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Arrow Up +2.83% MCDONALDS CORP 292.42USD Arrow Down –0.85% LEADERSHIP INSTI Private Company Have a confidential tip for our reporters? Get in Touch Before it’s here, it’s on the Bloomberg Terminal Bloomberg Terminal LEARN MORE FacebookTwitterLinkedInEmailLink Gift 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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