The War in Ukraine: Leadership and social responsibility in times of crisis
If business leaders do not make the tough decisions in a time of crisis what could the consequences be for both their reputation and finances?
The question presumes that reputation and finances go hand in hand, but often, in the shorter term at least, they do not. Regarding social or environmental responsibility, citizens increasingly expect business leaders to make tough decisions. These decisions may benefit their reputation, but often, it is at the expense of profits. This is also the case in terms of the climate crisis as well as the current war in Ukraine. At the moment, the energy company Ørsted is getting a lot of attention, because they have not yet terminated their contract with Russian Gazprom. Terminating the contract would, however, result in a huge loss of profits, not least because it is also about infrastructure, which makes it a really complicated challenge. So, it is really difficult for them to make that tough decision. But if they don’t do it, even with or without political backing for support, it may damage their reputation, because citizens increasingly expect them to make these tough decisions.
Citizens expect the business community to take additional steps regarding social responsibility that goes beyond the legal – what are these steps?
In many ways this has to do with citizens’ disillusionment with parliamentarian politics and their sense of failure when politicians do not have the courage or the will to act adequately, especially in relation to the climate crisis. Specifically, in relation to the war in Ukraine, citizens may want politicians to support Ørsted in ending their contract with Gazprom. But if politicians fail to do so, citizens will maybe expect Ørsted to end the contract anyway, even though it is a complicated case. In much the same way, citizens are frustrated with politicians who do not do enough to alleviate the climate crisis. Instead, we place our hopes in companies. We hope that they will go beyond the legal, because when the legal is not enough, we seek to place hope elsewhere. If we lose hope, we become apathetic.
How do multinationals balance their leadership towards the local workforce and the global community?
The really cynical answer is that it depends on what the local is or who the locals are. Because when the locals are in the Global North, they matter more from the perspective of many multinational corporations, because locals in the Global North are more privileged in the sense that it is easier for them to gain visibility and have a voice. For locals in frontline communities in the Global South, it can be more difficult to gain representation and to have a voice that is heard globally.
How do you stand up for your decisions when hard decisions need to be made? What affect could this have on your shareholders and employees?
Increasingly, it is about making the right decisions in societal and moral terms even if it may be at the expense of profit, especially in the shorter term. This is increasingly the case, even for shareholders. Previously, we have seen shareholders mainly having short term financial interests, in contrast to, for example, civil society stakeholders. Yet, increasingly, we are seeing shareholders as well as employees expressing societal and moral concerns, expecting companies to make those tough decisions, even when it is at the expense of profit, at least in the shorter term. Of course, there are so many things that can happen in this war that we just cannot foresee. But for companies, their reputation matters and, ultimately, it may also influence their profits.
Do the public like companies that have principles?
The public increasingly expect companies to have moral principles. Shareholders know this. They also know that share prices often go up and down quickly. So, long term investors such as pension funds are not likely to react to short term profit losses. By way of example, this is what we are seeing with investments in energy and technologies for a green transition. So, certain key shareholders would want companies to have principles and stick to them.
In relation to digital media and criticism, there will be criticism whatever companies do when they make tough decisions. But this also fades out. In many ways, we forget quickly, surprisingly quickly. But the Internet remembers. The next time there is a crisis, and if you did not make the right decision last time, it will re-emerge, and we will be reminded. And if companies try to contain or remove criticism, someone somewhere will have saved a screenshot and that screenshot will re-emerge as memes and so on. So, you have to make the right decisions, you have to do it swiftly and you have to stick to them. Then you need to trust that in the long term, shareholders would want you to have made the right decision. Or you have to insist on contributing positively to society regardless of profits.
To read relevant research articles from Associate Professor Julie Uldam:
Vestergaard, A., & Uldam, J. (2022). Legitimacy and cosmopolitanism: Online public debates on (corporate) responsibility. Journal of Business Ethics, 176(2), 227-240.
Gulbrandsen, I. T., Just, S. N., & Uldam, J. (2022). S (t) imulating resistance: Corporate responses to the Trump presidency. Organization, 1350508420939225.