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THE VIRAL LIST THAT TURNED A YALE PROFESSOR INTO AN ENEMY OF THE RUSSIAN STATE
Jeffrey Sonnenfeld has assigned grades to 1,400 companies and, in the process,
highlighted the economic costs of sanctions.
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By Robb Mandelbaum
December 6, 2022 at 8:00 AM EST
Updated on
December 6, 2022 at 11:29 AM EST
Jeffrey Sonnenfeld woke up to a bit of encouraging news one day last summer: He
was officially an enemy of the state. The Russian state, that is. A professor at
Yale University’s School of Management, he had inserted himself into that
country’s war with Ukraine by creating a global list of foreign companies that
trade in Russia. Sorted by the extent to which businesses have retreated Russia
since its invasion, the list assigns grades to almost 1,400 of them, from an A
for complete withdrawal to an F for what Sonnenfeld calls “digging in.” His
directory quickly became a cudgel against companies stubbornly holding fast and
counting their rubles—and a long stick to poke the Russian bear. It’s also
elevated a mild-mannered business professor famous in management circles into an
unusually influential role in the campaign to bring President Vladmir Putin’s
would-be resurrected Russian Empire to heel.
Now Sonnenfeld found himself among 25 American policymakers and academics added
to a Russian “stop list” who are barred from entering the country. First Lady
Jill Biden led the list, but Sonnenfeld notes, with a wry smile, that as the
sixth name, “I’m higher than Mitch McConnell.”
Sonnenfeld is careful not to explicitly articulate a point of view on whether
companies should stay in or leave Russia, but his work speaks for itself. “Our
position isn’t overtly one about advocacy,” he says—just before acknowledging,
with a slight laugh, that “it might subtly be so, when you’re listing companies
and grading them.” In conversation, he calls the executives who’ve pulled out of
Russia “courageous.”
Expand
SonnenfeldPhotographer: Mike Marsland/Yale
In 45 years of investigating corporate management, Sonnenfeld has gone from
observer to intermediary, bringing leaders from business, politics and other
arenas together at his Chief Executive Leadership Institute and his frequent CEO
conferences, for leaders in business and beyond. He convenes annual meetings for
mayors and university presidents. He’s advised thousands of C-suiters over the
decades across the spectrum of management challenges, yet he’s built his brand
in social responsibility. After the Chinese government imprisoned journalist Rui
Chenggang in 2014, Sonnenfeld pressed the dissident’s case with Chinese
executives and leaders of the World Economic Forum.
“I did not know when I was in solitary confinement, or in the gulag,” says Rui,
who served six-and-a-half years in prison. “But after I got back to Beijing, I
learned that Jeff had the courage and integrity to demand answers on numerous
occasions.”
Sonnenfeld played a pivotal role in organizing corporate CEOs to oppose Donald
Trump’s attempt to claim victory in the 2020 presidential election. “I had maybe
30 CEOs trying to reach me at the same time,” he says. “Each one of them would
think, ‘Well, you know, I am the CEO of the world’s second-largest media
company, I think you’ll take my call’—except I had the No. 1 media company and
the No. 3 already on the phone. I tried to merge them in, and I hit the limits.”
But in the days after Russia’s invasion of Ukraine, it was Sonnenfeld who
reached out. He watched as US businesses started withdrawing from Russia and
noticed an unconventional pattern. The first movers weren’t consumer brands
sensitive to public sentiment but businesses with good reasons to stay—oil
giants with complex local ties and huge sunk costs, tech companies wary of the
political complications and professional firms that hate to offend their
clients. “I just wanted to understand why they were doing it and what was likely
to happen next,” he says.
WHO’S STILL TRADING WITH RUSSIA—AND WHO’S BACKING AWAY
Companies on the Yale CELI list by country and state of operations in Russia
Source: Yale School of Management, as of Nov. 28
Countries with 10 or more companies on the list shown
After talking to a dozen CEOs, Sonnenfeld learned that professional and tech
companies responded to employee pressure to take a stand over concerns about
social responsibility. And oil company leaders could see starkly how their
business would directly fund Putin’s war. But the execs fumed that the media
hadn’t sufficiently acknowledged the difference between what they’d done and the
companies that merely sent their thoughts and prayers to the Ukrainian people
while clinging to the Russian market. “It’s demoralizing to the people who
really put something at risk. Like, why bother?” says Sonnenfeld. “So we wanted
to separate out the fraudsters.”
Sonnenfeld and his institute’s research director, a recent Yale grad named
Steven Tian, immediately began sorting through the 500 largest US companies and
checking for statements of intentions from those with Russian investments. “If
companies said they were leaving, that was the next best thing to actually
leaving,” Sonnenfeld says. “What was very damaging to Putin is the statement of
disdain of companies saying, ‘We’re pulling out because of this war.’ ” It
helped that Sonnenfeld, besides his expansive Rolodex, has a photographic memory
and a talent for multitasking. “Even as he was teaching,” says Tian, “he
literally kept on sending me emails like, ‘Do you think this company should be
exiting Russia or not exiting Russia?’ ”
Around the beginning of March, just days after Russian troops poured across the
border and Russian missiles assailed Ukrainian cities, Sonnenfeld posted online
the first version of his list, naming a few dozen companies that had pulled out.
By Sunday, March 6, the list had grown to 200 departing companies, and 30 that
chose to remain in Russia. On March 7, Sonnenfeld published a commentary on
Fortune.com that called out McDonald’s Corp. and several other prominent
companies staying put—then singled out the fast-food giant again later that day
in a two-minute riff on CNBC. The following day, McDonald’s announced it would
temporarily close its 847 Russian locations and “pause” all operations in the
country. In mid-May, it pledged to withdraw from Russia entirely, writing off
about $1.3 billion in assets there.
