CEOs Beware: “Feel-Good” Isolation of Russia Might Make Things Worse
Westerners and Ukrainians have cheered U.S.-based corporations as they have chosen to suspend their operations in Russia in response to its invasion of Ukraine. For the first time in decades, iconic American brands like Coca-Cola and Starbucks are no longer available to residents of the Russian Federation. Private companies that have not yet divested from the Russian marketplace have faced calls from consumers and investors to do so. While government responses to the conflict have varied in hopes of avoiding World War III, these ubiquitous global brands act as important symbols of American might. CEOs have cited humanitarian reasons for their decisions to halt operations in Russia, offering this move as evidence of their choice to “do the right thing.” Some global leaders have gone so far as to say they have a “moral imperative” to isolate Russia as punishment for its aggression. As Russia’s invasion stumbles forward, will such corporate action help to pave the way for peace?
After gathering data from and doing field research in Latin America, the Middle East, and Africa, I have found that one-sided corporate engagement can actually prolong a conflict and make it harder to negotiate a peace agreement. Private corporations, as profit-oriented organizations, ought to consider the business side of peace and violence. Any agreement will have implications for the future business environment. When firms act in a wartime setting, they become political actors. Thus, taking a stand in a conflict adds the preferences of the business sector to the complexities of wartime bargaining, often making it more difficult to build a peace agreement that all sides will accept. Corporations looking to promote more peaceful societies are better suited to engage in violence prevention by filling gaps in governance or, in wartime settings, acting as neutral champions of peace processes. If corporations want to really have an impact on peace and stability, they should invest in places that are at risk of conflict but where violence has yet to occur, or they should encourage negotiations without taking a side.
Unfortunately, corporations have been less inclined to proactively invest in peace, instead responding to violence after it has begun. Today’s corporate actions are similar to those of the Colombian private sector towards the end of the decades-long civil war with the Revolutionary Armed Forces of Colombia. The business community was disengaged for years but, when violence urbanized and became costlier, businesses began pushing for an end to the conflict. Business leaders eventually took an active role in the negotiations in Havana. While technically present as a government representative, the private sector had its own issues at stake, such as how wartime behavior would be treated legally, and interests in the nature of the final peace deal. Private commercial interests, which were not exclusively pro-peace, likely prolonged the negotiations process, and were instrumental in framing the public-opinion debate that led to the “no” vote on the plebiscite for peace requiring different terms be negotiated. In Guatemala, the private sector went even further, actively obstructing the peace process by resisting key reforms since the conflict was viewed as rural issue with few economic implications. These examples offer cautionary tales for today’s corporate leaders about the negative impact engagement can have when biased towards a specific outcome.
In seeking to understand how one-sided actions may play out, we can also draw from extensive research on state behavior in conflict management, negotiations, and peace processes. Global leaders are walking a tightrope between conflict management and overtly joining the war on one side. States with strong ties to one of the disputants often use these relationships as leverage in mediation, acting to end the conflict, and employing various conflict-management techniques. This leverage can help governments with bias be particularly effective mediators.
The private sector, however, has interests that fundamentally differ from those of states. When businesses engage in peacebuilding after war has broken out, as in the case of Russia and Ukraine, they become political actors. They also bring their own interests, such as the appeasement of shareholders and consumers, into an already complex conflict environment. As with multi-actor civil wars, conflicts with active private-sector involvement last longer since it is more difficult to find an agreement that is acceptable to all parties with interests at stake. While companies are unlikely to directly engage in Russia-Ukraine peace talks, they will certainly have a stake in any peace terms. This is the nature of the globalized economy, which links states’ international interests and market forces. Corporate leaders should proceed carefully, as their actions may further complicate negotiations and prolong violence, even if unintentionally so. More neutral reactions, such as pro-peace statements and future investment promises, are less likely to have adverse consequences.
