Box: The "Code"

To understand the corporate governance constraints on Yukos one must look to the Russian Corporate Governance Code, which comprises a set of best practice standards of corporate behavior essential to "the development of a vibrant, well-managed and profitable corporate sector." They include the following:

• The shareholders should be provided with a real opportunity to exercise their rights in relation to the company.

• The shareholders should be provided with access to effective protection in the event of a violation of their rights, and those owning the same number of shares should be treated equally.

• The board of directors should provide the strategic management of the company’s business. The board should exercise effective control over the company’s executive bodies and should be fully accountable to shareholders.

• The company’s executive bodies should be provided with the opportunity to manage the day-to-day activities of the company reasonably, in good faith, and solely in the interests of the company, and must report regularly to the board of directors and the shareholders.

The code is not, however, a legally enforceable document. Thus if companies do not adhere to it, the code is only as good as applicable Russian laws. Those laws, in turn, are only as good as the governments, will and ability to enforce them.