Stock Ownership and Corporate Control

Researchers of the Russian economy have unanimously identified the most important features of stock ownership and control. First, the concentration of capital in the corporate sector resulting from its aggressive redistribution for more than 15 years tends to be high. Second, the high concentration of ownership affected the development of corporate control and evolution of the mechanisms of corporate governance (Natsional’nyi Doklad 2008). This high concentration provides the basis for control by the majority shareholder or a consolidated group of such shareholders exercised by various formal and informal means (Dolgopyatova 2003, chapter 2). Majority shareholders are constrained only by the need to comply with the formal legal provisions and often imitate the activities of intra-corporate tools (bodies) (Razvitie Sprosa 2003). Third, the prevailing model of corporate control is that in which majority shareholders participate directly in management as top managers of companies (Insiders and Outsiders 2004; Stiglitz 1999). A combination of ownership and control has become a formal institution of Russian corporate practices, which restrict the demand for “outside” managers who do not own company shares. This institution has become widespread not only as a result of privatization (“red directors” becoming owners of enterprises) but also as a tool intentionally chosen by owners who established their businesses from scratch.