“Evolving Corruption: Hostile Takeovers, Corporate Raiding, and Company Capture in Russia”

09.02.2009

A hostile takeover in Russia has come to mean the redistribution of a company’s ownership through a combination of legal, illegal, and illegitimate means, including forced bankruptcies, the use of administrative resources, raids by police, tax officers, or government inspectors, and even the violent seizure of documents, assets, offices, and places of business. Such hostile takeovers, also known as “company captures” or “corporate raiding” pose a constant threat to successful Russian entrepreneurs, who must expend a great deal of resources to defend their businesses.

The increasing prevalence and magnitude of corporate raiding underscores the dysfunction of Russian legal system. In this Feature Service article, Alexander Settles, a professor at the State University – Higher School of Economics in Moscow, discusses the nature and causes of this phenomenon. He also talks about how resilient entrepreneurs are working to adapt to new risks.

Settles says, “Russian businesses are not helpless, even given such dire circumstances. Through independent, voluntary business organizations, such as business associations and chambers of commerce, the private sector can work to expose the various takeover practices and, through collective action, demand reforms in both the public and private sectors to reduce corporate raiding.”

Article at a Glance

  • Russian companies increasingly face the threat of “hostile” takeover, or company capture, which greatly increases the cost and uncertainty of conducting business.
  • Hostile takeovers through illegal or illegitimate means stem from the weakness in Russian law and institutions and have grave political, social, and economic consequences.
  • Reforms must include greater transparency and accountability of government officials as well as state and financial institutions.