When business aligns with activism

With the belated decisions by McDonald’s, Starbucks, Coca-Cola and PepsiCo to suspend operations in Russia this week, some of the most iconic global food and beverage companies have finally joined the ranks of international corporations delivering both an economic and symbolic blow to Russia.

Russia’s invasion of Ukraine has given the business community a rare opportunity to align its interests with the concerns of most Americans, particularly younger, more socially active consumers — a prized demographic for youth-conscious corporations. In this case, business activism and savvy marketing could turn out to be a win-win for everyone.

McDonald’s, Coca-Cola and PepsiCo were considered “brands of liberation” in the 1970s, 1980s and 1990s, blazing new trails in the former Soviet states and China. Still, for two weeks, these companies dithered in suspending their operations as other companies — some with more at stake — broke with Russia. Considering their status, it took a remarkably long time for them to close their doors. Possibly it was the shame of showing up on lists like the one created by Yale University professor Jeffrey Sonnenfeld and his team. Their roster of “Companies That Remain in Russia With Significant Exposure” has been acutely effective in tracking corporate laggards.

“Despite the cost of abandoning major investments and the loss of business, there is a strong reputational incentive to withdraw,” wrote Sonnenfeld in a Fortune commentary. “Companies that fail to withdraw face a wave of U.S. public resentment far greater than what they face on climate change, voting rights, gun safety, immigration reform, or border security.”

This corporate activism is straight out of risk and reputational management bibles, especially when recent surveys show that 75 percent of Americans want companies to close their businesses in Russia. With that kind of evidence, it doesn’t require a high level of C-suite leadership and courage to muster a boycott to satisfy consumers and employees.

McDonald’s Chief Executive Chris Kempczinski announced Tuesday it would temporarily close its 850 restaurants in the country, although it said it would keep its 62,000 local employees on the payroll during the suspension. “Our values mean we cannot ignore the needless human suffering unfolding in Ukraine,” he said in a statement. 

Once McDonald’s announced its decision, Starbucks, Coca-Cola, and PepsiCo quickly followed suit. All this opportune corporate patriotism begs the question of why it took so long to leave Russia, even temporarily. Any further delays and they were inviting serious consequences. It’s hard to find a reputational downside for companies that will likely continue to benefit from maintaining their embrace of democratic principles.

Taking the principled high ground poses little moral jeopardy here, but it does present some economic jeopardy — and potentially some costs on the ground for employees in Russian cities. Take McDonald’s. While Russian operations make up only about 3 percent of its operating revenue, they make up 9 percent of its revenue.

If the invasion continues for months or if it turns into an occupation, corporations will have to make tougher choices. The economic consequences could be substantial if those American restaurants, offices and plants in Russia remain closed. Once the accolades fade, the importance of shareholder value will return to the fore. Additionally, international business may be reaching an inflection point with a realignment of unchecked globalization, where free markets have driven global business policies for four decades.

But none of that may matter for the growing number of Millennials who are dominating the workforce (35 percent) and rising up in the ranks of politics, government and academia. Corporate social responsibility isn’t just a good PR move for the Millennials, it’s a philosophy for life, even if it comes at a cost of higher gas prices or fewer options in the marketplace. Corporations may be forced to pay a tab for their years of well-intentioned but somewhat low-risk corporate social responsibility.

Temporarily closing businesses sends a potent message to Russian leaders, even if it is dismaying for Russian citizens, but the question is whether companies will walk the talk as the price for decency deepens. That’s when activists will find out if corporate America is a fair-weather friend or an ally in the bigger battle to safeguard human rights and defend democracy.

James R. Bailey is a professor of leadership development at the George Washington University School of Business. He is the author of five books and hundreds of articles, and the founder and editor of Lessons on Leadership. Follow him on Twitter @ProfJamesBailey.