"Kazakhtelecom continually strives to introduce world-class governance processes and structures, as evidenced by good financial disclosure and the employment of a reputable international auditor. It is important that minority representatives and independent board members provide checks and balances to the influence of the majority shareholder," said Standard & Poor’s governance analyst Anna Grishina. "Nevertheless, weaknesses related to the board process and the timing of annual shareholder meetings are significant constraints on the GAMMA score."

The overall GAMMA score of Kazakhtelecom is the result of four component scores of 1 (low) to 10 (high).
-- Shareholder influence 5+
-- Shareholder rights 5+
-- Transparency, audit and ERM 6
-- Board effectiveness, strategic process and incentives 4+

The strengths of corporate governance practices at Kazakhtelecom include:

• The influence of Samruk-Kazyna is generally positive, and it is not exposed to any significant conflicts of interest. Minority shareholders enjoy a wide measure of voting rights under Kazakhstani law and Kazakhtelecom’s Charter, and in this case are represented on the board by three directors who are actively involved in management oversight.
• The board composition is balanced and has substantial authority. A majority of board members are independent of Samruk-Kazyna. The board process is supported by three board committees, which are fully independent.
• Shareholder meeting procedures are strong overall. Annual IFRS financials are available before the annual shareholder meeting (AGM).
• Financial disclosure is generally good. Annual and quarterly IFRS financial statements are available. The audit committee is chaired by an audit expert and is fairly active.
• All elements of a holistic risk management system are in place and the strategic process has several strengths.

• The board process has several drawbacks: formal in-person meetings are very rare, as they are for compensation committee . There is a room for improvement in terms of the quality and timing of materials circulated before board meetings.
• The board quorum requirement is fairly high (at least nine of 11 directors), which may not be optimal in the long run. There is a risk of a stalemate in the event shareholders fail to agree on certain issues. Nonetheless, we do not believe such a scenario is likely in the foreseeable future, and there is a track record of consensus-based decision making.
• The influence of the majority shareholder has been controversial at times, such as in the case of executive compensation policies. The government of Kazakhstan maintains a cap on compensation that applies to executives of the largest state-owned (national) companies, including Kazakhtelecom. There may be other areas related to the social role of telecoms services where the government as a shareholder may be exposed to conflicts of interest.
• AGMs was held but with significant delay in 2009, which resulted in a protracted dividend payout period (dividends were paid in two tranches, in November and December).
• Several weaknesses in disclosure practices remain.