With Russia's invasion of Ukraine causing significant changes in the geopolitical landscape, corporate decision-making is facing increased attention and scrutiny regarding ethical, financial, and moral aspects. The topic of companies remaining in Russia has become increasingly crucial and widely debated. Apart from financial considerations, the moral responsibility of corporations is being highlighted, forcing a reconsideration of the interconnected relationship between business, ethics, and the broader socio-political context.

We talked to Professor Jeffrey A. Sonnenfeld, Senior Associate Dean for Leadership Studies & Lester Crown Professor in the Practice of Management at the Yale School of Management and a founder and president of the Chief Executive Leadership Institute. Since the invasion of Ukraine, Prof. Jeffrey Sonnenfeld and his team have been monitoring companies that have publicly declared their intentions to cease operations in Russia. 

What Are the Reasons for the Yale Celi List Creation?

Michael: In today's conversation, we talk to Jeffrey Sonnenfeld from Yale University, who has created a marvelous list of businesses and their status as to whether they operate in Russia today or not. You were very fast when Russia attacked Ukraine; almost in a couple of weeks, your list popped up. What drove you to do that? Why?

Prof. Sonnenfeld: We have a good reputation with CEOs, and I usually know who's engaged on what topics. But on February 24th of 2022, I have to admit, honestly, I was caught by surprise. What really surprised me were a dozen or so companies that moved very quickly to the day, and those were not the companies I would've predicted. Michael, in the past, whether or not we're looking at the work conditions of the oppressed, forced labor of the Uyghurs in Xinjiang province in China, or various other issues, it's usually consumer products firms that are on a frontier. People that are closer to the world of public sensitivities in the fashion world, the advertising world, the restaurants, the fast food, the consumer goods companies, not in this case. In this case, the first movers were big oil.

Michael: Yes, big oil giants left right away. First week it was like, whoa.

Prof. Sonnenfeld: It was shocking. And companies like BP wrote down nine billion dollars and Exxon wrote down seven billion dollars. I never saw that coming. And with all the oligarchical entanglements that you know so much about but also the fossil fuel controversies and things, who would've thought they want more public scrutiny? 

Secondly, there were the big tech companies. With all the antitrust privacy invasion issues and promotion of hate speech concerns and things, who would've thought that they would be in the spotlight of public scrutiny? There, they jumped in.

And then the third one was the professional services, the accountants, the lawyers, and the consultants that usually rather jump off a cliff than get involved in controversial matters. It was a great concern to us. We didn't see that coming, and I talked to the CEOs immediately that very weekend.

I called the CEOs of the major consulting firms, and I knew quite a number of them. And they told me that they had different reasons for doing it. Some of it was the character of their enterprise, and some of it was enlightened self-interest. They knew that they wanted to be an employer of choice, and some were concerned about consumer blowback. But the consumer blowback of great interest and benefit from your work came in the second wave, which we'll talk about, which came very quickly. 

But this first wave, they were mad that academics and, frankly, the business press, the journalists in print media and television and online media were giving equal credit to fraudsters. People who said, "Oh, our hearts and minds are with the Ukrainian people. And here's a dollar-fifty to go out and buy yourself a quarter of a cup of coffee." And then they were continuing to plunder in Russia.

So, I complained to the editors and publishers immediately after I heard this from the CEOs who had done the bold major sacrifices. 

And they said, "Oh, tell those people to grow up."

 I said, "What? Grow up?" 

They said, "Well, it's all the general gestalt. It's in the general vector of doing the right thing, and they shouldn't worry about who gets how much credit." 

I said, "No, no, no, it is that the fraudsters are getting credit for doing nothing, and it's undermining the will of others to join this bandwagon." 

You can get credit for doing nothing. Why do anything and just put out platitudes of public relations smokescreens? So that's when we thought, okay, that does it. We're going to actually research who does what. And Stephen here led the research effort.

Initially, we said we had a big army of researchers, and you're looking at it, who's Stephen? But in a day and a half, we got over our heads, and we got 50 expert people, many of them from countries that some of your team works closely with. We had many Ukrainians and still do, many Poles, Belarusians, Uzbeks, Kazakhs, and of course, lots of Germans, and, in fact, even Iceland, but Japan and China, we had a great cross-section of workers who are experts in industry analysis. They had great tools for econometrics.

It got us this questionable list of 200-plus whistle-blowers that we don't know who they are. Is that the 50 working with us, we can vouch for them? Those other 200 though, they invariably bring us documents. If those archives, those documents are valid because we then will authenticate what they are, it's extremely helpful.

But we don't know if they're disgruntled employees who are being fired, and we don't know if they're angry at the boss and trying to settle scores. We don't know if they're a rival competitor trying to attack another player in their industry or what their situations are. But we do know if they give us archives and documents that we can validate. Now, there are fake archives out there. And I'm sorry to say that we have some other colleagues in this effort in other places that sometimes have vacuumed up fake documentation that's been harmful because Putin has figured this out, and they have people that are literally leaking false information.

