint ventures. The list of the countries of business for each company was formed based on the information of the geography of the corporation, which is available on the compa-ny’s the official website, and on data from the annual accounts, consolidated reporting, issuer’s reporting and the list of affiliated persons. For the integrity of the report, if the main country of business opera-tions was Russia, the results were not considered.

Since 2018, country-by-country reporting for some Russian companies will become mandatory under the Convention on Mutual Administrative Assistance in Tax Matters27.

In addition, the importance of country-by-country financial information disclosure is driven by various factors: transparent data on income and taxes will help to evaluate the significance of the company’s contribution to the budget of the country, and thus, its socio-economic and political influence; informa-tion about the support of local communities will assist to evaluate its responsible attitude to the CSR issue. In addition, country-by country financial disclosure is a valuable source of information for investors. Even more essential is the fact that public release of such information will make it possible to draw up the most exhaustive picture of how the largest companies use offshore zones. Thus, from the 115 companies of the survey sample, fourteen companies have affiliates or associates registered in the British Virgin Islands.

Results of the companies average result 4 %The average result of information disclosure on countries of operation for 115 companies from the survey sample was only 4 %. At the same time 87 companies do not disclose such information at all and they received 0 points.

Sberbank scored the maximum result in this part of the study. Its on-site reporting was estimated at 64 %. “Nizhnekamskneftekhim” company is on the second place, notwithstanding the fact that it carries out its activities in just one foreign country.

The metals and mining industry is the most transpar-ent, as far as the country-by-country financial report-ing is concerned. There is also a clear tendency to release more information by companies whose holdings are registered under the jurisdictions of other countries (consolidated statements of “Evraz”, “Rusal”, “Nordgold”, “Polymetal”, “Globaltrans”, although it is not as exhaustive as possible from the point of view of the research methodology, country-by-country financial reporting). None of the compa-nies that have an organizational and legal form of LLC and operate in more than one country in the world has disclosed any information on this part.

The majority of the companies disclose informa-tion about their revenues (sales volumes), but are unwilling to provide data about the amount of public contributions.

Country-by-country reporting Company results, 100 % maximum (for 115 companies)

27 for details, see page 46

64

60

32

29

25

21

20

16

14

13

12

10

9

8

6

4

3

2

1

Sberbank

Nizhnekamskneftekhim

Polymetal

Evraz

Nordgold

RUSAL

Globaltrans, USC, Katren, PPF "Blagosostoyanie"

Megaphone

Inter RAO

ALROSA

MTS

LSR group

VimpelCom

MMK

NNK-Aktiv

LUKOIL, SOGAZ

Nornickel, URALCHEM, Vnesheconombank, Industrial Metallurgical Holding

Tatneft

VTB

No companies100 %

87 companies0 %

Aeroflot, Rostelecom, RZD, Akron, Zarubezhneft, RusHydro, NOVATEK, RussNeft, RTI Systems, Bashneft, Gazprombank, Rosneft, DIXY Group, PhosAgro, Binbank, VSMPO-AVISMA, Sovcombank, Gazprom, KAMAZ, Severstal, United Aircraft Corporation (UAK), T Plus, Surgutneftegas, Ilim, SIBUR, Uralkali, Saint Petersburg Bank, LANIT, United Engine Corporation (ODK), Russian Helicopters, Credit Bank of Moscow, Detsky Mir, Promsvyazbank, Rosselkhozbank, Pochta Rossii, Slavneft, TMK, Metalloinvest, Power machines, Mechel, Mostotrest, GAZ Group, UTair, R-Pharm, Transneft, Otkritie Holding, PROTEK, AvtoVAZ, Rosgosstrakh, ChelPipe, Transmashholding, Sovcomflot, Ingosstrakh, RESO-Guarantee, Cherkizovo, Siberia Airlines, EuroChem, X5, Volga-Dnepr, PPF “RGS”, Neftegazindustriya, Yandex, Bank Rossiya, Rosatom, Tele2 Russia, CPC, Neftisa, Russian Standard, Bank SUEK, PPF Future, Ural Mining Metallurgical Company (UMMC), EuroSibEner-go, EUROCEMENT, Sportmaster, UNICONF, UCL, Metallservis, Aston, Alfa Bank, New Stream Group, Tashir, Forteinvest, Sodrugestvo, Drilling company “Eurasia”, Velesstroy, Euroset, Best price (Fix Price), Avtomir

