You Must Remember This

15 March 2022

What we are all seeing unfold as Russia pounds Ukraine is heart breaking, humbling and, for many, simply incomprehensible. How can a regime, a human being, be so cruel and so callous?

We have made the mistake in the West, of course, of equating a rise in sophistication, wealth, social awareness and global interconnectedness with a decline in appetite for “traditional” warfare.

We assume the best of people because it’s nicer and easier - and we discount the bad. Should we not have had a sharper eye on the danger for Ukraine after events such as the incursion into Georgia, the annexation of Crimea and the tragic shooting down of MH 17?

So, the appalling events in Ukraine are a terrible reminder that our comfortable Western lives can still be shaken to their core by dictators willing to deploy brutal force to secure their ends. We had the naivety, or maybe the arrogance, to think that what happened in Syria could not happen in Europe.

At the same time we should be inspired by the bravery and kindness we see in Ukraine and all around - like the English woman who dropped everything and flew to Poland to spend the night standing on the Ukrainian border in the snow waiting to collect the young children of her Ukrainian friend and bring them to safety in the UK. Or the German lady who hired a 40-seater bus and gathered up desperate Ukrainian women and children to take them to safety.

We must remember this, the bad and the good, as we contemplate the kind of future which our children may have and do our best to shape a better tomorrow.

The fundamental things apply, as time goes by.

This shock of aggression is literally turning the world upside down. Aside from the horrific price being paid by the people of Ukraine, it is radically reshaping Government thinking around defence (look at Germany’s volte face on strategy and spending) and around “rational behaviour”.

It is also of course having a profound impact on the business world. It brings different perspectives to values, the discharge of directors’ duties, ESG, risk and leadership.


BP’s decision early in the crisis to exit its 19.75% shareholding in Rosneft was striking. Whist some commentators said that the move was overdue, it will nonetheless involve a non-cash charge of up to $25billion - so the economic cost is not negligible. Bernard Looney, the CEO, explained that it was the “right thing to do” and “in the long-term interests of BP”.

Since then, hundreds of businesses have announced that they are cutting ties with Russia - from other energy firms (Shell, Equinor), to big consumer brands (Disney, Apple, Adidas), to luxury brands (Chanel, LVMH) to financial institutions (Visa, MasterCard, Deutsche Bank). A raft of professional service firms, such as PwC and Linklaters, are also pulling out.

For many this is not an easy step to take, given the nature and extent of the underlying business in Russia. The CEO of McDonalds, which is closing its 850 restaurants in Russia (but continuing to pay its 62,000 employees there), described the dilemma of how to respond to the situation as “extraordinarily challenging for a global brand”. Business leaders have had a many facetted challenge.

I would draw two themes out of this exodus:

  • the starting point is that the imperative for a business to “do the right thing” in response to an outrageous aggression trumps economic downside. This is a further dagger through the heart of the Milton Friedman doctrine from 50 years ago that the sole responsibility of corporations is to maximise profits within the law. Matthew Syed recently made the point in an article in The SundayTimes that morality is a vital underpinning to productive business activity. As he says: “fierce competition, which will always remain the prime driver of innovation, must take place within a framework of values”
  • but determining what the “right thing” is, within a framework of values, will often involve pragmatically solving a Rubik’s Cube of differing factors. In the context of whether and how to withdraw from Russia these will have included:
  1. standing firm with the people of Ukraine and observing the legal requirements of the sanctions regimes;
  2. particularly in areas of national strategic significance, paying appropriate heed to home Government preferences - the UK Government apparently left Bernard Looney “in no doubt” as to their wishes;
  3. the need to take care of staff and colleagues in Russia and have regard to the human needs of Russian people (for example for medicines);
  4. existing contractual obligations - and professional duties to long-standing clients; and
  5. weighing up the increasing confiscation risk in respect of local assets.

One can well see that many businesses would have needed time to reach a landing on the appropriate approach.

Directors’ duties

The above discussion gives a flavour of the challenges that Boards will have faced in deciding how best to discharge their fiduciary duties. For UK directors this means promoting the “success of the business for the benefit of the members as a whole” having regard to the interests of employees and counterparties, the environment and the company’s reputation for business conduct.

