In March, Glass Lewis published a blog post on our research approach to sanctioned Russian companies and individuals that serve on boards of directors, as well as our disclosure expectations from companies that are materially exposed to Russia. As the Russian proxy season approaches, our analysts have made some initial observations of the changing governance landscape in Russia since the outbreak of the war.
Sanctioned Directors Leaving Boards
As previously announced, Glass Lewis is tracking sanctions that have been levied against companies and individuals by a range of jurisdictions. At this time, we will not provide research on companies that are subject to sanctions and will not provide vote recommendations on proposals that directly or indirectly concern an individual that is subject to sanctions. To date, we have seen a large number of directors that have been sanctioned, as well as directors that have affiliations with sanctioned individuals and entities, resign from their board positions, both at Russian- and foreign-listed companies. While detailed reasons for board resignations are rarely disclosed by Russian companies, we note that this trend differs from our observation of the behaviour of directors that were sanctioned by the US Department of Treasury’s Office of Foreign Assets Control (OFAC) following the Russian annexation of Crimea, the majority of whom did not resign from their directorships.
Reduced Disclosure and Access to Information
In March 2022, the Central Bank of Russia, which serves as the regulator for Russian-incorporated financial institutions, passed a decision to temporarily reduce the volume of required reporting by credit institutions on their websites as well as on the Bank of Russia’s website. Among other reduced reporting requirements, banks are currently not required to publish their individual and consolidated financial statements complying with Russian GAAP, although these must still be submitted to the regulator.
Outside of the financial industry, we have observed a marked reduction in discretionary disclosures made by Russian companies. Quite broadly, we have observed a reduction in the depth and quality of governance information and data that was generally disclosed in previous years. However, in some cases, we have noted disclosure from companies that access to certain documents is now only possible in person at the company’s headquarters. In other cases, we have noted instances where company websites, or sections thereof, appear to be no longer accessible from non-Russian IP addresses.
Termination of Depositary Receipt Programmes (GDRs)
In April 2022, the Central Bank of Russia announced a ban on issuing and trading in foreign depositary receipts. By May 5, 2022, Russian issuers will be required to terminate foreign depositary receipt programmes; holders of depositary receipts are entitled to convert these into shares if they can prove their ownership as of April 27, 2022, although shares issued in lieu of GDRs will not confer voting or dividend rights. Russian companies with a depositary receipt programme are however entitled to apply to the Russian government for special permission to maintain the programme.
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See here for more information about Glass Lewis research in the context of Russia’s invasion of Ukraine. Or contact us to learn more about our approach to proxy research, engagement and stewardship:
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Chris Rushton co-authored this post.