No companies100 %


Legal context Russian companies are not required by law to disclose the data on revenues, taxes, capital ex-penditures and other income and expenses in all countries where they operate now. However, starting from January 2018, this situation will change, and it will be mandatory for all companies to become more transparent with regards to their business operations abroad.

The Action Plan for Fight Against Taxation Minimiza-tion and Releasing Profits (BEPS Plan) prepared by OECD in conjunction with the G20 in 201328 aims a set of measures against the dilution of the tax base and the movement of profit be taken. multinational groups of information on the global distribution of income, economic activity and payment of taxes for each country in a general form, as well as mecha-nisms for intercountry exchange of tax information.

In 2015, OECD published a report on the impact of the 13th paragraph of the BEPS Plan, which provides guidance on the implementation of legisla-tive requirements for tax reporting of international groups and country-by-country reporting. In compli-ance with the guidance, the disclosure of internal reporting is provided in the form of the Country-by-Country Reporting, which includes key financial and tax indicators of international groups (in particular, revenue, profits, taxes paid, number of employees, capital and material assets) in the context of the jurisdictions of their activities, as well as identifica-tion of information and data on the main activities of all participants in the international group, including information on revenues, profits, the amount taxes in the countries of presence.

According to the recommendations, multinational reporting should be prepared by transnational groups (international groups of companies) with annual consolidated revenues of over 750 million Euros based on data from the previous period, and the responsibility for submitting the country report is assigned to the parent company of the transnational group in the country of its registration (with subse-quent provision of this information to others national tax administrations).

Russia belongs to jurisdictions that have implement-ed the tax standards adopted at the international level. In 2014, Russia, with some reservations, rati-fied the OECD Convention on Mutual Administrative

The bill provides amendments to the Tax Code, including definitions of concepts such as “interna-tional group”, “member of an international group of companies”, “parent company of a global group of companies”.

“Multinational group of companies” for which country-by-country reporting is mandatory is defined as a set of organizations that are linked through the participation (ownership) and (or) control in respect of which consolidated financial statements are prepared and which includes at least one organiza-tion that is a tax resident of the Russian Federation, and one organization that is not a tax resident of the Russian Federation.

In compliance with the draft law, country-by-country reporting should be provided by groups whose ag-gregate revenue for the previous fiscal year, accord-ing to the consolidated financial statements, is at least 50 billion rubles. It is planned that companies will start submitting country-by-country reports for fiscal years on January 1, 2017.

“A participant of a multinational group” according to the bill, a participant is a person who works for a multinational group of companies. He is considered as a participant of the multinational enterprise. In addition, the bill also includes individuals and / or their permanent missions to the participants of the international group, whose financial statements are not considered while preparing the consolidated financial statements of the multinational group of companies solely due to their small size or insignifi-cance of such material. Also, any subdivision of a participant in a multinational group of companies, whose activities lead to the formation of a perma-nent representation is regarded as a participant of the multinational group too.

The Central Bank of the Russian Federation, as well as government authorities and local governments are not defined as participants in a multinational group of companies.

According to the bill, companies that are members of a multinational group are required to submit the following documents:

1) notification of participation in a multinational group of companies (electronically);

Assistance in Tax Matters (the document entered into force in 2015).

Since 2018, Russia plans to start exchanging the information on the Standard on Automatic Exchange of Information on Financial Accounts of the Common Reporting Standard (CRS, which provides for the au-tomatic exchange of data on non-resident accounts held by financial institutions) developed by the OECD to increase tax transparency29.

