Foreign companies helped to integrate Russia into the world economy. Now they should help to stop the war machine.
On March 16, 2022, President Volodymyr Zelensky appealed to the United States Congress for help and mentioned that there is something all Americans can help with. He asked them to stop buying the products of businesses that continue to fund Vladimir Putin’s war machine. “All American companies must leave Russia… – said Zelensky, – Leave their market immediately, because it is flooded with our blood… Peace is more important than income.” He sent a similar message to the French and other foreign companies doing business in Russia.
President Zelensky was one of the many voices arguing that the decision to stay or leave is more than just a business issue and that companies should “signal that they are on the right side of history.” Publications in prominent media, such as Forbes and The New Yorker, have compared businesses continuing their operations in Russa with those cooperating with Hitler or contemporary dictators in Myanmar. All in all, top managers of multinational companies conducting business in Russia face challenges rarely dealt with at business schools.
Following the invasion of Ukraine by Russia on February 24, 2022, the EU and US imposed sanctions targeting hundreds of individuals and enterprises directly contributing to Russia’s military power. However, only a fracture of organizations was sanctioned compared to all firms having business connections with Russia. Those companies that are formally not obliged to quit Russia have been publicly challenged about the ethics of continuing their business as usual.
Many high-ranking Ukrainian politicians, such as the Minister of Digital Transformation of Ukraine Mykhailo Fedorovn and the Minister of Foreign Affairs of Ukraine Dmytro Kuleba, actively shamed companies refusing to curtail their business in Russia. Since the first days of the invasion, individuals and groups of activists have put pressure on companies to stop business in Russia. As of April 11, 2022, Instagram had 8,317 posts with the hashtag #boycottrussia. Groups like “Boycott Russia” on LinkedIn or “Stop Business With Russia” on Facebook have over 1,000 followers each.
Several bottom-up initiatives use Telegram and Facebook to coordinate their activities. For example, a group on Telegram, “Spopelij, ale Zblysny” with almost 4,000 participants, has run over 500 information campaigns targeting around 200 brands. The main message is that businesses staying in Russia contribute to its economy and their taxes are spent on war. The shaming campaign usually includes posters presenting images of the corporate brands combined with weapons or horrors of war, such as damaged infrastructure, human victims, or spilled blood. Sometimes they draw historical parallels, such as in the case of Henkel (which has since announced to leave Russia) saying, “We remember your part in WW2, Henkel. Enjoying repeating your war crimes just like Russians? Do the right thing this time, stop supporting Russia’s war machine.” Another remarkable initiative is a Telegram bot, “BoycottRussiaBot,” developed by a group of Ukrainian volunteers. By typing a brand name, a user can get prompt information about the connection of that specific producing company to Russia. Based on that, the bot recommends buying or not buying certain goods.
Crisis response strategy
Companies under pressure choose different strategies. Jeffrey Sonnenfeld and his research team at the Yale Chief Executive Leadership Institute have monitored the corporate response to Russian aggression since the beginning of the war. As of April 11, 2022, they identified 222 firms continuing business-as-usual in Russia. Auchan-Retail, Globus, Huawei, and UniCredit are among the members of the “Digging In” groups. 199 companies have put up a smokescreen by saying that they hold off new investment but continue basic activities. Bayer, Colgate-Palmolive, and Nestle can serve as examples for this strategy. 87 companies have significantly reduced current operations and have kept what they call “essential needs.” Such enterprises are, for example, Bosch, GE, JPMorgan, Microsoft, and Oriflame. 314 companies, such as Adidas, Alphabet, BMW, H&M, and Volkswagen, have temporarily curtailed most operations while keeping return options open. Finally, 270 enterprises, such as Airbnb, Daimler, Heineken, and Netflix, have totally halted Russian engagements or have completely exited Russia.
Most businesses who have decided to remain in Russia justified it by their responsibility towards employees and the necessity to provide essential services to the Russian people. For instance, KOCH Industries, Inc., a privately held multinational conglomerate, said, “we will not walk away from our employees there or hand over these manufacturing facilities to the Russian government so it can operate and benefit from them. Doing so would only put our employees at greater risk and do more harm than good.”
