Skip to main content
  • Share to or

The 3 wins of keeping their wealth secret Explaining the significance of Russia's top state executives' latest victory

Source: Meduza
Photo: Valery Sharifulin / TASS / Scanpix

The Russian government has officially allowed the top managers of the largest state-owned companies to withhold data about their personal income. In fact, these individuals weren’t reporting their salaries already, but the secrecy was only semi-legal. Meduza explains what exactly has been achieved by the heads of companies like Rosneft, Gazprom, and the Russian Railways.

A brief history of the issue. The government previously required the heads of state-owned companies to report their income in 2014. The requirement didn’t specify where the income needed to be reported—on the company’s website, or on the government’s website. As a result, the information didn’t appear anywhere. Top managers at these companies strongly opposed the measure, saying data about their income is a trade secret.

The government didn’t take a firm position on the issue, and within a year it capitulated, deciding to allow executives to keep their income a secret, so long as they’re not appointed directly by the state, and their companies aren’t owned entirely by the state. This formula means the Russian Railways, for example, might remain obligated to publish how much it pays its president, Vladimir Yakunin, but the public isn’t likely to see his income declaration any time soon.

Winning their feud with the government, people like Rosneft’s Igor Sechin, Gazprom’s Alexei Miller, and other top managers score not one but three victories.

1. They don’t have to disclose their salaries. The main argument they raised against revealing their income was that the information is a trade secret: if Rosneft’s or the Russian Railways’ competitors found out how much they pay their top managers, these competitors would gain extra insights into their business activities.

This is an extremely weak argument: first, the total remuneration of all board members is already published in the state-owned companies’ international accounting reports, so the general salary level of the top executives is already known. Second, many of the world’s biggest corporations reveal the salaries of their chief executives. For example, it’s known that the CEO of ExxonMobil (the world’s largest private oil company according to market capitalization) earns more than $40 million a year.

Nevertheless, if we assume that people like Sechin, Yakunin, and others really feared giving an advantage to their competitors (though it’s hard to imagine what competitors threaten the Russian Railways, which has sparred repeatedly with Russia’s Federal Antimonopoly Service), then it’s now safe to say this danger has been neutralized.

2. They don’t have to disclose their property. It’s no secret that the top managers at state-owned companies earn millions, if not tens of millions, of dollars every year. The total sum, whether it’s 4 million or 40 million, doesn’t really interest the public, in the end. When it comes to declarations of wealth, people really want to know about all the real estate, cars, and property owned in Russia and abroad, registered in the executives’ names and the names of their relatives.

It’s not the amount of money that these people make that influence public opinion so much as whether they own an expensive car or something particularly exotic (like Russian Minister for Open Government Affairs Mikhail Abyzov’s helicopter). It’s not terribly difficult to hide such possessions by registering them under relatives’ names, but these arrangements can become public, exposing executives to unexpected scandals.

Even these scandals, however, pose no great threat to top managers. Anti-corruption activist Alexei Navalny’s many investigations of politicians’ undeclared property have produced just one resignation (Duma deputy Vladimir Pekhtin’s in 2013) and not a single reprimand from the Kremlin.

3. A psychological victory. This is possibly the most important facet of the story. Sechin, Yakunin, Miller, and others have shown basically that they don’t have to obey the government’s orders, and not only that but they can get meddlesome decisions reversed. “Special” individuals can get “special” treatment from the country’s leaders—that’s precisely the message Russia’s top managers send with this turn of events.

It’s probably safe to assume that people like Sechin wouldn’t have risked anything too great, if they’d gone ahead and revealed their income. After all, Sechin already disclosed his salary as a deputy prime minister. (In 2011, he declared a salary of 3 million rubles, a small apartment, and a Subaru.) More than anything, withholding information about their earnings is for these people a question of principle: they’re unwilling to disclose the slightest information that might allow a public discussion of their personal lives.

P.S. The top managers’ victory also jeopardizes another government order from May 2014, when Prime Minister Dmitry Medvedev ordered the heads of state-owned banks (particularly Sberbank’s German Gref and VTB’s Andrei Kostin) to declare their income. Given the new developments with Sechin and company, we’re not likely to find out how much the bankers earn, either.

  • Share to or