Introduction on "Impact of Socially Responsible Funds on the Behavior of Russian Companies"

Introduction 5 pages (2046 words) Sources: 6

[EXCERPT] . . . .

Russia SRI intro

The impact of socially responsible funds on the behaviour of Russian companies

In 1989, the Cold War came to an end with the fall of the Soviet Union. The dominant power in its hemisphere was reduced considerably in its economic sway, with the bulk of its extra-territorial holdings being disseminated into the world's population as independent, democratic nation-states. Likewise, its political weight had been diminished substantially, with the strength of its central leadership in the world now dwarfed by the emergent Cold War victor, the United States. Also significantly with regard to the Soviet identity, Russia's military, once an overwhelming and formidable force in the world, now lacked the foundational basis and purpose for its size. Essentially, the Russia which entered into the world community as the 1990's commenced was a nation in transition and transformation. Perhaps the dimension of Russian life and civil order which has experienced the greatest difficulty in moving toward democratic and capitalist engagement has been its business sphere. Prior to the collapse of the Soviet Union, Russian businesses had been largely state-controlled. This would create a distinct cultural disposition amongst Russian enterprises which dictates in-group loyalty and a shared coalescence to certain internally sanctioned practices. Many of these practices would be defined apart from the consideration of so-called business ethics. Therefore, as many of these state run agencies transformed into nominally privately-owned firms, the development of any universal code of ethics would be slow to nonexistent in Russian business culture.

The implications of this failure of development are becoming clearer today as Russia struggles with economic turmoil and the heavy influence of corruption and organized crime on its business landscape. While many of the developing nations produced as independent states following the Soviet collapse would move toward democratic openness and principles of free trade, many of the vestiges of Soviet governmental identity would remain in place to confound its economic progress. For Russia, a public's absence of exposure to the systems and conditions of democracy has rendered a people today deeply susceptible to exploitation, with the current Russian Prime Minister, former chief of the Soviet KGB, Vladamir Putin, imposing suppression of political opposition, journalistic freedom and social liberties. This is directly contrary to his own stated ambitions according to Evans (2010), who reports that "Vladimir Putin, then Russia's president and now prime minister, promised democracy in exchange for security back in 2000, but the result was neither democracy nor security." (Evans, 1)

Here, democracy has proven less-than-feasible due to an absence of internal will to or resource to seize on the opportunity. A history of oppression has rendered democracy abstract and unattainable, even in the face of charades such as Russian free elections. This is a point which is compounded by the behavior of Russian companies, many of which are secretly impinged upon by the interests of corrupt office holders and many others of which are dictated by the organized crime and Russian mafia figures that are omnipresent in the relatively unregulated Russian business climate. Indeed, strong-arming and bribe-taking are an inherent part of daily Russian life, reports an article by Stott (2010), which finds that "Berlin-based NGO Transparency International rates Russia joint 146th out of 180 nations in its Corruption Perception Index, saying bribe-taking is worth about $300 billion a year." (Stott, 1)

It is into this scenario that we enter our consideration of Socially Responsible Investment Funds (SRI), which are alliances designed to accumulate and distribute funds to corporations engaging in responsible and socially conscious practices and behaviors. The research to be conducted hereafter will focus largely on the impact of SRIs on Russian businesses and, as an extension, on the Russian economy as a whole. Indeed, we are moved to discuss this issue by the view that the Russian economies prolonged struggles at achieving stability and pursuing capitalist growth have been further obfuscated by the vulnerability of Russian businesses to unethical practices. According to Pamfilova (2010), "underdevelopment of basic democratic institutions and corruption are prohibiting the growth of civil society in Russia." (1)

In order to support that claim, the research conducted hereafter will provide some extensive evaluation of the implications of business ethics and ethical codification. Here, the research will consider the challenges specific to Russian businesses in light of the organizational culture left behind by Soviet propensities. Here, the Western conception of ethical business practices to which global companies are more commonly held today did not apply. As part and parcel of the strategy of remaining pointedly distinct from and in opposition to Western culture, ideology and economic practices, the processes within Soviet firms often called for actions, behaviors and views forged and maintained within an organizational vacuum. Such is to say that commitment to one's immediate comrades within an organization, dedication to the ends sought by the corporation and withholding from critique of the means used to achieve these ends would all be considered defining features of a code of 'ethics' during the era of Soviet domination.

Today, many organizations in Russia tend to reflect a similar approach to business affairs in spite of the alleged transition away from Soviet values. Even as Prime Minister Putin and President Dmitri Medvedev offer elaborate claims on drawing down Russian corruption, the government itself remains highly suspect. So denotes the report by Feifer (2009) which finds that "Medvedev first promised a major campaign against corruption when he took office last year. He and other top officials publicly declared their incomes and assets for the first time, in a widely publicized show of action. But some of the results strained credulity: Chechen leader Ramzan Kadyrov, who lives in a palatial, marble-clad mansion, admitted to owning only a small apartment and a Lada car." (Feifer, 1)

This type of state-level corruption underscores a tenor of lawlessness and deregulation in Russia. Where the heavy-handed involvement of the state on an explicit level would define the business atmosphere in Russia for many decades, the push toward a laissez-faire economy has not been accompanied by the corporate, social and governmental structures required to accommodate such open competition. As a consequence, corrupt members of the government, business community and the Russian criminal underground have united to create a business atmosphere in which companies have become highly isolated, non-transparent and scarcely influenced by public perception.

This calls for closer consideration of the role that SRIs might play in correcting the current situation. As our research will reveal, only 5 SRI funds have been identified in operation in Russia. The small sample denotes that Russia is a highly formidable atmosphere for those desiring to bring regulation, accountability and ethical practice to a rampant private industries sector. As our research will show, SRIs are designed to encourage and reward ethical corporate behaviors and endeavors as a way of promoting the intercession of ethicality and profitability. This intercession, however, is one that has scarcely been explored or endorsed in Russian business culture. To many business leaders, a perception remains in connection to Soviet philosophies which finds ethical practice to be counterintuitive to the achievement of corporate agendas such as survivability and profitability.

The modest scope of SRIs involved in business processes in Russia demonstrates that very few resources have yet been dedicated to reversing this perspective. Moreover, it suggests that hardship may await those parties that do attempt to reverse said perspective. To be sure, a great many interests and parties of considerable power have worked to obstruct the development of ethical orientation in Russian business. For these parties, the economic opportunities reserved specifically to them may be threatened by a process which inherently points to greater regulatory oversight. That said, the focus of the literature review and research here will be on how the improvement of ethical practice and orientation should be seen to precipitate the opportunity for greater economic success and organizational profitability. SRIs exist primarily to send this message and to reinforce it by benefiting those who work to benefit others.

The literature considered here throughout as a way of better investigating the correlation between Russia's current business climate and the push toward more ethical orientation proposed by SRIs addresses a bevy of organizational theories and models relating to business ethics. Many of these will be synthesized into a discussion on how the assumption of ethical practices should be seen as a more sound and sustainable approach to business development than the in-group loyalties and ends-justify-the-means approaches that remain in place since the days of the Soviet Union. This is also true of discussions on internal organizational behavior which argue that personnel will largely tend to reflect the tendencies and ethical propensities of their leadership. In the case of Russia, the corruption and criminality which seep through every level of authority from the government to the executive offices make it particularly difficult to impose a meaningful system of reforms across the boards.

While the Russian government seems to lack both the will and the capacity to enforce stronger regulations in the areas identified in our research… READ MORE

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