The Economist April 2nd 2022 Business 63Warand wokery
J
effrey sonnenfeldis having what he calls a Marshall Mc
Luhan moment—“15 minutes of prominence soon to subside
back into obscurity”. That is because, not long after Vladimir Putin
sent his troops into Ukraine on February 24th, the 68yearold pro
fessor at the Yale School of Management drew up a list of firms
withdrawing from Russia, helping catalyse a stampede out of the
country—470 businesses have closed or cut back operations. His
campaign has generated positive media reviews. It has also put
him under siege from publicrelations types trying to ensure that
the companies they represent do not fall into his “hall of shame”.
The “Ukraine morality test”, as the New York Timescalled it, has
dramatically raised the profile of a man already dubbed the “ceo
whisperer”. Don’t believe it when he talks about returning to ob
scurity, though. He sees the withdrawal from Russia not just as a
virtuous expression of repugnance against Mr Putin’s murderous
regime. It is also a nail in the coffin of globalisation. It would be no
surprise if he leads a ceocrusade against that next.
Mr Sonnenfeld is no stranger to the limelight. Indeed, he has
become the high priest of a belief system in Western business
which he started promoting almost 45 years ago, and which has at
last come into fashion. He calls it business ethics. Its critics deride
it as “woke” (“as if there is something wrong with the past partici
ple of awakening,” he harrumphs). There is nothing too woke
about why Western firms are pulling out of Russia. Some might
call it highminded but in most cases it is inherently pragmatic. It
pleases customers and staff who are outraged by the war, and be
cause Russia is a tiny part of most firms’ global revenues, it is im
material from an investor point of view.
It is a slippery slope, though. Less than a year ago Mr Sonnen
feld was helping whip up scores of ceos in America in a lather
about changes to voting legislation in Georgia and other states. He
has celebrated protests by business leaders over gun safety, immi
gration, climate change and transgender rights. He says that after
the corporate pullout from Russia, his most recent powwow with
chief executives revealed a sharp increase in their concerns about
global supply chains, and a consensus about the need for more
selfreliance. In other words, free trade may be next in line on the
woke agenda. Amid applause for companies’ quick response to
Russian aggression, this ethical mission creep is a worry. Where
do bosses draw the line as arbiters of rights and wrongs?
In an interview with your columnist, Mr Sonnenfeld elaborates
on why he believes Russia’s invasion of Ukraine will mark a shift
in support for globalisation. As he tells it, the era after the fall of
the Berlin Wall engendered a “naive belief” that Westernstyle
capitalism and products like McDonald’s hamburgers would
usher in global harmony. Russia’s aggression has buried that no
tion, he reckons. Asked whether the ceos he talks to want to
change a system that has brought their firms profit, as well as
helping lift parts of the world out of poverty, he says they do not
want the pendulum to swing back completely to isolationism. But
he discerns “diminished enthusiasm for limitless free trade”.
He is not alone in thinking that the war will tilt business opin
ion against globalisation. In his annual letter to shareholders,
Larry Fink, boss of BlackRock, the world’s biggest asset manager,
said on March 24th that he expected it to prompt companies to re
evaluate their supply chains, probably leading them to bring more
of their operations closer to home, even if that means higher costs
and margin pressures. Such sentiments gained ground amid the
SinoAmerican trade war during Donald Trump’s presidency, then
again amid high labour costs and logistical bottlenecks of the co
vid19 pandemic. For the time being, statistics that bear out large
scale reshoring are hard to find. But some anecdotal evidence of it
is popping up.
That may reflect nothing more than business pragmatism in
action. More and better automation helps offset the higher wages
in developed countries while reducing transport costs. As coun
tries divide themselves into opposing camps, with China and Rus
sia on one side and America and Europe on the other, their govern
ments may encourage firms to invest domestically in vital tech
nologies such as semiconductors to bolster security of supply. If
domestic demand for firms’ goods is increasing, or being subsi
dised, it makes sense for them to meet it. Moreover, pressure by
investors to put more focus on environmental, social and gover
nance concerns may spur Western companies to think twice about
having extended supply chains in hardtomonitor places. Autocrats in the c-suite
But when businesses wrap themselves in the flag, rather than
standing up for pragmatism (and profits), things become more
complicated. As bosses are no doubt aware, when pulling out of
Russia, they are leaving the field open to local competitors with no
qualms about supporting Mr Putin’s regime. They are abandoning
Russian employees who may oppose their government. And their
crowdpleasing stance in Russia may help distract attention from
other harmful externalities they are responsible for, such as the
carbon footprints of their businesses. As with all ideological posi
tions, there is a kaleidoscope of ways of looking at them.
Then there is democracy itself. Mr Sonnenfeld argues that
companies are a rare force pressing for social and political change
in Western society today. He sees the corporate campaign against
Mr Putin’s regime in the same light as divestment from South Afri
ca in the 1980s, which he argues helped bring about the end of
apartheid. By being good citizens, firms are upholding and enforc
ing democratic values. Yet the idea of an unrepresentative coterie
of unelected executives making moral choices on behalf of cus
tomers and employees couldundermine faith in democracy, not
shore it up. In a world at riskfrom autocracies like Russia, that
would be a crushing own goal.nSchumpeter
Is cancel culture coming to free trade?