The Problem of Agency Conflicts in Russian Corporations and Ways to Overcome It

Abstract

This article is devoted to the problem of agency conflicts between shareholders and the hired managers in large Russian corporations. The senior management decisions that don’t meet the interests of the owners can significantly weaken the company business model, which will lead to a decrease in the business efficiency. This may cause a significant drop in the company’s market capitalization within a short period of time in a digital economy, which means a decrease in the value of the business for the shareholders. The models and indicators used in Western practices of developed markets in most cases are based on a limited set of financial information and don’t make it possible to fully assess the quality of the financial management in economic realities of the corporate sector in Russia. In this regard, a new approach involving three stages of assessment is introduced, where interrelated indicators are selected and calculated according to the established procedure, all significant information environments are identified; a qualitative assessment of the indicators which allows identifying the strengths and weaknesses of the corporation taking into account its industry affiliation is carried out and the results of the second stage are consolidated in the final assessments of the financial management quality, which allows not only to determine the quality of the financial management, but also to identify weaknesses of the current business model. This approach has been tested in 20 largest corporations in Russia and the obtained results prove its effectiveness in Russian economic realities.