Yahoo - Putting the Ethical Cart Before the Horse

Recently, Yahoo’s CEO, Jerry Yang, faced blistering criticism at a congressional hearing over Yahoo’s handling of email records. In 2004, Yahoo handed over emails records of journalist Shi Tao to Chinese authorities. Tao used his Yahoo email account to send an email to the U.S. which included information on the government response to the Tiananmen Square massacre. Tao was imprisoned that December by the Chinese government and is serving a 10-year term. How could this happen?

The answer is simple: the lure of overseas markets. Like other corporations, in order to gain access to lucrative Chinese markets, Yahoo signed China's Public Pledge on Self-Discipline for the Internet Industry thereby agreeing to support China¹s system of censorship and control.

But, Yahoo is not the only corporate entity lusting over the potential that the Chinese market promises. Not too long ago Google acquiesced to Chinese government requests and built a special Chinese version of its might search engine, one that screens and filters out words and phrases deemed harmful by government officials.

However, to truly understand Yahoo’s recent ethical dilemma, we need to place all of this in perspective. Let us not forget that it was at a June 12 meeting when Yahoo shareholders criticized then CEO Terry Semel for Yahoo’s declining revenue growth and stock price. The following week Semel resigned and was replaced by Yahoo co-founder Jerry Yang. It was at this same meeting that Yahoo shareholders accepted two proposals specific to its international policies. Shareholders accepted proposals that asked the company to commit to not censor its internet sites in other countries, and establish a committee on human rights.

But is all this too little too late? Can Yahoo shareholders now have it both ways in China’s emerging market?

Yahoo, as with so many other entities, seem to justify their actions with a "when in Rome, do as the Romans do" defense. To enter the Chinese market, executives claim they must comply with local laws. But China's local laws present overseas companies with difficult and ethical choices that would be unacceptable in the West.

So what is the solution? In dealing in the international marketplace, US companies need to first determine an ethical baseline. For example, Seagate Technology says this about international ethics: “Every business must determine its standards in the global marketplace. Once these standards are determined, they must be clearly communicated to employees and enforced. Without clear standards, we place employees, the company, and its reputation at risk.”

In other words, a company must go into an international relationship knowing what its ethical standards will be. From that point on, from that baseline, a company makes decisions within the context of those ethical standards. Clearly, Yahoo’s ethical baseline was nonexistent. Yahoo did what was necessary in order to enter the Chinese market, knowing that Google had already singed on with the Chinese government. Instead of taking a stand, of creating an ethical baseline that would have differentiated it from Google, Yahoo opted to be like Google and like Google failed in its ethical approach.

Think about it for just a second: if Yahoo had drawn an ethical baseline in the sand, and opted out of the Chinese market for ethical reasons, it would then be in a position to present its case before the American public and differentiate itself from Google. Then, it would be up to the American public to reaffirm Yahoo’s ethical baseline and reward it over Google. Ultimately, an organization’s ethical approach is judged in the marketplace.

Unfortunately, as with Google, Yahoo put the ethical cart before the horse.