Are These Global Companies On The Right Side Of History?

Despite a global boycott of Russia and an international condemnation of the Kremlin’s actions against Ukraine, some multinationals have dismissed demands to exit or scale down their presence in Russia for various reasons and choosing to continue business-as-usual.

The conflict between Russia and Ukraine has dragged on for two months now since Russia started invading Ukraine on Feb. 24. The crisis has led to elevated commodity prices globally, particularly of oil, supply chain disruptions, food shortages and environmental impacts on Ukraine’s air, water and soil.

In the early days of the war, Russia witnessed a vast exodus of global companies that sought to avoid being branded as funding a war against the people of Ukraine.

Corporate exodus

The long list of multinationals that have severed ties with Russia amid the war includes PayPal PYPL, Ford Motor F, Volkswagen VOW, Toyota Motor TM, Boeing BA, Airbus, Diageo DEO, Apple AAPL, Samsung Electronics (KRX:005930), Walt Disney DIS and Netflix NFLX, as well as oil majors BP BP, ExxonMobil XOM and Shell SHEL.

Shell recently started to withdraw its staff from its joint ventures with Russia’s Gazprom over a month after the company said it will withdraw from Russian oil trade.

To date, more than 750 companies have already cut their ties with Russia, according to a tally by the Yale School of Management (Yale SOM).

Defying public pressure

While dozens of companies have already exited or reduced their operations in Russia, a number of firms are still choosing to stay, defying calls to stop funding a war machine.

Privately owned American industrial conglomerate Koch Industries is among them. In mid-March, Koch President and Chief Operating Officer Dave Robertson said the company’s subsidiary, Guardian Industries, "will not walk away from our employees there or hand over these manufacturing facilities to the Russian government so it can operate and benefit from them.”

Apart from Koch, there are about 330 more multinationals are still operating in Russia that are either defying demands to exit or reduce activities or are postponing future planned investment while still continuing substantive business in the country, according to non-profit group Don’t Fund War’s assessment of the Yale SOM list.

Tech companies stay the course

The list includes Chinese tech and gaming giant Tencent (HKG:0700) and Chinese e-commerce firm Alibaba Group BABA. Tencent has avoided taking sides in the war but appealed to users last month to be objective when discussing sensitive topics like the Ukraine conflict. Alibaba, which has built a presence in Russia in recent years, has remained quiet on its stance in the war.

Didi Global DIDI, which has been under intense regulatory scrutiny in China, had quickly reversed its earlier decision to pull out of Russia, saying it will continue to serve drivers and passengers in the market.

Computer manufacturers Lenovo (HKG:0992) and Asus (TPE:2357) have chosen to stay in Russia to sell computer-related products even after their peer Acer (TPE:2353) earlier this month decided to join the global boycott.

Xiaomi (HKG:1810), the second best-selling smartphone brand in Russia next to Samsung Electronics (KRX:005930), has also remained silent about its plans in Russia. The brand forayed into the market in 2017.

Apart from tech firms, global firms including Nestlé NESN, Procter & Gamble PG, Pfizer PFE and Merck MRK are buying time in Russia during the war. They are either pausing patient enrollment in ongoing clinical trials, scaling back operations and stopping new investments, or halting non-essential imports and exports.

Some experts say it is getting increasingly difficult for dozens of companies in Russia to leave, according to The Washington Post in March.

"This may be one of the moments in history in which proactive disinvestment is the best option… If you can’t move money in and out of Russia in a convertible currency, what’s the point of being there?,” James O’Rourke, a professor of management at the University of Notre Dame’s Mendoza College of Business, was quoted by The Washington Post as saying.