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{{infobox | {{infobox | ||
| nameofpractice =Reiderstvo | |||
| flagemoji = 🇷🇺 | |||
| definition =Corporate raiding by illegal, semi-legal or unethical means | |||
| location =Russia | |||
| imagemap =Russia map.png | |||
| clusters = | |||
}} | [[:Category:Market|Market]] – [[:Category: Functional ambivalence| Functional ambivalence]] – [[:Category: Gaming the system| Gaming the system]] – [[:Category: Camouflage| Camouflage]] – [[:Category: Playing the letter of the rules against their spirit| Playing the letter of the rules against their spirit]] | ||
| categories = | |||
[[:Category:Russia|Russia]] – [[:Category: FSU| FSU]] – [[:Category: Investment| Investment]] – [[:Category: Entrepreneurship| Entrepreneurship]] – [[:Category: Corporate informality| Corporate informality]] | |||
| authorofpiece =Michael Mesquita | |||
| authorinstitution =West Sands Advisory Limited, UK | |||
| authorwebsite =[https://www.linkedin.com/in/mike-mesquita Profile page at LinkedIn]}} | |||
<big>'''By Michael Mesquita, West Sands Advisory Limited, UK'''</big> | |||
[[Category:Market]] | |||
[[Category: Functional ambivalence]] | |||
[[Category: Gaming the system]] | |||
[[Category: Camouflage]] | |||
[[Category: Playing the letter of the rules against their spirit]] | |||
[[Category:Russia]] | |||
[[Category: FSU]] | |||
[[Category: Investment]] | |||
[[Category: Entrepreneurship]] | |||
[[Category: Corporate informality]] | |||
[[Category:Entry]] | |||
[[Category: Volume 2]] | |||
{| class="wikitable" | |||
|- | |||
|style="font-size:1.1em;"| The Russian word ''reiderstvo'', derived from the English term ‘corporate raiding’, is an attempt by an investor or group of investors to purchase a majority or significant minority stake in a publicly-traded or privately held company. Once a raider acquires a controlling interest, they may replace the current management team or implement cost saving measures in an attempt to increase the company’s overall share value<ref>Salinger, L. 2013. Encyclopaedia of White-Collar and Corporate Crime, Second Edition (Los Angeles: Sage Publications).</ref>. | |||
Unlike corporate raiding in the | |||
West, ''reiderstvo'' is designed for short-term gain rather than long-term investment, often for | West, ''reiderstvo'' is designed for short-term gain rather than long-term investment, often for | ||
the purpose of stripping the business of its assets. The acquisition of the company may be | the purpose of stripping the business of its assets. The acquisition of the company may be | ||
| Line 22: | Line 35: | ||
often semi-legal or outright illegal, including the use of physical force or corrupt collusion | often semi-legal or outright illegal, including the use of physical force or corrupt collusion | ||
with state institutions. | with state institutions. | ||
|} | |||
Much of the research on ''reiderstvo'' focuses primarily on Russia and Ukraine; | Much of the research on ''reiderstvo'' focuses primarily on Russia and Ukraine; | ||
however, this tactic with its various forms can be found in other post-Soviet countries, | however, this tactic with its various forms can be found in other post-Soviet countries, | ||
| Line 54: | Line 67: | ||
of judges, law enforcement, lawyers, accountants, journalists and others<ref>Viktorov, I. 2013. ‘Corporate Raiding in Post-Soviet Russia’, Baltic Worlds, 2: 4-8, | of judges, law enforcement, lawyers, accountants, journalists and others<ref>Viktorov, I. 2013. ‘Corporate Raiding in Post-Soviet Russia’, Baltic Worlds, 2: 4-8, | ||
http://balticworlds.com/in-post-soviet-russia/</ref>. | http://balticworlds.com/in-post-soviet-russia/</ref>. | ||
One of the more profound changes that precipitated the evolution of ''reiderstvo'' was the active | One of the more profound changes that precipitated the evolution of ''reiderstvo'' was the active | ||
assistance of regional and federal agencies. Such connections (through informal networks of | assistance of regional and federal agencies. Such connections (through informal networks of | ||
| Line 72: | Line 86: | ||
status (questionable privatisation deals, licence discrepancies, etc.). If discovered, the raider | status (questionable privatisation deals, licence discrepancies, etc.). If discovered, the raider | ||
files a criminal case, which may lead to bankruptcy proceedings or a business crisis as | files a criminal case, which may lead to bankruptcy proceedings or a business crisis as | ||
described above. Another tactic is the continual acquisition of minority shares to influence | described above. | ||
Another tactic is the continual acquisition of minority shares to influence | |||
board decisions. Once a raider is in this position, they may convene a shareholders’ meeting | board decisions. Once a raider is in this position, they may convene a shareholders’ meeting | ||
