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19 Apr 2022

Andrew Edgecliffe-Johnson

Investors' voices are missing in corporate exodus from Russia, experts claim

free use, no attribution required

Investors’ voices are missing in corporate flight from Russia, 15 April 2022

...Western brands’ pullback from Russia since Vladimir Putin launched its assault on Ukraine is now being hailed as CPR’s (corporate political responsibility) finest hour: the most impactful and least divisive example of corporate diplomacy so far...

With the exception of the oil and gas giants with multibillion-dollar ventures in Russia, most companies’ principled statements have so far come at a pretty low cost. In the current US reporting season, which has been marked by robust profits but growing inflation angst, the war has not been the biggest topic of discussion...

For most companies, Russia is a small enough market for the financial impact to be manageable. But as Moscow’s brutal campaign drags on, Sonnenfeld argues, the reputational costs to companies increasingly outweigh the benefits of keeping their options open...

Longer term, companies need a new framework for their geopolitical responsibilities that pays more attention to the rule of law, accountable governance and human rights, Bennett Freeman, associate fellow at Chatham House and former US state department official, argued this week.

“The battle is now on: companies must take sides for democracy and against autocracy,” he told California’s Institute of International Studies. First, though, boards need to be convinced that big shareholders will not punish them for quitting Russia completely.

So far, “investors have been missing in action”, Freeman laments. Pension funds and other institutions must “show some courage”, echoes Sonnenfeld. Fund managers have pontificated about the war heralding an age of deglobalisation, but offered little advice to companies on how to respond. We are entering a phase of the Ukraine crisis where companies’ principles look likely to come at a higher cost to their profits. So far, we know little about what their largest shareholders think about that prospect. It is time for investors to remedy that by making their own values clear.