| Gazprom management wants to stimulate itself with bonuses and options Tomorrow the board of directors of Gazprom will meet for the March meeting, which was postponed several times due to the busyness of state representatives in the process of distributing functions in the new government. And very conveniently, in the spirit of new trends, the directors of Gazprom will study how to materially stimulate management to work more efficiently. Let us recall that at a recent government meeting, Finance Minister Alexei Kudrin put forward the idea of “tying” the salaries of government officials to the results of their work.
As the Vremya Novostei newspaper learned, among other issues, the directors will discuss improving the system of remuneration and material incentives for senior management at Gazprom. The deputy chairman of the board for security, Sergei Ushakov, will report on this issue; the text of his speech fits on four pages. Top managers of Gazprom propose to stimulate their hard work through a rationally mixed system of bonuses and options. At the same time, the draft report says practically nothing about how and for what the monopoly’s leaders will be rewarded. And experts agree that it is unlikely that it will be possible to introduce an effective system of incentives for managerial work at Gazprom.
Mr. Ushakov will inform the board of directors that in order to increase motivation and responsibility for the assigned area of work, top managers “in 1998-2002 were transferred to a time-based individual remuneration system, which provided for the establishment of individual official salaries.” And the company is currently testing a draft methodology for assessing a manager’s personal contribution to the success of his line of work, proposed by PricewaterhouseCoopers. The results of the tests are still unknown, but the development of a system of bonuses and options is already underway, which will significantly increase the variable share in the remuneration of top managers. True, so far there is no most important thing - criteria for accruing (or not accruing) bonuses. The only example given in the report is bonuses given to managers for reducing costs. The value of this criterion raised serious doubts among experts interviewed by the Vremya Novostei newspaper.
“Last year, Gazprom announced its intention to reduce costs by 40 billion rubles, and in reporting according to international standards for nine months we saw an increase in the monopoly’s expenses,” says United Financial Group analyst Pavel Kushnir. Brunswick UBS expert Maxim Moshkov fully agrees with him, who emphasized that a significant increase was noted, including in labor costs. According to the Vremya Novostei newspaper, according to the draft budgets for 2005-2006, the salaries of Gazprom employees (we are talking about the parent company) will continue to grow. Next year, total labor costs will increase by 800 million, to 3.39 billion rubles, which, taking into account the strengthening of the ruble, corresponds to an increase of 40% per year. In 2006, another 240 million rubles will be added to the company's salary fund.
In addition to bonuses, Gazprom management wants to reward itself with options to purchase shares of the company, which should increase interest in growing its capitalization (long-term incentives). However, it is obvious that implementing this idea will be very difficult. In the same RAO UES of Russia, which long ago mastered the bonus system, the matter never came to options, since the management of the energy monopoly failed to develop and justify a transparent mechanism for their distribution.
A representative of a large international consulting firm doubted the feasibility of introducing an effective labor incentive system for a simpler reason. According to him, there are constantly rumors on the market about “sales” of managerial positions in state-owned companies, which makes both bonuses and options unnecessary. “For example, if a bonus can increase a manager’s annual salary to $1 million, and his position “cost” $7-10 million, it is obvious that the probability of the manager’s existence on a salary is close to zero,” our interlocutor regrets .
The agenda of the meeting of the Gazprom Board of Directors, which will take place tomorrow, includes issues of improving the company’s corporate governance, draft financial plans, investment programs, Gazprom’s cost optimization programs for 2005-2006, previously approved by the concern’s board, and the formation of a consolidated property register organizations of the Gazprom system. Alexey GRIVACHS |
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