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Page 111
Russian and American Business Practices
and Laws: Advice to Businesses in Russian Nuclear Cities
Blaine A.Gibson
Siberia-Pacific Company
I have enjoyed visiting all of you from the administration,
scientific community, and your state and private businesses, and
want to share with you some of my observations.
STARTING A BUSINESS
When you are starting a business, you need to have a clear
definition of whether you are a private company, a state
company, or a scientific research institute. Major problems and
confusion arise when you start acting as more than one of these.
If you are trying to make money, you need to have a business
plan that clearly defines
mission of the business
ownership structure
management
marketing and sales strategy
operations
financial projections, including revenues, expenses,
profit, and taxes
I have observed a lack of clarity over ownership and management
structure and will address those in particular. In your nuclear
cities, there are many private companies that are spin-offs or
that cooperate with a state company or scientific research
institute. Let us discuss this especially relevant example
first. The company needs to define its relationship
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with the state company or research institute in a written
agreement—a contract. This agreement must answer the following
questions:
Are you separate entities and merely renting space? This
is the relationship we saw when we visited RSTR
Technologia. It has a clearly defined rental contract,
with separate private and state companies, which is ideal
for mutual interest and very professional.
Are you partners? Does the research institute own a share
of the private company? If so, are you sharing expenses
and profits? The agreement must clearly define how.
Define the duties of the private company and research
institute or state company. Who is providing equipment,
labor, technology, and capital?
Try to avoid too many partners. It is often best to be
small and simple. We saw an excellent example in the firm
Eridan-1.
If using technology or selling technological products
coming from a university or research institute, you need
to have a licensure agreement. Resolve whether you pay a
fee or share profits. A fee agreement is preferable
because it is simpler and will result in fewer disputes.
If sharing managers, you must define their roles and the
time resources they will devote to each project. It is
preferable to have separate management for the private
company or research institute or center. Medbiopharm
produces great technological products but needs to work on
this question.
If sharing labor between a private company and a research
institute or center, you need to clarify the worktime
devoted to each and where the salaries come from. You need
to have separate budgets. In visiting Medbiopharm, I
observed a need to address this question.
It is not sufficient to handle these questions informally, (e.g., by
approximating that half the time workers and managers will work for
the company and by agreeing we'll use the institute's
technology, sell products, and then decide how we will divide the
profits—later when we are profitable). This is a recipe for
disaster, and the sad thing is that the more profitable you become,
the more complications and disputes arise.
RELATIONSHIP WITH LOCAL GOVERNMENT
A company needs to define its relationship with the regional and
city administrations. Preferably government regulates you and taxes
you fairly, provides necessary licenses quickly, and lets you run
your business. Is the regional administration a partner? Are
regional administrators partners? Preferably not. Having government
as a partner leads to complications and conflicts of interest.
Governmental entities are almost never partners
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in American businesses. However, I am aware that in Russia it is
common. When it is necessary, it is best that the regional
administration or administrator's share is limited to 10 or 15
percent, not a controlling interest.
SUMMARY
Businesses need to clarify the relationships discussed above for
the following reasons:
to achieve long term profitability. Following this
advice will help maximize efficiency and minimize
disputes. In a business the right hand needs to know
what the left hand is doing.
to comply with Russian laws covering articles of
incorporation (ustav), shareholder agreement
(dogovor), and licensure
to obtain financing, from Russian banks, but especially
from any private foreign investors, international
organizations, foreign governments, or financial
institutions
Yesterday we heard a great deal of discussion among scientists and
government bureaucrats about how government can help business.
There are some things government can do, but they are limited to
helping with technoparks and incubators. Meanwhile, businesses must
grow up and stand alone. The main thing government can do is tax
reasonably, regulate fairly, grant licenses and clear customs
quickly, and leave you alone. Local administrations need to focus
primarily on how they can help businesses in this second way.
Technoparks and incubators can be helpful, but businesses need to
focus more on their own business plans, structure, development, and
marketing. Businesses need to work with one another. Institutes and
businesses wishing to develop markets for their technology should
take Dr. Trivelpiece's repeated suggestions to contact and
invite foreign companies. This should be done now, and there is no
reason to wait or rely on government to begin these initiatives.
Representative terms from entire chapter:
state company
