Russian internet giant grants veto powers to Kremlin-linked body
Yandex, the Russian search giant, has agreed to a corporate restructuring that will grant a veto over key company decisions – such as those covering the security of personal data and intellectual property – to a body with close government ties.
The decision to offer a “golden share” to the newly formed Public Interest Foundation (PIF) to “defend the country’s interests” is likely to increase Kremlin oversight of Yandex, Russia’s largest internet company.
Other provisions of the proposal would allow the PIF to temporarily remove Yandex’s management, block a potential acquisition of the company, and nominate two permanent board members.
In an email to employees, Yandex’s chief executive, Arkady Volozh, offered assurances that the company would maintain control over its daily operations but said it needed to consider the public importance of its products, which range from maps and traffic data to food delivery and car sharing, adding that “the public interest now runs through us”.
Eight seats on the 11-person board of the PIF will belong to representatives of Russian universities and NGOs, such as the Russian Union of Industrialists and Entrepreneurs. Most have close ties to the government.
Citing many months of discussions, Volozh said the company sought an “optimal solution” for three concerns: “Leaving control of the company in our hands, maintaining the confidence of our international investors in the prospects for Yandex’s business and defending the country’s interests.”
Yandex in a statement said the board was not a government body. The proposal would need to be confirmed at a shareholder meeting in December.
Vladimir Putin, the Russian president, has previously tasked government agencies and the prime minister, Dmitry Medvedev, with preventing the private data of Russian citizens from falling into foreign hands. Russia has also demanded that social media companies such as Facebook place servers in Russia to prevent personal data from being sent outside the country.
A “golden share” in Yandex was previously held by Sberbank, a Russian state bank, and was designed in 2009 just to prevent a foreign takeover of Yandex.
“The ‘golden share’ did not affect the development of new services then, and it won’t have an effect now,” Volozh wrote.
John Boynton, the chairman of the board of of Yandex NV, said the company needed to consider an “evolving regulatory environment”.
Yandex’s shares plunged more than 18% in October after the government briefly said it was considering a law to limit foreign ownership in strategic tech firms at 20%.