Now, not all legal entities are required to disclose information reflecting their financial position, financial performance and changes in financial position. Federal Law No. 208-FZ from July 27, 2010 “On Consolidated Financial Statements” in Article 2 defines the list of organizations for which disclosure of such informa-tion is mandatory. Such organizations include banks, insurance organizations, non-state pension funds, organizations whose securities are admitted to trading at stock exchanges and / or other organizers of trading on the securities market, and some others. Disclosure shall be provided in the form of consolidated financial statements prepared in compliance with International Financial Reporting Standards (IFRS) if an entity is part of an IFRS group and unconsolidated, if it is not included.

Consolidated financial statements under IFRS do not provide disclosure of information in the context of the countries of presence of the transnational group on revenue (including separately for independent and interdependent persons), profits, taxes, etc.

In order to implement the Convention on Mutual Administrative Assistance in Tax Matters on July 20, 2017, the draft law of the Federal Law No. 231414-7 “On Amendments to the Tax Code of the Russian Federation (in connection with the implementation of the international automatic exchange of information on financial accounts and documentation for interna-tional groups of companies)” was presented, which defines the procedure for the exchange of information for tax purposes in compliance with the CRS, and the requirements for the preparation and filing of country-to-country report and notification of participants in a multinational group of companies. Generally, the bill follows the recommendations of OECD.

This bill was passed by the State Duma of the Federal Assembly on September 20, 2017 in the first reading.

2) country-by-country reporting of the multinational group of companies in which the company is a participant.

According to the bill, country-by-country reporting includes the following documents:1. global documentation for a multinational group of

companies (provided in an arbitrary form at the request of the Federal Tax Service), should include information in the form of a diagram on the ownership structure of a multinational group of companies, indicate the list of persons who are members of the group, and the countries in which these individuals exercise their business activities. These documents should release information about participants who act in the interests of other participants in the multinational group, and in countries where participants are registered;

2. the national documentation of the participant of the multinational group of companies (provided at the request of the Federal Tax Service);

3. the country-by-country reporting of the multinational group of companies for the countries whose tax residents are members of the multinational group of companies (submitted to the Federal Tax Service in the format of an electronic form annually), includes information on the total revenue for the fiscal year, the amount of profit before taxation, the amount paid corporate profit tax, the amount of the calculated corporate income tax in a generalized form, and identification information about each participant of the multinational group, indicating states and countries in which such company is registered, and the country of tax residence.

The form (format) of notification of participation in the multinational group of companies, the proce-dure for filling out the form and the procedure for submitting the notification should be developed and approved by FMS order within 6 months after the adoption of the law.

The country-by-country reporting of the multina-tional group of companies includes information on income, profits, key indicators which characterize the activities of participants in the multinational group of companies in the Russian Federation and other countries, and the amount of taxes paid in the Russian Federation and abroad.

28 https://goo.gl/2mHvsY 29 https://goo.gl/VBAuYU

48 49CENTER “TRANSPARENCY INTERNATIONAL—R”

According to the bill, not all companies which are mem-bers of a multinational group of companies and which have notified the authorities about their status, are re-quired to submit a country-by-country report. Companies are exempt from submitting country-by-country report in the following cases:1 if the parent company or an authorized participant

of the multinational group of companies submits the country-by-country report;

2 if the parent company or an authorized participant in a multinational group of companies is recognized as a tax resident in a country that is a party of Tax Informa-tion Exchange Agreement (TIEA), and its legislation re-quires filing of a country-by-country report with similar information articulated in the bill; and the legislation of that country does not allow for a systematic failure to fulfill obligations on information exchange agreements;

3 if the parent company is recognized as a tax resident of the Russian Federation and the total volume of revenues of the multinational enterprise is less than 50 billion rubles according to the consolidated financial statements for the previous fiscal year; or, if the parent company is recognized as a tax resident of another country, and the total volume of revenues is less than the total amount of profits required by the law of that country to file a country-by-country report which contains similar information as the one described in the bill.

