302 CORPORATE GOVERNANCE Volume 12 Number 3 July 2004 Introduction O ne of the “biggest stories” in the global economy, was Russia “wild ride” from communism to capitalism in the 1990s (Freeland, 1999). While this ride is not by any means complete, some major strides have been taken. Today, increasing numbers of Russians and Westerners believe that the insti- tutionalisation of good corporate governance practices is the next crucial step for Russia (Investor Relations Business, 2002). We agree with this view and attempt to document the institutional forces which will drive and hinder reform of corporate governance prac- tices for Russian corporations. By examining these institutional dynamics, we will better understand what is required for Russia’s future as well as deepen our understanding of institutional dynamics within emerging and transition economies. Institutional context of Russia The origins of Russia’s business traditions To best understand Russia’s current situation, one must first examine its history. Russian history is a story about wars and crisis situa- tions. “Customary ways of doing business in twentieth century Russia reflected an accumu- lation of hundreds of years of practice and policy that was antithetical to a market orien- tation” (Randall, 2001, p. 21). Now that it is over 1000 years old, some scholars argue that Russia has not had a 30 year period without a war or a crisis (Solzhenitsyn, 1995). In the interest of parsimony, we will focus on the previous century to document these facts, but the same story holds true for earlier times. Throughout its history, Russia has had inter- nal conflicts between the traditionalists, and those who would adopt the more Western ways. In 1905, the first of two Russian revolu- tions occurred. The aim of this revolution was to unseat the autocratic rulers and create a more democratic country. This Westernisation attempt failed to unseat the Tsar, but suc- ceeded somewhat when the Tsar reluctantly agreed to create an elected body of represen- tatives, or Duma (Service, 1997). When World War I began in 1914, defence priorities came first and the economy concen- trated on supplying the military with its needs (Randall, 2001). This war devastated the Russian economy, however, and in 1917, Lenin’s Bolsheviks took advantage of the © Blackwell Publishing Ltd 2004. 9600 Garsington Road, Oxford, OX4 2DQ, UK and 350 Main Street, Malden, MA 02148, USA. Corporate Governance in Russia: what model will it follow? William Judge* and Irina Naoumova Developing an effective corporate governance system is key to Russia’s future. Russia is now at a crossroads as it decides to either continue pursuing the Anglo-American form of gover- nance with its emphasis on external market controls, or turn to a more Western European model with its emphasis on internal controls, or some combination of the two. To make these challenges more tangible and bring them into sharper focus, we discuss some of the gover- nance challenges facing four bellwether Russian firms – Gazprom, Sberbank, Wimm-Bill- Dann and Mobile TeleSystems. We conclude with a discussion of the key institutional forces that will heavily influence the path taken by Russia in the future, along with predictions for the future. Keywords: Russia, corporate governance, comparative corporate governance systems *Address for correspondence: 411 Stokley Management Center, University of Ten- nessee, Knoxville, TN 37996- 0545, USA. Tel: (865) 974-1668; Fax: (865) 974-3163; E-mail: judge@utk.edu