In Other Words

Bed, Bath & Bribes

IKEA's struggle to do business in Putin's Russia.

For most Russians, the biggest problem with Vladimir Putin's authoritarian regime isn't the rigged elections or the lack of independent media. It's the entrenched corruption that permeates every sphere of life: the traffic cop lurking on the road to collect bribes from drivers, the surgeon in the supposedly free state hospital who refuses to operate unless he gets a "gift" from his patient, the teacher who hands out good grades for cash. And Russians universally think that such petty acts of greed are a pale echo of what goes on at top levels of the bureaucracy, where officials live in a cocoon of privilege symbolized by the migalki -- the blue sirens atop government officials' cars that allow them to defy the rules of the road. Despite periodic proclamations that the authorities are finally set to tackle the problem, things have gotten so bad that global graft watchdog Transparency International ranked Russia 146th out of 180 countries in its 2009 Corruption Perceptions Index, putting it on a par with Zimbabwe and Sierra Leone.

If you really want to understand what such epic levels of corruption mean in Russia, open a business. Russia's brave or foolhardy entrepreneurs -- and there are few of either kind these days -- confront thickets of red tape, endless inspections, and regular demands for bribes, ranging from the subtle to the blatant. This beleaguered new business class generally operates under a self-protective code of silence, terrified of doing anything that might hurt profits. So the abuses go unremarked, except by the increasing number of businessmen who have fled abroad to escape persecution. In a revealing exchange caught on television last year, metals tycoon Oleg Deripaska complained to President Dmitry Medvedev that judges regularly took bribes for rulings. "Everyone knows one has to pay," he said. A visibly angry Medvedev retorted that it was the fault of business for paying the bribes in the first place. Left unanswered was the obvious question: How can a business possibly make a profit if it doesn't play by the rules of a corrupt system?

A new memoir by Swedish businessman Lennart Dahlgren explores just that quandary. Dahlgren spent nearly a decade battling bureaucrats to bring furniture giant IKEA to Russia. His book, Despite Absurdity: How I Conquered Russia While It Conquered Me, reveals his behind-the-scenes struggles with officials who were ready to throw countless obstacles in IKEA's path unless they gave in to the system. Published in Swedish last November and now translated into Russian, the book has provoked heated discussion in Russia by providing a shocking and unusually public glimpse at the pervasive rot of Putin's system.

Dahlgren arrived in Russia in 1998 as IKEA's emissary to Russia's new middle class, sick of its clunky Soviet-era furniture and ready to upgrade to Scandinavian modern. His team quickly acquired property in Khimki, a suburb north of Moscow. Helped along by a friendly mayor, Russia's first IKEA store opened in March 2000, drawing a huge crowd of nearly 40,000 shoppers on its first day. The bedlam seemed to herald a bright future: The company had ambitious plans to build a shopping mall next to the flagship Khimki location and open as many as 20 more stores throughout Russia. But its plans were nearly derailed when Khimki's accommodating mayor was replaced by Vladimir Strelchenko, an ex-military officer with little patience for Western investors.

The epic Dahlgren-Strelchenko battle dragged on for years. One of the early skirmishes involved an overpass that IKEA wanted to build to connect the future shopping mall to a nearby highway. IKEA jumped through all the necessary hoops to obtain building permits, but once construction was partially completed, officials changed their minds and halted the process. The overpass, they said, veered too close to a World War II monument marking the historic front lines between German Nazi forces and the Red Army in 1941, and would thus be offensive to patriotic Russians. The overpass to nowhere stood there for about a year, until officials reversed their stance again and ordered IKEA to finish it as soon as possible. Now, they said, it was needed to ease traffic jams.

The battle over the shopping mall reached similarly arcane levels of bureaucratic balking. Strelchenko's administration ordered inspections of each of IKEA's 80 company cars. It said the planned mall was a biohazard because shoppers wouldn't be able to flee quickly enough if an epidemic broke out. It refused to allow the opening of a vital access road, citing the risk that cars might pose to an underground gas pipeline -- even though the same pipeline already passed under a busy six-lane highway and a major railroad. In the winter, IKEA was fined for not cleaning the snow off its roof. When Dahlgren asked a respected Russian lawyer for help, the lawyer had two words of advice: "Pay them."

