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  • Written by Steven Kreft, Clinical Professor of Business Economics and Public Policy, Indiana University
'Great resignation' appears to be hastening the exodus of US and other Western companies from Russia

Companies across the globe are fleeing Russia in an unprecedented display of corporate solidarity with their governments, appalled over the invasion of Ukraine. Over 750 multinational businesses so far have said they’re curtailing, suspending or severing ties to Russia[1], more than triple the number that abandoned South Africa over apartheid[2] in the 1980s.

Many corporate statements announcing the decisions have emphasized humanitarian aspects and unity with the Ukrainian people. For example, Pepsi suspended soda sales in Russia, describing events in Ukraine as “horrific”[3]; Ford Motor Co. cited Russia’s “threats to peace and stability” in pausing operations[4] at its three plants in the country; and Ikea closed its stores[5] there and called the war a “human tragedy.”

Detractors of this type of corporate do-goodery[6] have dismissed it as “virtue signaling,” implying there is an ulterior motive to the grandstanding[7]. As scholars of corporate social responsibility[8], we believe altruism can play a role in corporate decisions like these, but – as virtual signaling suggests – other more profit-focused drivers[9] are usually at work, especially given the stakes when deciding to abandon an entire country.

In this case, the common theme we see for many companies is the “great resignation[10]” – and the fight to attract increasingly picky, younger Gen Z and millennial[11] workers, who say they want to work[12] for socially responsible brands[13].

A white boy with a blue stocking hat and coat looks at a toy tank on a box on a table next to several glass Pepsi bottles
Pepsi, which has been in Russia for over 60 years, suspended soda sales, calling the invasion ‘horrific.’ AP Photo/Alexander Zemlianichenko[14]

A weighty decision

A company’s decision to entirely sever its operations in a country is seldom taken lightly.

In leaving Russia, companies will incur significant costs[15] from abandoning equipment, stores and factories, or even an entire workforce. For example, Exxon said it expected to lose US$4 billion[16] in assets over its decision to exit Russia, while McDonald’s restaurant closures will cost the company $50 million per month[17].

And there’s no knowing when the companies leaving Russia[18] will be able to return – if ever.

Yet that isn’t stopping hundreds of companies from making the difficult decision to back away. Amid their condemnations of the invasion and expressions of solidarity with the Ukrainian people, many companies have also acknowledged clear business-related reasons. Appliance maker Whirlpool cited the security of its workers[19], Japanese automaker Toyota blamed logistical and supply-chain hurdles[20], and video streaming company Netflix said troubles with payment processing[21] will strain operations[22].

Growing power of workers

While these practical reasons, along with the moral concerns, could be enough to drive the exodus, we believe the great resignation, in which record numbers of workers are quitting their jobs, is amplifying all these other risks of staying in Russia.

Roughly 47 million[23] U.S. workers voluntarily left their jobs[24] in 2021, accounting for well over a quarter of the civilian labor force[25], according to the Bureau of Labor Statistics. Over 4.5 million quit in November alone, a single-month record, and nearly that many continued to hand in their notices in early 2022.

It’s not just a U.S. phenomenon. Many other countries are experiencing similarly high rates[26] of workers voluntarily quitting their jobs.

This trend has shifted bargaining power to employees[27], and companies are struggling to acquire skilled workers[28] to fill vacant positions. Employees are demanding higher pay and more benefits[29], and some are rethinking their careers[30] so that their work is more aligned with their values.

Another sign of the shift in power is the recent success of youth-led labor organizing efforts. A growing number of Starbucks locations are becoming unionized, while Amazon got its first U.S.-based union[31] after workers on Staten Island in New York City voted to form one in April 2022. Starbucks[32] and Amazon[33] have both suspended operations in Russia.

Some industries are experiencing especially high employee attrition rates[34], including management consulting[35] and oil and gas[36], according to a recent article in MIT Sloan Management Review. The attrition rate measures how many workers are lost and not replaced over a period of time.

