Defending Democracy and Justice in an Era of Rising Autocracies

As business leaders confront a world where democratic norms are eroding and autocratic regimes are rising, they face tough decisions on how to manage risks and ensure their businesses do not contribute to the forces undermining these democratic norms.  At the Stanford Graduate School of Business event titled Democracy Dilemma: Business Leadership in an Era of Rising Autocracies, Sir William Browder (Stanford GSB alumnus ’89) shared insights on the complexities of working in high-risk markets, the impact of corruption on business, and the importance of standing up for justice and accountability in the face of autocratic power. 

Browder is CEO of Hermitage Capital Management, head of the Global Magnitsky Justice Campaign, and author of Red Notice and Freezing Order. The event was moderated by CASI student leader Rachel Hersh. Browder began the discussion by sharing his unconventional background and path to becoming a prominent capitalist in Eastern Europe.

“I've come from an unusual family. My grandfather [Earl Browder] was a labor union organizer from Wichita, Kansas. And he was so good at organizing the union back in the 1920s, that the Soviets, the communists, spotted him and said, ‘If you like labor unionism, you're going to love communism. Why don't you come over to check it out’?”

As Browder explained, his grandfather moved to Moscow in 1927, married a Russian woman, and had a son there. Returning to the U.S., Earl Browder led the American Communist Party and ran for president against Roosevelt in 1936 and 1940. Imprisoned for his communist ties in 1940 and pardoned a year later, he was eventually expelled from the party in 1945 for being seen as too capitalist, only to face persecution during the McCarthy era for his communist past.

Growing up in a politically charged environment, Sir William said his form of teenage rebellion was to embrace capitalism.

“I was trying to figure out a good way of rebelling from this family of communists. And I came up with a great idea,” he said. “I became a capitalist, and I came to Stanford Business School.”

After graduating in 1989, the year the Berlin Wall fell, Browder sought opportunities emerging in the transitioning Eastern European economies. His breakthrough came while working for Salomon Brothers, a prominent Wall Street investment bank known for its bond trading and investment banking services, and famously depicted in Michael Lewis's Liar's Poker. The firm faced significant setbacks due to a Treasury bond scandal in the early 1990s and was eventually acquired by Travelers Group in 1997, becoming part of Citigroup before being phased out.

Early in his career at Salomon, Browder was sent to Murmansk in Russia where he was tasked with advising on the privatization of a Russian fishing fleet. Witnessing the extreme undervaluation pervading Russia's privatization program, where billion-dollar assets were being sold for a fraction of their worth, he decided to shift from advising to investing.

“WhatI learned was that [the Russians] made this political decision to go from communism to capitalism, but just declaring themselves capitalists doesn't do much good unless you can somehow bring the process along. And the way they did that was they gave away these vouchers, these certificates to every person in the country.”

Browder recounted the extraordinary investment opportunity in Russia during the early 1990s where privatization vouchers issued to citizens valued the entire nation's assets at just $10 billion. This realization led him to dive deeply into the Russian market, seeing it as the "single most compelling investment opportunity" in capital market history.

“This is a country with 30% of the world's natural gas, 10% of the world's oil, there's 10% of the world's steel, aluminum, electricity, fertilizer, car companies, banks, everything,” he explained. “You couldn't buy a mid-sized oil company in Oklahoma for $10 billion but you could buy the entire country of Russia and that's when I realized that I needed to just go all in on this whole thing.”

Browder shared how, when he returned to London, his pitch to invest in Russian equities fell on deaf ears.

“They shut me down,” he said, “and by the time I'd gone to 10 people, I'd completely discredited myself inside the whole organization.”

With his job on the line, a senior partner unexpectedly offered him $25 million to invest, leading to rapid success as the portfolio quintupled in value following a surge in interest sparked by The Economist's coverage of Russia's voucher program.

Despite the newfound recognition within Salomon Brothers, Browder encountered internal conflict over who would receive credit for his success, sidelining him in the process. Frustrated by the firm's politics, he decided to strike out on his own.

With initial backing from Edmund Safra of Republic National Bank, Browder launched his hedge fund, Hermitage Capital Management in Moscow, achieving extraordinary early returns.

“We started with $25 million and in the first 18 months, we were up 835%. We went from $25 million to $1 billion of assets under management. My fund was the best-performing fund in the world in 1997.”

This move not only solidified Browder's reputation as a top fund manager at the young age of 31, but also marked his transition from a corporate employee to a successful entrepreneur. But his meteoric rise was short-lived, as the 1998 Russian financial crisis hit.

“And my billion-dollar portfolio went down 90%. I lost $900 million of my client's money. And that was a very sobering moment in my life.”

Browder shared the tragic story of Sergei Magnitsky, a lawyer who worked for him in Russia, and how his death led to a global human rights movement. Following the 1998 crash, as corruption among Russian oligarchs intensified, Browder's firm began exposing fraud to protect their remaining investments. During that time, Browder was arrested, deported and declared a threat to Russia’s national security.

Magnitsky played a key role in uncovering a $230 million tax fraud scheme involving Russian officials. After testifying against those responsible, Magnitsky was arrested, tortured, and ultimately beaten to death in a Russian prison in 2009, at the age of 37.

“He left a wife and two children, “Browder explained. “That was almost 15 years ago. And that was the tragedy that changed my life.”

“I made a vow to his memory, to his family, and myself that I was going to put aside everything I was doing in my business and devote all of my time, energy, and resources to going after the people who killed him and make sure they face justice. And that's what I've been doing for the last 15 years.”

Browder led the charge to pursue legal accountability for those responsible for Magnitsky’s death, resulting in the passage of the Magnitsky Act in the United States in 2012. The law freezes assets and bans travel for individuals involved in Magnitsky’s death and other human rights abuses, provoking strong opposition from Vladimir Putin, who retaliated by banning American adoptions of Russian orphans. Since then, the Magnitsky Act has expanded to 35 countries and become a powerful tool for sanctioning human rights violators worldwide, including those connected to Russia’s invasion of Ukraine, and continues to deter abuses by threatening financial and travel restrictions.

“It's hard to know whether it's been a deterrent or not,” he remarked. “but I'd like to think that there are people who have been asked to do terrible things who chose not to because they didn't want to have their worldwide assets frozen.”

Browder emphasized the critical roles democracy, the rule of law, and freedom of the media play in creating environments in which sound investments can be made, particularly in the context of emerging markets.

“I made all of my money in public markets, in emerging markets,” he said. “But after what I've seen, I don't have a penny invested in emerging markets.”

Browder offered China as an example of a country where investments are highly speculative because the lack of rule of law makes it impossible to secure returns.

He argued that without these fundamental components, investing becomes mere speculation since there is no reliable way to protect one’s assets from being seized by powerful interests.

Moderator Hersh asked Browder if he now sees signs of democracy backsliding in various regions. He acknowledged a widespread decline in democratic principles, citing examples from Europe where authoritarian tendencies are gaining ground.

“It's remarkable what's happening,” he commented. “You’ve got Hungary, which was occupied by the Soviets in 1956, and you've got this sort of mini dictator Viktor Orban, who wants to basically become part of Russia again. And of course, you see what Putin is doing in Ukraine. If Putin succeeds in Ukraine, he'll then roll out his version of klepto-fascism to any place that he can occupy.”

Despite these daunting challenges, Browder remains optimistic about his work as a human rights advocate and the impact he hopes to make.

“I have a mission in my life, which I feel is a righteous mission. I get up every day excited to do the things I do and do good things and help people. I have a purpose in my life, and I feel good about that.”