Corporate exit from Russia: ethical – or just woke?

By Professor Dirk Matten (Gourlay Ethics in Business Professor)

Professor Dirk Matten, one of our visiting professors who is in Australia for the Gourlay Ethics in Business week, weighs in on whether companies should really be exiting from Russia. Are they acting from a place of public good or public pressure?

Man in front of closed store

As of this week, almost 1000 Western companies have in part or completely exited Russia. They did so not just to comply with sanctions but as a voluntary reaction to the war. In some ways, it is textbook CSR (corporate social responsibility). They responded to stakeholder pressure, most notably from governments, investors, consumers, competitors, and the general public. Some even made a hefty financial sacrifice.

But I would challenge the legitimacy of these actions. It is my view that the corporate exit from Russia is predicated on rather dubious ethical judgments and contributes to the general skepticism many have about CSR.

First, let’s look at the actual effects. It’s obvious that companies providing goods and services directly used in the war, including financial services that fund it, have an immediate responsibility. But most companies are not in this position. Producing or consuming a McDonald’s Happy Meal, a Renault Clio, or a Prada dress has no effect on the war. In some cases, corporate exit puts Russian employees and communities immediately in distress. The rights and interests of the Russian stakeholders of these Western companies do not seem to matter at all.

Some proponents compare today’s situation to the boycott of South Africa during apartheid. However, the Sullivan principles, then drawn up by General Motors and adopted widely, ended active complicity in human rights violations in Western-owned South African plants. It is hard to establish such a responsibility between McDonald’s burgers or Lego toys and what Russian troops do in Ukraine at this hour.

How far, then, are companies responsible for the actions of governments in their host countries? The most obvious current example is China: even the US has clearly qualified the treatment of the Uighur minority as genocide. Many displaced Uighurs are working as forced labour in the factories of Western companies. No similar call for boycott has been implemented there.

This raises the question of consistency. There are 20 wars ongoing in the world as we speak. Which wars qualify as a reason for a corporate boycott? Saudi Arabia’s role in Yemen has never been scrutinised (with some 20,000 civilian fatalities in Yemen during the period of the Russia-Ukraine war). Such ethical assignments of responsibility to corporations are arbitrary and questionable.

But Ukraine is more relevant for the West. One can frequently hear in mainstream media that Ukrainians ‘look like us’, are ‘Europeans’ with ‘blond hair and blue eyes’ who ‘pray like us’ and ‘drive cars like we do’. Boycotting Russia based on this kind of stakeholder pressure is just pandering to racism.

This leads to a thornier question. Is this war in itself unethical, unjustified, unprovoked, and illegal? On the one hand, the mainstream consensus seems to be that Russia is aggressively attempting to rebuild the Soviet empire, ignoring the territorial integrity of Ukraine.

On the other hand, there are a number of arguments that challenge this. Russia started the military intervention as an attempt to prevent Ukraine from joining NATO. Australia’s defence minister just threatened ‘to go to war’ with the tiny Solomon Islands if they allow China to have a military presence there. If Australia considers what goes on more than 3000 kilometres away from its shores a threat, how can we expect Russia to agree to having NATO right on its doorstep? There are other more historical reasons to empathise somewhat with Russian anxieties.

From the perspective of corporate responsibility, there are two takeaways. First, the moral status of exiting Russia is not clear or consistent, and the fallout from doing so is problematic, to say the least. It is hard to see anything clearly ethical in this.

The second takeaway is that all these public commitments to social responsibility and ethical values as a result of exiting Russia may well be little more than hypocrisy. Corporations take these actions ultimately to remain profitable, in this case by pandering to their Western stakeholders. ‘Woke’ corporations, as Vivek Ramasamy argues, do this because, ultimately, they know that maintaining an ethical veneer is good for the bottom line. Whether exiting Russia will achieve any social good, such as ending the war, is almost beside the point.

It is perfectly legitimate to demand greater social responsibility and ethical conduct from business. We need more of it. But subjecting business to questionable public pressure to undertake responsibilities that only governments and the democratic process can address is the wrong way to get there.

Dirk Matten is Associate Dean, Research at the Schulich School of Business in Toronto, where he is a Professor of Sustainability and holds the Hewlett-Packard Chair in Corporate Social Responsibility. He is in Melbourne at Trinity College for the 2022 Gourlay Ethics in Business Week in May 22–27. Book now to attend a session with Dirk and other business ethics experts.

This article is based off a story by Dirk Matten published by The Conversation.

19 May 2022
Category: People