but systematically exclude other shareholders. This can be achieved by holding the meeting | but systematically exclude other shareholders. This can be achieved by holding the meeting | ||
| Line 87: | Line 103: | ||
etc.). The company is then compelled to sell a stake in the company for the attacks to stop. | etc.). The company is then compelled to sell a stake in the company for the attacks to stop. | ||
This process is repeated until it becomes too costly for the company to continue; thus it is | This process is repeated until it becomes too costly for the company to continue; thus it is | ||
forced to sell to the raider. Extortion may also be used to guarantee the target company | forced to sell to the raider. | ||
receives the necessary state licences or government contracts to operate. Uzbek President | |||
Islam Karimov’s daughter, Gulnara, who allegedly received bribes from Russian and Finnish | Extortion may also be used to guarantee the target company | ||
receives the necessary state licences or government contracts to operate. Uzbek President Islam Karimov’s daughter, Gulnara, who allegedly received bribes from Russian and Finnish | |||
telecoms companies, reportedly used this practice to exact bribes and increase her stake in the | telecoms companies, reportedly used this practice to exact bribes and increase her stake in the | ||
local telecoms market<ref>Patrucic, M. 2015. ‘Uzbekistan: How The President’s Daughter Controlled The Telecom | local telecoms market<ref>Patrucic, M. 2015. ‘Uzbekistan: How The President’s Daughter Controlled The Telecom | ||
| Line 104: | Line 121: | ||
rule on false criminal charges against the management or owners of a target company (see | rule on false criminal charges against the management or owners of a target company (see | ||
also entry on [[Telefonnoe_pravo|telefonnoe pravo]] (‘telephone justice’) in this volume). The victim is then | also entry on [[Telefonnoe_pravo|telefonnoe pravo]] (‘telephone justice’) in this volume). The victim is then | ||
arrested, but can buy their freedom by selling the company at a reduced price. Alternatively, a | arrested, but can buy their freedom by selling the company at a reduced price. | ||
Alternatively, a | |||
raider may employ the ‘shareholder scheme’ to seize company assets while the victim is in | raider may employ the ‘shareholder scheme’ to seize company assets while the victim is in | ||
custody. According to the Moscow-based NGO Liberal Mission Foundation (Open Democracy 2013), between 2000 and 2010 over 15 per cent of all Russian business entities | custody. According to the Moscow-based NGO Liberal Mission Foundation (Open Democracy 2013), between 2000 and 2010 over 15 per cent of all Russian business entities | ||
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on an injunction that has been granted by a bribed judicial figure. While any corporate raid is | on an injunction that has been granted by a bribed judicial figure. While any corporate raid is | ||
usually reliant on the support of a legal or political actor, intimidation is still used to facilitate | usually reliant on the support of a legal or political actor, intimidation is still used to facilitate | ||
or expedite the process. A recent public instance of hiring armed men to seize company | or expedite the process. | ||
A recent public instance of hiring armed men to seize company | |||
property was the case of Ukrainian oligarch and former Mayor of Dnepropetrovsk, Ihor | property was the case of Ukrainian oligarch and former Mayor of Dnepropetrovsk, Ihor | ||
Kolomoysky, in March 2015. Following the passing of legislation that limited his influence | Kolomoysky, in March 2015. Following the passing of legislation that limited his influence | ||
| Line 122: | Line 143: | ||
Dnepropetrovsk shortly after. Nonetheless, the event highlights how intimidation can still be | Dnepropetrovsk shortly after. Nonetheless, the event highlights how intimidation can still be | ||
a useful tool for corporate raiding. | a useful tool for corporate raiding. | ||
==References== | |||
== | <references /> | ||
<references /> | |||
==Further reading== | |||
Aslund, A. 2014. ‘Oligarchs, Corruption, and European Integration’, Journal of Democracy, | Aslund, A. 2014. ‘Oligarchs, Corruption, and European Integration’, Journal of Democracy, | ||
25, 3.<br> | 25, 3.<br> | ||
| Line 149: | Line 170: | ||
Zaostrovtsev, A. 2013 ‘Russia: An Oprechnik Economy,’ Open Democracy, 9 January 2013, | Zaostrovtsev, A. 2013 ‘Russia: An Oprechnik Economy,’ Open Democracy, 9 January 2013, | ||
https://www.opendemocracy.net/od-russia/andrei-zaostrovtsev/russia-oprichnik-economy | https://www.opendemocracy.net/od-russia/andrei-zaostrovtsev/russia-oprichnik-economy | ||