In addition to severe sanctions imposed on Russia by Western governments, more than 1,000 businesses employing 1 million Russians left the country in protest over President Vladimir Putin’s invasion of Ukraine, Yale researchers find.

Such principled protests are popular among Americans, suggests research by Harvard’s Oliver Hart, MIT’s David Thesmar, and Chicago Booth’s Luigi Zingales. Their study reveals that a majority of Americans think companies should respond to geopolitics, and that a slightly smaller majority would be willing to take a personal financial hit to promote these “private sanctions.”

In part to learn what drives companies to take such actions, Hart, Thesmar, and Zingales surveyed a representative sample of 3,000 Americans in May 2022, three months after the invasion. They asked groups of respondents to imagine themselves as shareholders, as employees, or as customers of a hypothetical company, and then asked how they would react if the company were to continue doing business with Russia.

Two-thirds said they would cut ties with the company, whether by selling shares, quitting, or shopping elsewhere. That number fell when punishing the company was linked to personal financial pain, the researchers find. When respondents were presented with a scenario in which divesting, quitting, or boycotting would cost them $100, 53 percent still chose to act; a $500 price tag depressed the number to 43 percent.

“Participants trade off their moral obligation with their cost,” the researchers write. This reality, they say, suggests that the respondents answered the questions honestly rather than trying to virtue signal.

Willing to cut ties

A majority of Americans surveyed indicated that they would boycott, sell the stock of, or even quit working at a hypothetical company that continued to operate in Russia because of the invasion of Ukraine.

The researchers also posed a separate set of questions that didn’t ask about personal cost. With that issue off the table, 61 percent of respondents said private businesses should stop all commerce with Russia “whatever the consequences,” compared with 37 percent who said the decision should reflect an analysis of economic costs and benefits alone.

These general opinions held steady whether the participants were responding as shareholders, as employees, or as customers. In terms of willingness to punish a company for doing business with Russia, respondents in the customer and the employee groups were ready to sever ties whether or not their actions appeared likely to affect its behavior. Shareholders were more likely to punish if they thought doing so would have an impact.

A model the researchers developed to analyze the responses made clear that a combination of warm glow and expected impact—or prosocial motives—went a considerable way toward explaining variations in who would boycott a business and who wouldn’t.

The model, which the researchers argue can be used to anticipate when companies will impose private sanctions, predicts that a person’s moral stance is more strongly correlated with their Russia responses than their political views are. People with high scores for “compassion” on the moral scale and low scores for “purity,” for example, will be more willing to punish companies for working with Russia, regardless of whether they identify as politically liberal or conservative.

Morals also played as big a role in the decision-making of respondents as the personal cost of punishment, the researchers find. And age proved to be a factor, with older respondents more willing to punish. “This stands in stark contrast with the commonly held view that the younger generation is politically more sensitive,” the researchers write.

Hart, Thesmar, and Zingales warn against assuming that stakeholders will react to geopolitics in the same way. They also suggest that different stakeholder groups might have different leverage vis-à-vis a company. “To pay $500 to retain one reluctant employee is affordable, but to pay $500 to one customer can be extremely expensive if the company’s annual margin per consumer is low,” they write.

They add that with private sanctions taking on geopolitical relevance and being recognized as “an essential component of modern warfare,” it becomes particularly important to understand what drives companies to impose them.

“Neoclassical economics is based on the assumption that firms maximize profits,” the researchers write. “We provide survey evidence that a majority of Americans do not want the firms they invest in, shop from, and work for to behave in this way.”

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