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01.03.10
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Treasure Mainland
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By Svetlana Kononova
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In February, the Swedish furniture firm IKEA fired two executive managers in Russia for involvement in a corruption scandal. The managers, one Swedish and the other Swiss, had “looked the other way” when bribes were given by a subcontractor in order to resolve a power supply issue at the MEGA shopping mall in St. Petersburg. But how can a successful business in Russia be run without giving bribes? And how should foreign executives operate when inefficient and arbitrary bureaucracy turns simple, mundane tasks into year-long projects?
“We are deeply upset and disappointed,” Michael Olsson, the president of IKEA, said in the company’s statement. “Any tolerance of a display of corruption is completely unacceptable for IKEA. We consider the situation to be deplorable, and we will be acting promptly and resolutely.” IKEA, which was recently listed as one of the world’s “most ethical companies,” has always paid attention to its global reputation. Therefore the managers were sacked as soon they were suspected of “tolerating” bribes, despite the fact that they did not give or receive the bribes themselves.
Every second company in Russia faced economic fraud in 2009, according to a PricewaterhouseCoopers survey carried out in conjunction with the INSEAD business school, and the risk of fraud against individuals is even higher. Russia and South Africa topped the list of countries reporting economic crime: the survey found that 71 percent of Russian respondents had experienced some form of economic crime during the past 12 months.
Bribery and corruption are most common in cases where companies are dealing with government officials and where organizations use sales agents and distributors. A special characteristic of Russia is that economic crimes are a “prerogative” of top managers, data from PricewaterhouseCoopers shows. While in other countries staff and middle-level managers commit two thirds of economic offences, in Russia half of corruption cases involve top managers. “It is quite difficult to work in Russia without giving bribes, but it is possible,” said Vyacheslav Terekhin, the CEO at Multisoft IT. “However, it is necessary to take two factors into account. Firstly, your business growth rate strongly depends on your attitude toward corruption. If you are ready to give bribes your business will probably develop faster. If not, it will grow more slowly. Secondly, every segment of the market has its own ‘corruption standards.’ Some markets are more corrupt than others; in some areas you have to pay more and in others – less. But you can also choose anticorruption policies and your business might survive even if you do not give any bribes it all.”
However, despite hard economic conditions, a corrupt business environment and obstructive bureaucracy, many foreign managers find Russia a very attractive destination for work. A recent global survey conducted by Korn/Ferry International in 70 countries found that 64 percent of top managers believe that the best career opportunities in the world are in fast developing economies such as Russia, China, India and Brazil. In comparison, only 22 percent of respondents pointed to the United States as an attractive destination for work, and only nine percent opined that working in Western European countries and Japan might be beneficial for their career development. Sixty three percent of respondents said they would accept an attractive job offer from Russia with a good salary and bonuses regardless of the economic situation in their home countries.
Another reason for Russia’s popularity is high demand for foreign managers. The tradition of hiring foreigners has been established in the country since Peter the Great opened his “window to Europe” in the 18th century, and it is still alive today. “Many big corporations and large banks in Russia prefer to hire foreigners as financial directors because they have experience in working in overseas markets, where Russian firms already run a business or want to establish a presence,” said Aleksey Zakharov, the chief executive of the SuperJob.ru Internet portal. “However, the citizenship of the candidate is not very important in itself. For example, a Russian manager who has good basic education from a prestigious local university, an MBA from a Western university and work experience at home and abroad is more valuable for employers than a foreigner. But there is a very limited number of professionals like that on the Russian market, so foreign managers are still in high demand.”
The average senior manager in Russia is a man in his 30s or 40s with a degree from a technical university, perfect communication skills and experience in working in difficult economic conditions. They tend to be are charismatic leaders and highly motivated professionals. Top managers who are able to solve difficult management problems and successfully develop a business might earn $500,000 annually or more if they become partners. In Russia, however, most top managers are not salaried employees but business owners. Some Russian executives have MBAs, but not all. “If an executive works on the international market the MBA is a big plus, but if his job is to operate inside the country he could probably not use the skills gained from a Western university,” Zakharov said.
While the economic crunch has affected the average employees and middle-level managers considerably, most of Russia’s top managers did not see any impact on their incomes and bonuses. While middle managers and professionals have seen their salaries drop from $3,000 to $2,000 a month, jobs for senior managers offer the same income as they used to before the crisis, SuperJob.ru reported. |
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