* Prosperity Capital CEO says Russia becoming more welcoming
* Companies better managed, more productive, than past
* BP, Telenor, gained from Russia investment despite spats
* Corporate governance remains major issue for investors
By John Bowker
MOSCOW, Nov 29 (Reuters) - Russian companies are becoming more receptive to foreign investors while shareholder scandals of previous years have been overplayed by the market, the head of Russia-focused fund manager Prosperity Capital said.
"Russian companies are more modern, they have different managers. Productivity is improving ... Regardless of what happens in the world, we can guarantee companies will be better run this time next year than now," Prosperity Chief Executive Mattias Westman told Reuters in an interview.
He said Prosperity, which has $4.4 billion under management and claims to be the biggest overseas investor in Russia, had been picking Russian firms based on management teams and attitudes to outside investors, including dividend policy.
"(Mid-sized oil company) Bashneft is an example of the improvement -- more modern management has taken over and it has increased production, profit and dividend," he said.
Russian shares remain among the cheapest in the world as its two share indexes struggle to keep up with corporate earnings growth and economic recovery.
Westman said Russia was likely to remain cheap in 2011, adding the group's main fund's portfolio was trading at a price to equity ratio of nearly five times -- a historic low except for the nadir of the financial crisis in late 2008.
"It's lower than it has been for some time, so there is upward potential. If global growth rates remain OK, people will take a closer look at Russia," he said.
The group's flagship Russia Prosperity Fund was up 38 percent in the year to date by the end of October, compared to an MSCI emerging markets index growth of 5.6 percent.
SCANDALS
Russia remains a victim of infamous power struggles fought by oil giant BP and Norwegian telecoms firm Telenor with Russian partners, Westman said, but he argued that both companies had pocketed major gains despite the conflicts.
"There have been scandals ... but both (BP and Telenor) have made very successful investments in Russia and owe a large part of their value to them," he said, adding that Prosperity acted as a mediator in both disputes.
BP was forced to cede greater control of TNK-BP to a group of billionaire oligarchs including Mikhail Fridman, whose Alfa Group also played out the years-long fight for dominance of telecoms giant Vimpelcom with Telenor.
BP expatriate workers including then TNK-BP head Robert Dudley were forced to leave Russia at the height of the shareholder conflict in 2008, which erupted when the oligarchs said BP ignored their calls to expand abroad.
And Telenor nearly lost its 26.6 percent stake in Vimpelcom and was ordered to pay $1.7 billion in damages by a Siberian court before patching up its differences with Alfa -- also over expansion plans.
"This has been putting strategic investors off -- they think BP suffered, but it's just not true," Westman said.
"BP's investment in TNK-BP was around $8 billion, and it has received $25 billion in dividends. You could argue that BP would not be an independent company were it not for its investment in Russia. Now it is in trouble, BP is even asking TNK-BP to buy some of its assets.
It's the same with Telenor -- half its subscribers are in the former Soviet Union," he added.
He conceded corporate governance and corruption remained major issues for Russia, highlighting two situations familiar to followers of Prosperity -- those of power producers OGK-3 and TGK-2, where the fund manager has questioned the usage of certain funds. (Editing by Matthew Jones)