At the latest count by the Yale University School of Management, more than 500 multinational companies have terminated or suspended, in whole or in part, their activities in Russia, following the invasion of Ukraine1.
Posted at 12:00 p.m.
This is the latest and most dramatic demonstration that the business world is changing dramatically. The time when, according to the doctrine set out in 1970 by the great economist Milton Friedman, CEOs were concerned only with the interests of their shareholders, that is to say with profits, that time is on the way to being over.
In the age of social media, which can make and break a global brand’s reputation in mere hours, companies can less than ever afford to ignore public opinion, especially the feelings of those they we call their “stakeholders”: their employees, their customers, their suppliers and the communities in which they operate.
Since the aggression against Ukraine, the expectations of Western public opinion have been clear. For example, according to a poll conducted for the Canadian Center for Business Mission, 82% of Canadians believe that even if it hurts them financially, companies should do everything possible to withdraw from Russia. A similar proportion of respondents, 81%, believe that companies should end their business in Russia, regardless of whether it has an impact on the conflict in Ukraine. These sentiments are widely shared by Canadians from all parts of the country, all age groups and all income levels.2.
More and more business people recognize that companies must not only play a greater role in addressing the major issues of our time, but that they must place this mission at the heart of their activities.
This is how the company will generate sustainable profits, argues Larry Fink, boss of BlackRock. This is called ‘stakeholder capitalism’, which is distinct from ‘shareholder capitalism’. Says Fink: “Stakeholder capitalism has nothing to do with politics. It is not a social or ideological agenda. It’s not woke. It’s capitalism, powered by mutually beneficial relationships between you [le PDG] and the employees, customers, suppliers, and communities your company relies on to thrive. This is the power of capitalism. »
This means, among other things, that companies cannot remain silent when events occur that stir public opinion, whether it is the war in Ukraine, the upheaval caused by climate change or the murder of George Floyd. . We – especially the employees – expect the bosses to speak out in favor of peace, the decarbonisation of the economy and against systemic racism.
However, it is not just about speaking up. It’s about being authentic, about making the action follow. This is why denouncing the invasion of Ukraine is not enough; ties must be severed, despite the short-term financial cost to the company.
In this new economic world for which they have not been trained, business leaders are wondering. Most of them understand why they have to act differently, but they wonder how. This is especially the case for the bosses of public companies, who are confronted each quarter with the demands of shareholders, in particular activists, and with the expectations of analysts.
These questions are legitimate and complex. However, recent research and practice provide clues. In particular, companies must think about these questions BEFORE the news puts them in front of difficult decisions to be made urgently. When is it appropriate to take a public position? What criteria to use? What process should be followed? How to consult stakeholders? What should the role of the board of directors be? This preliminary reflection will be based on the mission of the company, its values, its sector of activity.
The invasion of Ukraine is a relatively easy “case” from a reputational point of view, such is the feeling of indignation in the West. Not all cases are so clear cut. This is why it is essential that the company be well prepared and that it has clearly defined its mission and its values; these will serve as an anchor during the inevitable storms to come.
2. 1509 Canadians were surveyed on March 30, 2022.