Alexander Krakovsky

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www.lemonjuice.biz

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Alexander Krakovsky studied corporate governance in graduate school at the University of Maryland. The baptism by fire came in the mid-nineties when he was managing a $100 million portfolio in the former Soviet Union for NCH Capital.

 

Most Soviet state enterprises were mass-privatized. This was supported by the advice of the Western donor community. Under mass privatization, the state enterprises were summarily corporatized, and newly issued shares were distributed for free to workers and the general population. This was an opportunity to buy cheaply on an asset basis into “public companies” that were governed by proverbial red directors, had a system of controls based on the Soviet central plan, and had a myriad of parallel structures to siphon off any spare cash. Quick and decisive change in control was required to salvage the seemingly unsalvageable.

 

This gave Mr. Krakovsky an opportunity to butt heads with the red directors, with oligarchs to be and with oligarch wannabes. He acquired control of several high profile companies and entered into proxy fights for more. A proxy fight over the national oil company of Ukraine, yielded more than a 600% annualized return. It also got him into a short shouting match with the then-Energy Minister and the current Prime-Minister, Julia Timoshenko.

 

The absurdity of just distributing shares in these enterprises to millions of individuals was not lost on him. The first debate was with OPIC, which was guaranteeing the largest of the NCH funds at that time. OPIC wanted their fund to invest in minority stakes, but Mr. Krakovsky resisted. Incidentally, this fund, with 40% of its capital ultimately invested in majority stakes in Ukraine, was the second-highest-yielding OPIC fund in history.

 

Later he found the Western donor criticism of the control consolidation in public enterprises to be both amusing and disturbing. Some multilateral agencies and their consultants were even calling for ways to erect barriers to consolidation of control “in order to allow capital markets to develop.” Mr. Krakovsky found himself writing papers and giving speeches, advocating the opposite -- the recognition that the consolidation of control is the only way to salvage these enterprises, and that the facilitation of orderly and fair mechanisms for consolidation would create a lot of efficiency. His papers and presentations received both positive and negative attention. OECD and the World Bank published his work, including:

 

http://www.oecd.org/dataoecd/5/60/1930613.pdf (Corporate Governance After Mass Privatization) http://www.worldbank.org/html/prddr/trans/marapr02/pgs17-19.htm (Short Article in Beyond Transition Newsletter) http://www.oecd.org/dataoecd/41/26/2097476.pdf (Corporate Governance Upside-Down).

 

Many other works referenced these papers. Yet, there was also some negative reaction. For example, after a speech at the USAID in Washington, he was told in no uncertain terms that all his assertions were wrong and could jeopardize further funding for USAID corporate governance programs.

 

Upon returning to the United States at the end of 2002, Alex began to participate in the proxy process of US power and utility companies, whose shares he acquired following the Enron Collapse. He was pushing sensible shareholder initiatives, such as separating the CEO and the Chairmanship roles. However, all this activity (or harassment) landed Mr. Krakovsky a role with the restructuring office of the AES Corporation and later led to his stake in establishing ContourGlobal, a private power company. This role took him back to Europe.

 

Upon returning to the United States this time in 2009, he found Corporate Governance again “popular.” However, Corporate Governance has never been unpopular for Mr. Krakovsky. He believes that the basis for a functional capitalist system are the well-defined ownership rights, and not camouflaged rights of the functionaries.

Mr. Krakovsky will continue to be active in his new venture, LemonJuice.Biz, LLC, and hopes to form synergies with people who share his views and interest to be entrepreneurial in building shareholder value.

 

alex@lemonjuice.biz

 

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