The law does not stipulate procedures for submitting and receiving country-by-country reports, requirements for protection of this information, the lists of countries with which automatic exchange of information is carried out, and the list of countries where systematic failure to provide automatic exchange of country-by-country reporting is a possibility. These issues should be resolved within 18 months after the official publication of the law by the Government of the Russian Federation and federal executive bodies through the adoption of a few regulatory legal acts.

The bill stipulates introduction of sanctions for failure to provide notice of participation in a multinational group and failure to submit country-by-country report, but these measures can hardly be called serious. So, companies which did not notify about their participation in a multina-tional group, were liable to pay a fine of 50,000 thousand rubles, those companies which have not provided coun-try-by-country reporting are to pay the fine of 100,000 thousand rubles. At the same time, sanctions are not ap-plied for tax offenses committed from 2017–2019, during the so-called transition period.

Russian companies are also required to disclose the final beneficiaries at the request of the Federal Tax Service and The Federal Financial Monitoring Service (Rosfinmon-itoring). A beneficial owner means a person who directly or through third parties controls more than 25 % of the company or influences the decision-making in it.

Companies which fail to provide such information for le-gal entities, are liable to pay a fine of 100,000 to 500,000 thousand rubles.

In 2016, the authorities were discussing the idea of creat-ing a single register of ultimate beneficiaries based on the Single Federal Register of Information on the Activities of Legal Entities, but Rosfinmonitoring did not support this initiative.

In August 2017, the Federal Tax Service published a let-ter in which it drew attention to unscrupulous tax evasion schemes for the ultimate beneficiaries. In bankruptcy cases, tax specialists recommend not only to receive intentionally crafted unenforceable court decisions, but to collect company debts at the expense of persons who ran it. This suggests that the approach of state bodies to the ultimate beneficiaries varies from formal to the actual. The beneficiaries, according to the tax authorities, are not only the nominal persons recorded in the register, tax officials act guided by the principle of “look for individuals who are the real beneficiaries.” The Federal Tax Service specialists intend to identify the final beneficiaries by copying the practice of criminal investigation and offer-ing a plea agreement to the nominal directors who are expected to point to the ultimate beneficiaries.

ANNEXES


ANNEX 1 LIST OF EVALUATED INFORMATION

I ANTI-CORRUPTION DOCUMENTSThe main sources of information for gathering material on the first part: The Code of Corporate Ethics and other ethical documents, the anti-corruption policy of the company, the annual report on CSR, the supplier’s code of conduct, the conflict of interest policy, the policy of gift giving and hospitality.

1 Does the company state publicly its commitment to combat corruption (the principle of “zero tolerance”)?

2 Does the company agree publicly to comply with all relevant laws, including anti-corruption laws?

3 Do top managers of the company (senior members of the Board or members of the Board of Directors) personally demonstrate support for the fight against corruption?30

4 Does the anti-corruption policy of the company (norms of the Code of Ethics) apply directly to all employees and directors?

5 Does the anti-corruption policy of the company apply directly to persons who are not employees but are authorized to act on behalf of the company or rep-resent it (for example, to agents, consultants, representatives, intermediaries)?

6 Does the Anti-Corruption Program of the company apply to uncontrolled individuals or entities that provide goods or services as part of a contractual relationships (for example, to contractors, subcontractors, suppliers)?

7 Does the company conduct anti-corruption training programs for its employ-ees and directors?

8 Has the company introduced gift and hospitality policy that regulates gifts, guest reception and hospitality?

9 Is there a policy that explicitly prohibits facilitation payments?

10 Does the company policy allow employees and others to express concerns and report violations of these policies) without the risk of retaliation?

