New capitalism

Which companies will fit better into the post-crisis economy?

How will Russian business emerge from the economic crisis? The question is by no means rhetorical, and it is advisable to predict the answer to it now in order to immediately begin to rebuild correctly. Like any crisis, its consequences will certainly be dramatic for people, businesses and the country as a whole. The entire world political and especially economic, as they say now, architecture will also seriously change. The country's economy already has and will continue to have both victims and winners who will be able to emerge from the crisis rather battered, but also stronger.

What kind of business can survive? One that will be helped by the federal government or local authorities? But even now, even if the state has serious gold and foreign exchange reserves (about $380 billion), it is clear that financing the budget deficit, maintaining an acceptable exchange rate of the ruble, as well as assistance to the regions, especially their social spheres, will require further urgent and large-scale use of the accumulated "airbags". More than a third of all reserves have already been spent, and it is clear that by the end of 2009 they will need to be used further, and on an equally large scale. So businesses clearly shouldn’t count on government support. Selective lending to private companies, as has already happened with RUSAL , Evraz and Alfa Group, is unlikely to continue. This has already been repeatedly stated by senior government officials.

Enterprises on the government's list of 295 so-called systemically important companies can most likely only count on a favorable attitude from the state, but not on serious financial support. In addition, if “targeted” support continues, a serious question with political implications will certainly arise: why are they helping this business and not mine?

It will be increasingly difficult to explain the selection criterion to the government, because everyone has similar problems: demand is falling sharply, it is almost impossible to attract new loans on acceptable terms in the country and abroad. Of course, state-owned business will be seriously supported by the government, the largest state-owned companies will receive loans and direct subsidies. Although, by what criteria the government will support, for example, newly created state corporations, which now unite hundreds and hundreds of commercial enterprises in an opaque non-commercial legal form, is not yet very clear.

The state is already facing, and the situation is only getting worse, the main problems are arising in the social sphere: employment of the population with growing unemployment, accelerating inflation, declining real incomes of the population, regional imbalances, etc. So the majority of businesses will have to get out of the crisis on their own. It’s good if the company does not have serious external debts and only needs to cope with the obvious consequences of the crisis by optimizing production and personnel. And for those companies that borrowed mainly from abroad on the security of their own assets and have already spent colossal financial resources, the situation is certainly threatening. The total corporate external debt of Russian companies and banks, private and public, amounts to 450-500 billion dollars, of which approximately 120-140 billion must be repaid this year. It is clear that many are expecting real bankruptcies and the sale of businesses at the price of the “bottom” of the crisis in the near future. And there is no need to be mistaken about this.

Thus, the vast majority of companies need to rely only on their own strength.

It seems that the new requirements will be very stringent, since almost everyone will have to prove again, primarily to consumers and investors, the feasibility of their continued existence.

What business has a chance to survive and become successful in the “new economy”? This may seem premature to some, but it is obvious that the main task of a “post-crisis business” will be to gain trust - among customers who buy its products and services, as well as among investors. Both their own company owners, who are ready or not ready to invest their savings and dividends accumulated in the “fat 2000s” in the development of their companies, and new players, Russian and foreign, interested in profitable investment of their capital.

But we are talking not only about those companies that, by updating, will be able to continue their activities, but also about completely new, venture and innovative ones, completely different from our business today. What will these new requirements be?

Firstly, “new companies” will have to ensure production and again present a high-quality and safe to use, as well as physically accessible and affordable product or service. In new crisis or post-crisis conditions, it is not at all obvious to consumers that the production and quality of goods of even well-known companies will be able to meet their requirements - trust will have to be restored or won again. After all, any consumer may suspect that companies, even if forced, use low-quality raw materials, skimp on qualified labor, do not comply with standards, etc. So, first: quality, safety and availability of products and services .

Secondly, and this is no longer fashionable, companies will have to once again demonstrate the environmental friendliness of their products and their production. In the new conditions of choice, the consumer will become more demanding in this regard, both Russian and especially foreign. So, second: environmental friendliness .

As we have already noted, in addition to the “new capitalist”, a “new investor” and a “new shareholder” will inevitably appear. And they need to be convinced of the profitability of investments and the advisability of their participation in a particular production. It will no longer be enough to justify new investments only in terms of economics, sales and expected profitability.

