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  • Writer's pictureThe San Juan Daily Star

Companies partly exiting Russia are under pressure to make it all or nothing

Procter & Gamble, maker of Tide laundry detergent, said it had “discontinued all new capital investments” in Russia but would still sell health and hygiene products to Russians.

By Lauren Hirsch

As Western governments ratchet up their economic punishments against Russia, the corporate world has paused or pulled out of operations there. But as the list of companies quitting Russia grows by the day — and as Russia’s attacks on Ukraine escalate — differences in the degree of disconnection are spurring debate, the DealBook newsletter notes.

Companies that have paused operations or announced limited pullouts are coming under pressure to make a more definitive break: all or nothing, in or out. That has led some to rapidly revise their plans, raising questions about the long-term implications.

Some corporate withdrawals are partial. Procter & Gamble, for example, has “discontinued all new capital investments” in Russia. It is also “significantly reducing” its product portfolio there to focus on “basic health, hygiene and personal care items needed by the many Russian families who depend on them in their daily lives.” Danone and PepsiCo made similar moves, halting new investments and stopping sales of some products, but continuing with dairy and baby products, arguing that those products serve essential needs.

Is that enough? “The point is that we’re trying to starve the regime of their resources,” said William Browder, a hedge fund manager who worked in Russia and has long campaigned against corruption there. Some companies that initially said they would remain in Russia backtracked within days, including Deutsche Bank and retailer Uniqlo. Others, including Shell, were pushed to go further than they originally announced.

Shutting down plants, offices and supply chains is complicated. Procter & Gamble’s Gillette plant in St. Petersburg, for example, exports shaving products to more than 50 countries and accounts for 70% of the Russian shaving-product market.

There are also concerns at some companies about expropriation and intellectual property theft.

Some executives have argued it is not up to companies to lead on the punishments that Russia faces. “I don’t think businesses are supposed to decide how global trade works in the world,” David Solomon of Goldman Sachs told Time magazine. “Government sets policy, and then businesses follow that policy.” (The bank said last week that it would wind down its business in Russia.)

How does this square with pledges to embrace broader stakeholder concerns? The days of companies saying they serve only shareholders are long gone. (“We want to be a force for good and a force for growth,” P&G says.) And society’s expectations for companies have changed since Coca-Cola sold drinks in Nazi Germany and Heineken brewed beer in Rwanda during the genocide there. (Both companies said they would suspend their operations in Russia.)

Corporations also spend big to lobby for public policy that puts them at the forefront of important social and environmental issues.

The precedent set by pulling out of Russia may test corporate policies about where to draw the line for doing business in places facing geopolitical or human rights concerns; in other words, it is becoming harder for boardrooms to see things in shades of gray.

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