Boycott mechanics – Kommersant newspaper No. 242 (7443) dated 12/28/2022

Despite the widespread belief that the exit of Western companies from the Russian market in the spring and summer of 2022 was mainly due to business reasons, three well-known American economists – Oliver Hart, David Tesmar and Luigi Zingales – suggest that the underlying reason for what is happening is a potential public pressure on companies. A complex survey-experiment in the summer of 2022 shows that private sanctions against the Russian Federation are based mainly on ethical motives, in which it is difficult to separate adherence to beliefs and intention to act. Globalization has the potential to increase the effectiveness and future prevalence of private sanctions, in which companies behave rationally but outside the concept of profit maximization.

A preprint of “Private Sanctions” by Oliver Hart (Harvard), David Tesmar (MIT, Sloan Business School) and Luigi Zingales (University of Chicago Booth Business School) was published in December in the NBER series. The article analyzes an experiment-study conducted for the authors by Respondi on a representative sample of the US population, in which, during a sociological survey in May-June 2022, the reaction of society in the United States to the withdrawal of foreign companies from the Russian market after Russia began a military operation on Ukraine.

The exit of Western companies from Russia is unique in itself (research on the closest analogue, the boycott of the apartheid regime in South Africa, has been limited, and it is remote in time, scale and context), and there are already several studies by economists studying this phenomenon. The conclusions in these 2022 texts are contradictory: Li Huang and his colleagues, as well as Alan Beatty, came to conclusions about the purely economic motivation of departing companies, Anette Pajuste and Anna Toviolo showed examples of “moral laundering” (woke-washing) of company management in this process. Huang and colleagues assumed that the capitalization of companies during the withdrawal from the Russian Federation did not suffer – in this sense, the exit can be considered as its protection. In general, most of the authors proposed an analysis of the capitalization risks of exiting companies as a mechanism and studied their correlations with the ESG metrics of such actions.

Hart, Tesmar, and Zingales explored the process in a much more sophisticated way, instead of motivating real managers, employees, and shareholders of companies, by modeling the reaction of society in the United States in this situation: in their survey, 61% of respondents (who in the experimental part of the surveys were asked to choose the role of shareholder, employee, or consumer for a company that decides to leave or not leave Russia in the circumstances of the military operation in Ukraine) stated that companies should leave the Russian Federation regardless of the economic consequences, and only 37% believed that the decision should be purely economic.

The intention of 66% of respondents to boycott a company that refused to leave the Russian market, demonstrated by the authors, was studied by Hart and colleagues from the point of view of real motives. The desire for a boycott turned out to be quite stable, 43% of respondents were ready to lose their personal $500 during such a boycott, 53% – $100. At the same time, the researchers were unable to separate purely moral (deontological) motives from the intentions of making a contribution and obtaining a result (consequential): the first motive prevails, but both of these motives are mixed, since the desire of the respondents to “act despite the consequences” correlates with their belief that the boycott will be effective — this is typically politically motivated, and only 30% of respondents in the US sample believed that sanctions should be the business of governments alone.

The identified “moral” motivations for leaving the Russian Federation most strongly coincide with the motivations of shareholders, and not employees or consumers of companies. Hart and colleagues state that private sanctions of this kind, based on the results of the study, will play an important role in world trade and segment, including in the United States, domestic markets – and in the future they can lead to convergence of business and politics in the same scenario. From the point of view of the authors, the results of the research show that neoclassical economic explanations for the situation in which companies act to maximize profits do not work in this case – at least in the United States, the population considers companies, among other things, as a tool to achieve goals other than “pure” welfare.

Dmitry Butrin