Instead, the Swedes fought back. Dahlgren announced to the media that the opening of IKEA's Mega Mall would take place as scheduled on Dec. 10, 2004, whether local officials liked it or not. Journalists who showed up at the grand opening were treated to a surreal sight. Police had sealed off the mall, but Dahlgren and his team held a pomp-filled opening ceremony anyway. The Swedish ambassador to Russia defiantly parked his car, bearing the Swedish flag, in front of the police lines.

A media frenzy ensued. Newspapers around the world ran articles sympathizing with IKEA's plight and criticizing the Khimki authorities. Under pressure from his higher-ups, who worried about the damage to Russia's reputation, Strelchenko finally called Dahlgren into his office and said the Mega Mall could open its doors.

IKEA has been remarkably persistent in the face of such difficulties, investing $4 billion in Russia to date and opening a dozen stores throughout the country. But lately the company has shown signs of wearing down. Last year, it announced that it was halting its expansion plans in Russia because of trouble with bureaucrats. (Notably, officials in the city of Samara had prevented a store from opening because they said its walls could not withstand hurricane-force winds, though such weather conditions are virtually unknown there.) And in February, IKEA's squeaky-clean image took a hit when it fired two senior executives for tolerating the paying of bribes to a Russian subcontractor.

Throughout his time in Russia, Dahlgren kept searching for farsighted officials who could grasp the value of working with a big foreign investor like IKEA. He got help from some colorful characters, including a mysterious man whom Dahlgren suspected of being a former KGB agent. He once showed up at Dahlgren's office carrying an odd device with glowing lights. "Lennart, do you know your office is being listened to?" he asked. Then he pushed a button: "Now nobody can hear us."

Dahlgren's book made a splash in Russia this year after a selection of juicy excerpts was published in various magazines and newspapers. For those familiar with the struggles of Russian entrepreneurs, the book was further proof of a grim reality. "It is clear from this book that many here are not especially concerned about our country's attractiveness to foreign investors," Kommersant business daily dryly observed.

There will likely be more books documenting the grip that corruption holds over life in Putin's Russia. But until the Kremlin is ready to open up society, allowing a free press and genuine opposition parties to criticize government graft, whistle-blowers like Lennart Dahlgren are unlikely to have much impact. And bribery will remain just as omnipresent in everyday life as IKEA furniture is in the apartments of middle-class Russians.

Eric Feferberg/AFP/Getty Images

In Other Words

The Global Dream

With the global rise of the celebrity CEO, some new stories are being told.

Lee Iacocca said it best. In the introduction to the paperback edition of his massively best-selling 1984 autobiography, the erstwhile savior of Chrysler and symbol of American capitalism reflected on his book's success: "After all, this is just a story about a kid from a good immigrant family who studied hard and worked hard, who had some big successes and some big disappointments, and who made out fine in the end because of the simple values he learned from his parents and teachers, and because he had the good luck to live in America."

There, in one sentence, is everything a triumphant account of a life in American business requires: the hardscrabble childhood, tempered by the parents and teachers who imparted the necessity of honest toil; the character-forging career setback; the ultimate triumph. There, too, are the twin heroes of the U.S. business bestseller: the humble CEO and America itself, the country that makes everything possible.

Iacocca's latter-day followers have faithfully reproduced his model, glossing over awkward divorces and inconveniently prosperous childhoods to squeeze their lives into the same Horatio Alger narrative. In Bloomberg by Bloomberg, for example, Michael Bloomberg concedes that his mother's family had some money but emphasizes his accountant father's modest job keeping the books in a dairy. Jack Welch's Jack: Straight from the Gut dispenses with the legendary General Electric CEO's divorce from his first wife in a little over half a page: "Carolyn and I simply found ourselves on different paths." If it doesn't fit in with the dream, it's not part of the book.

But what dream do you embody if you're not an American? Over the last two decades, with new markets springing up around the world, the celebrity CEO has become more than an American institution -- and the CEO biography has gone global as well. Twenty-four years ago, Akio Morita, co-founder of Sony, published perhaps the first example of the international business memoir, Made in Japan. In recent years, everyone from Abilio dos Santos Diniz, the manically overachieving Brazilian retail magnate, to Muhammad Yunus, the Bangladeshi founder of Grameen Bank and father of microcredit, has followed suit, inventing a new form of tycoon lit for the emerging-market set. In China, where the number of billionaires has shot up from just one in 1999 to 64 this year, inspirational business books line the walls of stores. The hugely popular translation of Straight from the Gut sold more than 600,000 copies there in its first year. Biographies of business moguls like the car-selling Tata family have become popular in India, too, as the country's economy has boomed.

