WSJ: Yahoo’s Lashing Highlights Risks Of China Market

Today, Co-founder and CEO of Yahoo!, Jerry Yang, along with General Counsel Michael Callahan, testified in Congress today, as reported in The Wall Street Journal’s article “Yahoo’s Lashing Highlights Risks Of China Market”

“An unusually dramatic congressional hearing on Yahoo Inc.’s role in the imprisonment of at least two dissidents in China exposed the company to withering criticism and underscored the risks for Western companies seeking to expand there. “While technologically and financially you are giants, morally you are pygmies,” Rep. Tom Lantos (D., Calif.), who called the hearing on Capitol Hill, told Yahoo’s co-founder and Chief Executive Jerry Yang and General Counsel Michael Callahan. “This testimony has been an appallingly disappointing performance.” Mr. Yang apologized to the mother of journalist Shi Tao, who was jailed after Yahoo China, then a unit of the company, handed information about him to Chinese authorities in 2004. She was at the hearing, sitting directly behind Messrs. Callahan and Yang. Addressing the families of the dissidents, Mr. Yang said: “I want to say we are committed to doing what we can to secure their freedom. And I want to personally apologize for what they are going through.” The hearing was called by Rep. Lantos, chairman of the House Foreign Affairs Committee, to hear testimony about the circumstances under which Yahoo cooperated with the Chinese authorities, and to hear from Mr. Callahan about apparent inconsistencies in his [past] testimony. The highly publicized hearing highlighted a risk that comes with the rewards of moving into the huge Chinese market: Yahoo, Google Inc. and other U.S. Internet companies face a potentially high cost in negative publicity with their gains.”

There was some debate internally within 8Asians whether or not to post or comment on this subject since a few of us (including myself) used to work at Yahoo!, as well as some current 8Asian bloggers. However, given the fact that 8Asians is a blog expressing our individual thoughts and not representing our present or former employers, we are cautiously optimistic about commenting on this topic.

Personally, the WSJ headline says it all – when working in China, you have to be careful. When it comes to China, all major corporations essentially will bend over backgrounds to please the government and conform to local Chinese laws, practices and self-censorship because of the potential (or actual) business opportunity. For other smaller, less lucrative countries, U.S. corporations will take the moral high road.

Yahoo! is not alone in being morally flexible while working in China. Although Google’s corporate mantra has been “Don’t be evil,” even they self-censor their search results to operate Google.cn within China (try searching for “Tibet,” “Falun Gong,” or “Taiwan independence” – or even trying to read 8Asians.com within China – good luck!).

It is with great irony that Jerry Yang, a Taiwanese-American who immigrated to the U.S. when he was a young child, has to defend his company’s actions within China, whom I am sure does not agree with mainland China’s policies or actions. You can read Yang’s prepared remarks here. It’s a Prisoner’s Dilemma, where if the Yahoo!’s or Google’s don’t bend to China’s rules, others will, and are the Chinese any better off? It’s hard to get all of the countries in the world to act in unison on any position in dealing with China. You can read more about Google in China in this New York Times article, “Google’s China Problem (and China’s Google Problem)” and Sergey Brin’s regret. Microsoft also hasn’t been absent to bending their practices to make China happy (Microsoft deletes ‘freedom’ and ‘democracy’ in China)

Old line manufacturing businesses have had to deal with this in the past, with Boeing being the best and biggest example. Boeing is I believe the largest U.S. exporter to China, and China essentially plays Boeing vs. Europe’s Airbus off each other, especially when the U.S. presses China on a variety of issues around human rights, Taiwan , Tibet, etc.

What are your thoughts? Are U.S corporations just sycophants doing anything to please shareholders or are being realistic in a morally gray situation?