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Why Russia Can Pay Millions To Public Sector Bosses

Moscow, red light-green light
Moscow, red light-green light
Siranush Sharoyan

MOSCOW - Only a couple of years ago, government jobs were lucrative and only for the highest-ranking executives in Russia. But that is changing, and now the public sector is aggressively competing in the job market, offering competitive salaries and poaching talented employees from private companies.

In Russia, unlike in Europe or the United States, even public companies are not required to disclose their executive compensation packages, but there are legends circulating about what those packages might include, and occasionally numbers will turn up in publicly available documents.

At the end of last year, Forbes ranked the highest paid CEOs in Russia, and the top five spots were occupied by representatives of state-owned companies. At the top of the list was Andrey Kostin, the head of a state-owned VTB bank, who was paid nearly $30 million a year – approaching the likes of Jamie Dimon, CEO of JPMorgan Chase, who was paid $42 million. It is worth noting, though, that Kostin’s bank is 10 times smaller than JPMorgan Chase.

This is a pattern seen throughout Russian business –executive compensation in line with western pay, even though the Russian companies in question often are far smaller and less competitive.

“Russian top managers often defend their pay by saying that their analogues outside of Russia make similar amounts,” explains Konstantin Borisov, CEO of Support Partners. “But first of all, they are not taking into account the company’s competitiveness, which is often much lower in Russia then the Western equivalents. Secondly, Western managers are often much more experienced than Russian managers – Western managers have often worked for a company for 20 years before taking the helm, while in Russia – one minute you’re a member of parliament, the next you’re running a state-owned company. It’s a big question whether or not these business people understand those differences,” says Borisov.

But while it is perhaps not surprising that the top ranks are paid handsomely, state-owned companies have also started to pay more mid-level managers substantially above average. At the end of last year, oil company Gasprom’s average remuneration, excluding top-management, was around $3,000 per month, more than three times the average salary in Moscow. Other state-owned companies paid their mid-level employees even more handsomely.

A new era in the job market

“After the 2008 crisis, the government became the country’s main businessman,” explains Borisov. “Everyone remembers how, in the mid-2000s, the most talented job-seekers went to work for transnational and western companies, because the pay was better and the projects were more interesting. Now those same people are coming back to work at state-owned companied. You could say it’s a new era in the Russian labor market,” he says.

The aggressive recruiting by the government could heat up the labor market to such an extent that private companies can’t compete – something that Oksana Feshenko, a labor expert, says is already happening. Ekaterina Ilina, a partner at Boyden, gives an example, “it’s crazy when a human resource director, even at a very big company, is making 15,000 to 20,000 euros per month. In Europe, that’s the kind of salary you would give a CEO who is responsible for a multimillion euro business and has a huge responsibility.”

According to Borisov, the government can operate like this because it is flush with cash thanks to the high gas prices. But at the first hint of a crisis, salaries are likely to plummet.

Nowhere has the government been more aggressive than in the media sector. This is the case with Russia Today, the state-owned TV channel specially created in 2005 to help build a positive image for Russia overseas. The government has given these media companies huge subsidies, allowing them to give substantially more money, and stability, to well-known journalists from private media companies, which in turn lends credibility to Russia Today and other state-owned media.

Announcements about journalists going to work for the state-owned media are frequent, although representatives from state-owned media denied that there was any sort of pattern or that they were buying up journalists from the private market.

According to Vasilii Gatov, vice-president of the Publishers’ Guild, there is another important factor for journalists. The state-owned media offers a buffer with the government, and journalists can better understand the restrictions they should work within, while working in private media can be like a stroll through a minefield.

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In Northern Kenya, Where Climate Change Is Measured In Starving Children

The worst drought in 40 years, which has deepened from the effects of climate change, is hitting the young the hardest around the Horn of Africa. A close-up look at the victims, and attempts to save lives and limit lasting effects on an already fragile region in Kenya.

Photo of five mothers holding their malnourished children

At feeding time, nurses and aides encourage mothers to socialize their children and stimulate them to eat.

Georgina Gustin

KAKUMA — The words "Stabilization Ward" are painted in uneven black letters above the entrance, but everyone in this massive refugee camp in Kakuma, Kenya, calls it ya maziwa: The place of milk.

Rescue workers and doctors, mothers and fathers, have carried hundreds of starving children through the doors of this one-room hospital wing, which is sometimes so crowded that babies and toddlers have to share beds. A pediatric unit is only a few steps away, but malnourished children don’t go there. They need special care, and even that doesn’t always save them.

In an office of the International Rescue Committee nearby, Vincent Opinya sits behind a desk with figures on dry-erase boards and a map of the camp on the walls around him. “We’ve lost 45 children this year due to malnutrition,” he says, juggling emergencies, phone calls, and texts. “We’re seeing a significant increase in malnutrition cases as a result of the drought — the worst we’ve faced in 40 years.”

From January to June, the ward experienced an 800 percent rise in admissions of children under 5 who needed treatment for malnourishment — a surge that aid groups blame mostly on a climate change-fueled drought that has turned the region into a parched barren.

Opinya, the nutrition manager for the IRC here, has had to rattle off these statistics many times, but the reality of the numbers is starting to crack his professional armor. “It’s a very sad situation,” he says, wearily. And he believes it will only get worse. A third year of drought is likely on the way.

More children may die. But millions will survive malnutrition and hunger only to live through a compromised future, researchers say. The longer-term health effects of this drought — weakened immune systems, developmental problems — will persist for a generation or more, with consequences that will cascade into communities and societies for decades.

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