Interaction between the new code and new listing requirements

1. OECD Russia CorporateGovernance Roundtable Moscow, 22-23 October 2013 Interaction between the new code and new listing requirements Dr. Jochen Biedermann

2. OECD Russia Corporate Governance Roundtable Moscow, 22-23 October 2013 Disclaimer: The views expressed in this presentation are those of the author and do not necessarily represent the opinion of the OECD Russia Corporate Governance Roundtable, the OECD or its Member countries, or of the Moscow Exchange.

3. Why consider including Corporate Governance requirements into listing rules • CG report (e.g. declaration of conformity) becomes part of the annual reporting, thus increasing transparency for investors • Exchange can directly monitor and sanction missing/late reports or lack of transparency/clarity • Companies with a high grade of conformity can be emphasized, e.g. by a premium segment membership Corporate Governance Requirements within Stock Exchange Listing Rules National Corporate Governance Codes OECD Principles of Corporate Governance 3

4. International comparison does not provide a clear picture how to implement Corporate Governance rules * set by the listing authority (regulator or stock exchange), at least for a premium segment ** referencing German CG Codex 4

5. “Living the code” rather than “obeying the law” Fulfilling legal requirements Qualifying for a (premium) listing segment • Focus on compliance: • Reducing legal and resulting financial risks for the company • Avoiding penalties or fines • Transparency vis-à-vis relevant authorities • CG reports are not necessarily public • Over-fulfilling of CG requirements does not make sense • Efforts and impact on existing governance are minimised • National scope of legal requirements • Might differ significantly from international CG best practice CG as cost factor • Focus on investor communication: • Demonstrating superior governance to ease capital market financing • Creating and maintaining trust • Transparency vis-à-vis investors, in particular existing shareholders • CG reports become part of annual company reporting • Over-fulfilling of CG requirements can make lots of sense • Achieve outstanding position among peers • International best practice of CG rules • Exchanges compete globally for listings of leading international companies - their reputation is at risk CG as important differentiator 5

6. Corporate Governance as a process: Requirements have to be constantly adapted to a changing world Example: Social Networks and Corporate Governance Analysis of hidden relationships suggests to introduce a completely different definition of independence in board of directors (www.sonean.com/sna-based-services.html, www.top1000funds.com/conversation/2013/08/14/social-networks-in-the-investment-web) “Say, for example, you have an independent director who is actually closely connected to the rest of the board. Their efforts to maintain independence might be compromised by having been recommended to the board by an executive director with prior social ties or sharing the same mindset – these kind of ties could be disastrous if they are unable to see a problem in time.” (Murat Ünal, SONEAN) Exchanges can usually adapt listing rules much faster than lawmakers, who often have to wait for crisis to be able to sell major changes to the public. Exchanges must take the leadership role in the marketplace in every field of work, including governance and listing. It is a responsibility to society, and also very good business, the right way to work. 6

7. Thank you for your attention! Спасибо за Ваше внимание! Dr. Jochen Biedermann Independent Exchange Industry Expert E-mail: jbieder@gmx.de Mobile: +49 172 4549484