In 2002, it introduced a formal corporate governance code, which is based on existing international good practice.

However, it does not in practice set a sufficiently high bar and, in addition, the Russian code’s enforcement is very weak, particularly in relation to issues such as information disclosure and board composition.

Russian companies are still not very transparent on matters such as company accounts, board structure, related party transactions and beneficial ownership arrangements, which are often very opaque and make the company’s compliance with international money laundering standards difficult to verify.

A lack of transparency may lead to a misrepresentation of the company’s risk profile and its value to shareholders.

Companies have also used poor disclosure to hide crucial information from shareholders and obscure their understanding of the company.

It also means that it is often virtually impossible to get accurate information about company assets and associated contingencies or liabilities – something that would be unthinkable in the UK, where such disclosure is governed by strict rules.

One area of particular concern in Russia is the risks associated with hostile takeovers and related-party transactions.

In the case of UK companies, these risks would be examined by a fully independent audit committee, and presented to shareholders for review, particularly if these concern a major transaction, in which case prior shareholder approval is necessary.

Russian companies have not yet adopted this practice, and either fail to present major transactions to shareholders altogether, or do so retrospectively, thereby preventing minority shareholders from informing themselves and protecting their interests should this be necessary.

Russia has also adopted the practice of cumulative voting on issues such as board membership, whereby shareholders are asked to select a limited number of directors from a long list of 30-35 candidates – without giving any information about their experience or employment history.

It effectively makes it impossible for international shareholders unfamiliar with the local Russian business community to assess the nominees’ independence and suitability, thereby turning the election into a pointless window-dressing exercise.

The practice also enables majority shareholders to dominate the board, which may further jeopardise minority shareholders’ position.

Global best practice would normally enable shareholders to cast a separate vote for each proposed candidate, having been fully informed about each one’s background, relevant experience and most importantly, potential conflicts of interest.

Compared with the UK, where all large companies are expected to have a majority of independent directors, independent non-executive directors are typically in the minority on Russian company boards.

There are not many directors with relevant experience and even fewer non-Russian directors. One particular concern is a widespread practice of appointing government representatives on company boards.

While this may enhance their access to government contracts, it raises concerns about the firm’s strategies and whether they are aligned with shareholders’ interests of those of the government.

The good news is that many Russian companies are beginning to realise the importance of improving their corporate governance if they want to attract foreign capital, although evidence of improvement is coming through rather slowly given the scale of issuance activity.

More Western non-executive directors, many of them with distinguished track records of managing global companies, are appearing on boards and company accounting practices have improved compared with a few years ago.

The cloud on the horizon, however, is that it will remain a challenge for Russian companies to reach a standard of corporate governance that meets the expectations of most Western investors.

That is, so long as the Russian government itself fails properly to enforce the country’s corporate governance code, and insists on maintaining control of key listed companies by dominating boards with its own nominees.

Karina Litvack is head of corporate governance and socially responsible investment at F&C Asset Management