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- Show the cards: The Central Bank and the Ministry of Finance have given recommendations for companies with state participation on interaction with retail investors
Show the cards: The Central Bank and the Ministry of Finance have given recommendations for companies with state participation on interaction with retail investors
The Central Bank and the Ministry of Finance of Russia advise public state-owned companies to build relationships with retail investors based on the principles of information openness and protection of minority shareholders' rights. Such recommendations are given on the regulator's website. They are a logical continuation of the course towards developing a culture of corporate transparency and trust between state-owned companies and private investors, experts are convinced. Which tips will be most effective — in the material of Izvestia.
A guide to action
The Central Bank and the Ministry of Finance of the Russian Federation have developed recommendations for state-owned companies to interact with retail investors. We are talking about organizations whose shares are traded on the stock exchange. Regulators advise issuers to adhere to the best practices for building relationships with minority shareholders, based on the principles of protecting their rights and information openness. The recommendations are posted on the website of the Bank of Russia.
The document emphasizes that public state-owned companies should take into account the interests of retail investors when making corporate decisions, since they want to be confident in the stability of issuers, hoping to receive dividends and increase the value of shares.
Regulators recommend that companies be more open and tell minority shareholders about their chosen development strategies, their operational and financial goals, as well as current performance indicators. It is desirable to present all this in a clear language using visual materials. The same information should be reflected in the company's annual report, which is a key source of information for investors.
The agencies advise issuers to expand channels of communication with minority shareholders, giving preference to resources with greater audience reach and feedback. At the same time, investors should hold meetings with management, organize various conferences, actively maintain accounts on social networks and create special mobile applications.
According to the Central Bank and the Ministry of Finance, special attention should be paid to the involvement of retail investors in the company's activities. In particular, to provide them with the opportunity to participate in its management and making important decisions by allowing minority shareholders to nominate their candidates to the board of directors. It also makes sense to organize a committee for interaction with minority shareholders.
According to the Bank of Russia's estimates, following these recommendations will set a new standard for relations between large issuers and their retail investors. The regulator believes that this will bring corporate practices closer together and strengthen investor confidence. All this is designed to contribute to the capitalization of the stock market. The goal is to achieve it at a level of at least 66% of gross domestic product by 2030. By 2036, it is expected to grow to 75% of GDP.
The editorial board of Izvestia sent inquiries to the Bank of Russia and the Ministry of Finance of the Russian Federation. No responses had been received at the time of publication.
The path to trust
The recommendations of the Central Bank and the Ministry of Finance are aimed at increasing trust between public companies with state participation and private investors, according to investment adviser in the registry of the Central Bank of the Russian Federation, founder of the online investment university "Finansologiya" Yulia Kuznetsova. This is a logical continuation of the course towards developing a culture of corporate transparency, says Yuri Mishukov, Director of the investment department of the Gazfond Pension Savings non-governmental pension fund.
Information asymmetry remains one of the main problems in the interaction between issuers and minority shareholders today, says Kuznetsova. Private investors often learn about important events after the fact, which reduces the confidence and liquidity of stocks.
"If companies implement common standards of interaction and begin to speak to investors in a clear language, this will increase the investment attractiveness of their securities and reduce volatility," the expert emphasizes.
In the meantime, the interaction of state—owned companies with retail investors in Russia is formal in nature - most companies are limited to mandatory reports and rare communications, while stable forms of dialogue remain the exception, says Yaroslav Kabakov, Director of Strategy at Finam IC and lecturer at the Higher School of Business at the National Research University Higher School of Economics.
— This is due both to the dominance of the state in capital, and to the lack of a developed culture of corporate participation among private shareholders, — explains the expert.
The most useful measures may be those aimed at accessibility of information and open dialogue, Kabakov confirms. The expansion of communication formats, the use of online platforms and social networks will reduce barriers for private investors. And the involvement of minority shareholders through corporate mechanisms, such as nominating candidates to the board of directors or participating in committees, will strengthen trust and contribute to the growth of investment loyalty.
However, the success of the regulators' recommendations depends on their practical implementation, Mishukov points out. The willingness of the companies themselves to apply them not formally, but in practice is important, Kabakov agrees.
"Formally following the advice will not change the situation: trust will appear only when companies begin to openly explain their actions, disclose risks and long—term goals," the expert warns.
Companies should provide explanations of their actions, report on the implementation of the strategy and openly admit mistakes, experts of the investment and financial company Solid list. This approach transforms the investor from a passive observer into a full-fledged partner and co-owner of the business.
A step towards maturity
The benefits of closer cooperation between issuers and minority shareholders are obvious to both sides, Yaroslav Kabakov draws attention. For retail investors, advice from the Central Bank and the Ministry of Finance is an opportunity to receive reliable information and assess real business prospects, rather than relying on rumors or emotions, Yulia Kuznetsova notes. Citizens will receive tools for informed participation in the market, Yuri Mishukov believes.
The benefits of the recommendations are obvious for public state-owned companies themselves, Kuznetsova points out. Their implementation will lead to an increase in the confidence of market players and attract a wider range of investors. And a broad base of loyal retail investors who understand the company's long-term strategy can act as a stabilizing factor during periods of market turbulence, according to IFC Solid.
In other words, systematic work with minority shareholders is a way to increase capitalization, reputation and liquidity of shares, Mishukov adds. In addition, public companies, with the help of regulatory advice, will be able to reduce the risks of corporate conflicts, Kabakov believes.
"The trend towards a direct dialogue with investors, supported by official recommendations, can make the interaction successful, turning it from a formal obligation into a tool for creating long—term shareholder value," Solid experts say.
The advice of regulators is a step towards the maturity of the Russian stock market, Kuznetsova emphasizes.
"If they are not a declaration, but a standard of conduct, it will strengthen the reputation of state—owned companies and increase public involvement in investments," the Izvestia interlocutor is convinced.
As a result, mutual trust is strengthened and the stability of the entire stock market is increased, Kabakov emphasizes.
"If the recommendations of the Central Bank and the Ministry of Finance are really implemented, they can become an important step towards the formation of a new investment culture, where state—owned companies will cease to be closed structures, and will be perceived by private investors as reliable and transparent issuers," the expert summarizes.
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