Economic system

Corporate reactions to Russian aggression could sow seeds for a better economic system – Chicago Tribune

Much has been written about trading actions in Russia over the past few weeks. Given the nature of this conflict, others will unfold for years. It is because out of every conflict come the seeds of new orders.

Russia views a democratic and potentially NATO-allied Ukraine as a security issue. Russian President Vladimir Putin dreams of an empire, and Chinese President Xi Jinping would like a partnership to help him achieve his ambitions in Taiwan. There are a lot of tanks, bombs and other cutting powers engaged in this conflict, but underlying it all is the sticky power of the West – the economic system – which aims to strangle Russia and threaten China.

Yet, in addition to sanctions, two important seeds must germinate to simultaneously counter an autocratic economic system and foster a more values-based approach.

The first seed concerns our way of seeing business. The big companies that left Russia are iconic brands. Pepsi, Coca-Cola and McDonald’s are geopolitical entities. When they decide to leave a country, the calculation is based on three elements: the nature of their relationships with employees and customers, and to some extent, suppliers; the impact on reputation, and therefore on profit; and leadership itself.

Leadership matters. While it’s tempting to view companies as for-profit monoliths, leaders make decisions based on their own values ​​and the values ​​of the company’s culture and history, all of which may differ from one company to another. Stakeholders matter. Companies that have left Russia have rightly expressed concern about the well-being of their workforce. Depending on the product they make – for example, drugs that could help relieve suffering – companies have good reason to place significant importance on their customers. Shareholders matter. The potential reputational damage – especially for consumer-branded companies – is a very strong reason for companies to divest themselves of any association with a regime that bombards children’s shelters and hospitals.

Each of these considerations is affected by a given nation-state in a global economy, but goes well beyond that. There is great risk in relying on a nation-state, or even a combination of nation-states, to cultivate the values ​​that generate leadership, concern for at least some key non-shareholder voters, and reputation of the company. In addition to alliances like NATO, we need alliances with the companies themselves, companies that also generate these values.

This leads to the second seed which must germinate. The strategy that promotes work in countries that are willing to crush human rights in the name of profit leads to the tensions we saw in Russia this month. Does this mean companies should avoid Russia, China and others? Well no. Just as liberal democratic values ​​can seep into autocratic countries – which is why they are so threatening to those countries – so can free market concepts, but only if those business practices genuinely uphold the values ​​that promote human rights, voice, gender equity and avoidance of corruption, which runs counter to the values ​​of regimes willing to bomb hospitals.

The way corporations as geopolitical entities do business can not only benefit them, but it can also strengthen alliances for a kind of soft trade that provides an additional bulwark against autocratic efforts to make the system global even darker. This is not to say that the Western shareholder-centric economic system is ideal. I have a career as a professor of business ethics because companies often suck. However, we can envisage the emergence of a kind of soft trade.

These seeds have been sown, and we have seen some germination. As the world endures this current conflict, the hope is that a softer economic system can emerge that stands in opposition to harsher systems – a system that can reform the more problematic edges of our own system.

Timothy L. Fort is the Eveleigh Professor of Business Ethics at Indiana University Kelley School of Business and an Affiliate Fellow at the Kroc Institute for International Peace Studies at the University of Notre Dame. He has written four books on business and peace.

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