Mass Exodus: Behind America’s Unprecedented Corporate Show of Force Against Putin’s Invasion
Over the past two weeks, hundreds of major companies with substantial ties to Russia have pulled out of the country amid its devastating invasion of Ukraine. The mass exodus is a marked departure from what is generally corporate America’s lukewarm response to calls for divestment based on human rights concerns.
From Credit Suisse and BP to UPS and Activision Blizzard, companies across all industry sectors have halted Russian exports and investment, a move that follows a series of tough US sanctions imposed on the country’s energy and financial sectors. Others like Adidas, Coca-Cola and McDonald’s have closed hundreds of Russia-based offices, stores and manufacturing plants despite what will likely amount to billions of dollars in financial losses.
But even in the face of immense public pressure, dozens of top companies still entangled in Russia’s economy have chosen to weather the public relations storm, according to an extensive public list compiled by Yale School professor Jeffrey Sonnenfeld. of Management.
These include major hotel and resort chains like Marriott, Hilton, Hyatt, and Accor, as well as food chains and manufacturers like Nestlé, Cargill, Mars, and Papa John’s. Other examples include pharmaceutical company AbbVie, Bridgestone Tire, Ferragamo, Dow Chemical Company, John Deere and cigarette manufacturer Philip Morris.
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Hilton, for example, operates at least 29 hotels in cities including St. Petersburg, Moscow and Volgograd, according to the company’s website. “Russia has been one of our primary target markets for several years,” Phil Cordell, global head of targeted service brands for Hilton, told Hotel Management in 2016. “In 2008, we opened our first two hotels, and six more by 2014. In the first half of 2016, Hilton became the first international brand to open hotels in the Russian market.”
Hyatt, one of Hilton’s main competitors, operates six locations in Russia. Asked about the company’s operations there, a company representative directed Salon to a Wednesday statement in which the company said it would “immediately suspend [its] development activities and any new investments in Russia.
“We will continue to assess hotel operations in Russia, while complying with applicable sanctions and U.S. government guidance in hopes of a resolution to this crisis,” the company added, suggesting the status quo will remain unchanged. for its current locations in Russia.
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Phillip Morris, whose shares fell 10% immediately after the invasion, struck a similar pose, promising “the suspension of its planned investments in the Russian Federation, including all new product launches and business investments, innovation and manufacturing”. The company also pledged to “reduce its [present] manufacturing operations” in Russia. But the Phillip Morris Company did not provide any details or timelines for the rollback. According to Seeking Alpha, Russian consumers accounted for 8.4% of the company’s cigarette shipments and more than 17, 1% of its volume of heated tobacco units in 2021.
At the same time, many multinationals have gone above and beyond in exiting the Russian economy, despite the prospect of significant financial losses.
American Express, Mastercard and Visa have completely suspended their services in the country, rendering all their cards issued by Russian banks unusable. Deloitte, EY, KPMG and PwC – collectively known as the Big Four accounting firms – have all announced plans to close their Russia-based offices. Food and beverage companies like McDonald’s and Starbucks have closed all of their stores in Russia, a move that will effectively end operations at hundreds of locations.
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Anthony Johndrow, CEO of Reputation Economy, a reputation management consultancy, said US corporate response to Russia’s invasion is a sea change from past public relations postures.
“If you go back to Georgia’s election law, if you go back to George Floyd … there was no government leadership. Business had to speak up, despite what governments weren’t doing or saying,” said Johndrow. But now, he added, “governments are stepping forward in unison to act on this. So companies are [back in] their normal role, which is to go with the flow on these things, rather than having to take the lead.”
For the most part, it appears the companies took inspiration from the recent deployment of multilateral sanctions against Russia, including those imposed by the United States.
Earlier this month, the Treasury Department sanctioned Putin and eleven senior government officials as well as a number of Russian oligarchs. The Biden administration has also imposed sanctions on the country’s Central Bank and banned Russian imports of oil, natural gas and coal.
While the U.S. government routinely uses sanctions as the first line of defense to prevent international conflict from afar, Johndrow said, the speed and depth of Biden’s recent sanctions have shocked many U.S. business leaders.
“What everyone expected…was a gradual escalation of sanctions. And the fact that so many [sanctions] came online so quickly, really, really shocked,” Johndrow said. “It’s the speed at which typically slow decision-making bureaucracies… [are] moving much faster than businesses have ever seen before.”
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In recent decades, there has been a growing expectation that Corporate America will intervene on justice issues, with minority rights in the United States under constant threat from districts, cities and states ruled by republicans. But in recent years, critics say, private sector contributions have been token gestures amounting to little more than window dressing.
In 2020, at the height of the George Floyd protests, for example, fifty of America’s largest corporations pledged around $50 billion to address racial inequality, according to the Washington Post. While many of these companies issued strong condemnations of racism at the time, Salon reported that many were regular donors to police foundations, which allow police departments to raise hidden funds for initiatives. that have a history of “enabling state violence against black communities and communities of color,” as a Color of Change report noted. Even Corporate America’s $50 billion pledge has been, according to the Post, mostly “given in the form of loans or investments that they could profit from.” About 0.14% of the money actually went to criminal justice reform groups.
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Yet the unprecedented corporate American response to the Russian invasion may indicate that big business is willing to re-examine its role in mitigating domestic and global conflict, especially when under public and governmental pressure.
According to a Morning Consult poll last month, about 75% of Americans support separating the private sector from Russia. Nearly four in ten think companies should permanently sever ties with the country.
Jeffrey Sonnenfeld, who has spent four decades studying CEO leadership and corporate governance, told Salon he found Corporate America’s actions around the Russian incursion “remarkable.”
“Precursors took action rather than platitudes. And they were among the sectors least likely to start first,” he said in an interview.
However, the circumstances under which Corporate America is resuming operations in Russia remain unclear. And many companies are worried about the prospect of reinstatement, Sonnenfeld said, noting a recent conversation he had with six well-known CEOs who mostly stood by their decision to step down.
“Part of the reason why [businesses] stay is that they are just afraid that the return to school will be difficult, because there will be a residual bad will – that they will be presented as anti-Russian by the whole of the population”, he said. he added. “But I think that’s naive because if Putin or his successors succeed in inheriting mainstream resentment, it’s going to generalize to all western businesses, and it doesn’t matter whether you step down or not. “