The American Dream, though, turns out to need some customizing for this new breed of Iacoccas. Now, the bootstraps belong to an entire nation: The aspiring billionaire must struggle with his country's poverty and isolation rather than his own. America is still glorified -- but it's a far-off beacon and often a discouraging emblem of what cannot be accomplished at home. And the dream embodied in these books can at times seem to be the exact reverse of the American one: rising to the top in spite of one's national circumstances, not because of them.

Morita's account, like Iacocca's, laid out the expectations. Morita describes his wealthy background ("I was born the first son and fifteenth-generation heir to one of Japan's finest and oldest sake-brewing families"), which contrasts sharply with the catastrophes of living through World War II in Tokyo. In the early postwar days, Morita and his staff ran the company that would become Sony in an office so bomb-damaged that they had to hold up umbrellas indoors when it rained.

Many of the new generation of global business memoirists also acknowledge their privileged upbringings -- while taking care to juxtapose their family's wealth with the struggles faced by their country in general. "I was born wealthy," writes Ricardo Semler, author of Maverick and head of Semco, the Brazilian industrial group, which he inherited from his father, the immigrant son of a Viennese dentist. But, he points out, he began running Semco in the 1980s, Brazil's "lost decade." "From 1986 to 1990, the country endured five economic shock plans, knocked three zeros off its currency twice and on two occasions changed it altogether," Semler writes.

Nandan Nilekani, co-founder of the Indian IT group Infosys Technologies, is similarly frank about his background. In Imagining India, his 2008 book, Nilekani writes that his parents "were Brahmins who were educated and knew where the opportunities lay." All the same, he was not from one of the famous Indian business families, and when he arrived in Bombay to take up his first job in 1979, he had to share a tiny room with two others. For Nilekani, the "hum and thrum" of entrepreneurial India has to be set against its electricity problems, failing schools, lousy health care, and political tensions. It is easier, he confesses, to be optimistic about India when one is far away from it.

In terms of work culture, the foreign CEOs face issues no American executive would ever have to contend with. In Banker to the Poor, Yunus recalls having to speak with potential female customers through curtains, as they were not permitted to talk to men outside the family. More challenging than etiquette, however, is the fact that, in many of these countries, CEOs can encounter fierce opposition to the basic idea of entrepreneurship. American entrepreneurs might face investors who don't understand their ideas or bosses who don't recognize their brilliance. But everything in American business culture at large is on their side: The idea that creativity and innovation are the key to capitalistic success is ingrained in the culture. For the foreign aspirants, accomplishing some of the most basic aspects of expanding a business often meant confronting decades or even centuries of economic and social tradition.

Nilekani writes about the long history of Indian distrust of entrepreneurship, particularly the fierce opposition to the removal of protectionism by the "Bombay Club," a group of entrenched Indian business leaders who met during the economic upheavals of the early 1990s to try to keep out international trade. In the first days of Infosys, IT was a scorned subfield and computers were euphemistically called "ledger posting machines" in government reports out of fear that unions would react badly to what they conceived of as "job-eating machines." Like Nilekani, who was warned that start-ups would never work in India, Yunus was told his ideas were impossible. When he first tried to organize a loan on behalf of a group of poor stool-makers, he was dragged into a Kafkaesque debate with the bank manager over the justice of a system that only gives money to borrowers who can fill out a written application -- in a country that had 75 percent illiteracy. "Professor, banking is not as simple as you think," the bank manager told him.

One thing CEOs worldwide share is a love for America. Semler kept a Boston subway token in his wallet as an emblem of his obsessive ambition to study at Harvard University (he was rejected twice, but eventually enrolled in a Harvard Business School program for established executives). When Nilekani extols the opportunities that India's new outsourcing sectors provide to young, ambitious English-speakers, he can think of only one description for it, one that could sum up the aspirations embodied by the new class of global billionaires: "[T]his Indian industry," he writes, "has carved out a route to the American dream."

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