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Yahoo! in China

Yahoo! in China
Case 5.1 Yahoo! in China
Shi Tao is a thirty- seven- year- old Chinese journalist and democracy advocate. Arrested for leaking
state secrets in 2005, he was sentenced to ten years in prison. His crime? Mr. Shi had disclosed that the
Communist Party’s propaganda department had ordered tight controls for handling the anniversary of
the infamous June 4, 1989, crackdown on demonstrators in Beijing’s Tiananmen Square. A sad story, for
sure, but it’s an all too familiar one, given China’s notoriously poor record on human rights. What makes
Mr. Shi’s case stand out, however, is the fact that he was arrested and convicted only because the
American com-pany Yahoo! revealed his identity to Chinese authorities. 82 You see, Mr. Shi had posted
his information anonymously on a Chinese- language Website called Democracy Forum, which is based in
New York. Chinese journalists say that Shi’s information, which revealed only routine instructions on how
officials were to dampen possible protests, was already widely circulated. Still, the Chinese
government’s elite State Security Bureau wanted to put its hands on the culprit behind the anonymous
posting. And for that it needed Yahoo!’ s help in tracking down the Internet address from which
huoyan1989@ yahoo. com. cn had accessed his e- mail. This turned out to be a computer in Mr. Shi’s
workplace, Contemporary Business News in Changsha, China. A few months after Shi’s conviction, the
watchdog group “ Reporters Without Borders” revealed the story of Yahoo!’ s involvement and
embroiled the company in a squall of controversy. After initially declining to comment on the allegation,
Yahoo! eventually admitted that it had helped Chinese authorities catch Mr. Shi and that it had supplied
information on other customers as well. But the company claimed that it had no choice, that the ­
information was provided as part of a “ legal process,” and that the company is obliged to obey the
laws of any country in which it operates. Yahoo! co- founder, Jerry Yang, said: “ I do not like the
outcome of what happens with these things . . . but we have to comply with the law. That’s what you
need to do in business.” Some critics immediately spied a technical flaw in that argument: The
information on Mr. Shi was provided by Yahoo!’ s subsidiary in Hong Kong, which has an independent
judiciary and a legal process separate from that of mainland China. Hong Kong legislation does not spell
out what e- mail service providers must do when presented with a court order by mainland authorities.
Commentators pointed out, however, that even if Yahoo! was legally obliged to reveal the informa-tion,
there was a deeper question of principle involved. As the Financial Times put it in an editorial: “ As a
general principle, companies choosing to operate in a country should be pre-pared to obey its laws.
When those laws are so reprehensible that conforming to them would be unethical, they should be ready
to withdraw from that market.” Congressional repre-sentative Christopher H. Smith, a New Jersey
Republican and chair of a House subcommittee on human rights, was even blunter: “ This is about
accommodating a dictatorship. It’s outrageous to be complicit in cracking down on dissenters.” And in
an open letter to Jerry Yang, the Chinese dissident Liu Xiabo, who has himself suffered censorship,
imprisonment, and other indignities, wrote: “ I must tell you that my indigna-tion at and contempt for
you and your company are not a bit less than my indignation and contempt for the Communist regime. .
. . Profit makes you dull in morality. Did it ever occur to you that it is a shame for you to be considered
a traitor to your customer Shi Tao?” Whether profit is dulling their morality is an issue that must be
confronted not just by Yahoo! but also by other Internet- related companies doing business in China.
Microsoft, for example, recently shut down the MSN Spaces Website of a popular Beijing blogger whose
postings had run afoul of censors. Google has agreed to apply the Chinese censors’ blacklist to its new
Chinese search engine. And a congressional investigative committee has accused Google, Yahoo!, and
Cisco of helping to maintain in China “ the most sophisticated Internet control system in the world.” In
their defense, the companies ask what good it would do for them to pull out of the Chinese market. They
contend that if they resist the Chinese government and their operations are closed down or if they
choose to leave the country for moral reasons, they would only deny to ordinary Chinese whatever fresh
air the Internet, even filtered and censored, can provide in a closed society. It’s more important for
them to stay there, play ball with the government, and do what they can to push for Internet freedom.
