March 29, 2022

Ukraine Crisis: Naming and Shaming

Russia’s invasion of Ukraine has presented companies with an unprecedented decision – should they cut all ties with the world’s 11th largest economy? Companies pondering next steps when it comes to their Russian business operations should keep in mind that the eyes of the media – and their investors – are on them.  In that regard, Yale School of Management Prof. Jeffery Sonnenfeld is maintaining a list of over 400 companies with Russian operations and their current status.

The list is graded – in order to earn an “A”, companies must have made a “clean break” with Russia. Companies temporarily curtailing their Russian operations while keeping return options open earn a “B” grade, while those scaling back some business operations while continuing others rate a “C”. Companies that are buying time by postponing new investments but maintaining current operations get a “D”, while those are digging in & defying calls for severing ties rate an “F”. 

What’s the impact of this list? Well, it’s been credited in the media with helping accelerate the exodus of U.S. businesses from Russia, but it also looks like it’s having a bottom-line impact on those that have decided to stay. According to a recent Fortune article by Prof. Sonnenfeld, those companies identified as “digging in” have taken a sizeable hit to their stock prices:

Finally, our list provided a much cited “hall of shame” that guided the voices of employees, customers, and investors seeking to show their disapproval. In fact, the first day our list appeared on CNBC, many of the companies we identified as remaining in Russia saw their stocks drop 15% to 30%, on a day where the key market indexes fell only two to three percent.

This WSJ article discusses another issue that companies that continue operations in Russia, especially those that do so for “humanitarian” reasons, have to address – what do you do with the profits you’ve earned there?

John Jenkins