And, for me, the Ukrainian crisis does emphasise that directors thinking about the conscientious discharge of their duties should bear in mind that:

  • “success” is about much more than economic success - it embraces the living of values which shareholders can align with and be proud of;
  • the “long term” is key - many decisions taken in relation to Russia will entail short-term pain for long-term gain; and
  • reputation (corporate and personal) is precious. As a colleague on a panel said some years ago - “What is my most important possession? My reputation”


The Ukraine crisis sheds a new light of realism on the ESG movement which, as Oliver Shah observes, can err to the holier than thou.

Whilst we can appreciate that a values-based approach to disinvestment in Russia aligns with principles of good governance and (although it’s a mixed picture given likely suffering among ordinary Russians) tenets of social justice, matters become more confused for the ESG community around defence and energy. Defence companies have been widely shunned over recent years and traded on low tobacco-style multiples. Oliver Shah quotes Robert Stallard from Vertical Research Partners as saying that the sector has been “blacklisted by many European investors - and even if defence companies replanted the Amazon, they would still be on the blacklist”. Well, it is suddenly clear that hard power is not a nice to have. In this context I have been struck to discover that Germany, France and the UK have, between them 1,050 tanks - Russia has 12,420 tanks. Hold that thought.

In energy, whilst the concern about burning coal and oil is entirely understandable, there is necessarily going to need to be some short-term changes to many nations’ energy policies. In the UK the Government is promising to publish an energy independence plan soon. Whilst one would not want this to be grist to the mill of the climate sceptics and would want it to emphasise the importance of clean energy, it may well need to accommodate some short-term additional dependence on hydrocarbons.

All of this is a wake-up call for the ESG warriors. Many ESG principles are highly desirable but the Ukraine crisis demonstrates that some flexibility and pragmatism is necessary in the mix. And that goes for the burgeoning advisory and ratings industry as well as for the principals.


Who could have thought, two years ago, that we were on the eve of a global pandemic and that that would be followed by a war in Europe? Very few people. Two major Black Swan Events in two years.

What should Boards and Audit Committee Chairs take from this in terms of risk analysis and strategy for risk mitigation?

Three thoughts:

  • many companies resolved to mitigate supply chain risk in light of the pandemic but McKinsey research suggested that companies were much more likely to do this by increasing inventories than diversifying and near-shoring supply sources. The war in Ukraine surely re-emphasises the need to localise and diversify supply sources and to deploy the best technology for supply chain management;
  • there is much speculation about the knock-on implications in China of the Ukraine situation. Might China support Russia? Has the risk of an invasion of Taiwan increased? Boards should be taking stock of their business’s dependence on China in terms of a sales market and a source of supply and assessing whether they need a strategy now to reduce that dependence; and
  • does risk come to the full board often enough and creatively enough? When it does, is it just a desultory run through the risk register or are there, for example, case studies to assess whether things that have gone wrong elsewhere could be a concern for the company?


We have all been struck by the leadership which Volodymyr Zelensky has demonstrated. He has inspired the Ukrainian people with his regular posts (“I don’t hide and I’m not afraid of anyone”) and he pushes the West hard for support (“I need ammunition, not a ride”). This is leadership which makes a difference on every level and its very humility strikes a startling contrast with Vladimir Putin’s style. This reminds us resonantly that leadership counts. It counts in politics and it counts in business. Leaders who evidently love their business, set a clear course, communicate clearly and walk the talk often make a huge difference internally and with external stakeholders.

We are heading into much economic turbulence with higher inflation than we have known for many years, very high energy prices and continuing supply chain disruption. As Herbert Diess, CEO of Volkswagen has said, a prolonged war in Ukraine could be “very much worse” for Europe’s economy than the pandemic. So inspiring business leadership will be all the more important.

Like kisses and sighs, bravery and kindness, it’s one of those fundamental things.

Christopher Saul

Christopher Saul provides independent trusted advice to senior executives and key stakeholders within publicly quoted and privately owned businesses and professional service firms. His areas of focus are governance, succession and the moderation of differences.

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