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Monday, October 28, 2013

Govt rules to cut golden parachutes in state corporations

Govt rules to cut golden parachutes in state corporationsRIA Novosti/Alexey Kudenko

The Russian government has approved the bill limiting compensation to senior managers in state-owned companies, following an outstanding payment of over $7 million made to retiring head of the telephone provider Rostelecom.
The new bill that will now be sent to parliament for consideration will regulate the size of so-called golden parachutes that are offered to senior executives in state corporations – companies where 50 percent or more of the stock is state property.
If the bill is passed the executive will be offered compensation and severance pay between three and six times their mean monthly salary. However, the senior managers will still receive unlimited compensation for unused vacation time. Russian law currently stipulates that people be paid for unused vacation, with the amount of the payment varying depending on the employee’s work record, but usually equaling the average salary. After the new law is signed into force, state corporations will also have to amend the contracts with senior managers within a three-month period.
The idea to limit the golden parachutes was approved at the highest level after the resignation of Aleksandr Provotorov, head of state-owned Rostelecom. Russian mass media reported that after the resignation, Provorov, who held top positions in the company for three years, received compensation of more than 230 million rubles (over US$7 million).
The issue was raised by President Vladimir Putin, who said in a public speech in March this year that severance payments must be stimulating but reasonable.
The bill is not the first of its kind. Not long ago, activists from the All-Russian Popular Front (a loose political organization uniting the supporters of President Vladimir Putin and associated with parliamentary majority party United Russia) submitted their own bill that set the limits to golden parachutes. According to the Front, the heads of companies partially-owned by the state could receive 12 average monthly salaries and the heads of completely state-owned enterprises could get 18 monthly salaries.
This bill was submitted to the State Duma in May, but in mid-October the house’s Legislative Committee gave a negative assessment of the draft, saying that it still left loopholes for excessively greedy officials.