By Jeffrey Sonnenfeld and Steven Tian
Dr. Sonnenfeld is the Lester Crown Professor of Management Practices at the Yale School of Management. He studied corporate social responsibility for 45 years. Mr. Tian is Director of Research at the Yale Chief Executive Leadership Institute.
In the second half of the 1980s, about 200 American companies withdrew from South Africa, partly in protest against its apartheid system. As businesses fled the country, South Africa’s segregationist President PW Botha came under increasing economic pressure. The corporate exodus contributed to the end of apartheid and was a remarkable demonstration of corporate power. When they are brave enough to use this power for good, it can help topple repressive governments.
Over the past six weeks, we have witnessed an equally strong private sector response to Russia’s war in Ukraine. Hundreds of American companies have announced that they are voluntarily restricting or ending their activities in Russia, according to data compiled by our team of 24 researchers from the Yale School of Management. While it is impossible to say whether all of these undertakings are motivated by purely moral concerns, they have all gone beyond what is legally required by international sanctions.
It is still too early to tell whether their actions will help force Russia to end the war. But sanctions from Ukraine’s allies have already shaken the Russian economy. The country’s stock market is on life support and the Kremlin has imposed strict controls to support the value of the ruble.
Businesses have a role to play in keeping the economic pressure on President Vladimir Putin. To this end, our team has classified companies into one of five categories based on their response to the war. Consumers should know if the companies that make their food, clothes and goods are fully committed to ending Mr. Putin’s atrocities.
Our objective is absolute, and some might even say extreme: every company present in Russia must publicly commit to ceasing all activities in this country. Russians who depend on the food or medicine these companies make or the jobs they provide may suffer hardship. But if that’s what it takes to stop Mr. Putin from killing innocent Ukrainians, that’s what corporations need to do.
We realize that some companies already do business with many other repressive and murderous regimes around the world. But now there is a chance to draw a line under a country, an unprovoked war of aggression, and make a difference. Here are some of the biggest brands leaving Russia, as well as companies staying put and supporting Mr. Putin with their imports, exports and taxes.
At least 253 companies make a clean break from Russia, leaving virtually no operational footprint.
BP, Exxon and Shell said they are selling off billions of dollars of Russian energy assets. Bernard Looney, the chief executive of BP, explained that the invasion caused BP to fundamentally rethink its position in Russia. “I am convinced that the decisions we have taken as a board of directors are not only the right thing to do, but also in the long-term interest of BP,” he said.
Tool and household products maker Stanley Black & Decker has also shut down operations in Russia, potentially forgoing millions of dollars in profits. According to the company’s estimates, its Russian operations generated about $150 million in revenue annually.
Suspension of activity
At least 248 companies have suspended all or almost all of their business activities in Russia without withdrawing or divesting permanently.
In many cases, these companies have stopped doing business in Russia but continue to pay their Russian employees, leaving the door open to return. Adidas, Disney, IBM and Nike all fall into this category.
At least 75 companies have suspended a significant part of their activities in Russia.
PepsiCo, for example, halted work in all of its sodas in the country, including Pepsi-Cola, 7Up and Mirinda, but not in its dairy products. JPMorgan and Goldman Sachs also fall into this category. Both said they were ending their operations in the area. However, the companies did not divest entirely: they would apparently continue to grab depressed Russian stocks for pennies on the dollar.
Stop of investments
At least 96 companies have publicly announced they are suspending new investments in Russia, but largely continue to operate in the country as they previously did.
Many of these companies explained their decision by saying that they provide “essentials” to Russians. What exactly companies consider an “essential” good is unclear. Mondelez International, owner of Nabisco and other snack makers, has pledged to reduce all “non-essential” activities while “helping to maintain the continuity of the food supply”. We’re pretty sure Russians can live without the company’s chewing gum and chocolates until Mr. Putin decides to stop killing Ukrainians.
At least 162 companies have not announced substantial voluntary changes to their operations or investments in the country.
Some of these companies have made donations to international humanitarian organizations or announced vague reassessments of operations in Russia but have taken no concrete measures to suspend or reduce their activities there, beyond the bare minimum legally required by the sanctions. international. Others didn’t address the war at all.
Koch Industries – which makes products such as Brawny paper towels, Quilted Northern and Angel Soft toilet paper and Dixie cups – employs about 600 people at two manufacturing plants in Russia. The company condemned the Russian invasion and the subsidiary that manages the factories stopped all new investment in Russia. But it refuses to close its manufacturing plants, suggesting that if it did, Russia would nationalize the facilities. It may be true. But it’s a risk hundreds of other companies have taken in deciding to pull out of Russia, and it’s a risk a multibillion-dollar company like Koch can afford to take as well.
International Paper’s response was even more muted. Since we released our data, International Paper has told us it is reviewing its 50% stake in Ilim Group, a Russian forest products company. But as of April 1, International Paper had not actually sold Ilim Group.
Hundreds of companies are giving up their profits to hamper the Russian war machine. Their divestment will slow the country’s growth for years to come. Even if the war ends tomorrow, business leaders will think twice about investing in a country with such a capricious leader.
Yet many Western companies refuse to leave a country whose soldiers apparently execute Ukrainian civilians. Fortunately, Americans sickened by corporate indifference to the bloodshed can make their voices heard: if corporations don’t boycott Russia, boycott corporations.