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Russian authorities declare war on golden parachutes

January 27, 2014, 16:56 UTC+3 Zamyatina Tamara

MOSCOW, January 27. /ITAR-TASS/. The issue of the so-called “golden parachutes” — severance packages paid to top executives of state corporations - has engrossed the minds of Russians for two years. Last Friday, after heated discussions, the State Duma, the lower house of the Russian parliament, adopted in the first reading a bill in line with which a resigning executive will receive three to six monthly salaries.

In the spring of 2013, President Vladimir Putin proposed introducing an amendment into Russia’s Labour Code to limit the size of the severance package to senior executives of state corporations. The move was triggered by the dismissal of the former head of Russian telecoms company Rostelecom, Alexander Provotorov, who received a golden parachute of 230 million rubles (€5 million).

Putin’s supporters from the All-Russia People’s Front public movement have drafted a bill substantially limiting the size of severance packages to bosses. But the government has left their initiative behind, and the State Duma is considering the cabinet’s draft law.

Why has the issue that affects a small part of the elite alarmed society so much?

“In many state corporations, the salary of top executives reaches 2 million rubles ($57,480) whereas the minimum monthly wage across the country only slightly exceeds 5,000 rubles ($144),” a State Duma lawmaker from Russia’s Communist Party, Nikolai Kolomeitsev, explained.

So the authorities’ legislative initiative is first and foremost designed to ensure that social justice is observed, although it is useless to speak about it both in terms of Russia and the rest of the world. The planet’s 85 richest people control half of the world’s economy, according to figures cited at last week’s World Economic Forum in Davos.

Russia’s practice of golden parachutes in conditions when the economy does not grow looks defiant in the eyes of the population. Personnel cuts are taking place everywhere across the country. A total of 7,500 employees of Russian major carmaker AvtoVAZ in the city of Togliatti are expected to be fired in 2014. No “golden” or “silver” parachutes are stipulated for workers who will be dismissed. At best, they will receive three monthly wages in line with the Labour Code.

However, Mikhail Berger, a professor with the Higher School of Economics, has spoken in support of golden parachutes. “A businessman who takes employment as an executive in a state corporation invests his knowledge and qualifications in it. He risks losing his job should the company’s management change or for a different reason. That is why a serious expert cannot be lured into a state corporation without a golden parachute. This is global practice,” the expert said in an interview with Itar-Tass.

At the same time, Berger admits: “In conditions of an economic decline, the state has to think about saving costs. The more so, as ‘golden parachutes’ are increasingly turning into ‘diamond parachutes’ because the appetites of top executives are growing."

Asked why the authorities have decided to cut the size of severance packages to state corporations’ chief executives right now, the expert answered: “In conditions of a huge stratification of people’s revenues, the topic becomes advantageous for populist policies, which makes it possible for the authorities to collect additional points in the eyes of the population.”

“Russia’s living standards have sharply gone down. Inflation is growing. The rouble is greatly weakening. So the authorities are forced to start fighting for social justice. This is what the attack on golden parachutes is explained by,” Mikhail Delyagin, the director of the Globalization Problems Institute, said in an interview with Itar-Tass.


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