And then one of the first things Putin said is these companies never left. And then what the companies were doing is the ones that were there, which were 1,400 of them originally, now it's only 400. We have about 1,030 that have completely left. We realized that they were saying, "Well, we have cut off future investments." Future investments in what timeframe? And you never announced those investments. But all the lawyers told us we had to legally recognize that they called out the war, they criticized Putin, that they're somewhat different, but they're still operating there. 

What Are the Grades on the Yale list?

Prof. Sonnenfeld: So we realized, we are basically a school. So, what does a school know how to do but give out grades? We gave out A, B, C, D, and F grades. Some people were very nervous in the beginning on our team and around the school because we knew that we'd get a lot of threatened lawsuits, a lot of litigation, a lot of angry people, CEOs, attorneys, and public relations people coming after us.

The Fs were people that stayed and didn't care. The Ds stayed and they were talking about reducing and attacking the war. The Cs partially pulled out. The Bs completely pulled out but said they wanted to go back in. Why say that? And the As completely pulled out, and there's frankly no difference between the As and the Bs other than some of the language that we used. But it's roughly an equal split between the As and the Bs, and that's what gets us up to the 1,000; we're probably at the 1,050 as of today. And every night, we're going through re-grading them, lowering a few, and upgrading a few.

How Is the Information Verified?

Michael: So 16 months ago we tried to send letters as an organization to major firms, the PR organizations, and we got zero answers. Who am I to tell large corporations that they need to leave Russia? It's a single voice. So let me ask you a question. You've touched upon a little bit about sourcing the information and how you validate it. So you have Kazakhs, Turks, Poles, and Ukrainians helping you out with the information. How do you validate it before putting it on the list? What kind of process do you have before you give a grade to the company?

Prof. Sonnenfeld: We go through all kinds of current databases and archival bases. So, that would mean going through everything from Thomson Reuters and Bloomberg, Capital IQ, FactSet, and a lot of data sources. And try to find consistency to triangulate between multiple database sources on what the company's position is. And then we do a combing of the media, and then we look for what the company has said. And then, if the company challenges, we ask them to give us a statement. 

What happens not five times, not ten times but well more than 100 times, I don't know, we even say it was several 100 times, they'll come to us and say, "Well, just on the down low between us, we think this war's terrible, and we're going to get out." And "No, no, no, that doesn't work. You have to make a public statement.""Oh no, we're a private company with some of the smaller German companies." "No, make it."

And these were all. By the way, the large multinationals that we're looking at make a public statement. But it seemed that many companies weren't comfortable with accountability and transparency. But to whisper to us by some public relations official or some outside PR firm, they're not accountable. They can always say that person was not a responsible agent, or they made a mistake, or they changed their mind, but you have to make a public statement. 

On many occasions, we found that even with the proper public statements, we had inconsistent conduct on the ground, which was so disappointing. A major car rental company, for example, the CEO, we thought he honestly thought they were out of there. And we said, "Well, here is a current video. Let's punch it up and bring your marketing team into the room. And, in real-time, we'll show you a transaction in the Moscow Station, your company with uniforms that read your company's name, with banners overhead with a folder that shows the transaction and being now put in the database of your customers that will appear before your eyes. It'll be on your company's database record of customers when we close the transaction."

They couldn't believe it, we said, "Yeah, you're not being told the truth." And we gave them, and this person in particular had gone on CNBC and said that we were wrong. I didn't even raise their name. A CNBC anchor, Andrew Ross Sorkin, mentioned that this company was still there. The CEO said, "Oh, no, they're wrong." Well, no, we weren't. So we gave them a short window to correct it so we didn't have to go out and tell them that they libeled us and they were reckless, so they corrected. That's all we care about is for them to be on the right side of history. We don't care about the recognition.

How Have Carlsberg, Heineken, and McDonald’s Decisions on Russia Impacted Their Finances and Public Image?

Michael: Some interesting facts to share with you. We ran two polls in May 2022 and March 2023, where we asked consumers whether they would be interested in paying a little bit extra for the goods to compensate the company for leaving Russia. Consumers said that they were willing to pay up to 11% more for the goods if the company leaves Russia.

Prof. Sonnenfeld: There are many cases, Carlsberg, they kept telling us forever they're pulling out. And then that old expression in the US about being too cute by half, they kept delaying and delaying with an extraordinary volume of beer sales and other beverages beyond beers. Then they finally had somebody lined up, and I think authentically, 17 months later, they really did have somebody lined up, and the whole thing got expropriated by Putin. Serves them right. They should have gotten out right away like BP, and as we said, Exxon and others wrote down billions and billions of dollars of assets. It wouldn't have cost Carlsberg that much. 

Similarly, Heineken is shameful, a company with that degree of family control and those same centuries of being in the same town, the same building. I used to use them as a model of responsibility in corporate responsibility teaching. It was shameful. They are still there now as we speak now, their sales are plummeted.

We see that they're stuck in terms of consumer blowback. I'm sure enhanced because of efforts such as yours, they're feeling the pain, but they're still there saying, "Oh, we're talking and trying to sell, and Putin won't let us." Who cares what Putin says? Just get out. 

