In 1990, the Soviet Union was about to dissolve, ushering in a new era at the close of the Cold War. It was then McDonalds, one to the most obvious symbols of Western capitalism, decided to open its first Russian store. Russians lined up in the thousands to get their first taste of a Big Mac. It wasn’t that Russians were anxious to embrace western ways. Instead, it was about finally having an experience that had previously been unavailable to them. Now, some 32 years later, McDonalds has decided to sell all its Russian stores. And the impact this may have on Russia today goes far beyond the loss of a hamburger.
The effect of political actions on business choices is easily recognizable. Some 600 companies have decided to suspend services in Russia since the Ukrainian invasion. At the same time, business decisions affect politics in major ways as well. This is especially true in a globally, interconnected world with hundreds of multinational corporations. But the magnitude of these impacts is just beginning to be realized in the aftermath of a global pandemic and humanitarian crisis. Both politics and business choices can affect the final outcomes when the dust settles. That’s why it’s important that businesses make decisions wisely and thoughtfully as these crises continue.
“The humanitarian crisis caused by the war in Ukraine, and the precipitating unpredictable operating environment, have led McDonald’s to conclude that continued ownership of the business in Russia is no longer tenable.” – McDonalds Corporation company statement
The Repercussions of Political Actions
Russia’s decision to attack Ukraine is rather complex and results from developments occurring over many decades. Nonetheless, the unprovoked attack resulted in hundreds if not thousands of civilian casualties. And the effect of political actions on business choices has been substantial. In addition to government responses, major companies decided to pull out of Russia altogether. Notably, these business decisions affect politics in a significant way. In fact, Russia is already feeling the economic impacts of these new world developments. And it may soon be feeling the social effects within its country as well.
According to some analysist, the unemployment rate in Russia could rise from 4% to 7.5% in a short time. In essence, this would be comparable to the country’s unemployment rate in the Recession of 2009. In addition, Russia pays unemployed workers 67% of their salary if unemployment results from a company decision. With hundreds of thousands at risk for losing their jobs, this would force Russia to rethink its position. This is how business decisions affect politics from an economic perspective. Of course, no one anticipates that these developments would be enough for Russia to change course. But it does highlight how the effects of political actions on business choices result in challenging situations.
“We have a commitment to our global community and must remain steadfast in our values. And our commitment to our values means that we can no longer keep the Arches shining there.” – Chris Kempczinski, CEO of McDonalds Corporation
Business Values and Political Influences
The effect of political actions on business choices is often multifactorial. At one level, corporations must negotiate logistics and changes in supply chains affected by new policies. These issues affect business operations and secondarily profits. Therefore, they will notably influence business decisions as well. But these are not the only effect of political actions on business choices. Many companies, including McDonalds, made the decision to leave Russia due to their value systems. This is important because these business decisions affect politics and social attitudes greatly. This is likely to be the case in Russia as time evolves.
While recently unemployed Russian workers can fall back on government supplements, many aren’t having to do so. Companies like McDonalds have made the decision to continue to pay worker salaries for now event though they’re shut down. In essence, the effect of political actions on business choices were aimed at affecting Russia economically. But this was not intended to target individuals who had supported the company. As a result, McDonalds employees recognize the company values in place despite the decision to leave the country. This will make it more difficult for Russia to blame companies like McDonalds for ill effects. This is how business decisions affect politics by espousing corporate values that align with those of the people.
“There’s just this sickening feeling that [Russia is] going to go back, not to the 1990s, but to the 1970s when [Russians] didn’t have access to these things, and when you were living isolated from the rest of the world.” – Angela Stent, Georgetown University Professor and former National Intelligence Council officer
The Expanding View of Corporate Social Responsibility
For some companies, corporate social responsibility has become a buzzword for sustainability and charity work. While these are important responsibilities that business may have, they no longer encompass the entirety of corporate social responsibility today. As the effect of political actions on business choices grow, corporations must consider their options in greater depth. Because business decisions affect politics, companies can also play an important role in advocating specific values. In the process, they can influence the policies countries around the globe consider moving forward. This is precisely what companies like McDonalds and others are doing in regard to the Ukrainian crisis.
Critics may suggest that McDonalds plans to exit Russia have little to do with values and much to do with operations. Without a doubt, the company has faced numerous setbacks in its operations in Russia since the Ukrainian crisis began. At the same time, however, experts estimate the departure will cost McDonalds about $1.4 billion in total. Thus, it’s hard to suggest that profits and logistics alone are driving this choice. The effect of political actions on business choices for the corporation extend beyond routine business considerations. Values are playing a significant part in the decision-making process as they are for other companies. Naturally, the hope is that business decisions affect politics in a positive way. But even if these effects are limited or even nonexistent, corporations like McDonalds can be proud that they took a valued approach. And in the long run, this is what customers will remember, including those no longer served in Russia.