As Yahoo! chairman Terry S. Semel puts it: “ Part of our role in any form of media is to get whatever we
can into those countries and to show and to enable people, slowly, to see the Western way and what our
culture is like, and to learn.” But critics wonder what these companies, when they are complicit in
political repression, are teaching the Chinese about American values. Some tech companies are turning
to the U. S. government for help. Bill Gates, for example, thinks that legislation making it illegal for
American companies to assist in the violation of human rights overseas would help. A carefully crafted
American anti- repression law would give Yahoo! an answer the next time Chinese officials demand
evidence against cyber- dissidents. We want to obey your laws, Yahoo! officials could say, but our hands
are tied; we can’t break American law. The assumption is that China would have no choice but to accept
this because it does not want to forgo the advan-tages of having U. S. tech companies operating there.
Still, this doesn’t answer the underlying moral questions. At a November 2007 congressional hearing,
however, a number of lawmakers made their own moral views perfectly clear. They lambasted Yahoo!,
describing the company as “ spineless and irresponsible” and “ moral pygmies.” In response, Jerry Yang
apologized to the mother of Shi Tao, who attended the hearing. Still, Yahoo! has its defenders. Robert
Reich, for instance, argues that “ Yahoo! is not a moral entity” and “ its executives have only one
responsibility . . . to make money for their shareholders and, along the way, satisfy their consumers.”
And in this case, he thinks, the key “ con-sumer” is the Chinese government. Update How to deal with
China continues to confound American internet companies. In January 2010, upset by the hacking of its
servers by the Chinese government, which was trying to gain information about dissidents, and uneasy
about continuing its complicity in Internet censorship, Google announced that it would withdraw from
China altogether if it could not operate there without censorship. Two months later, after negotiations
with Chinese authorities went nowhere, Google began automatically redirecting searches on its Chinese
servers to its Hong Kong affiliate. Hong Kong has an independent legal system, and mainland Chinese
censorship laws do not apply there. In response the Chinese government threatened to pull Google’s
Internet license. The stalemate lasted until July of that year when Google replaced its automatic
redirect from Google China to Google Hong Kong with a link to the latter, and signed a new licens-ing
agreement that allows it to continue to operate in China but to deliver results only for searches about
products and music and for some maps. One result is that the popular Chinese search engine Baidu,
which complies fully with government censorship rules, has greatly increased its market share.
Discussion Questions
1. What moral issues does this controversy raise? What obli-gations should Yahoo! have weighed in this
situation? Was the company a “ traitor” to its customer, as Liu Xiabo says?
2. In your view, was Yahoo! right or wrong to assist Chinese authorities? What would you have done if
you were in charge of Yahoo!?
3. Is Jerry Yang correct that the company had “ no choice”? Assuming that Yahoo! was legally required
to do what it did, does that justify its conduct morally?
4. Assess the actions of Yahoo! and of Microsoft, Google, and Cisco from the point of view of both the
narrow and the broader views of corporate responsibility. What view of corporate responsibility do you
think these compa-nies hold? Do you think they see themselves as acting in a morally legitimate and
socially responsible way?
5. In light of this case, do you think it makes sense to talk of a corporation like Yahoo! as a moral agent,
or is it only the people in it who can be properly described as having moral responsibility?
6. Would American companies do more good by refusing to cooperate with Chinese authorities ( and risk
not being able to do business in China) or by cooperating and working gradually to spread Internet
freedom? In general, under what circumstances is it permissible for a company to operate in a repressive
country or do business with a dictatorial regime?
7. Assess the pros and cons of a law forbidding American high- tech companies from assisting repressive
foreign governments.

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