Bruce Misamore was Chief Financial Officer and Deputy Chairman of Yukos, Russia’s largest oil company, from 2001 until 2005. While there, he introduced world-class standards in corporate governance, financial transparency and accounting. However, Misamore’s reforms were unwound when the company had its domestic assets seized by the Russian government after 2004 and Russia arrested its chief executive Mikhail Khodorkovsky. Misamore resigned in December 2005 and has since been instrumental in a global legal campaign to ensure that Yukos’s thousands of legitimate stakeholders receive compensation from the Russian government. Before joining Yukos, Misamore held senior-level finance roles with US oil companies PennzEnergy, Pennzoil Co and Marathon Oil. Misamore taught finance at Bowling Green State University in Ohio in the 1970s and says that the winters there are even colder than in Moscow.
Why did you choose to move to Russia and become Yukos’s CFO?
During my initial conversations with the CEO of Yukos, Mikhail Khodorkovsky, he made it clear that he wanted Yukos to become a transparent stakeholder-focused company. His aspiration was, in fact, to set the agenda for other Russian companies and oil companies globally, making Yukos a world leader for operational excellence, corporate governance, financial reporting, and investor relations. It seemed like a place where I would be able to make a major positive contribution, not just to the company itself, but also to the wider Russian economy.
What processes did you introduce to improve transparency and the quality of reporting and what did you find most questionable about Russian accounting practice?
Russian accounting had not really evolved since the Soviet era. It was primarily cash accounting, and they had no such thing as consolidation accounting. This meant that each individual legal entity was treated as a separate accounting entity and had to report to the government as such. This made it impossible to create a consolidated financial statement, which in turn caused a lack of sensible financial reporting and other practical problems. Michel Soublin, Yukos’ former CFO, and Khodorkovsky had already recognized that Russian accounting standards were inappropriate for a company like Yukos and had made a choice between International Financial Reporting Standards or US GAAP. Before I arrived, they had chosen the latter, in view of their plan to seek a listing for Yukos on a US stock exchange.
Were there any tensions between the use of US GAAP and statutory requirements Yukos had to also report using Russian accounting?
Yes. Despite the move to US GAAP, Yukos was still required to maintain Russian books for domestic tax and financial reporting purposes. As Russian accounts could not be consolidated, the eliminations you would normally make in consolidated statements needed to be tossed out the window, and accruals to reflect the true state of the business were non-existent. Because of the lack of inter-company eliminations, no reader of the Russian financials could have been properly informed of the true situation of the group as a whole.