Features of a career as a financier on the boards of directors of Russian state-owned companies

Features of a career as a financier on the boards of directors of Russian state-owned companies
The author of the study is Andrey Frank, Head of the Internal Control Group of the State Budgetary Institution «GlavAPU», Graduate of the SACM certification program «Corporate Governance in the 21st Century», Certified Expert EU-NQF Level A in Corporate Governance according to European Union standards, edited by Alexander Lebedev, SACM Professor

As a financier, I am concerned about the development and prospects of my profession in the current turbulent times. At the growth stage, a financier can develop in various directions until he covers the main ones: accounting, reporting, control, budgeting, fundraising, financial modeling, automation and optimization of processes, the basics of personnel management, etc. For 5-10 years, a financier gains professional experience, becomes a line manager or financial director. Over the next 5-10 years, a high-level professional is being formed, for whom the status of the head of the financial function becomes narrow. In preparing the essay, I turned to the study of the publication The Financial Director for materials. 412 Russian financial directors were interviewed. The results of the study showed that the average age of financial directors is 43 years. Which corresponds to my conclusion about the timing of the development of a financier from a novice employee to a high-level professional in operational management with a good theoretical base, extensive practical experience, high managerial competencies and the ability to work with the strategic tasks of companies. At the same time, the financier already manages to gain experience in risk management, communicating with investors, managing various related functions (personnel, legal, IT, procurement), taking part in the development of new products for the market, in commercial activities and strategy development, as well as its implementation.

What happens when a financier has reached the heights of the profession? Where and how to move on? The same magazine survey says that the majority of financiers (46%) are ready to leave the position of financial director, as they want to grow professionally, and 34% of those surveyed - due to the desire for change. What are the wishes of financiers for professional growth? Almost half (48%) want to work with strategy, 24% with information technology, and the rest - communication with investors, legal issues, risk management, procurement and personnel. The survey also showed that the majority of financial directors (90%) plan to open their own business, become a financial consultant, CEO, move to a similar position in a larger company, move, go to public service. 10% of respondents suggest a different development scenario. It seems to me that it is in this proportion, who have not followed common patterns, that there are those financiers who, through their career growth, see development within the boards of directors of Russian companies, including those with state participation. What is a board of directors and why is participation in it not popular? The Board of Directors is the key and highest body in the corporate governance system of companies. The Board is engaged in the development of the strategy and control of its implementation within the boundaries set by the shareholders. He also develops the company's performance indicators and sets the framework for management in the form of regulations, policies, etc. In addition to powers, the board of directors is responsible for the decisions that its members make or do not make. Instead of wages, members of the board of directors receive remuneration.

The low popularity of this area of professional development among financiers, in my opinion, lies in the relatively low level of demand for corporate governance itself in Russia, in high competition and a relatively difficult start. In practice, there is a big gap between experienced members of the boards of directors who are already in demand and do not need help in promotion and between novice managers who are just mastering this direction. Corporate governance itself needs to be popularized in Russia as a tool to increase the capitalization of companies. Boards of directors of small companies with state participation can become a window of opportunity and growth for financiers who have chosen this direction. As a rule, there is no remuneration for work, and they are not of professional interest to experienced experts. The first step on the way to corporate governance will be working with the interdepartmental portal of the Federal Property Management Agency. Where you need to register, fill out a questionnaire, attach documents for compliance (in the form of certificates of no criminal record, no disqualification, copies of documents confirming the experience and qualifications of an expert), and sign them with an electronic signature. Next, you need to select a company to apply and wait for the results of the selection. What difficulties will a financier face in a new role for himself?