Issues of maximum transparency of the capital structure and ownership of companies, as well as the state of all assets and fixed assets, will become extremely relevant, and this will be very important for the “new investor.” It seems that offshore schemes for participation in the share capital of companies, behind which various shady personalities and officials are sometimes hidden, will become, to put it mildly, unpopular and will be intimidating. This means that the existing business will have to put everything in this sense in proper order, and the newly created “new business” will have to take these requirements into account from the very beginning and disclose the names of its beneficiaries. And this is the third: transparency of ownership and capital.

Fourthly, responsibility. It seems that the days of companies being primarily responsible only to their large shareholders and tax authorities are coming to an end. For “new investment attractiveness” you will need to achieve trust and constantly demonstrate your responsibility to all stakeholders of the business: primarily strategic and portfolio investors, including small shareholders, the local community, consisting of a conglomerate of public, non-profit, informal, network and government structures, as well as the media.

And finally, fifthly, accountability. This concept in Russia has always been interpreted very narrowly and mainly included formal financial and statistical reporting. And the “new accountability” will include much more serious requirements for new businesses, namely:

regular financial and non-financial reporting in accordance with Russian and international standards and even exceeding their requirements;

fulfillment of assumed obligations in the economic, environmental and social fields;

compliance with mandatory and voluntarily accepted standards of quality, safety, environmental friendliness, social responsibility, etc.

How should this transition from old to “new business” actually take place?

It is quite difficult to predict this, but we can try to describe the individual contours of this transition.

Previously, before the crisis, all these requirements were called “world best practices” or “advanced standards for quality, safety, environmental friendliness, corporate governance and management, etc.” In the “new capitalism”, which we don’t yet know exactly, these requirements will no longer be desirable, but mandatory. Moreover, they don’t even have to be legislated: company owners themselves will quickly understand that they need to make very serious changes and become “socially responsible.” Through quality, safety and environmental friendliness of production and product, as well as transparency and accountability of companies.

There will be less and less state free capital in Russia, since its main reserves will be spent on extinguishing the economic and social “fire” of an inefficient and corrupt economy. This is already clear.

The era of socially responsible capital is coming. And it doesn’t matter whether it’s private or public – any, since the new requirements will be equally stringent. The main criterion: trust of the market and stakeholders.

According to various estimates, the share of state property in the US economy ranges from 4 to 10%. In Russia, as is known, state and private business split in a ratio of approximately 50:50. It turns out that private business is mainly to blame for the problems of the American economy, while public and private businesses are equally to blame for the Russian economy. Therefore, some increase in the level of state ownership in the US economy seems quite justified, but in our country it is by no means obvious what should be more. Only one thing is clear: it is necessary to reduce the share of inefficient and opaque businesses, both private and public. It is necessary to create a “new business”, and in what proportion will be decided by the “new investor” and the market itself, whether or not it is ready to invest and buy this or that product and service. So the big question is whether our government now needs to help the inefficient “real sector”, which will continue to work “for storage”, or whether it should financially support newly created businesses, as well as public demand.

The main thing in the development of a new post-crisis economy is to provide everyone with new equal opportunities. But, quite possibly, this is precisely where the most serious problems will arise in Russia: a corrupt and uncompetitive economy in the interests of “its own” will simply not be able to inspire trust and develop progressively. It will also be very difficult for state-owned companies - there will be an order of magnitude less government money for business.

So we will either have to establish new rules of fair and transparent competition, or step on the traditional Russian “rake”: more state and state monopolies, more corruption in the economy, more inefficiency and technological backwardness, more offshore capital and more yet another price deception of the consumer, who is already already pays more for all goods than in the West and even more so in neighboring China.

It seems that it is possible to reproduce another model of state-monopoly capitalism in Russia. But it will certainly not be possible to create a new effective economy to gain economic, technological and ideological leadership in the world. It is time for public and private businesses to look at themselves from the outside - just as a new, demanding investor and client who has lost faith in everything will now look at their assets. And reach a new level of transparency, social responsibility, and accountability.

...Someone will say: yes, this is all utopia. No, it's already reality. Try to increase your sales, raise capital or start a new business today.

Alexey KOSTIN, executive director of the non-profit partnership "CSR - Russian Center", Candidate of Economic Sciences