Nordic companies as foreign agents
A notorious law enacted by the Russian State Duma in this summer forces all NGOs receiving funding from abroad to register themselves as ‘foreign agents’. This law has been regarded by foreign spectators as yet another attack against the evolving civil society in Russia. The spectators are also worried about repercussions of the chosen policy for other areas of the society. United Russia deputies consider extending the law to cover media as well.
There is a certain group of ‘foreign agents’ that proudly present their foreignness: multinational companies. For them, operating as a foreign agent in the Russian market might prove a competitive advantage.
Foreign companies are in essence foreign agents that have entered the Russian market. They compete with local companies in the product and consumer markets, and they hire employees from the local labour market. In their labour policies, public relations and business networking, they may opt either for adaptation to the local customs, traditions and culture, or cultivate best practices carried over from their home countries. In such manner, they are highly likely to act as ‘foreign agents’.
The type of the investment matters when evaluating the consequences of this activity for the labour market. An advantage will be that it brings forth new workplaces and technologies, and thus enhances productivity of the industry. However, there are examples of foreign investors who strive for increasing production volumes while labour productivity does not necessarily increase. So, the question of Russians about 'foreign agents' is legitimate and they have the right to ponder of what benefit investment activity would bring to the country and its people.
What are Nordic companies like as foreign investors? In the Nordic countries, there is growing interest in investment in Russia due to the expanding Russian market. When earlier efficiency-seeking and resource-seeking investment took precedence, now market-seeking investment is preferred. Arguably for successful market-seeking investment, the relationships between the investor, the locality and the employees are of utmost importance.
According to the Ministry of Foreign Affairs of Denmark, there are more than 140 Danish companies operating in Russia, where such sectors as food and agricultural, pharmaceutical, consultancy, building and environment, IT, industrial equipment, transportation are represented. As regards Finnish investment, there are more than 600 Finnish firms in Russia employing about 50,000 workers altogether. The Finnish investment stock amounts to about seven billion euro. Investments have flown for example to such sectors as retail, food, construction and energy. Norwegian investment is the most modest among the Nordic countries. According to the statistics of the Ministry of Foreign Affairs, there are about 70 Norwegian enterprises actively operating in Russia, of which about 40 are in Murmansk region. According to the Swedish Trade Council, there are about 350 Swedish companies operating in Russia in various sectors.
My current research at the Karelian Institute, which draws upon interviews with managers, employees in seven manufacturing firms in Russia, asserts that for foreign managements, it pays off to pay attention to social relations on shop-floor and in the locality. Nordic companies emphasize local social relations by using two distinctive strategies: either by resorting to a more Soviet-style (and also Nordic-type) personnel management with social awards, outdoor events and collective bargaining; or by transferring Anglo-Saxon human resource management practices, such as performance-related pay, suggestion schemes and employee consultation, to the Russian subsidiary. Both strategies have their pros and cons, although the latter one is more detached from the social reality based on local social relations. The post-Soviet patron-type management style – which is still admired by among the older workers – strengthens the significance of local embeddedness.
Besides the fact that the labour market is tightening in Russia, there is almost a 'Scandinavian' tendency towards demands among ordinary workers for decent salaries, sufficient leisure time and employee involvement schemes. On one hand, there is a trend to establish 'Soviet' style non-material awards for retaining the employees. On the other hand, some Nordic companies have introduced real measures of employee participation and job autonomy. The management at a researched factory is pondering whether, and which way, to involve trade unions in participation processes. In the long run, a more holistic labour management strategy - that takes the employees' needs better into account – will be needed to gain a better position - and reputation - in the Russian market.
Nordic firms might serve as change agents in establishing more human resource oriented workplace regime in Russia. Although Nordic investment is still modest compared to the aggregate FDI inflow in Russia, it can serve as a benchmark for other investment given its human orientation. The interviews that I made during my case studies in Russia revealed that Nordic-originated companies have a quite good track record in cultivating such a culture.
From the perspective of the government, it is sensible to require multinational companies to cultivate good corporate governance and corporate social responsibility. In fact, in the case of market-seeking investment, this makes even more sense, since such investments are supposed to serve the market, the customers – and the society as a whole. Such a “high road” approach to investment and labour management would be advisable for foreign investors in current Russian political and economic climate where the government pays much attention to the industrial sector to obtain better productivity and the better use of human resources. Nordic companies as ‘foreign agents’ might help the Russian government in this pursuit.