PowerPoint Presentation

Key Legislative Reforms - new property and organizational forms cont.

•Reform of State Enterprises and Cooperatives

–1988 Law on Cooperatives continued:

•By August 1991 - 255,000 registered coops with 6.5 million employees, 42 billion ruble’s worth of output in first half of 1991

–November 1989 Leasing Law

•Entire enterprise could be leased with 2/3 of workers vote in favor of such reorganization

•Coop thus paid rent and depreciation costs to its “state” parents on equipment and buildings - high potential for profit and theft of state assets

•Coops could purchase equipment outright with their earnings, result –> purchase on the cheap from parent “state” firms

•Loophole for nomenklatura, directors and “mafia” black marketers, to end up owning such coop firms

•Bribing workers with promises of pay raises and job security to secure votes favoring conversion

–1990 Law on Enterprises

•Owner of enterprise had exclusive right to choose management personnel

•OK in Western firms, but in Russian transitional context weakened the political and economic positions of workers and strengthened those of administrators and “managers” or the likely new owners.