VKontakte investors clash over CEO candidates

Reuters News
Posted: Jun 19, 2014 9:41 AM

MOSCOW (Reuters) - Shareholders in Russia's top social network VKontakte (VK) have clashed over who should replace former CEO Pavel Durov, deepening a more than year-long dispute that threatens to destabilize Russia's answer to Facebook.

Since April last year VK has been the focus of an ownership battle between Russian billionaire Alisher Usmanov's Mail.Ru Group, which owns 52 percent, and investment fund United Capital Partners (UCP), which bought a 48 percent stake that month.

The dispute over influence and strategy between both sides has resulted in mutual lawsuits and the departure of VKontakte founding CEO Pavel Durov, who said he had been fired because VKontakte was under "full control" of allies of the Kremlin, which has tightened its grip on media since President Vladimir Putin rose to power in 1999.

VKontakte is Russia's biggest social networking site and also Europe's largest home-grown social network with 240 million registered users. It has been used widely as a platform by opposition groups against Putin and the arrival of UCP as a shareholder provoked fears of an imminent crackdown.

Ilya Sherbovich, a partner at UCP, used to have a seat on the board of state oil firm Rosneft, which is run by Putin's close ally Igor Sechin.

At a meeting this week, the VKontakte board failed to elect a new chief executive to replace Durov because UCP rejected the candidate brought forward by Mail.Ru - VKontakte Deputy CEO Boris Dobrodeev.

UCP said it would only agree to the appointment of Dobrodeev if, among other conditions, Mail.Ru dropped its lawsuit challenging UCP's acquisition of its VK stake, and if Mail.Ru backed UCP's claims that Durov had violated fiduciary duties while working on instant messaging application Telegram, which it believed should be appropriated by VKontakte.

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Alternatively, UCP said, it had identified other candidates and was prepared to put those names forward for consideration by a recruiting firm it also proposed to hire.

Mail.Ru said UCP's conditions for hiring Dobrodeev were unacceptable and added that hiring a recruiting firm did not guarantee the election of a suitable candidate.

"The social network has for more than two months been working de-facto without the general director which may have negative legal consequences for the company and eventually critically affect its business," Mail.Ru said.

(Reporting by Maria Kiselyova; Editing by Sophie Walker)