Companies That Haven't Left Russia May Be Too Late to Win Back Americans

Hundreds of corporations have suspended their operations in Russia in response to its unprovoked attack on Ukraine. While the list of withdrawals continues to grow, experts say that for companies remaining in Russia, it may be too late to win back the American public.

"When someone acts from a visceral, emotional place, they're being very authentic," Cait Lamberton, a marketing professor at the Wharton School of the University of Pennsylvania, told Newsweek. "At this point, these companies have had time to sit back and think about what they can do that will create the right impression, but that may not really create any costs for them."

Companies pulling out of Russia more than two weeks into the war "have lost the consumer tendency to infer real authenticity," Lamberton said.

Companies Russia Ukraine Withdrawl
Nearly 400 companies have curtailed operations in Russia in response to the war in Ukraine. Pictured, a woman walks outside the Kremlin, Red Square and St. Basil's Cathedral in central Moscow on February 22, 2022. Dimitar Dilkoff/AFP

As of Tuesday, 380 major corporations, including McDonald's, Goldman Sachs and Coca-Cola among others, have announced plans to suspend operations in the country—a move more than three-quarters of Americans say they support, recent polling shows.

"It matters a great deal, what the rest of the free world thinks of you," James O'Rourke, a management professor at the University of Notre Dame's Mendoza College of Business, told Newsweek.

"Just like [President Joe] Biden and his national security advisors are rethinking the war, executives have to rethink the reasons for doing business in Russia," he said.

O'Rourke advises top executives to rethink their calculations around risk and reputation. He said their assessments may be misconceived.

"They went in believing it was a stable, sound country, that they could do business with [Russian President Vladimir] Putin, that he was rational and that they could make money, and for a while that was all true," he said.

"They thought the risk was around whether people were going to accept and purchase their products in Russia, whether they were going to be able to export enough to other nations to make it worthwhile to set up production facilities, but that wasn't the risk," he added. "The risk is whether you're going to lose it all."

Even if companies continue operations in Russia, O'Rouke noted that issues surrounding the supply chain will eventually catch up to them.

Brick-and-mortar restaurants that continue serving Russian diners will eventually run out of produce and other products, unless all of those items are being sourced within the Russian Federation.

While pulling out of Russia may seem calculated or expected at this point in time, Lamberton warned that "continuing to take half measures or to do nothing is a mistake."

"Right now, it feels like it's late. But when we look back, historically, taking the action will still have been better than not taking the action," she said. "Consumers are more likely to remember the companies that don't leave rather than the ones that do."

Although it may benefit corporations to curtail operations in Russia, some say companies should take a firmer stance and suspend all business dealings, rather than picking and choosing which ones will continue.

"The half measures raise more questions than they provide answers for," Lamberton said. "Companies that are taking the weaker method are getting a lot of attention for it."

"By staying in the [Russian] market, they still benefit from a cozy relationship with the Putin administration," she explained. "It's a little bit like saying, 'I'm breaking up with my girlfriend, but we still own this really nice house together, so I'm just gonna stay there.' You can understand why that half measures feel a bit disingenuous."

Visa Mastercard Amex Russia
Visa, American Express and Mastercard have all announced they are suspending operations in Russia and credit and debit cards issued by Russian banks will no longer work outside of the country. Pictured, a pile of debit and credit cards from various banking institutions. Matt Cardy/Getty

Business dealings in Russia have become particularly tricky for companies where franchisees are owned and operated by third parties.

For example, Marriott's 28 hotels have continued serving Russians despite the closing of the company's corporate offices. Because they lack legal authority to shut down individual facilities, it is difficult for them to control the operations under their brand names.

While shuttering would be outside their control, Lamberton said "what consumers would want to know is that the company was willing to absorb economic damage because they were taking a position."

Corporations may not need to shut down all operations; if it's out of their hands, what they need to prove to the public is their commitment to helping Ukraine defend its sovereignty.

One way companies can go that extra mile and differentiate themselves from others is to begin making further commitments to the cause.

"They've taken the first step by removing something from their practices. The next best step is to add something positive," Lamberton explained. "If you really care about humanitarian causes, show us that you support them. If you're really concerned about refugees from Ukraine, show that you are supporting them in their process of building a new life."

"The notion about assisting Ukraine is shifting by the day," O'Rourke said. "A couple of weeks ago, donating money to charitable organizations that would bring in goods and services seemed like a good idea...the emphasis has shifted to refugees. Which nations have said they will willingly take them in and which nations are proving it with action?"

"I would say to an executive: If you want to make a difference in somebody's life, sponsor Ukrainian refugees," he added. "Put your money where your promises have been. Show us with action that you care about the outcome here."

Lamberton said companies could also use the opportunity to collaborate with one another. While a packaged goods company might not have experience delivering materials, it could partner with one that has the logistical expertise to support distribution.

McDonald's Russia Sanctions Corporations
Last week, McDonald's announced it would temporarily close 850 locations in Russia. Men walk in front of the McDonald's flagship restaurant at Pushkinskaya Square on March 13, 2022, McDonald's last day in Russia. AFP

O'Rourke said that while the general public may move on after the war ends or forget the current reputation of a company, the decisions that corporations are making right now will continue to have profound impacts on their staff well after a ceasefire comes.

"The risk is not whether people will continue buying from you. There is a risk in whether you can hire and keep good employees. There is a risk to whether you can partner with people," he said. "Your reputation matters. The public at large may forget more quickly, but businesspeople don't easily forget."