They are all well-known, but here I make the reference to one
of the president's in July 92 order on transformation
of the state owned enterprises and to limited liability companies,
which permitted to sell, to issue and to sell shares.
And after that order, that other method
of privatization became very popular and
start to be massively used as a method
of state SS privatization.
According to the new Russian registration, all big enterprises
with asset failure of more 50 million rubles personal of more than 1,
000 people, which meant big relatively big enterprises
with big turnover and with relatively big personnel.
They were submitted under this method of privatization,
you can see the number of state owned enterprises
submitted to this form of privatization.
Roughly, slightly more than 30,000 such
big enterprises existed at that time within the national economy and
this method turned out to be quite popular and
had relatively success.
Because as you can see through the figures,
more than 70% of those enterprises
have been privatized til mid of the year 1994.
How was that done?
What were the particularities of this
methodology, because details matter.
A lot of important details I will put a special stress
on the analysis of some of the minor details,
which seem to be minor details.
But in fact, they do matter to explain a lot of major problems,
which arose eventually.
So, the method consisted in the non-market prices buy-outs.
Preference for those buy-outs was given to personnel
of those enterprises and they were lead to buy shares
of their appropriate units, units where they worked.
There were three options to privatize such enterprises.
But one of the most popular oceans
consisted in permission of buying
more than half, 51% of shares.
Exactly 51% of shares of a stake in an enterprise.
The price would be slightly different.
Because when a person opted for
to buy 25% of shares, for
example, the price was less.
It was really nominal.
It was really symbolic.
Well, 70% more from symbolic price was not agreed thing.
So a lot of personally, a lot of enterprises opted for this second method,
which lead them buying the controlling stake in the enterprise.
As you can see here, the figure as much as 80% for
all of the enterprises have selected that method of privatization.
If the person know will let to buy-out
shares of an enterprise where they work,
on which principle should they be authorized to do that?
That's a game, a question.
Well, if we are guided by the idea of the quality,
amount of people, amount of personnel,
then probably the logical thing would be to distribute
all the shares of an enterprise evenly among all
the personnel working for a certain enterprise.
Would it be just?
Probably not and the other logic was
chosen within this legislation.
Because the higher the standing of the management
within an enterprise, the more shares this management
were entitled to buy-out and that was the logic.
Well, it was not probably fair from an absolute
equality point of view, but there was a logic in that.
The more experienced you are,
the higher your position with an enterprise is.
The more knowledgeable you are in the business of a certain
enterprise, you should be entitled to more shares,
to buy more shares, to buy out more shares.
So, there was a certain logic to grant the top management
of an enterprise that privilege to buy the biggest share or shares of an enterprise.
So, that was it.
That was done in that way.
Again, same question, was it a good idea or not a good idea?
That's kind of a rhetoric question.
That's the way it was done.
I have explained already both ways of thinking why to a certain way,
the idea of granting directors and top management.
The privilege position to buy out more shares was justified.
There was a reason, because they could In theory by more useful to an enterprise and
more interested to have more shares, to better manage those enterprises.
So, that was done and there was a certain logic.