Management consulting, in which a talented workforce is vital[37], for example, saw an attrition rate of 16% over the six-month period researchers looked at, or over five times the national average.

a red sign with white letters reads 'now hiring!'
The number of open positions has exploded as a record share of workers quit their jobs. AP Photo/Matt Rourke[38]

Employees demand solidarity with Ukraine

This is why it wasn’t a surprise to us that companies in these labor-strained industries either were among those that severed ties with Russia or quickly did so after facing criticism from employees.

IT consultant Accenture, with nearly 700,000 employees, seemed to set the tone for what would be expected of companies in its industry when on March 3, 2022, it said it was discontinuing all business in Russia[39].

“Accenture stands with the people of Ukraine and the governments, companies and individuals around the world calling for the immediate end to the unlawful and horrific attack on the people of Ukraine and their freedom,” it wrote.

Competitors McKinsey[40] and Boston Consulting Group[41] initially planned more timid withdrawals by cutting ties with the Russian government but continuing to honor existing private contracts. But after current and former employees of both companies took to social media[42] to call out their perceived soft stance[43] and even cowardice on Russia, the companies quickly reversed[44] course by announcing[45] they were pulling out completely. All the other consulting giants[46] have done the same, including Bain[47], Deloitte[48], EY, KPMG[49] and PwC[50].

The big Western oil companies have similarly faced employee pressure[51] to exit Russia, with workers going so far as to refuse to offload Russian oil and gas onto their docks. This comes on top of governments pushing companies to take steps[52] that go beyond the sanctions. In severing ties, companies such as BP, Shell[53] and Exxon[54] have abandoned significant assets[55] in Russia, which will result in huge losses[56] on their balance sheets.

Short-term costs for long-term gains

But accepting these short-term losses appear to be worth it to avoid larger ones down the road.

Recruiting and retaining a talented workforce[57] is an important driver[58] of a company’s long-term profitability.

Training new workers is costly[59], and the best talent is always hard to recruit[60] – a challenge made worse by the great resignation. Survey[61] after survey[62] has shown workers are increasingly driven by a sense of purpose and expect their companies to reinforce their values[63].

No company that we know of explicitly cited issues related to the great resignation as a driver of its decision to leave Russia. And industries with high attrition rates and vocal workforces such as Big Tech[64] haven’t seen complete withdrawals. In some cases, such as with Apple[65], Alphabet[66] and Meta[67], they’ve suspended some operations but are trying to keep doing business[68] in part because they play important roles in providing free information to Russian citizens to counter Kremlin propaganda[69].

Every company and every industry has its own unique analysis to go through based on exposure to business and reputational risk in Russia. We believe the great resignation compounds this risk, in some cases significantly. And employees are increasingly reporting feeling stressed out[70] over Ukraine.

Russia’s aggression against Ukraine has been condemned almost universally[71] in the West. Given that, many of the companies that severed ties – while sacrificing short-term profits[72] – likely knew that staying would have been far more harmful for their brand[73], not only with customers but their employees as well[74].

[More than 150,000 readers get one of The Conversation’s informative newsletters. Join the list today[75].]

