4 th International Doctoral Meeting of Montpellier 3 – 5 May, 2011

1. Index of balancing stakeholders’ interests as a mechanism to improve corporate governance of Russian oil companies 4th International Doctoral Meeting of Montpellier 3 – 5 May, 2011 Julia Krutilina National Research University – Higher School of Economics

2. financial and economic crisis of 2008-2010 and its implications globalization of the world economy increasing level of quality of people life increasing desire of companies to improve their reputation Consumers Company Government Actuality and theoretical background Suppliers Stakeholder concept Standards • Guide to reporting on sustainable development from GRI; • AA1000 series from AccountAbility; • Oil and gas industry guidance on voluntary sustainability reporting from IPIECA; • Global compact from UN; • etc. Recommendations on Policy Conceptual framework Models of evaluation Mitchell, 1997; Frooman, 1999; Jones, 1995; Rowley, 2003; Kaler, 2006 Freeman, 1984; Jensen, 1976; Post, Preston, 2002; Bradley, 2009; Donaldson, 1995; Hill, Jones, 1992 Freeman, 2007; Keeney, Gregory, 1999

3. Scorecard model based on index of balancing stakeholder interests Stakeholders interests Indicators of benefits and costs Companies values of indicators Internal C1 C2 Cn … … … Groups dynamic indicators Interests Groups indexes Index of balancing stakeholder interests Shareholders, investors, Management, Employees … … … … … … External … … … Annual average increase rate of main indicators of benefits Suppliers Consumers, Government, Regions and local communities … … … … … … … … … Short-term and long-term periods 3

4. Scorecard model based on index of balancing stakeholder interests Table 1. Indicators for internal stakeholder groups. 4

5. Scorecard model based on index of balancing stakeholder interests Table 2. Indicators for external stakeholder groups. 5

6. Scorecard model based on index of balancing stakeholder interests Table 3. Indicators for external stakeholder groups. 6

7. Scorecard model based on index of balancing stakeholder interests Table 4. Main indicators of the proposed scorecard model based on index of balancing stakeholder interests. 7

8. The index of indicator: Calculation formula of the scorecard model • 1 • The stakeholder group index: , i - consecutive number of group; j - consecutive number of indicator • 2 • Index of balancing stakeholder interests: , m - number of indicators in the group • 3 n - number stakeholder groups - weight of stakeholder group , 8

9. Matrices for analysis the balance of stakeholders interests Annual average increase rate of main indicators of benefits, % Positive dynamics UPD BPD Group index meaning Negative dynamics UND BND 0 1 Unbalance Balance Figure 1. Matrix of interests balance of external stakeholders groups. 9

10. Matrices for analysis the balance of stakeholders interests Annual average increase rate of main indicators of benefits, % Over inflation Positive dynamics UPDoi BPDoi Inflation rate, % Under inflation UPDui BPDui Group index meaning 0 1 Negative dynamics UND BND Unbalance Balance Figure 2. Matrix of interests balance of internal stakeholders groups. 10

11. BPD • No special events to increase the stakeholders satisfaction involved in this zone • To use a potential for reallocating resources towards less satisfied groups • UPD • To increase a static indicator in the short term • To review long-term plan for reallocating resources towards less satisfied weighty groups UPD UPD UPD UPD BPD BPD BPD BPD Recommendations on adjusting the company's stakeholder policy • BND • To plan an increase of the key benefits indicators in the long term, • To undertake work to bring new policy to stakeholders UND UND UND UND BND BND BND BND • UND • To bring values of static and dynamic indicators to market average level • To gradually increase the level of indicators values to level of core industry leaders towards less satisfied weighty groups • To use of the mechanisms to inform stakeholders about planned activities, organization of the feedback channel to receive complaints and grievances for they can be removed

12. Implementation of the model: TNK-BP Scorecard model calculation Average in industry 2005 - 2009 Financial and social statements TNK-BP Rosneft Lukoil TNK-BP’s model Gazpromneft Surgutneftegas Bashneft Tatneft TNK-BP

13. Implementation of the model: TNK-BP Calculation results analysis Figure 3. Matrix of interests balance of internal stakeholders groups of TNK-BP.

14. Implementation of the model: TNK-BP Calculation results analysis Figure 4. Matrix of interests balance of external stakeholders groups of TNK-BP.

15. Implementation of the model: TNK-BP Main recommendations on company’s policy in stakeholder management

16. Testing model Main pitfalls Preliminary current control

17. Testing model

18. Спасибо за внимание! Julia Krutilina E-mail: Julia.kroutilina@gmail.com

19. Appendix A: calculation of TNK-BP model

20. Appendix A: calculation of TNK-BP model

21. Appendix A: calculation of TNK-BP model