Corporate Response to the War in Ukraine: Stakeholder Governance or Stakeholder Pressure?







After six months of War in Ukraine more and more Business Professionals think about the corporate response to the Russian invasion of Ukraine in the framework of  the stakeholder capitalism debate.  The following article of Anete Pajuste, Stockholm School of Economics, and Anna Toniolo, Harvard Law School, investigates the subject empirically.

Some call the decision of corporate leaders to withdraw from Russia an example of stakeholder governance, claiming that they put social responsibility above profit. Others question the genuineness of corporate support for Ukraine, arguing that companies left Russia primarily for operational and reputational reasons. Against this background, an empirical study was conducted on the reactions of companies from the S&P500 and STOXX600 indices to the outbreak of war. It was investigated whether managers indeed decided mainly on ethical and moral grounds or whether there might have been another possible channel. In particular, the study focuses on evaluating the role of pressure that stakeholders exerted on companies to leave Russia.

Overall, the evidence presented in this study suggests that corporate leaders tend to promote stakeholder interests when faced with potential reputational damage that could impact shareholder wealth or when it is a good marketing move, so-called "woke-washing." The analysis also supports and reinforces the view that stakeholder pressure can successfully influence companies' decision to pursue certain social goals rather than just profits. However, the studys‘ results make it clear that size matters in the debate over stakeholder capitalism.

Source: ECGI (European Corporate Governance Institute), Professor Anete Pajuste, Research Member, Stockholm School of Economics (Riga) & Anna Toniolo, Harvard Law School, August 22, 2022