CEOs seek their own State Departments
Russia’s invasion of Ukraine is prompting American CEOs anew to build their own mini-State Departments as they navigate the uncertainties of a war and world increasingly unbound by norms and institutions.
Why it matters: Executives traditionally rise to power by creating successful products and business lines, managing expectations and turning profits — not mastering foreign policy. With little margin for error, many are turning to D.C. experts with heightened urgency.
What we're hearing: “Every CEO of a global business today has to make sure they have a real plan for geopolitical disruption,” said Robert Gibbs, former President Obama’s first White House press secretary.
- Gibbs subsequently provided strategic communication for McDonald's, which this week closed its approximately 850 locations in Russia.
- He’s now senior counsel at Bully Pulpit Interactive.
- Such corporate moves came as Russia threatened to arrest those branding its invasion a "war" and to seize corporate assets in retaliation for multinational firms departing from the country.
By the numbers: Nearly 400 companies have announced their intent to withdraw from Russia since President Vladimir Putin invaded Ukraine, according to a list compiled by Jeffrey Sonnenfeld, a professor at the Yale School of Management.
- Washington, D.C.-based Beacon Global Strategies is monitoring 234 companies at latest count to analyze how they're responding to the crisis.
- The analysis ranges from sanction compliance to hardening cyber defenses, said managing director and co-founder Jeremy Bash — a former CIA and Pentagon official.
Between the lines: Corporate concern about world affairs isn't completely new — especially in the financial services sector, which relies on global markets.
- Former national security adviser Tom Donilon has spent much of his time since leaving the Obama administration as chairman of the BlackRock Investment Institute, the Wall Street firm's global think tank. He advises customers — as well as executives.
- Jonathan Finer, now serving as principal deputy national security adviser, came back into the federal government after serving as head of political risk and public policy at Warburg Pincus LLC.
- He'd previously worked as State Department chief of staff and director of policy planning.
Be smart: Just as the protests after George Floyd's murder forced companies to review their posture on social issues, the invasion of Ukraine is putting a new batch of CEOs on notice.
Each new round of international sanctions or Russian strikes on civilians or near a NATO border is forcing companies to analyze their exposure.
- Beyond sanctions and cyber, issues ranging from employee safety to growth strategy and statements of support or condemnation must be considered.
- The uncertainty also highlights corporations' vulnerabilities around China's plans for Taiwan, Iran's nuclear program, North Korea's ambitions and potential conflicts that aren't yet as obvious.
- Companies also must consult with security experts about the safety of their worldwide locations — each of which carries their brand name.
How it works: Most companies are turning to outside consultancies, stocked with former congressional, administration and defense officials to help them weigh risks and consider safer options.
- “CEOs and boards now need detailed advice and planning on national security issues — or they risk falling behind the fast-moving events, putting at risk their employees, their supply chains and their reputations,” Bash said.
- Other companies like WestExec Advisors, the Cohen Group and the Eurasia Group, as well as white-shoe law firms, allow former officials to trade on their expertise and provide high-level briefings.
- The current secretary of State, Antony Blinken, co-founded WestExec Advisors, where the current director of national intelligence, Avril Haines, and current White House press secretary, Jen Psaki, formerly worked.
- Richard Fontaine, CEO of the Center for a New American Security and a former National Security Council and congressional staffer, said he's fielding growing requests to brief companies in real time so they can react "virtually overnight."
- "War and international politics," he said, "now directly impact the bottom line."
Between the lines: Defense contractors and companies that already do business with foreign governments have a head start.
- “From economic realities to national security threats to sustainability, we must have our finger on the world’s pulse,” Kathy Warden, chairman and CEO of Northrop Grumman, tells Axios.
- "We work with experts inside and outside of our company, using data and analytics to ensure a comprehensive view of the full environment."
The bottom line: Companies would rather react to clear government regulations than try to divine the shifting motives of politicians — especially the actions of authoritarian leaders like those in Moscow and Beijing.