Board members quit Russian companies en masse

Board members quit Russian companies en masse
Steel giant Evraz is the latest company to see directors leave over the war in Ukraine. Roman Abramovich, who is now facing sanctions in the UK, is a minority shareholder of Evraz. / Image: bne IntelliNews.
By Theo Normanton in Moscow March 12, 2022

All 10 non-executive directors of Russian steel group Evraz resigned with immediate effect on Friday. The move came after sanctions on the London-listed company’s largest shareholder Roman Abramovich prompted the Financial Conduct Authority (FCA) to suspend trading of Evraz shares.

This exodus, although dramatically timed, is not unique. Board directors from Russian companies of every stripe are resigning in the wake of Russia’s invasion of Ukraine on February 24.

The first to go were European former politicians with senior roles in Russian companies. Former Prime Minister of Italy Matteo Renzi stepped down from the board of Delimobil on the day that Russia’s invasion began. He was joined by former Finnish Prime Minister Esko Aho, who stepped down after six years as an independent director of Sberbank, and Austrian former Chancellor Christian Kern, who resigned from the board of Russian Railways (RZD).

Former French Prime Minister François Fillon joined his peers the following day, stepping down from the boards of energy company Zarubezhneft and petrochemicals major Sibur.

The mass exit was accelerated when the business lobby group Institute of Directors (IoD) called on British directors to step down from the boards of Russian companies in solidarity with Ukrainians. The IoD said that it was morally “untenable” to remain a director of a Russian company after Putin launched an all-out invasion of Ukraine from three different sides.

In the week that followed, scores of directors of London-listed Russian companies resigned. Climate executive Joan McNaughton stepped down from metals group EN+ on Friday, followed by her colleague and former UK energy minister Greg Barker on Monday.

The weekend brought some temporary respite, but the steady flow of resignations continued on Monday, with six directors of precious metals producer Polymetal stepping down, in addition to four directors of supermarket chain Lenta. The latter is majority-owned by sanctioned billionaire Alexei Mordashov.

A particularly painful resignation was that of Matthew Hammond, managing director and chief financial officer of Russian tech giant VK group.

Most directors who commented publicly on their resignations were at pains to stress that they held no animosity towards their companies, but felt obliged to step down either due to the practical difficulties brought on by western sanctions, or a moral obligation in response to Russia’s military action.

Sanctions on Russian companies which have enabled or financed the war, enriched the state, or contributed to the military-industrial complex have been co-ordinated by western countries in recent weeks, including Europe, the USA, the UK, Australia, Switzerland, Japan and Canada. Asset freezes and export bans have wrought havoc on the day-to-day operations of many Russian companies, while the decisions of indices like Nasdaq and FTSE to suspend the trading of all Russian equities have created problems for management boards hoping to keep stakeholders onside.

A source from state carrier Aeroflot told Izvestiya news agency that Aeroflot’s CEO is also planning to resign. Rumours that Elvira Nabiullina, head of the Russian Central Bank wanted to resign were rejected by Kremlin spokesperson Dmitriy Peskov.

The latest resignations come from steel major Evraz, where all of the group’s 10 non-executive directors announced their resignations on Friday.

The move followed sanctions on the group’s largest shareholder, Roman Abramovich. The UK government accused Abramovich of involvement in a process of “destabilising Ukraine and undermining and threatening the territorial integrity, sovereignty and independence of Ukraine via Evraz.” It accuses the group of providing steel to the Russian military for the construction of tanks. Evraz denies this claim.

The company’s shares were suspended by the FCA on Thursday, purportedly to “protect investors”. Evraz has been at pains to distance itself from controlling shareholder Roman Abramovich, pointing out that he has appointed only two of the board’s 11 directors in the last five years.

As the exit from Russian companies picks up pace, pressure now grows on those foreign directors who remain on Russian boards to leave. Expect to see more resignations in the coming days.