Moral Rating Agency

Shades of red

The exposure of false heroes


The devil is in the detail.

Our research and resulting ratings reveal that companies often hide their ‘non-actions’ very cleverly, make their half-hearted actions look full, or spin their small actions to look significant.  Such companies are engaged in Moralwashing.

Companies involved in Russia are under a lot of pressure to make a statement and yet many want to do the least they possibly can.  The result is they often take unsatisfactory actions and then communicate them in confusing ways.

As a result, they are getting credit from the world for taking actions that are frequently not worth the paper they are written on.

The two main failures in the actual action are:

  • exiting one part of their business and not another (and often not mentioning what they haven’t exited)
  • promising they will exit something but not actually following through with it

Many companies do a combination of the two:  they say they will withdrawal only one part of their business and then they don’t follow through with it.  We consider this an unsatisfactory promise that is not even fulfilled.

Red Herrings

To confuse things further, some companies state they will not make new investments in Russia.  In a well-worded statement, this sounds like something real.   The danger with Red Herring statements is that they can give false or misleading impressions to the reader that a company is taking real action

Such a statement, by definition, does not relate to anything that the company actually owned or was involved in.  It is a promise that can be withdrawn at any moment relating to something that doesn’t yet exist.  Indeed, to make the point, any company that isn’t involved with Russia at all could similarly make a commitment to the world that it will not invest in or trade with Russia.

Companies making these ‘no new investment’ statements will often continue all of their Activities, meaning they are making no concrete change whatsoever.  The words “will cease 100% of new investments” sound a lot better than “we will continue with everything”, but that’s exactly what they are doing because the two statements are two totally different ways of presenting the exact same facts

We call such statements Red Herrings.

Another type of Red Herring is when companies say they are “considering terminating” or “reviewing investments”.

Yet another is a statement of the obvious such as when a company states it is respecting all sanctions, as though it is doing something concrete when it would be obliged to do so by law, or when it says it will respect sanctions when none have yet been issued.

Red Herrings are not just used by companies to disguise their failure to cut any ties with Russia (which we call a ‘Lone Red Herring’ for emphasis) but are also used by companies that are making a Partial withdrawal and they throw in a Red Herring to make it look better.  The more pieces there are to their subterfuge, the more convincing it sounds to the casual observer.

Spins are spinning out of control

Apart from the Red Herring technique, there is a wide range of other spin techniques being deployed to confuse a world looking for good news they don’t want to provide:

Amnesia: The company promotes the good news of what it is stopping but forgets to mention the bad news.

Confusing wording:  The company avoids using the future tense for something that obviously needs follow-through in the future to become real, or it hides its exports to Russia by using clever words such as “we don’t operate in Russia” (our italics).

Wriggle room wording: The company’s statement gives it the opportunity to keep operating in Russia. It often involves a complex series of caveats or carve-outs.

Hiding information:  The company deletes information from its website about its Russian businesses and earlier press releases about them, making it difficult to find out that it still has business with Russia.

False Martyr:  The company suggests it will suffer pain from its action when it has a low level of Exposure.

Retroactive:  The company takes an action long after the invasion but says it had decided to do so long beforehand.

Confused Humanitarian:  The company suggests there are overriding benefits for not doing what it should, with excuses such as they are “essential” for health, or people have a human right to buy its food products.

Big Talker:  The company says a lot of things against Russia but continues to do business.

Do-gooder-do-badder:  The company’s generosity towards relief efforts in Ukraine hides its failure to withdraw from Russia.

Not every company is in on this game but, the more pressure companies are under to do what they don’t want to do, the more they tend to find a way to look better.

False heroes

The irony is that the companies that only withdraw in part or don’t follow-through – in addition to those that engage in Red Herrings, Retroactive Exits, spins, or act like Confused Humanitarians, Big Talkers or Do-gooder-do-badders – actually get applauded when they should be criticized.

The public, and even business media, can perceive these companies as the good guys when they can be nearly as bad as the companies refusing to leave Russia.

Meanwhile, the false heroes themselves are no doubt delighted.  They then do nothing to improve their actions and of course do nothing to correct their falsely good image.  It could be argued that those companies that openly state they are refusing to leave are at least not engaging in subterfuge nor benefiting from false praise.

The sort of puzzle we face is like this: the company mentions it is ceasing a couple of operations In Russia, while failing to mention a third one.  We discover what was hidden so we can record the statement as a Partial rather than Full withdrawal.  Then we look more closely at what the company did disclose.  We discover that one factory is just being suspended temporarily, while another is promised for a divestiture at an undisclosed point in the future and which may never occur.  Looking deeper at the suspended factory, we see that it is actually going to continue operating at some level to meet existing customer demand or for some products.  Apart from not being transparent about what it has in Russia, such a company is hardly doing anything, yet it is getting credit for a strong-sounding, labyrinthian statement.

No ifs

This is where the Moral Rating Agency comes in.  According to our rules, out means out – no ‘ifs’, ‘buts’, ‘mights’, or even ‘wills’.  If a company wants a good Moral Rating, the exit has to be unequivocal, which we define as a Full & Complete action.

To shed light on the ‘Partial’ tendency, we investigate the Breadth of the action (how many of the business areas are covered); for the promises, we look at the Depth of the action (where it stands in follow through); and on the Red Herrings, we ignore them in our ratings but flag the companies that use them, as we do companies that ‘spin up’ their statements.