The decision to pull out informational or medical services is especially controversial. By cutting off communication services, companies deprive the Russian population of access to independent information about the war and political situation within the country. The withdrawal of pharmaceutical enterprises can result in a situation where people in need do not receive the necessary medications. When Lilly, an American pharmaceutical company decided “to suspend all investments, promotional activities, and new clinical trials in Russia, as well as the exportation of non-essential medicines to that country,” it provoked comments such as “This will not make Putin stop the war. This will just remove the access of ordinary Russians to the drugs they need.” The decisions the executives must make are not easy; however, to continue operating as usual is a fallacious strategy.
Why companies must leave Russia
Foreign companies significantly contribute to Russia’s economy. In 2020, the 50 largest (by revenues) foreign companies operating in Russia generated $99.8 billion, part of which went to Russia’s state budget as taxes and similar contributions. They were also among the largest employers in the country: Forbes calculated that as of March 15, 2022, companies halting business in Russia directly employed at least 200,000 workers. Tech and engineering companies such as Bosch and Siemens were important transfer agents of technologies and managerial know-how. Foreign banks flooded the country with investment capital. Disinvestment of foreign companies from Russia will cause technological and organizational decline, raise unemployment, and curtail social programs. For example, since 1990, McDonald’s have employed in Russia over 65,000 workers, spent millions of dollars on staff development, and spent over 10 million US-$ on charity. Coca-Cola has invested around 70 million US-$ in social projects since 1979. Foreign companies helped to integrate Russia into the world economy. Now they should help to stop the war machine.
By staying in Russia, foreign companies (indirectly) support the political regime of Russia. Putin’s government assured people that the country was prepared for the sanctions and expected a rather symbolic protest in the West. Or, as Russian Ambassador to Sweden Viktor Tatarintsev formulated it “We shit on all your sanctions.” Putin’s propagandists persuaded Russians that the West would not dare pull out from Russia because the latter is too big and important for Western economies.
Reality shows that this was a serious underestimation of Western solidarity and the ability of the public to put pressure on business actors. The exodus of foreign business turned out to be much more significant than anticipated by Putin’s advisors. The departure of brands like McDonald’s, Coca-Cola, and Ikea symbolizes the extreme speed of Russia’s deglobalization, its rapid shift from a “normal” modern economy to being isolated and backward. Companies refusing to join the boycott put themselves into the dishonorable positions of free riders. Not only do they undermine the solidarity with their peers but also use the situation to serve their economic benefit since they now have less competitors in Russia’s market.
The position that hanging-on companies support people, not Russia’s government, is not convincing. The idea of sanctions is that they should be painful. Unemployment is bad. Decreasing the quality of medical services is even worse. Still, these sacrifices seem to be just compared to the devastation caused by Russia’s aggression in Ukraine. Moreover, there is convincing evidence that the level of public support in Russia for the “special operations” in Ukraine is very high. Multiple survey results show that momentarily most of the population support this war.
The sanctions did not work as quickly and efficiently as many experts anticipated, but ultimately, they will impact Russia’s economy. As an increasing number of people is getting frustrated, the approval rate of Putin will go down. Working towards the establishment of peace and stopping war crimes should be prioritized in the hierarchy of corporate social responsibilities. Foreign companies may decide to leave Russia forever or return when the authoritarian regime is gone. But for now, the only historically right decision is to stop doing business with the dictatorship.
 https://fortune.com/2022/03/16/companies-leaving-russia-list-accountability/; https://www.newyorker.com/business/currency/the-consequences-of-the-unprecedented-rush-of-companies-leaving-russia?utm_campaign=falcon&mbid=social_twitter&utm_source=twitter&utm_medium=social&utm_brand=tny&utm_social-type=owned
 https://www.linkedin.com/company/boycott-russia/; https://www.facebook.com/stopbusinesswithrussia
 https://www.forbes.ru/biznes/441733-50-krupnejsih-inostrannyh-kompanij-v-rossii-2021-rejting-forbes Financial companies excluded. For comparison, the total revenues of Russia’s state budget in 2021 were $350,8 billion.
Featured image: JBouchez, Stop Putin, CC BY-SA 4.0
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