Recent events also reveal the expanding connections between international politics and global economy. Corporations are increasingly acting in ways beyond standard economic exchange, engaging more directly in arenas once left to governments with implications that are not straightforward and largely depend on the nature and timing of their actions. The war in Ukraine has also created a global commodity calamity, meaning it is likely to impact households in places far from the battlefield. Academics have yet to fully explore the implications of these linkages, however. There is significant management-focused research offering suggested frameworks for corporate policy when operated amidst violent conflict. Political scientists and scholars of conflict processes, however, are just beginning to explore a role for corporations in the topics we study. While corporate actions impact the lives of those in weak states, in particular, the current crisis suggests those living under more capable governments are not immune from their policy decisions. It also suggests that public opinion, a much-debated topic in the study of foreign policy, may be even more prickly when it comes to decisions surrounding corporate social responsibility. My research suggests community investments can help to prevent violence from occurring in the first place, but that companies need to be cautious in the ways they engage once conflict has already begun to avoid unintentionally prolonging violence.
While there is limited evidence around corporate engagement in the context of international war, we can learn from their activities during civil wars. These suggest the need to act without taking a side. The Northern Ireland example is especially relevant, as U.S. companies were the some of the first U.S. actors to promote a peace process. Their efforts, which culminated with MacBride Principals (which required all U.S. companies operating in Northern Ireland to adopt fair hiring practices) and U.S.-led mediation. U.K.-based companies followed suit, eventually publishing the highly publicized “Peace Dividends” paper, which highlighted the potential for economic growth were a peace deal to be signed. Acting as the “Group of Seven,” trade and business organizations advanced a message of peace and prosperity with a strategy of political cooperation and impartiality, hosting collective meetings that urged political parties to work towards peace. The nature of corporate engagement in Northern Ireland, which was instrumental in leading to the so-called “Good Friday Agreement,” differs from what we are currently witnessing. Both U.S. firms and, later, firms headquartered in Northern Ireland acted as neutral proponents of peace.
Desmond Tutu famously said that being neutral in cases of injustice was akin to siding with the oppressor. The logic of a moral imperative assumes an outcome that punishes aggressors, protects human rights, and sees justice prevail. This logic has led to historic policy reversals in Switzerland and Germany, pushes for cutting off Russian oil imports to Europe, and mass public support for Ukraine in the United States and globally. The global outcry is only likely to increase with evidence of war crimes emerging. Such a strong reaction seems appropriate in a world that purports to have learned the lessons of the many genocides of the 20th century. And yet, corporate engagement does not easily lend itself to such black-and-white ethical boundaries, acting in a space that is not inherently negative or positive. Rather, corporate engagement should be done with a knowledge of the complexities involved, allowing for potential adverse consequences to what might initially seem morally appropriate.
That is not to say that the firm does not have a salient role to play for the global good. Most importantly, large-N analysis shows that corporations wanting to be good global citizens can also do so by investing in places at risk of violence, such as Sri Lanka, Pakistan, Mozambique, and Tunisia. Research shows the private sector can prevent the onset of violence with policies and programs that fight corruption, fill governmental gaps in service provision, and promote human rights. As corporate leaders are increasingly motivated by ethical and moral commitments, evidence suggests firms can play an important role in violence prevention and peacebuilding. These might not be the actions that catch news headlines, however.
Actors from international sports leagues to Netflix have responded to Putin’s flaunting of international territorial norms, but to what effect? Is Putin likely to reverse course because he can’t have a venti caramel macchiato while binge-watching Seinfeld? Unlikely. The effect of sanctions on Putin’s popularity in Russia is difficult to gauge since public-opinion polling in Russia faces many obstacles, but scholars suggest sanctions may actually push elite oligarchs closer to Putin. That said, the world has awakened and is watching. And while that didn’t deter the invasion, it has implications for Putin’s future. While sanctions, withdrawing businesses, and a devastated economy are unlikely to prompt policy reversal or topple Putin’s regime, the broad range of responses to the invasion, as well as arms-control measures, may both prevent a wider war in Europe and deter other leaders with territorial ambitions from following suit.
Molly M. Melin is an associate professor in the Department of Political Science at Loyola University Chicago. Her publications on third-party interventions in international conflicts, the dynamics of conflict expansion, and peacekeeping operations have appeared in International Studies Quarterly, Journal of Conflict Resolution, Conflict Management and Peace Science, and International Interactions. Her recent book The Building and Breaking of Peace: Corporate Activities in Civil War Prevention and Resolution (Oxford University Press) explores the role of the private sector in peacebuilding.
Image: McDonald’s in St. Petersburg