Partial withdrawals

Partial actions can be hard to spot and hard to measure.  The range of ways of doing business with Russia is wide – from imports, exports, wholly-owned subsidiaries, partially-owned investments, joint ventures, franchisees and franchisors to licensees and licensors.

For large companies, Activities across this range might be going on in any branch of its corporate family tree.  So, when a company makes a statement about one Activity without discussing all others, it is easy to think the statement covers the whole picture.  Indeed, no company is required to clarify whether its statement covers all of its Activities.  That’s left for people to figure out or be confused.  Even publicly-traded companies don’t have any obligation to report or quantify such things, so they often present things in a way that makes them look good.

Why call out Partials?

As a result of what could politely be called weak disclosure, companies are getting credit for exiting Russia totally when they have not.  In fact, sometimes the Activity a company doesn’t exit is substantially more important than the one covered by the

The weak disclosure makes it fruitful territory for the Moral Rating Agency.  We expose the Announcement as Partial and highlight what is missing.

Then, until the company makes amends and withdraws totally, our ratings score them down.  And, even if the company later gets out properly, we retain the history of the prior failure as an Indelible Ledger.

Incomplete withdrawals

A statement often sounds like the action is in the bag but, reading between the lines, that’s far from the case.  We are not talking here about Red Herrings, but an actual promise relating to an existing Activity.  This Incomplete situation applies to companies that have assets in Russia more often than to companies stating they are ceasing trading, although trade can sometimes be Incomplete as well.

There are three types of Incomplete withdrawals: promises that may never be kept (as in “disposing of investments”), vague statements that don’t even contain promises (as in “suspending until further notice”) and statements with carve-outs coupled with excuses (as in “ceasing business apart from existing customers”).

1.  Time-Delayed Incomplete

This refers to the company that says it will withdraw, often also using wording such as “is selling” to make it seem like it is already happening.  The company may in fact have no real intention of leaving Russia.  It usually involves a sale of an asset because this is where most future promises apply.  The exit logistics of a sale allow the company to hide behind the obvious obstacles of implementing the initial statement.  Meanwhile, the company makes a grandiose statement about leaving Russia.  Such a statement may be sincere or insincere.  The point is that, in either case, these are just words until a buyer has been found for the asset and the deal has gone through.

Companies may be hoping that, before they have managed to implement the promise, the war will come to an end, and they will then be able simply to cancel the unimplemented divestment.  Indeed, perhaps the only definitive statement the company will ever make will be: “The war ended before we were able to complete the planned sale and therefore the board of directors has decided to retain the investment.”

We are not saying these promises cannot become real, but we refuse to give companies full credit just for making a promise.  They need to follow through to get an Upgrade.

These companies, which we call Asset Sloths, can hide in a long-term promise they never have to keep.

2.  Vague Incomplete

This is when the company says it has, is, or will suspend operations without saying that it will permanently close by selling the assets.  The lights have been switched off, but they can be switched back on when the time is right.

By contrast, ceasing exports or imports is not considered Incomplete, because the company could hardly do more that cease exporting.  Therefore, a Vague Incomplete focuses on companies with Activities inside Russia.

These companies, which we call Mothballers, can hide in double-speak about their true long-term intentions.

3.  Carve-Out Incomplete

This is where the company has admitted that the withdrawal is Incomplete.  These come with the disclosure of a concrete aspect of a withdrawal and almost always with an excuse for the incompleteness, since disclosing it is controversial without a reason.

For example, they might say they will “protect” their employees’ livelihoods by keeping them on the payroll, or “honor” their contracts with existing customers so they will only stop new business.

These companies, which we call Nibblers, can hide behind excuses.

Why call out Incompletes?

The multifarious ways of a company not withdrawing properly result in a lot of complexity, and in companies being given too much credit in three ways:

  • Asset Sloths making promises to exit are being recognized as “sellers” of Russian assets despite having not sold the assets yet
  • Mothballers keeping their options open are often viewed as having done something definitive about leaving Russia
  • Meanwhile, Nibblers giving excuses for not completely leaving are being waved through as though the carve-outs are “details”

All three types contain insincere companies which are probably thrilled that they are in the clear.  An Asset Sloth that has no intention to fulfill its promise – and perhaps even has a plan to purposefully slow down the process of a sale until the situation changes – is laughing at its good luck while it waits;  a Mothballer may be basking in the sunlight of its statement while it’s waiting to switch on the lights the very second it would be acceptable; and a Nibbler can hold its head high with excuses that pretend to cleanse its soul and that act as a sort of stop-gap with minimal consequence.  We are not saying all companies are so manipulative and cynical, but the Shades of Red give them the cover for both.

Leaving aside motive, all three types maintain their reputations while they may do little of concrete value.  Until their actions are complete, they cannot get full ratings, so we:

  • Score down Asset Sloths depending on how concrete was their promise, and highlight the wriggle room they have to cancel a sale
  • Score down Mothballers, and point out they are making no commitment at all to withdraw
  • Scored down Nibblers, and spotlight their excuses so they are not forgotten

Our ratings show that a company with assets in Russia that makes what we call a Full and Complete withdrawal is rare.

Saying goodbye to ‘Shades of Red’

When a company says or implies that it has withdrawn from Russia, the devil is in the detail.  At the Moral Rating Agency, our first task is to sort out all of these ‘Shades of Red’.  It’s pointless, for example, to talk about how fast a company acted before knowing what it really did.  After this, we can look at the Speed and Attitude of the action, and the Exposure and Power that the company possessed.

This site is published by Mark Dixon under the name Moral Rating Agency. Copyright, 2022