As the pandemic has tightened its grip on societies across the world, at Hudson Sandler we have been struck in particular by how our Russian corporate clients have responded, taking swift and sweeping action to protect not only their employees but the broader communities in the local regions where they operate.
Gold miner Polyus quickly established a RUB 1 billion joint fund with the Far East Development Fund; steel giant Severstal handed out staff bonuses and grocery coupons; oil and gas producer Gazprom Neft is manufacturing and donating sanitisers to medical facilities; aluminium and power business En+ Group, fertiliser producer Uralkali and miner Trans-Siberian Gold are distributing medical equipment and funding hospital facilities. Alongside this the Russian Direct Investment Fund, Russia’s sovereign wealth fund, is supporting the production of mobile tests and antiviral drugs.
While in the UK and elsewhere it is governments that have stepped forward to preserve jobs, increase hospital capacity and control the physical spread of the virus, in Russia, these initiatives are being demonstratively led by independent businesses.
We explored why this is the case in Hudson Sandler’s latest webinar – ‘The Russian Social Contract and COVID-19’ - hosted by our Managing Partner Andrew Hayes, with a panel of esteemed guests: Henry Foy, Moscow Bureau Chief for the Financial Times, Vera Kurochkina, Deputy CEO of En+ Group, Chris Weafer, founder and CEO of Macro-Advisory, and Kirsty Bashforth, author of “Culture Shift” (Bloomsbury).
Our panellists discussed whether the unique Russian response reflected a Soviet-legacy sense of social responsibility and pride in looking after the collective, demonstrated by these decades-old industrial companies.
It was also suggested that this system reflected a ‘contract’ between big business owners and the Kremlin, by which companies are expected to maintain the social stability of the regions where they dominate in return for their significant economic power.
Some reasoned it might simply be the “Social” in ESG at work in its most authentic form, with many today touting the potential future rewards ESG observance can bring, in securing employee and customer loyalty and investor confidence.
Others argued that, with a brain drain driving increased competition for skills, and Russia’s new generations of workers having higher expectations than their parents, the individual actions purely reflected the need for businesses to offer more attractive living and working environments than their peers.
What became clear was that in Russia the ‘social contract’ takes many forms.
Our webinar also discussed whether these structures could endure at a time when multiple significant economic pressures are converging. In Russia, the COVID-19 death toll has not yet reached its peak, and oil prices, on which its economy and major businesses rely heavily, are significantly depressed. Polls suggest the President’s approval ratings have declined and lockdown is expected to delay major economic stimulus programmes such as the celebrated ‘National Projects’, which were part of a promise to improve national incomes.
A revision of the national budget, expected in early June, will give us a clearer idea of the government’s immediate priorities, but it seems evident that independent business will continue to shoulder the social burden. Russian industrial companies, including our clients, play a critical role in holding societies across the vast country together and are leading the national fight against this devastating virus.
Whatever the structural drivers behind it, the Russian corporate response to the virus has been outstanding, and perhaps, for their ESG-conscious international peers, there are indeed some lessons to be shared.
Reflections on the Russian ‘Social Contract’