Corporations take credit for leaving Russia with dubious evidence

Oliver Bullough



As corporations lined up to pull out of Russia back in the spring, they made sure to issue press releases to reap as much credit from it as they could. Operating in Russia was not “consistent with McDonald’s value;” Coca-Cola’s “hearts are with the people who are enduring unconscionable effects from these tragic events in Ukraine;” British-American tobacco prides itself “on our values and our ethos;” “Fast Retailing is strongly against any acts of hostility.” Etc, etc, etc.

There’s a problem with this: the PR boost from the press release only lasts for a day or two, but the drop in revenues is forever. Values can be annoyingly expensive, and there has to be a temptation to sneak back when no one’s paying attention.

So, I’m intrigued by the idea behind the Moral Rating Agency, which apparently aims to assess to what extent companies are actually living up to their promises, by rating them on a scale from “Sprinting Boycotter with Power” to “Shameless failing to use its power.”

  • “The goal is to provide consumers, shareholders, and the media with transparent information on corporate behavior so they can boycott companies’ brands and shares, in order in turn to cause companies to boycott Russia while governments are failing to force them to do so,” it says.
  • “The companies don’t just fail to exit properly. They often also exaggerate or spin up their paltry efforts. Russia is such a hot potato that companies are ‘moralwashing’ to hide their inaction or incomplete action. And, when they do admit to keeping an activity going, they are masterful at coming up with excuses. I wish they would spend as much energy leaving Russia completely as they spend pretending that they already have,” said founder Mark Dixon, who previously founded Breaking Views.

Full disclosure, I know nothing about these people, but Dixon is right that there is a problem with how difficult it is to keep track of how well companies are living up to their professed values, and it would be good if rating agencies could find a way to assess them in the same way they do for creditworthiness.

Businessweek published a superb investigation at the end of last year about the most widely-used index of “Environmental, Social and Governance” performance, which revealed that – for example – companies’ record on climate change is not considered relevant in how a company is ranked, since that doesn’t pose any risk to its profitability. This has left a lot of people, including me, completely baffled by what an ESG rating actually means.

  • “Criteria such as these explain why almost 90% of the stocks in the S&P 500 have wound up in ESG funds built with MSCI’s ratings. What does sustainable mean if it applies to almost every company in a representative sample of the U.S. economy?” the article asked.

There are good examples of organizations producing valuable research on how well companies behave. The Fair Tax Mark is a particularly good one. It is earned by companies that not only stick to the letter of the law, but which actually follow its spirit.

  • “Tax contributions are a key part of the positive social and economic impact made by business  helping the communities in which they operate to deliver valuable public services and to build the infrastructure that allows business to thrive,” it states.

The issue of course is that this is not a very profitable business model, for the rating organization. No one’s going to bother to get a rating if complying with it costs them too much money. As the credit rating agencies revealed in the 2007-8 financial crisis, if you stop giving good ratings to bonds, then the companies issuing them will take their business somewhere else. So, the Moral Rating Agency’s challenge is to find a way to be honest about companies’ behavior, while also covering its costs. I have no idea if it will manage to do this, but at the time of writing, its crowdfunder has raised precisely zero pounds, which is a worrying sign.

However, boycotting Russia is as important as ever. Russia is not China, and its government has been focused on stealing stuff, murdering its neighbors and staging sporting tournaments for the last three decades, rather than on building up genuine homegrown alternatives to major Western products. So, if we can cut it off from the financial system, the tech architecture, and consumer goods, we can inflict genuine pain on the Kremlin. It’s worth noting that two of the companies the Moral Rating Agency rates highly are Alphabet (which owns Google) and Amazon, and software is one area which sanctions are beginning to bite. According to this article from Bloomberg, Microsoft will be gone in August too.

  • “Russian analogues in this area are much weaker and the need is high,” said Elena Semenovskaya, a Russia-focused analyst at IDC. “But for now the approach is to rely on piracy and outdated copies, which is a dead-end and not sustainable.”


Interesting news from Canada, where the government has passed legislation to simplify efforts to confiscate frozen Russian property.

  • “We think it’s really important to extend our legal authorities because it’s going to be really, really important to find the money to rebuild Ukraine,” Finance Minister Chrystia Freeland told Canadian and American reporters. “I can think of no more appropriate source of that funding than confiscated Russian assets.”

Well done, Chrystia Freeland, but there is a long journey from legislation being passed to legislation being in any way useful for achieving the goals set out for it. And to see that, let’s cross the Atlantic to the U.K. Shortly after Putin invaded Ukraine, the British government rushed through measures to impose transparency on the “beneficial ownership” of top-end real estate. This is important, because oligarchs have spent years stashing their stolen money in London property, while hiding their identities behind shell companies in tax havens. Exposing the ownership of the shell companies would (theoretically) allow us to see what oligarchs own!

We can now see the detail of the proposals, thanks to a blog post from Companies House, the U.K. corporate registry which will be implementing the measures, and it’s … not great.

A confused reader of the post asked whether, if the owner of the shell company was another shell company, that second shell company would also have to declare its owner: “if you’re asking, if the beneficial owner is an entity whether they need to provide details of the beneficial owners of that entity – then the answer is no.”

So, oligarchs, if you want to defang the U.K.’s signature post-invasion anti-oligarch achievement, all you need to do is own your shell company with another shell company, which you’re probably doing anyway. Yay. A separate point of course is there hasn’t been enough money made available to enforce the law anyway, which coincidentally also negates various reforms made to the Unexplained Wealth Order system in the same piece of legislation.

  • “The UWO regime was welcomed at the time of introduction but hasn’t packed the punch expected. Widening the net will do nothing in terms of having more successful UWOs. The Government haven’t dealt with the issues within the Prosecuting Authorities at ground level. Funding is their ultimate issue. Until that is resolved adding more tools to the toolbox fixes nothing,” as lawyer Lauren Bowkett makes clear.

Funding Is the Ultimate Issue. I might have that written on a t-shirt. I hope you’re not as bored with me going on about this as I am with the fact that I have to keep saying it.

If those oligarchs are looking for a good place for a shell company by the way, it turns out Ireland has been taking up much of the slack caused by Scotland’s, er, reputational difficulties.


I went to see Richard Beard talking about his book Sad Little Men: how public schools failed Britain at the Hay Festival a month ago and picked it up this week mainly because it was shorter than the other books gazing balefully at me from my “to read” shelf. Slightly to my surprise, I’m finding it very moving. It’s beautifully written, both witty and furious, and full of insights into the harm that sending kids off to boarding school too young does to their ability to connect with other people in a human way. I’m halfway through and think I’m going to end up with some important insights into how my home country works.