Business

U.S. companies on Yale list suspend operations in Russia

U.S. companies on Yale list suspend operations in Russia

Jeffrey Sonnenfeld, Yale School of Management

Scott Mlyn | CNBC

The Yale professor who set up a list of major western companies still operating in Russia applauded the decisions of several major US brands to suspend operations in that country due to its government’s war on Ukraine.

“I feel pretty good about it!” Jeffrey Sonnenfeld, a professor at the Yale School of Management, told CNBC in an email Tuesday after hearing news that McDonald’s, Starbucks and Coca-Cola were shutting down operations in Russia.

PepsiCo quickly followed suit, announcing that it was suspending Russian sales of Pepsi-Cola, 7UP and Mirinda-branded sodas, while continuing to sell some essential products.

Earlier Tuesday, The Washington Post had named the first three companies, in the order of their subsequent announcements, in the title of an article on the spreadsheet maintained by Sonnenfeld and his research team at the Yale Chief Executive Leadership Institute.

The newspaper called the spreadsheet “a naughty or kind list of sorts.” It currently lists 290 companies that have said they will leave Russia, or suspend or reduce their activities there. It also lists companies that have continued operations in Russia.

Sonnenfeld said in an interview that he had been in contact in recent days with executives from some of the four companies that announced their decision on Tuesday in the face of outrage over Russia’s attack on Ukraine.

“I greatly admire all of these companies,” Sonnenfeld said, referring to their decisions.

“Our list made a big difference in that CEOs wanted to do the right thing,” he said. “They kept telling me they were looking for affirmation from others” and that their boards were monitoring the actions of other big companies, Sonnenfeld said.

“They were afraid of “big poppy syndrome”, as Australians call it, and they didn’t want to face any reprisals,” Sonnenfeld said.

Spokespersons for Coca-Cola and PepsiCo had no immediate comment on Sonnenfeld’s remarks.

McDonald’s and Starbucks responded by pointing to statements by their respective CEOs on their decisions on Tuesday.

McDonald’s CEO Chris Kempczinski said that although the restaurant chain has operated for more than three decades in Russia and has become “an essential part of the 850 communities in which we operate. … At the same time, our values ​​mean that we cannot ignore the needless human suffering that is taking place in Ukraine.”

Starbucks CEO Kevin Johnson sentenced Russia’s “horrifying” attack on Ukraine. “In this dynamic situation, we will continue to make decisions that are true to our mission and values ​​and to communicate with transparency,” he said.

Sonnenfeld, in his interview, said that as one company after another in recent days said they were leaving Russia or suspending operations, “it had a snowball effect.”

“These are some of the strongest exponents of core American values,” he said of the four companies, which announced their business suspensions on Tuesday.

“These brands have legacies dating back to perestroika in 1990, when the Soviet Union was opening up to the West, and they were enthusiastically welcomed by all parties,” he said.

“That’s why these companies, given that legacy, didn’t know what to do,” in light of the invasion of Ukraine, Sonnenfeld said.

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“They got lost in time because they were looking for a win-win solution in a world where [there is] more common ground,” he said.

Sonnenfeld said that in his talks with three of the companies, the executives were trying to find a legal and operational solution to the problem of doing business in Russia as the nation faces global condemnation and tough economic sanctions from the Russian Federation. from major Western governments.

“None of them were troubled by financial considerations,” he said. “They were trying to find the right thing in a very complex geopolitical and cultural situation with loyalty and compassion for the important local workforce.”

Another U.S. food brand on Sonnenfeld’s list, Papa John’s, said Wednesday it would also suspend operations in Russia.

Sonnenfeld said he compiled his spreadsheet as a moral argument to punish Russia.

“All the interest of legal sanctions [by governments] coupled with voluntary economic embargoes against employers is to shut down the Russian economy,” he said.

The professor cited the success of widespread corporate boycotts in South Africa, together with world government action, in the 1980s and 1990s as helping to push that country to dissolve its apartheid system, in which the white minority population had institutionalized legal, economic and legal power. on the black majority.

Sonnenfeld predicted that the actions of Western companies will “absolutely have an effect” on Russia.

He argued that Russian President Vladimir Putin’s power over the country is “rooted in two things”: a willingness to use violence as coercion and “the illusion that he has totalitarian control over all sectors”.

But the loss of major Western companies in the country shattered that illusion, the professor said.

“The ruble has already fallen by almost 80%. Inflation has climbed to almost 30%. So it’s 10 days of unprecedented economic history in the world,” Sonnenfeld said.

He noted that the flight of major companies from Russian business, including by oil giants like Exxon, Shell and BP, means “several hundred billion dollars written off” in physical assets and other assets in Russia, “as distinct from the hundreds of billion in lost revenue.”

“It’s a big deal,” he said.

“It was extraordinary moral courage. It surpasses even what happened in South Africa,” Sonnefeld said.

He noted, however, that there were about three dozen Western companies on his list that “stubbornly stayed” in Russia. For now, at least.