FOCUS: VKontakte’s new collegial body management may be temporary

By Yekaterina Yezhova

MOSCOW, Jul 17 (PRIME) -- Leading Russian social network VKontakte has been governed by a collegial body since July 3 after three top managers resigned to develop their own project, and analysts said it is usually a temporary move till new executives are approved.

“Probably, the candidate of a sole head of the social network has not been approved by the holding company (VK) yet while the previous management decided to quit. Besides, the holding company’s management may be thinking whether to keep the previous system of the social network’s control or reorganize it,” investment company Finam analyst Leonid Delitsyn told PRIME.

Internet company VK said on July 3 that VKontakte will be run by a collegial body after its General Director Marina Krasnova and Technical Director Alexander Tobol quit to be followed by Marketing Director Alexander Volodin the next day.

The collegial body will represent VK’s top managers and VKontakte’s management. VK General Director Vladimir Kiriyenko said in a statement that the new format reflects the effective way of making the bulk of the key decisions at VKontakte.

VK said in its January–March financial statement that VKontakte’s revenue increased by 49% on the year. VK said that revenue of its Social Networks and Content Services segment – comprising VKontakte, its sibling Odnoklassniki, content platform Dzen, and others – advanced by 46.7% on the year to 21.5 billion rubles.

The number of VKontakte’s monthly active users climbed by 11% to a record 81.5 million. Its global average monthly audience rocketed to 104.2 million active users. VKontakte approached 86% of the country’s Internet audience in March with 54% of the users visiting it daily.

“There are no standards for membership in a collegial body to manage a company’s subdivision because it is a temporary measure for firms. As a rule, it is chosen when a company head leaves it for external or corporate reasons, while a replacement has not been found yet,” Delitsyn said.

“In the most common management system of a company or a subdivision, the top executive in charge of decisions is appointed.”

The Finam analyst said the collegial body will be most likely headed by a VK representative, while the functions of the technical and marketing directors will be fulfilled by someone, for example, the former executives’ deputies.

“If the social network remains an independent subdivision, the technical and marketing directors will be appointed. If there is restructuring, the social network will be merged with other projects, and new top positions will appear,” Delitsyn said.

“It’s hard to hold a collegial body responsible, it’s hard to motivate it. Charters, reports, and strategies are usually approved collegially, while day-to-day management is usually headed by one person.”

Among the downsides of collegial control, financial company Freedom Finance Global analyst Vladimir Chernov pointed to possible difficulties with unanimous decisions that are not always made fast.

“Quorum means at least half the management members, but if the votes are split equally, a decision rests with a company director. This is how it is usually done, but quorum is initially outlined in the firm’s charter,” he told PRIME.

“Among the upsides, we can mention active assistance to the director in governing the business processes of the company and several opinions during voting that helps make decisions more objectively and tackle key tasks more effectively.”

Chernov concluded that everything will depend on performance of the collegial body reflected mainly in the company’s final financial results.

“A collegial body usually employs experts specializing in certain business vectors, this is why the effectiveness of their participation in the company’s management increases. This is why we will be waiting for a similar outcome in this case,” he added.

(90.1190 rubles – U.S. $1)

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