References

  1. ^ curtailing, suspending or severing ties to Russia (som.yale.edu)
  2. ^ abandoned South Africa over apartheid (www.latimes.com)
  3. ^ describing events in Ukraine as “horrific” (www.pepsico.com)
  4. ^ pausing operations (www.nytimes.com)
  5. ^ closed its stores (about.ikea.com)
  6. ^ this type of corporate do-goodery (www.spectator.co.uk)
  7. ^ ulterior motive to the grandstanding (theconversation.com)
  8. ^ scholars of corporate social responsibility (theconversation.com)
  9. ^ profit-focused drivers (www.nytimes.com)
  10. ^ great resignation (theconversation.com)
  11. ^ Gen Z and millennial (www.ypulse.com)
  12. ^ they want to work (www.fastcompany.com)
  13. ^ socially responsible brands (www.zenefits.com)
  14. ^ AP Photo/Alexander Zemlianichenko (newsroom.ap.org)
  15. ^ companies will incur significant costs (www.reuters.com)
  16. ^ expected to lose US$4 billion (www.reuters.com)
  17. ^ McDonald’s restaurant closures will cost the company $50 million per month (www.reuters.com)
  18. ^ companies leaving Russia (www.ft.com)
  19. ^ security of its workers (whirlpoolcorp.com)
  20. ^ logistical and supply-chain hurdles (www.reuters.com)
  21. ^ troubles with payment processing (www.americanbanker.com)
  22. ^ strain operations (www.wsj.com)
  23. ^ Roughly 47 million (www.cnbc.com)
  24. ^ voluntarily left their jobs (fred.stlouisfed.org)
  25. ^ civilian labor force (fred.stlouisfed.org)
  26. ^ are experiencing similarly high rates (www.washingtonpost.com)
  27. ^ shifted bargaining power to employees (www.vox.com)
  28. ^ acquire skilled workers (www.forbes.com)
  29. ^ demanding higher pay and more benefits (www.cnbc.com)
  30. ^ some are rethinking their careers (www.forbes.com)
  31. ^ Amazon got its first U.S.-based union (www.nytimes.com)
  32. ^ Starbucks (www.linkedin.com)
  33. ^ Amazon (www.retaildive.com)
  34. ^ are experiencing especially high employee attrition rates (sloanreview.mit.edu)
  35. ^ management consulting (www.linkedin.com)
  36. ^ oil and gas (hiring.oilandgasjobsearch.com)
  37. ^ talented workforce is vital (www.sourceglobalresearch.com)
  38. ^ AP Photo/Matt Rourke (newsroom.ap.org)
  39. ^ discontinuing all business in Russia (newsroom.accenture.com)
  40. ^ McKinsey (www.mckinsey.com)
  41. ^ Boston Consulting Group (www.bcg.com)
  42. ^ social media (www.linkedin.com)
  43. ^ call out their perceived soft stance (www.bloomberg.com)
  44. ^ companies quickly reversed (www.consulting.us)
  45. ^ announcing (www.mckinsey.com)
  46. ^ All the other consulting giants (www.wsj.com)
  47. ^ Bain (www.linkedin.com)
  48. ^ Deloitte (www2.deloitte.com)
  49. ^ KPMG (home.kpmg)
  50. ^ PwC (www.pwc.com)
  51. ^ faced employee pressure (oilprice.com)
  52. ^ pushing companies to take steps (www.wsj.com)
  53. ^ Shell (www.reuters.com)
  54. ^ Exxon (corporate.exxonmobil.com)
  55. ^ abandoned significant assets (www.forbes.com)
  56. ^ huge losses (www.npr.org)
  57. ^ Recruiting and retaining a talented workforce (doi.org)
  58. ^ is an important driver (www.blackrock.com)
  59. ^ Training new workers is costly (www.statista.com)
  60. ^ best talent is always hard to recruit (trainingindustry.com)
  61. ^ Survey (assets.ey.com)
  62. ^ survey (www.porternovelli.com)
  63. ^ reinforce their values (doi.org)
  64. ^ Big Tech (www.nytimes.com)
  65. ^ Apple (www.cnbc.com)
  66. ^ Alphabet (www.reuters.com)
  67. ^ Meta (about.fb.com)
  68. ^ but are trying to keep doing business (www.nytimes.com)
  69. ^ Kremlin propaganda (www.voanews.com)
  70. ^ reporting feeling stressed out (fortune.com)
  71. ^ has been condemned almost universally (www.cnbc.com)
  72. ^ sacrificing short-term profits (www.nytimes.com)
  73. ^ far more harmful for their brand (corpgov.law.harvard.edu)
  74. ^ but their employees as well (www.forbes.com)
  75. ^ Join the list today (memberservices.theconversation.com)

Authors: Steven Kreft, Clinical Professor of Business Economics and Public Policy, Indiana University

Read more https://theconversation.com/great-resignation-appears-to-be-hastening-the-exodus-of-us-and-other-western-companies-from-russia-180741

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