In early 2008, when Zhardem Kurmangaziyev turned up for work as a corporate secretary of
the Sustainable Development Fund Kazyna JSC, the HR department had never encountered a corporate secretary before and decided to list him as a manager in the legal department. Since then, Kazakhstan has moved faster than any of the other CIS countries (former Soviet Republics) to establish and promote a corporate secretarial profession. Zhardem has been a key player in this endeavour and in this month’s Peer to Peer interview he tells us how corporate secretaries came to be included in the official list of recognised professions in Kazakhstan.
Thanks for giving us this interview, can we start with some background about yourself?
‘Certainly. I have been working in business and also as a civil servant for some time. In March of 2008, I was appointed as a corporate secretary of the Sustainable Development Fund Kazyna JSC (the Kazyna Fund). In October 2008, the President of the Republic of Kazakhstan, Nursu he ltan Nazarbayev, decreed the merger of the country’s two main sovereign wealth funds (the Kazakhstan Holding for Management of State Assets Samruk JSC and the Kazyna fund). I was then appointed as the Head of the Corporate Secretary Service of the newly-formed Sovereign Wealth Fund Samruk-Kazyna JSC (the Samruk-Kazyna Fund). The Fund is wholly state-owned and includes mining, energy, railway and telecom companies in the form of a joint stock holding company. About 50% of Kazakhstan’s GDP comes from the companies in the group. The charter capital of the company is about US$20 billion.’
Did you train as a corporate secretary?
‘No I didn’t, so when I got my first appointment as a corporate secretary in the Kazyna Fund I contacted a colleague of mine who was working in an oil and gas company that was going through an IPO. She gave me a kind of peer-education and a good introduction to the role. She had a lot of practical experience having worked in many big international companies. She had also attended courses at the Institute of Directors in London.’
When was the corporate secretarial profession established in Kazakhstan?
‘Officially in 2008 there was no such profession in Kazakhstan. When I started my new job, the HR department did not know about the profession as it was not on the list of professions issued by the Ministry of Labour. They were a little confused about my position and decided to list me as a manager in the legal department. Of course, I disagreed with them on this issue because I was not an ordinary manager in the line management of the company; I was the Head of the Secretariat of the Board of Directors. We have a two-tier management system in joint stock companies in Kazakhstan and the legal foundation and the competence of the management board and the board of directors are strictly differentiated.
I had to explain that corporate secretaries are not ordinary managers, they hold a higher position and their tasks are very different. I went to our Chairman of the Board with this issue, who was also an independent director at the time. He was well aware of the nature of the position and supported me. The
first assignment I received from him was to improve corporate governance within the group of companies of the Kazyna Fund. Conjunctively with colleagues we worked hard on various improvements. The Kazyna Fund group included some of the major and important companies and development institutions
in the country, many of which receive funding from state programmes. Our first job was to unify the corporate governance structure across these companies.
In the beginning, working with the Internal Audit Service, we drew up an action plan for corporate governance improvement which got the agreement of all stakeholders and the approval of the board of directors. I took tight control of the execution of this plan and gave monthly updates on progress.
It was a major achievement that we were able to implement the plan within half a year. By September of the same year, KPMG’s audit firm evaluated and passed our corporate governance structure as being in compliance with international practice. This was all done thanks to the hard work of colleagues from different departments and, of course, our Corporate Secretary Service.’
Is there a corporate secretarial professional body in Kazakhstan?
‘In the same year that the Samruk and Kazyna funds were merged (2008), we set up a society of corporate secretaries – called the Corporate Secretary Club – and held our first meeting. One of the co-founders was working for a branch of the International Finance Corporation (IFC)/ World Bank which was doing work on corporate governance in Kazakhstan. The club includes the members of clubs from Kazakhstan’s two biggest cities Almaty and Astana, and its members come from many different companies, not just those of the Samruk-Kazyna Fund.
One of the first issues I raised was to include the corporate secretarial profession in the registry of positions of the Ministry of Labour. I should mention that in 2008 there was the first corporate secretary competition in Kazakhstan – held jointly by the Kazakhstan Institute of Independent Directors and the IFC project on corporate governance – and I was one of the winners. We had been following Standard & Poor’s ‘Gamma 5’ standard [the Gamma standards rate companies’ corporate governance practices on a scale from 1 (lowest) to 10 (highest)], and the recognition of our work by the prize was significant. It greatly influenced my future job as a corporate secretary.’
Is there a body organising training and issuing professional certificates for corporate secretaries in Kazakhstan?
‘We created a Corporate Secretary Council in 2009 – of which I am currently Chairman. We have also been holding an annual forum of corporate secretaries since 2010. We are working to develop the corporate secretary profession in Kazakhstan such as through study tours to gain experience from other jurisdictions. In 2011 we were in London attending a conference and training sessions. In October last year we came to Hong Kong to attend the HKICS Corporate Governance Conference 2012.
We have organised a certification programme with four modules on the basis of our Corporate University Samruk-Kazyna. In 2011 we presented our programme to the Institute of Chartered Secretaries and Administrators (ICSA) in London which they found to be a satisfactory programme. We have computerised the final testing and worked with colleagues to prepare the test base. We now have 74 corporate secretaries who have undergone the programme and received their certificates. We work with our Russian colleagues and went to the corporate secretary forum in Stockholm in 2012. There we learned that we were the first of the CIS countries [Commonwealth of Independent States – the former Soviet Republics before the break up of the Soviet Union] to implement such a programme.