11 Does the company provide a channel through which employees can report suspected violations of anti-corruption policies, and does such channel allow confidential and / or anonymous data reporting (informing)?

12 Does the company regularly monitor the Anti-Corruption Program to review the suitability, acceptability and effectiveness of the program, as well as its improvement (if necessary)?

13 Has the company introduced a policy on political contributions and a ban on political donations, and if it is not prohibited, then is there any public disclo-sure of such contributions?

30 Public support of the company’s manage-ment can be manifested in the preamble to the anti-corruption policy or in the company’s Code of Ethics and may be published as a separate public letter or an ap-peal of the company’s executive.

II ORGANIZATIONAL TRANSPARENCY The main sources of information for data collection in the second part of this report have been an-nual consolidated financial statements under IFRS, annual accounts of the company, list of affiliated persons, quarterly reports of the issuer, sections of the site dedicated to subsidiaries.

Questions 18–21: “Unconsolidated subsidiaries” — associates, joint ventures, companies that are consoli-dated using the equity method.

An unconsolidated subsidiary is a company that is owned by a parent company, but whose individual finan-cial statements31 are not included in the consolidated or combined financial statements of the parent com-pany32 to which it belongs.

14 Does the company disclose the full list of names of all its fully consolidated subsidiaries?

15 Does the company disclose ownership interest for all its fully consolidated subsidiaries?

16 Does the company disclose the country of registration for all its fully consoli-dated subsidiaries?

17 Does the company disclose the activities of the country for all its fully consoli-dated subsidiaries?

18 Does the company disclose the full list of names of all its unconsolidated subsidiaries?

19 Does the company disclose ownership interest for all its unconsolidated subsidiaries?

20 Does the company disclose the country of registration for all unconsolidated subsidiaries?

21 Does the company disclose activities of all its unconsolidated subsidiaries?

III COUNTRY-BY-COUNTRY REPORTING The main sources of information for collecting material in the third part of this report have been annual consolidated financial statements according to IFRS, annual financial statements of the company, list of affiliated parties, quarterly reports of the issuer, annual reports on CSR, reports on payments to state bodies, sections of the site on the geography of the company.

In this study, the countries of operation are those ones (except for their own country) in which the company is present either directly or indirectly through its subsidiaries or associated entities, joint ventures, branches and representative offices or other legal entities that are directly or indirectly controlled company. The list of coun-tries for each company is based on information obtained from the company’s public reporting and specialized sections of its website.

The following questions were asked for each country in which the company operates:

