"This wasn't a simple decision for the company," TNK CEO Simon Kukes said Thursday at a news conference. "We have realized that, as a Russian company, we don't know how to do a lot of things. We created this board to tell us what we're doing right and what we're doing wrong."
In the 1990s, international oil major BP's struggle with TNK over a lucrative Siberian oil producer became a textbook case of Russia's bad record of corporate governance. Since then, Russia's oil industry has begun to seriously court -- not stiff -- investors, resulting in a wave of reforms in corporate behavior. These changes range from the adoption of codes of business conduct to the timely publication of financials audited to Western standards.
Yukos was a pioneer in 2000 when it created a board of directors made up of mostly independent members, and company officials say this has given it greater credibility with international investors.
For now, TNK's new supervisory board will remain separate from its board of directors, Kukes said. But TNK eventually hopes to have a board similar to that of Yukos and global oil majors.
The TNK council will be headed by Peter Walters, who was BP's chairman from 1981 to 1990 and European drugmaker GlaxoSmithKline's deputy chairman from 2000 to 2002. Walters envisages a board with four to five members, one of which will be William Purves, who was director of Shell Transport and Trading Co. from 1993 to May 2002.
The board's main goal will be to increase TNK's value, said Walters, who is also president of the London-based Institute of Business Ethics.
"One of the main risks to any company is reputation risk," he said. "A company's strength is based on its reputation. We plan to help management evaluate those aspects by which TNK will be judged internationally."
Kukes said he will have to answer for the management's actions in front of the supervisory board, which, it is tentatively planned, will meet four times a year.
"There was a lot of discussion within the company before shareholders made the final decision," he said. "We know this is the point of no return."
TNK International, which combines the assets of TNK and the Onaco oil company, is jointly owned by the Alfa and Access/Renova groups.
Kukes emphasized that TNK's supervisory board is not just a public relations stunt. And although analysts showed some optimism, they remained skeptical.
"Russia is changing so fast that it's quite possible to wake up one day and find that a company has completely changed," said one analyst with a Western investment bank who declined to be identified. "I, however, prefer to take the wait-and-see approach."
Kukes also said Tuesday that TNK's delayed $500 million Eurobond issue should take place in one or two weeks.
"All of the necessary documents are ready," he said. "Now we are talking to investors. It is just a matter of time."
Last month, the Eurobond issue was canceled at the last minute when it was discovered that PricewaterhouseCoopers had made an auditing mistake.
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