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The Hidden Signals in Corporate Ribbon-Cutting Ceremonies

The ritual can reveal much more about government-business relations than you'd think, according to a new analysis.
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In the final season of HBO's The Wire, Baltimore mayor Tommy Carcetti holds a waterfront press conference with developers at his sides to announce the groundbreaking of a new housing and commercial development. After his brief remarks, an old dock worker yells at Carcetti for "tearing down the port of Baltimore and selling it to some yuppie asshole from Washington." He's quickly led away by security.

The scene is creator David Simon's brief examination of the politics, community relations, and media manipulation that occurs in these symbolic ceremonies between governments and private businesses. For the cameras, it's all grins and handshakes, but there's usually something simmering beneath the surface.

Since 2012, Igor Gurkov, a professor at the Higher School of Economics in Moscow, has been studying these ceremonies. He argues that the ceremonies "have profound symbolic meanings" that can manage anxiety about a lack of job prospects in the community, communicate corporate values such as job security and social responsibility, and provide signals to the rest of the world about what the project will mean for them. These ceremonies can signal the strength of international relationships, or the power of a state's rule over industries within its borders.

"In Holland, the first barrel of freshly salted herring from a new fishing season continues to be sent to the Queen of the Netherlands," Gurkov says, in an email. "This ritual harks back to the beginning of the 16th century following the invention of a new method of salting herring, resulting in the Low Countries becoming the European leader in herring fishing and the entire industry growing into one of national economic importance."

To Gurkov, the shift from relatively small offerings to media extravaganzas took place on November 15th, 1869, when Egypt celebrated the opening of the Suez Canal. "This ceremony comprised all of the key ceremonial elements deemed appropriate for such a large international industrial project," Gurkov says, in an email. It involved fireworks; speeches; parades; the housing of more than 1,000 foreign dignitaries in palaces; the construction of an opera house; and was rumored to have cost Egypt the equivalent of one billion dollars in today's money. (It's not surprising that Egypt went bankrupt only six years later.)

Through this lens, Gurkov began closely examining the ceremonies of industrial plant openings in Russia, particularly those owned by Western multinational corporations, between the years of 2012 and 2016. During his investigation, Gurkov noticed an important difference between ceremonies taking place before and after Russia's annexation of Crimea—and the subsequent sanctions imposed on it by the United States and the European Union—in 2014.

"MNCs continued to open new factories in Russia against all crisis events and under sanctions. The public opening ceremony remains a necessary attribute of plant openings by MNCs in Russia," Gurkov says. "However, the composition of attendees at such ceremonies has changed dramatically."

While Russia's president and prime minister made only a few total appearances over the years (thereby making it impossible to draw conclusions from their inclusion or absence at such events), what was most insightful to Gurkov was the participation of the local regional governors. Their presence was "almost mandatory" in 2013 and 2014, before a slight dip in 2015. By 2016, only 40 percent of ceremonies involved their presence.

Why would this be? It's impossible to know without getting every person involved to agree to honest, on-the-record interviews. But Gurkov believes these declining rates of participation may be attributed to an unwillingness to share a personal relationship with investors from countries that have imposed sanctions on Russia.

He also suggests this is a subtle way to show loyalty to their country without being outspoken in a way that'd cost them future business. In addition, Gurkov has noticed a similar pattern emerging on the MNC side: fewer chief executive officers (CEOs) are showing up. He suspects this may be due to the uncertainness of the environment (that is, Russia) where the project is taking place. (Of course, with such a small sample size, there are plenty of variables—scheduling, shifting priorities, falling budgets, etc.—left unaccounted for.)

"There are now two extremes [of CEOs] who show," he says. "Very self-assured CEOs ... and CEOs with serious doubts about the projects also appear in person to check the installed facilities."

What effect do these non-appearances have? There's no clear x-means-y correlation, as this field of study is far too unique to provide more than speculation. But Gurkov has a few ideas based on subsequent research and follow-up interviews with managers of the plants that had such ceremonies. "When global CEOs participate in opening ceremonies, local project managers expect higher rewards for the successfully completed project," Gurkov says. "If such rewards are not given, they [may] leave the company."

Next time you watch news coverage of a ribbon-cutting ceremony, Gurkov suggests keeping an eye on the top government representative present.

"The most important thing is [their] mood," he says. "If you can read from their face that they're just performing the duties, or you can see that they're confused by strange procedures they must take part in," this could signal problems for the company's project down the road.