Does Russia’s War in Ukraine Mark a Shift in Corporate Policy?

With the recent sanctions imposed by the US and Europe Union, Russia is facing mounting economic pressure to stop its invasion into Ukraine. In order to comply with the sanctions as well as the requests of Ukrainian officials, Western companies ranging from energy to technology sectors have curtailed their operations in Russia.

However, many corporations have gone above and beyond what is needed to align with the sanctions by either withdrawing completely or providing additional support to Ukraine. For example, SpaceX has sent Starlink terminals to provide internet access to Ukraine in response to faltering Ukrainian communication and Airbnb is providing short-term housing for Ukrainian refugees.

It is rare to see a company to do more than the bare minimum in order to affect politics. One could optimistically argue that the companies have suddenly developed a moral compass, but the likely motivation for taking a stance in this geopolitical conflict is the fear of reputational damage to the companies’ brands. This is evident from WeWork, which previously announced that it would not remove business from Russia because its “assets were doing incredibly well” but now has divested its operations after criticism from consumers.

Thus, the Russia-Ukraine war begs the question: have corporations begun to shift their focus from just shareholder concerns to stakeholders more broadly or is this just a one-off?

There is an age-old debate regarding corporate objectives. On the one hand, shareholder primacy requires companies to care solely about shareholder interests – making profits. On the other hand, stakeholder primacy gives corporations the freedom to seriously consider the concerns of other stakeholders, like consumers and employees, which often run counter to shareholder interests. For example, higher wages for employees may decrease the amount of money payable to shareholders, but will benefit employee morale.

In this geopolitical conflict, consumers have demanded that companies with considerable  political power forego potential profits and do more than what is simply required by law. Many of these corporations are financial powerhouses as well as global enterprises. The vast amount of money that these corporations hold allows them to support important causes that need financial stimulation. Furthermore, globalization has led to the inherent involvement of companies in other countries and makes them inescapably influential in foreign politics. For example, although social media platforms like Meta Platforms and YouTube are American corporations, they connect people from all over the world and are therefore used by many consumers outside the US. Since there are many users in Russia, these companies play vital roles in this war by ensuring their platforms are not exploited by the Russian government to promote propaganda and false information.

Because of this potential to shape political landscapes, consumers have been rightly advocating for companies to use this power to take a stance in political conflicts, even to the detriment of shareholder profits. To a hopeful mind, this war could represent a turning point in corporate objectives, allowing for stakeholder voices to be heard in addition to shareholders, and treating corporate social responsibility more seriously in the future.

However, some express concern that the corporate actions in the Russia-Ukraine war might only be an exception to the norm for two reasons. First, while Russia’s actions have received almost unanimous outrage, other conflicts with similar human rights implications have received less international condemnation, whether it is due to racial bias, unequal media coverage, or other reasons that have resulted in less stakeholder pressure. Second, many technology companies do not have large operations in Russia, making the burden of losing profits in that region much less significant in comparison to the wrath of consumers.

08With the growing apprehension of a possible conflict between China and Taiwan, it will be interesting to see if companies will continue to value stakeholder concern and take similar measures in a situation where such actions could significantly impact corporate growth and profits.