22 Does the company disclose its income in country X?

23 Does the company disclose its capital expenditures in country X?

24 Does the company disclose its profit before tax in Country X?

25 Does the company disclose its income tax in Country X?

26 Does the company disclose the amount of its public contribution / charitable donations in country X?

31 https://goo.gl/22azoT32 https://goo.gl/PtUHQn


ANNEX 2 DATA PER COMPANIES

Company Industry index ACP OT CBC

Aeroflot Transport 4.2 50 75 0

Agro-Belogorie Agriculture & Food products 0.6 0 13 —

Akron Chemicals & Petrochemicals 5.4 88 75 0

Alfa Bank Financials 0 0 0 0

AlfaStrakhovanie Financials 2.2 0 44 —

Alkor and Co Trade 0 0 0 —

Almaz-Antey MIC & Engineering 0 0 0 —

ALROSA Basic materials 6 92 75 13

Aston Agriculture & Food products 0.2 0 6 0

Avtomir Auto industry 0 0 0 0

Avtotor Auto industry 0 0 0 —

AvtoVAZ Auto industry 2.5 0 75 0

Bank Rossiya Financials 1.9 0 56 0

Bank SUEK Basic materials 1.3 19 19 0

Bashneft Oil & Gas 5.1 77 75 0

Best price (Fix Price) Trade 0 0 0 0

Binbank Financials 4.6 62 75 0

ChelPipe Basic materials 2.5 0 75 0

Cherkizovo Agriculture & Food products 2.5 0 75 0

CPC Transport 1.5 38 6 0

Credit Bank of Moscow Financials 3.8 38 75 0

CSC Group Agriculture & Food products 0 0 0 —

Detsky Mir Trade 3.8 77 38 0

DIXY Group Trade 4.9 73 75 0

DNS Trade 0 0 0 —

Drilling company "Eurasia" Oil & Gas 0 0 0 0

EFKO Group Agriculture & Food products 0 0 0 —

Eldorado Trade 0.6 12 0 —

Element-Treyd Trade 0.2 4 0 —

EUROCEMENT Building material 0.5 4 13 0

EuroChem Chemicals & Petrochemicals 2.4 35 38 0

Euroset Trade 0 0 0 0

EuroSibEnergo Electricity 0.8 0 25 0

Evraz Basic materials 5.7 85 56 29

Finance&Construction Corporation "Lider" Development & Construction 1.3 0 25 —

Forteinvest Oil & Gas 0 0 0 0

GAZ Group Auto industry 2.6 4 75 0

GAZFOND Financials 0 0 0 —

Gazprom Oil & Gas 4.4 50 81 0

Gazprom Burenie Oil & Gas 3.7 12 63 —

Gazprombank Financials 5 62 88 0

Genser Auto industry 0.6 0 13 —

Globaltrans Transport 4.7 46 75 20

High Precision Systems MIC & Engineering 2.1 4 38 —

Holiday Group Trade 0.2 4 0 —

Ilim Timber processing 4.3 54 75 0


Industrial Metallurgical Holding Basic materials 2.6 0 75 3

Ingosstrakh Financials 2.5 0 75 0

Inter RAO Electricity 5.2 54 88 14

Intertorg Trade 0 0 0 —

Irkutsk Oil Company (INK) Oil & Gas 3.5 69 0 —

KAMAZ Auto industry 4.4 58 75 0

Katren Pharmaceuticals 1.5 8 19 20

Kazanorgsintez Chemicals & Petrochemicals 7.8 81 75 —

Krastsvetmet Basic materials 0 0 0 —

KRET MIC & Engineering 4.9 23 75 —

LANIT Information technology 4.1 92 31 0

Lenta Trade 3.3 15 50 —

LocoTech MIC & Engineering 0 0 0 —

LSR group Development & Construction 3.3 15 75 10

LUKOIL Oil & Gas 4.1 42 75 4

LUKOIL-Garant Financials 0 0 0 —

M.Video Trade 2.5 0 50 —

Magnet Trade 7.9 58 100 —

Magnitogorsk Iron and Steel Works Basic materials 5.2 73 75 8

Major-Auto Auto industry 0 0 0 —

Mechel Basic materials 3.1 19 75 0

Megaphone Telecommunications 6 77 88 16

Megapolis Distribution 4.4 81 6 —

Merlion Distribution 0 0 0 —

