The day after the U.S. lifted its trade embargo on Burma in 2012, I spoke to an executive at Coca-Cola Co. He proudly announced that his company already had people on a plane headed to the country. It is Coca-Cola's policy, he explained, to sell its beverages anywhere it's allowed to do so. Coke was sold in Russia during the last part of the Cold War, and even during the 1980 Moscow Olympic Games boycotted by the U.S.
Yet two weeks ago, Coke caved to public pressure and announced it was pulling out of Russia because of President Vladimir Putin’s invasion and brutal assault in Ukraine, even though government sanctions didn't require its withdrawal.
The stampede of businesses out of Russia—from Dunkin’ Donuts Inc. to Exxon Mobil Corp.—marks a major change in global capitalism that may not be for the better. If nothing else, it introduces a new risk to operating overseas.
There is a good case for not doing business in Russia right now. Earning a profit from selling products or services that enable a government doing terrible things feels wrong. But it also reveals that the role of business in our society has changed.
Coke certainly has a profit motive to be in every global market, but the executive I spoke to 10 years ago also saw it as a form of diplomacy. In the 1970s, Coke diplomacy was a big part of its branding strategy, selling the idea that we are all united by our love of sugar water.
The public now puts more trust in corporations than the government and expects them to make decisions—such as where to do business—based on our shared values. Employees want to work for a company that acts on those values. Between the widespread movement for stakeholder capitalism and ESG investing, company leaders can’t just consider profits anymore; business decisions carry a moral weight.
But is pulling out of Russia better for the cause than, say, continuing to do business there and donating profits to Ukrainian refugees? The moral case for denying individual Russians access to foreign products is even less clear. Not every Russian is complicit in the invasion. In theory, pulling out of Russian markets could make people there realize they live in a pariah state, which could embarrass and anger them enough to push for a regime change. Or the opposite may be true: It could make them feel more defensive and resentful of outsiders. A trade embargo on Cuba did not hasten the end of Fidel Castro’s communist regime.
Nonetheless, hundreds of Western companies have suspended operations in Russia mainly because it would reflect poorly on them not to do so. Which is something new. For decades, Coke and other big corporations have operated in countries around the world that do all sorts of things that offend our Western values. Russia is a relatively small part of a large global presence for most of the companies that pulled out. So while culturally significant, suspending business in Russia doesn't cost shareholders or the executive suite much money.
That doesn’t mean there aren’t large costs, especially to smaller business owners. There was a recent social media outcry against an American businessman, Christopher Wynne, who owns Papa John’s franchises in Russia, for continuing to do business there (I went to high school with Chris but haven't spoken with him in 20 years). It’s one thing for major global corporations to exit Russia, including Papa John’s corporate parent, but suspending operations is a bigger sacrifice for Wynne and other franchise owners whose businesses are more dependent on the Russian market.
Wynne, who has worked in Russia for decades, also sees the situation from the individual Russian perspective. He wrote on Facebook, “I have spent 20 years trying to build a cultural bridge based upon hard work and honesty. I refuse to sever relationships or put people out of work who have bought into those basic values. That would be un-American.”