We are constantly working to improve this certification scheme and raise our corporate governance standards. We organised an award for the Best Corporate Secretary of 2011/ 2012 and the results were announced during our corporate secretaries forum on 23 November 2012. The winner of the contest became the Corporate Secretary of Kazakhtelecom JSC. We are doing this in cooperation with the Corporate Secretaries Club of Central Asia.
Also, I am glad to say that we succeeded in getting the profession formally included in the register of positions of the Ministry of Labour of the Republic of Kazakhstan on 25 November 2010. We now celebrate that day as our professional holiday.’
The global profession has been lobbying for a similar cause. In June 2012, the Corporate Secretaries International Association (CSIA) lobbied the WTO in Geneva regarding the creation of the new ‘Corporate Governance, Compliance and Secretarial Advisory Services’ heading in its services sectoral classification list.
‘I am sure they will include it.’
While we are on the subject of the global profession, what’s your view of the current work of the CSIA to forge closer ties between the disparate corporate secretaries organisations around the world?
‘It would be our pleasure to join. We saw at the HKICS conference last year that the challenges are broadly the same in Hong Kong as those we face.’
How similar do you think the job of a corporate secretary in Kazakhstan would be to that of a company secretary in Hong Kong?
‘Many of our corporate secretaries work in companies that are not listed on the exchanges so their level of work is a bit easier because the standards set are not so high or strict. We have the Law on Joint Stock companies in Kazakhstan which states that it is a requirement to have a corporate secretary in a company and what the duties are. We therefore have a good understanding of the importance of this role.
As an example, I can tell you about my job. Our board has 11 members and the Chairman is the Prime Minister of the Republic of Kazakhstan. Among the members are four ministers, three independent directors, one chairman of the executive board (as I mentioned, Kazakhstan follows a two-tier board system), the Deputy Prime Minister and the Deputy Head of the Administration of the President of the Republic of Kazakhstan on economic issues. My job is to ensure that the supervisory board works efficiently and to liaise with the stock holder (the government). The board has four committees and the development strategy of the Fund has been officially approved and linked to the ‘Kazakhstan 2030’ strategy which was formulated by the President in 1997.
In the financial crisis we did a lot of work to stabilise the economy and our Fund was a main driver in overcoming the crisis in Kazakhstan. We have done a lot of work on the stabilisation of the financial sector and real estate market. We also issue credits for SMEs through our development institutions and are now implementing a strategy to enhance industrial innovation in Kazakhstan.
Most of the country’s largest companies are included in the Samruk-Kazyna Fund, so the Corporate Secretaries Council assists our colleagues to comply with the best corporate governance practices.
Globally the corporate secretarial role is increasingly associated with corporate governance – is this trend also apparent in Kazakhstan?
‘The Managing Director of the Samruk-Kazyna Fund, Peter Howes, has the overall responsibility for improving corporate governance in the company. We work closely. My work is focused on implementing the plan and ensuring everyone involved understands what they should be doing. Once you have agreement from everyone involved it is much easier to accomplish your objectives, so we spent a lot of time, more than a month, reconciling the plan with the people involved. In the end, the heads of departments and other responsible persons had a clear picture of what they had to do and why. We made sure they were aware of the standards we needed to achieve. Once we had this good understanding of the plan there were no misunderstandings or challenges so we were able to implement it very quickly.’
How well do you think the corporate secretarial role is understood among directors and even the general public?
‘Companies with a corporate secretary will of course be aware of the role, but in the beginning nobody in the general public knew about this role. That is changing, however. For example, a very popular newspaper in Kazakhstan recently ran an article about corporate secretaries. It made the point that, while nobody knew about this position before, now corporate secretaries are highly respected people with an established status in the company hierarchy.
For the past five years I have been working to raise the status of corporate secretaries and our group is translating best practice and our experience to other companies. If you talk now to corporate secretaries in Kazakhstan they feel that their job is respected and they have a high position.’
SIDEBAR: Kazakhstan: a governance profile
Legal system: Civil law.
Economic system: Market economy, though the country still has a high level of government involvement in the economy.
Key regulation: The Law of the Republic of Kazakhstan on Joint Stock Companies, the Listing Rules of the Kazakhstan Stock Exchange and the Code on Corporate Governance. Both the corporate governance code and the JSC law are currently being revised under an initiative of the European Bank for Reconstruction and Development. Many large state-owned groups such as the Samruk-Kazyna Fund have devised their own corporate governance codes setting out the governance standards companies in the group must follow.
Financial reporting standards: Kazakhstan adopted IFRS in 2009.
Key statutory/ regulatory bodies: The National Bank (its Committee on Financial Supervision is the country’s securities regulator) and the Kazakhstan Stock Exchange. The 1995 constitution establishes strong presidential power. The President may veto legislation that has been passed by parliament and can issue legislation by decree.
Predominant ownership structure: Mostly dominant shareholders and a high percentage of state ownership.
Board structure: Two-tier.
Corporate secretary job title: Corporate Secretary.
Corporate secretary duties: The role varies significantly across companies, but the board support function tends to dominate. Given the two-tier board structure, corporate secretaries in Kazakhstan play a key role in liaising between the supervisory and executive boards.
Corporate secretarial community: Informal. The Corporate Secretaries Club provides an informal networking opportunity for corporate secretaries in Kazakhstan.
The Samruk-Kazyna Fund forms its own training and certification standards for the major state-owned companies within the fund.