Metalloinvest Basic materials 3.3 23 75 0

Metallokomplekt-M Basic materials 0 0 0 —

Metallservis Basic materials 0.2 0 6 0

Miratorg Agriculture & Food products 0 0 0 —

Morton — — — — —

Mosinzhproekt Development & Construction 3.5 69 0 —

Moskovsky Metropoliten Transport 0 0 0 —

Mostotrest Infrastructure construction 2.9 12 75 0

Mosvodokanal Utilities 5.5 35 75 —

MTS Telecommunications 6.3 88 88 12

NCC Information technology 0.3 0 6 —

NCSP Transport 5.3 31 75 —

Neftegazindustriya Oil & Gas 0 0 0 —

Neftekhimservis Oil & Gas 0.6 0 13 —

Neftetransservis Transport 2.1 50 13 0

Neftisa Oil & Gas 1.4 4 38 0

New Stream Group Oil & Gas 0 0 0 0

Nizhnekamskneftekhim Chemicals & Petrochemicals 6.8 62 81 60

NLMK Basic materials 5.8 92 75 8

NNK-Aktiv Oil & Gas 3.2 8 81 6

Nordgold Basic materials 5.8 73 75 25

Nornickel Basic materials 5 73 75 3



NOVATEK Oil & Gas 5.1 77 75 0

Novoshakhtinskii Zavod Nefteproduktov Oil & Gas 0 0 0 —

O’Key Group Trade 3.2 27 38 —

Oboronstroy MIC & Engineering 0 0 0 —

Otkritie Holding Financials 2.5 0 75 0

PhosAgro Chemicals & Petrochemicals 4.8 69 75 0

PIK Group Development & Construction 1.9 0 38 —

Pipe Innovation Technologies Basic materials 0 0 0 —

Pochta Rossii Postal service 3.6 69 38 0

Polymetal Basic materials 4.7 77 31 32

Polyus Basic materials 2.8 19 38 —

Power machines MIC & Engineering 3.2 19 75 0

PPF "Blagosostoyanie" Financials 1.5 0 25 20

PPF "RGS" Financials 2.2 15 50 0

PPF Future Financials 1.1 8 25 0

Promsvyazbank Financials 3.8 77 38 0

PROTEK Pharmaceuticals 2.5 0 75 0

Pulse Pharmaceuticals 2.5 31 19 —

R-Pharm Pharmaceuticals 2.6 77 0 0

Red&White Trade 0 0 0 —

RESO-Guarantee Financials 2.5 0 75 0

Retail K-1 ("Maria-RA") Trade 0 0 0 —

RIF Agriculture & Food products 0 0 0 —

Rolf Auto industry 1.9 0 38 —

Rosatom Nuclear industry 1.9 19 38 0

Rosgosstrakh Financials 2.5 0 75 0

Rosneft Oil & Gas 4.9 73 75 0

Rosselkhozbank Financials 3.6 58 50 0

Rosseti Electricity 7.5 50 100 —

Rosta Pharmaceuticals 4.5 77 13 —

Rostelecom Telecommunications 5.6 81 88 0

RTI Systems Information technology 5.1 77 75 0

Rusagro Agriculture & Food products 5 50 50 —

RUSAL Basic materials 6.2 88 75 21

Ruselectronics MIC & Engineering 2.5 0 50 —

RUSENERGOSBYT Electricity 3.3 65 0 —

RusHydro Electricity 5.1 65 88 0

Russian Helicopters MIC & Engineering 3.8 27 88 0

Russian Standard Financials 1.3 0 38 0

RussNeft Oil & Gas 5.1 77 75 0

RZD Transport 5.4 81 81 0

Saint Petersburg Bank Financials 4.2 50 75 0

Sakhalin Energy Oil & Gas 3.7 73 0 —

Salym Petroleum Oil & Gas 1 19 0 —

Sberbank Financials 7.9 85 88 64

SDS-Ugol Basic materials 0.6 0 13 —


Sedmoi Kontinent Trade 0.4 8 0 —

SeverEnergia Oil & Gas 0 0 0 —

Severstal Basic materials 4.4 58 75 0

SIA International Pharmaceuticals 0 0 0 —

Siberia Airlines Transport 2.5 0 75 0

Siberian Generating Company Electricity 0.9 0 19 —

SIBUR Chemicals & Petrochemicals 4.2 38 88 0

Slavneft Oil & Gas 3.4 27 75 0

SNS Group Distribution 0 0 0 —

Sodrugestvo Agriculture & Food products 0 0 0 0

SOGAZ Financials 2 0 56 4