McDonald's was not a first mover, but they were an early mover. Initially, they were there with 850 or 160 restaurants that they largely owned. It wasn't one of these situations where they could hide behind a vendor relation or franchisee relationship as they could turn the spigot and shut it down themselves. And when we pointed that out, Chris Kempczinski, who I didn't know, I'd never met at that time, heard these criticisms, and the consumers heard them, and they pivoted immediately. I give him so much credit because many consumer goods companies were hiding under the skirts of McDonald's. And when McDonald's moved, then many other consumer goods companies moved.

There was a big consumer boycott of it; I think it was called Uniqlo, a Japanese but worldwide fashion company. The CEO and founder stubbornly said, "We're staying." But the consumer boycott hit them hard, and they moved out. Good for them, they're a little bit late, but the consumer boycott paid off. 

Similarly, just recently, a Hard Rock Cafe, they were digging in their heels that they're staying, but they needed to get some licenses to operate in some casinos and other places in New York and elsewhere. The consumer boycotts hit them hard, so they shut down and pulled out. And by the way, for most of these companies, it's not even close to 2% of their global revenues and not even 1% of their global profits. In fact, in most cases, they're just completely breaking even.

What Do You Think About the Russian Nationalization of Companies?

Michael: The effort where Putin has taken the loan to Carlsberg and nationalized them. Are the companies afraid of that now?

Prof. Sonnenfeld: You would think they'd be afraid of that nationalization, and they should pull out. They should pull out on their own terms and not run that risk. You hear these ridiculous, and they are ridiculous, cynical, false excuses saying, "Oh, we care about the well-being of our Russian employees."

Many of these companies were not renowned as being paternalistic model employers before, but maybe some of them were but I don't think so. But let's just say they were. They said that Duma had passed sanctions against any idle workers. That's just not true; nobody has been punished. Nobody can come up with a single person because they've been laid off or lost their jobs because of a multinational that pulled out. 

There are tens of millions of people that are out on the streets because of the word. This is a little bit more than a third of Russia's GDP of these companies that have already left. If Putin were to round up all these people, there aren't enough jails and prisons, detention centers, sports arenas, and stadiums to detain these people. But it'd be wonderful if he did. It would trigger the long-past due next Russian Revolution.

It'd be absurd. Even he wouldn't try this. That's just not true. Or else they say, "Well, we are there providing humanitarian goods." Company after company that tells us that, Nabisco or others, we take a look at what they're providing. It's confectioners, candies, and baked goods—some of the pharmaceutical companies. We took a look at what they're providing; its cosmetics are the higher margin products. So they say, "Oh, we'll stop that." What are they still providing? Analgesics and antihistamines for coughs and colds. There are plenty of substitute products, and even if there weren't in Russia, who cares? 

The whole idea here is not to try to make this easy on the average Russian; it's to make it harder. The idea of these corporate withdrawals is not to make Vladimir Putin's quality of life more miserable. Vladimir Putin is probably wealthier than Bernard Arnault and Elon Musk. He's perhaps the wealthiest person in the world. We don't know for sure, but he's certainly among the top 10. He can get all the creature comforts and luxury goods he needs with no problem. 

It's to put pressure on the average Russian, just as we know from Daniel Goldhagen's 1995 book, Hitler's Willing Executioners, it wasn't the brilliance of Hitler that led to the triumph for a while of the Third Reich. It was because of the unwitting conspiracy and the cowardice of the average Russian that they were complicit. 

Through their complacency, only 4% of Russians bothered to download a VPN to get the truth. When they know that 86 journalists didn't just happen to step out of the windowsill and lose their balance, they were murdered. Or 34 oligarchs didn't just accidentally jump in front of a moving car and get run over.

They know that they're being denied the truth, but they don't have the courage and character that we see in Ukraine, and Romania, and Libya, and Argentina, and elsewhere, or Chile that speak up for democracy. So they need to be motivated this way. They need to see that the architect of their misfortune is their own leader, and that leader is there, thanks to their cowardice.

What About the Russian Mobilization Law, Particularly Concerning Companies Remaining in Russia?

Michael: When you speak next time to the big CEOs that tell you that they stay in Russia for the people, for the employees, ask them how they feel about military drafts, that would be mandatory even for a multinational corporation where a certain percentage of those employees would need to go to the front lines.

Prof. Sonnenfeld: I'm so glad you bring up the military side of this because, once again, the counter to anybody saying that they're providing a humanitarian alternative by staying there, no, they're providing the blood money to fuel Putin's war machine. 

So, they are aggravating the bloodshed. And on top of that, the humane answer is the peaceful economic war as opposed to the spreading catastrophic military war, where we've gone into HIMars and Abrams tanks and Leopard tanks and F-15s and cluster bombs. We want to have hopefully stopped the spread of this before. 

That country and this country have 12,500 thermonuclear warheads pointed at each other. It sure would be nice to have a peaceful economic war bring people to their senses. And so, the humanitarian alternative is, in fact, through the consumer boycott and the withdrawal of these companies. 

What is your opinion about companies remaining in Russia? Is it imperative for Western brands to cease operations in Russia to uphold ethical standards and contribute to the broader efforts fostering peace and accountability? Please subscribe to our YouTube channel to follow updates on experts’ videos.

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