The first is a paradigm shift at work. It is necessary to move from operational management and manual work to the strategic level. The task of the financier in the council is to ensure the preparation of the society's strategy depending on the political and economic situation. Directive management is not allowed, even where obvious errors are visible. It is necessary to skillfully use available corporate procedures. The second is to effectively interact with management, to learn how to bypass the internal resistance of the sole executive body, or the board, which sometimes opposes itself to the board of directors. The third is to learn how to work with the owner represented by the state, to try to convey strategically important initiatives to representatives of the Federal Property Management Agency and ministries. The problem in this case is connected with the main load of employees - representatives of the interests of the state. Much of their work is not directly related to governance in societies. After all, this is just one of the routine tasks of a representative of the interests of the state. There is not always time to delve into and fully immerse yourself in the activities of society. The last, in my opinion, is to adapt to the specifics of the work of the board of directors, its dynamics, master the basic legal principles, understand the importance of documenting activities: incoming, outgoing, decisions, protocols, work schedules, reporting and financial documents. 

After gaining experience on the board of directors in small companies, having mastered the basic principles, having understood the nuances of work, it is worthwhile to approach the formation of applications more carefully, look at large companies with turnovers of several billion rubles and significant net profit. The next step will be the selection of significant companies, both in individual industries and in the country's economy as a whole. Inside the boards of directors, the work is based on the principle of committees. These are advisory bodies consisting of members of the board of directors, company management and external consultants. Committees are created for the preliminary study of complex issues for their submission to the board of directors. Such work significantly saves the time and effort of the council. At the same time, the committees themselves do not make decisions. The absence of committees in a society is a signal that the work of the council is not effective, or the society is very small. Three areas of committee work are most common: strategy, internal audit, human resources and remuneration. This list is not closed, but the emergence of new councils requires justification and allocation of additional funding for the work of the council. Whereas in the most common areas, it is not required to prove the need to create committees.

It is enough to give statistics. Functionally, the closest areas of work in committees for financiers are internal audit, as well as personnel and remuneration. The task of the internal audit committee is to organize ownership control for management in society. It is necessary to set up work in the company in such a way that a control system functions at each workplace. Allowing you to control risks and signal violations. A system that permeates the entire society and penetrates into all business processes: sales, production, procurement, finance, and others. In its work, the Committee actively cooperates with external auditors and the audit commission of the company, creating guarantees for the preservation of the company's assets and compliance with compliance procedures. At the same time, there is a clear delimitation of powers with the audit commission. The Audit Commission checks the events that have occurred, documented, i.e. subsequent control. The Audit Committee exercises current and preliminary control. A frequent practice of the work of this committee is the responsibility for the management of building a risk management system in the company. Both the board of directors and management must clearly understand what risks they carry, what consequences their actions may lead to, how much these consequences will cost the society and how much it costs to insure these risks. In Russia, as well as throughout the world, the practice of insuring the liability of members of the boards of directors in connection with the risk of possible subsidiary liability is welcomed. 

The Human Resources and Compensation Committee considers and determines the issues of succession of members of the Board of Directors and management, providing a permanent personnel reserve in case of unexpected departure of key persons. Continuity is closely related to the motivation system, especially long-term, which includes options, share rewards, etc. The result of the committee's work in terms of the direction of personnel policy should be descriptions of the profiles of all key persons of the board of directors and management. In terms of the direction of remuneration, the result of the work is a company management system based on key performance indicators. Advice helps to adequately assess which indicators work and which do not in relation to a particular society. The financier, depending on the available competencies, may also be interested in the following areas of work of the board of directors: information technology and digitalization, increasing the stability of the company and protecting against cyber threats, as well as implementing ESG principles. These vectors are currently the most popular and will provide an additional professional driver in the development of a financier. Thus, we see that the participation of a financier in corporate governance as a member of the board of directors makes it possible to move to a fundamentally different, visionary level. The financier stops working with the operating system and works with the strategy. The level of scale and importance of the tasks of the financier is also growing, depending on the chosen society. Returning to the study, we can conclude that the work on the board of directors satisfies the needs of a mature financier striving for professional growth. At the same time, participation in the boards of state-owned companies opens a window of opportunity for this.


"I am confident that with time you will become leaders among business professionals, and, perhaps, return to the academy to share your knowledge and experience with new doctoral students.."

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