Staff Editorial – The responsibility of companies during crises

by the editorial staff

March 17, 2022

As more companies begin to pull their business from Russia in the wake of the Ukrainian invasion, it brings up the question of what corporations’ responsibilities are in the midst of a crisis. They are not governing bodies, so should they have any responsibility in global affairs?

The influence of multinational corporations on the world stage continues to grow, and it is important that they take on the responsibility that comes with that influence. 

Some companies make revenues that are equal or larger than the GDPs of entire countries, which puts significant economic responsibility on those companies. Apple, for example, has a market cap of 1.3 million dollars, which is equal to the GDP of Australia, according to ABC Financial Limited.

Corporations have a large influence over Russia’s economy, and pulling their business from Russia will make the economic sanctions imposed by governments more effective. 

Mark Haas, a political science professor at Duquesne, says that economic sanctions have been limited in their effectiveness in the past.

“Historically speaking, sanctions rarely work in changing [an] enemy state’s behavior, especially behavior that is considered a vital interest to the rival state’s leaders,” Haas said in an earlier interview with The Duke.

While countries like the U.S. are banning Russian oil and gas imports, the withdrawal of major businesses will further cripple the Russian economy and apply more pressure to withdraw from Ukraine.

Gary Hufbauer, an economist at the Peterson Institute for International Economics, notes the emphasis on corporate responsibility in an article by CNBC.

“My thinking is that we’ve had this period of emphasis on corporate social responsibility and many CEOs and directors nominally saying they are all for it. With the ‘woke language’ of the moment they would be hard pressed by the background and their statements and the atmosphere not to be out in front of it,” Hufbauer said.

While it is good that companies are taking steps to counter the Russian invasion, it is important to keep motivation in perspective.

These companies may believe that what they are doing is right, but their decisions are likely not altruistic in nature. They have an image and brand to maintain, and it would not look very good to do business in an aggressive Russian state.

Witold Henisz, a professor of management at the University of Pennsylvania, commented on the potential motivation of corporations pulling out of Russia in a CNBC article.

“If you have to pull out under such pressure, you might as well look courageous. No one wants to be the last one still in,” Henisz said.

When it comes to activism, consistency is key. If companies truly want to make an impact, it is important that they continue to take steps and not merely work to appease public opinion.