South refineries company Oil & Gas 0 0 0 —

Sovcombank Financials 4.6 62 75 0

Sovcomflot Transport 2.5 0 75 0

Spetsstroyinzheniring — — — — —

Sportmaster Trade 0.5 15 0 0

State ATM Corporation Transport 0.3 0 6 —

STROYGAZMONTAZH Infrastructure construction 0.3 0 6 —

StroyTransNefteGaz Infrastructure construction 0.8 4 13 —

Surgutneftegas Oil & Gas 4.3 42 88 0

Svyaznoy Trade 0.6 12 0 —

T Plus Electricity 4.4 58 75 0

Tactical missiles Corporation MIC & Engineering 5.9 42 75 —

TAIF Oil & Gas 3.3 65 0 —

Tashir Сommercial estate 0 0 0 0

Tatneft Oil & Gas 4.6 54 81 2

Techmash MIC & Engineering 0.2 4 0 —

Tele2 Russia Telecommunications 1.8 23 31 0

TMK Basic materials 3.4 27 75 0

TNS Energo Electricity 3.8 0 75 —

Togliattiazot Chemicals & Petrochemicals 3.8 0 75 —

Tomskneft Oil & Gas 0 0 0 —

Trans Nafta Oil & Gas 0 0 0 —

Transaero — — — — —

Transmashholding MIC & Engineering 2.5 0 75 0

Transneft Oil & Gas 2.5 0 75 0

Transoil Transport 0.9 0 19 —

UCL Transport 0.2 0 6 0

Udmurtneft Oil & Gas 6.4 54 75 —

Ulmart Trade 0 0 0 —

UNICONF Agriculture & Food products 0.4 0 13 0

United Aircraft Corporation (UAK) MIC & Engineering 4.4 58 75 0

United Engine Corporation (ODK) MIC & Engineering 3.9 42 75 0

United Instrument Manufacturing Corporation (UIMC)

MIC & Engineering 2.3 8 38 —

United Metallurgical Company (OMK) Basic materials 1.7 27 6 —



United Shipbuilding Corporation (USC) MIC & Engineering 4.5 27 88 20

Ural Mining Metallurgical Company (UMMC) Basic materials 0.8 0 25 0

URALCHEM Chemicals & Petrochemicals 2.7 4 75 3

Uralkali Chemicals & Petrochemicals 4.2 50 75 0

Uralo-Sibirskaya Metallurgicheskaya Kompaniya Basic materials 0 0 0 —

Uralvagonzavod MIC & Engineering 4.9 23 75 —

UTair Transport 2.6 4 75 0

Velesstroy Infrastructure construction 0 0 0 0

VimpelCom Telecommunications 5.7 73 88 9

Vnesheconombank Financials 3.1 15 75 3

Voentorg Trade 0.6 0 13 —

Volga-Dnepr Transport 2.3 58 13 0

VSMPO-AVISMA Basic materials 4.6 62 75 0

VTB Financials 3.3 23 75 1

X5 Trade 2.4 54 19 0

Yandex Media & Internet 2 42 19 0

Zarubezhneft Oil & Gas 5.3 85 75 0 The previous research in the field of transparency in corporate reporting, you can find here:

www.transparency.org/whatwedo/publication/transparency_in_corporate_reporting_assessing_emerging_market_multinat

The independent non-profit organization Center for Anti-corruption Research and Initiatives “Transparency International Russia” has been included on the register of non-profit organizations that act as foreign agents by the Ministry of Justice of the Russian Federation

ASSESSING RUSSIA’S LARGEST COMPANIES

“TRANSPARENCY INTERNATIONAL—RUSSIA” REPORT

CENTER FOR ANTI-CORRUPTION RESEARCH AND INITIATIVES “TRANSPARENCY INTERNATIONAL RUSSIA”Rozhdestvenskiy Bulvar, 10/7, Building 1, Room 1Moscow, Russia, 107031

+7 (495) 915 0019 [email protected] www.transparency.org.ru

facebook.com/tirussia twitter.com/Transparency_ru youtube.com/user/TIRUSSIA vk.com/centr_tir

transparency in corporate reporting · togliattiazot w w75 — 3.8 russian

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