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On February 21, Russia sent troops to the two self-declared independent republics on Ukraine’s eastern border. Three days later, he launched a full-scale invasion of Ukraine.
The news is full of stories about the fighting while economic news reveals another concern for many: how will the conflict in Eastern Europe affect my bottom line? There are good reasons to ask this question. Shipping companies around the world are interrupting cargo deliveries to Russia, which significantly affects imports and exports. The ruble has fallen almost 70% in the past five days. Seven Russian banks have been cut off from SWIFT – a harsh move that will undermine confidence in Russian financial markets.
Scan economic news related to the Russian invasion and you’ll see concerns about grain prices, oil price volatility, and other economic symptoms of global turmoil. Yet we are missing an opportunity to have an important discussion: what is the role of business in times like these?
Companies and their representatives stand with Ukraine
Look closely, and you will see the two main camps emerge. Some companies remain silent, passively hoping that the conflict will be resolved before supply chain issues reach them. Others are unable to sit on the sidelines and watch. Starlink has sent terminals to Ukraine to help support communications that have been disrupted by Russian attacks. Airbnb provides free short-term housing to Ukrainian refugees fleeing the Russian occupation. Same Fifa banned Russian teams from competing while Adidas also dropped their deals with the teams.
Companies are taking proactive steps not only to signal their general support, but also to show it through concrete actions. And it’s not just companies that are stepping in; they are also their representatives. The business roundtable released a statement saying “…our members join the people of Ukraine, the U.S. government, and the global community in condemning Russia’s attack on Ukraine and its citizens.” Laboratory Bthe parent organization which represents and certifies a global network of more than 4,000 charities, recently updated its website to include a condemnation of Russia’s aggression and resources to support those affected by the conflict .
For some companies, this will turn out to be a savvy marketing move. But for others, they risk losing substantial shareholder value. This underlines the fundamental question that we have yet to answer. Since the dawn of time, companies have had the responsibility of prioritizing the needs of shareholders. But this maxim is changing and shareholder primacy is coming to an end.
Related: These franchises have stopped doing business in Russia
What takes priority during a global crisis?
Given this, we now have a more nuanced understanding of the role of business in society. As a result, we are faced with a not-so-simple question: if shareholders’ financial motivations conflict with basic human rights, which needs should be prioritized?
My long-standing argument has been that the long-term needs of shareholders are never out of step with our societal needs. Henry Ford argued that excess profits should subsidize the price of his cars so that his employees could afford to buy them. He knew that making cars more affordable would create a much bigger market for them in the long run. His investors sued him because he traded short-term shareholder profit for the company’s long-term financial viability and societal benefit.
When it comes to the conflict in Ukraine, many companies have come to a crossroads. The path they choose may bring immediate relief to shareholders, but does not accurately reflect their values as an organization. But the idea that a person’s personal ethics can be separated from that of their business is a mistake.
Related: How to be an ethical leader
A good business decision and a moral imperative
The need for companies to pull out of Russia is both a good business decision and a moral imperative. A positive public perception, a reliable supply chain and strong diplomatic values are in the long-term interests of shareholders. Doing business with and in a country with an erratic and aggressive foreign policy will most likely erode shareholder value over time. Society and investors are more apt to see the long-term benefits of being a “good” company. This case is no exception.
As for the moral imperative, I’m sure many companies will refuse to take a stand against Russia’s invasion of Ukraine. They will probably do very well on behalf of their shareholders in the years to come. But as the shareholder-first paradigm erodes, the companies that will thrive will be those that reflect the values of their founders and of our society.
Our ability to separate our personal ethics from our corporate ethics has been at the heart of the corporate social responsibility debate for decades. It’s up to us to break the firewall between individual and corporate ethics and guide a future in which business does good and good at the same time.
Related: Why Should Your Company Care About Social Responsibility?