On March 9 alone, almost 300,000 people discovered Sonnenfeld’s list. Dozens of
volunteers were lining up to help him uncover foreign companies’ Russian
connections: current students, graduates who’d burrowed into highly specialized
sectors of finance, people he’d never met from Eastern Europe and Russia.
Company insiders leaked information. The American property insurer FM Global,
for one, found itself on the wrong side of the list partly because an employee
sent Sonnenfeld the names of 192 of its Russian reinsurance clients.
Over the next two months, Sonnenfeld’s tally of companies went global,
ballooning to more than a thousand, and became more nuanced, as Sonnenfeld
realized that there were degrees to withdrawing—as well as ways to pretend to
withdraw. Lawyer friends suggested that he add a “Buying Time” category for
companies pledging little more than forgoing often-vague future investments in
Russia, as FM Global eventually did, when it announced it would no longer write
or renew reinsurance contracts for Russian insurers. (The insurer declined
further comment.) In late March, when Sonnenfeld assigned the letter grades to
each category, “Buying Time” became a D.
To date, the list has drawn almost 3 million unique page views—including some
from C-suites. CEOs, says Sonnenfeld, like to know what other CEOs are doing;
the list allows them to benchmark their actions in Russia against their peers’.
Robert Zoellick, the veteran Republican economic hand and former World Bank
president, says he admires Sonnenfeld’s work. “I tell business executives that
they should pay attention to it—customers and employees do,” says Zoellick, now
a senior counselor at global affairs consultant Brunswick Group. “I don’t know
of anyone who has been critical.”
Journalists have mined the list to call attention to local companies or
businesses in their trade that were persisting in Russia. Activists sympathetic
to Ukraine have used the list to pressure executives at those companies.
A handful of companies have publicly challenged their place on the list. Early
in April, for instance, newly anointed Hertz Global Holdings, Inc. CEO Stephen
Scherr appeared on CNBC, where host Andrew Ross Sorkin asked him about Hertz’s F
grade for operating at several Russian airports. Scherr disputed Sorkin’s
characterization. “We have withdrawn,” he told the host, “and have not been
taking reservations in Russia.”
Sonnenfeld promptly pulled Hertz from the “Digging In” category and moved it to
Withdrawal, the A grade. That summer, he quietly arranged a meeting with Scherr.
Sonnenfeld and his collaborators shared instances of Hertz’s former agent in
Russia still using the company’s signature black-on-yellow logo and Hertz
advertising on Russian websites uncovered by NewsGuard, the online
misinformation tracker founded by Steven Brill and Gordon Crovitz.
Hertz spokeswoman Lauren Luster says the company had a very small presence in
Russia, through a local rental car agency, before the invasion, and stopped
advertising and taking reservations there on March 2. “We welcomed Mr.
Sonnenfeld’s input,” she says, which “helped prevent the further, unauthorized
use of the Hertz brand in Russia.”
Says Sonnenfeld: “The reason we keep turning the stone over, it has got to be
right.” He claims that since the list was created, lawyers for 22 companies have
sent threatening letters, but all backed down in the face of the evidence his
team mustered.
In May, anticipating a different line of attack, this time from right-wing
pundits who might accuse withdrawing CEOs of being “woke” at shareholders’
expense, the team began crunching numbers. They found that the markets quickly
rewarded businesses announcing a Russia exit. Public companies tended to see
their stock prices rise; their private counterparts paid less interest on new
debt. “We had such a large database of 1,300 companies,” says Sonnenfeld, “we
could show [it] without a lot of complicated statistical gymnastics. These
companies made an announcement, and then right away something happened to their
stock price.”
The researchers then examined the toll the business withdrawals and sanctions
have taken on the Russian economy. They claim Russia’s commodity exports and
imports of finished goods and components have all plummeted, devastating
domestic production and consumption. Russian gas deliveries to Europe dropped by
more than 60% from June 2021 to June 2022; by May, the country’s monthly motor
vehicle production had fallen three-quarters from the previous May. Only a
heavy-handed, and ultimately unsustainable, government intervention in the
economy, they argue, has staved off complete collapse.
Today, Sonnenfeld has become a sort of unofficial ambassador for the sanctions
regime. The analysis his team published in late July has been downloaded almost
100,000 times, making it the ninth most popular ever posted to SSRN, the giant
academic research paper data bank, in its 28 years. Every week, Sonnenfeld
accepts several invitations to speak to academic and elite economic and
political organizations around the world, including the US Congress and State
and Treasury Departments. In October, he hosted Volodymyr Zelenskiy at a
videoconference at Yale. (This was the Ukrainian president’s second video
appearance with Sonnenfeld; Zelenskiy accepted a “Legend in Leadership” award
from Sonnenfeld’s institute in June.)
But Sonnenfeld has set his sights on other targets. After Saudi Arabia pushed
OPEC to cut oil production in October—a move that he, like many other observers,
believes is meant to prop up inefficient Russian production and prices—he began
investigating US arms transfers to the kingdom. Two days after the decision, on
a Friday night, Sonnenfeld persuaded Senator Richard Blumenthal of Connecticut
and Representative Ro Khanna of California to jointly sponsor a bill to block
those transfers for a year. Although both are Democrats, the men “never had one
word in common with each other,” says Sonnenfeld. “I just said, ‘Look, I think
you’re both interested in the same topic here.’ ” So he merged the two of them
into a conference call.
The following Tuesday, Blumenthal introduced the legislation in the Senate.
(Updates to include additional details in paragraphs 9, 11, 12, 16, 17, 21, 22.)
LinkCopy Link
Robb Mandelbaum writes for Bloomberg.
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