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LC-A Big Book Chapter 58: Privatisation: Steering LOMO PLC Towards the Open Market

The preparations for the privatisation of the company were then made under Klebanov’s shrewd command. A Privatisation Committee was set up, restructuring processes were finalised and the American consultant company McKinsey was hired to advise the LOMO PLC managers on the entry to the new market.

A LOMO PLC shareholder meeting in 1994.

In 1992, I.I. Klebanov became Director General of the company. Although the Moscow Government fought this decision and wanted to install a governmental person in the company (they feared that LOMO PLC would stop producing for the military after becoming a joint stock company), the freshly founded workers collective who supported Klebanov succeeded in their struggles to nominate a LOMO PLC internal person. It has always been tradition that the Director General position should be filled by someone who had worked for LOMO PLC from the early days of their career. The preparations for the privatisation of the company were then made under Klebanov’s shrewd command. A Privatisation Committee was set up, restructuring processes were finalised and the American consultant company McKinsey was hired to advise the LOMO PLC managers on the entry to the new market. The giant structures of LOMO PLC corporation were hard to handle in the new conditions and the industrial conglomeration that had worked quite satisfactorily in Soviet times proved to be a slow and bulky mechanism under the changed circumstances. An important step for the Russian economy was made in 1992 when President Boris Yeltsin signed a decree that introduced a system of privatisation vouchers. These vouchers were supposed to be the first step towards the construction of a capitalist society. All Russian citizens received vouchers worth 10,000 Rubles entitling them to a piece of government property. They could exchange vouchers for shares of their factories, buy securities in voucher investment funds or simply sell them.
Hopping on to the steam train of a Russia re-born into a capitalist society, LOMO PLC decided to put up shares for the All-Russian vouchers action. Every Russian citizen had the chance to invest their vouchers into companies that were formerly owned by the State.

In 1994, the privatisation of LOMO PLC was organized as a great PR campaign. As it was initially decided that the enterprise had to become a public corporation, it was necessary to demonstrate its openness to the public and future investors. In order to prepare and promote the All-Russian vouchers action LOMO PLC held an open press conference. This was an absolutely new phenomenon in social and media life in the whole country. The result of the conference was that the mass media reported that the State was selling 30% of LOMO PLC’s shares. The St Petersburg company wanted to attract investors, from individuals to bigger companies, to invest into the company. The firm was transforming from a state-owned and state–dependent structure into a privately owned concern. LOMO PLC sent advertising brochures out to 60 regions of Russia.

Director General I.I. Klebanov explained in this brochure: “Today our industry is experiencing hard times. However, we are full of optimism for the future. Changing the name of our corporation is not a mere formality. We have already set in motion the processes of reorganization, basic restructuring, extending independence of the operating departments, and the renovation of the production. The privatisation of LOMO creates the necessary prerequisites for more aggressive and effective work. On the threshold of the All-Russian vouchers auction, at which we are going to sell the shares of our corporation, I assure you that we will do our best in order that our shareholders do not regret choosing LOMO out of all the other alternatives to place their vouchers.”

Many TV channels and newspapers reported on LOMO PLC, and by the end the company had gained 610,000 vouchers, more than any other company in St Petersburg. The marketing activities of the company proved to be successful and were a taster of what the formerly non-existent Marketing and PR departments were capable of. Having put their shares up for the All-Russian vouchers auction, LOMO PLC made an important contribution to the development of the All-Russian stock market as a common free market zone. It was obvious to all that the collective of LOMO PLC was really orientated towards the market, and attached great importance to the joint efforts of state organizations and industrial companies.

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written by ungrumpy

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This is the original article written in: English. It is also available in: Deutsch.