When business aligns with activism
With the belated decisions of McDonald’s, Starbucks, Coca-Cola and PepsiCo to suspend operations in Russia this week, some of the world’s most iconic food and beverage companies have finally joined the ranks of international companies carrying both a economic and symbolic blow to Russia.
Russia’s invasion of Ukraine gave the business community a rare opportunity to align its interests with the concerns of most Americans, especially younger and more socially active consumers – a popular demographic for Americans. youth-friendly businesses. In this case, business activism and savvy marketing could prove to be a win-win for everyone.
McDonald’s, Coca-Cola and PepsiCo were considered “liberation brands” in the 1970s, 1980s and 1990s, blazing new trails in former Soviet states and China. Yet for two weeks, these companies balked at suspending operations as other companies – some with more at stake – broke with Russia. Given their status, it took them a remarkably long time to close. Perhaps it was the shame of appearing on lists like the one created by Yale University professor Jeffrey Sonnenfeld and his team. Their list of “companies that remain in Russia with significant exposure” has been extremely effective in tracking lagging companies.
“Despite the cost of abandoning major investments and loss of business, there is a strong reputational incentive to exit,” Sonnenfeld wrote in a Fortune remark. “Companies that don’t walk away face a far greater outpouring of resentment from the American public than they face on climate change, voting rights, gun safety, security reform. immigration or border security.”
This corporate activism is straight out of the risk and reputation management bibles, especially when recent polls show that 75% of Americans want companies to shut down their operations in Russia. With this kind of evidence, it doesn’t take a high level of leadership and courage to organize a boycott to satisfy consumers and employees.
McDonald’s chief executive Chris Kempczinski announced on Tuesday that he would temporarily close his 850 restaurants nationwide, although he said he would keep his 62,000 local employees on the payroll during the suspension. “Our values mean that we cannot ignore the unnecessary human suffering taking place in Ukraine,” he said in a statement.
Once McDonald’s announced its decision, Starbucks, Coca-Cola and PepsiCo quickly followed suit. All this timely corporate patriotism begs the question of why it took so long to leave Russia, even temporarily. Any further delay and they invited serious consequences. It’s hard to find a downside to the reputations of companies that are likely to continue to benefit from maintaining their adherence to democratic principles.
Taking the principled high ground poses little moral hazard here, but it does present some economic hazard — and potentially on-the-ground costs for workers in Russian cities. Take McDonald’s. While Russian operations make up only about 3% of its operating revenue, they make up 9% of its revenue.
If the invasion continues for months or turns into an occupation, companies will have to make tougher choices. The economic consequences could be significant if these American restaurants, offices and factories in Russia remain closed. Once the accolades pass, the importance of shareholder value will come back to the fore. Moreover, international trade could reach an inflection point with a realignment of unchecked globalization, where free markets have guided global trade policies for four decades.
But none of that matters to the growing number of Millennials who dominate the workforce (35%) and rise through the ranks of politics, government and academia. Corporate social responsibility isn’t just a good public relations initiative for millennials, it’s a philosophy of life, even if it means higher gas prices or fewer options on the Marlet. Companies may be forced to foot a tab for their years of well-meaning but low-risk social responsibility.
The temporary closure of businesses sends a powerful message to Russian leaders, even if it is appalling to Russian citizens, but the question is whether businesses will keep their word as the price of decency deepens. That’s when activists will discover whether corporate America is a fair weather friend or an ally in the greater battle to safeguard human rights and defend democracy.
James R. Bailey is Professor of Leadership Development at the George Washington University School of Business. He is the author of five books and hundreds of articles, and the founder and editor of Lessons on Leadership. Follow him on Twitter @ProfJamesBailey.