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U.S. Web firms aid in repression

My latest media column for the Rocky Mountain News details how firms such as Yahoo, Google, Microsoft, and Cisco have chosen to help the Chinese tyrants create the world's most sophisticated architecture of repression. I also argue that the greedy and immoral policies of these corporations directly endanger Americans. Because moral considerations obviously have not swayed these companies, I conclude that "Perhaps only consumer and shareholder pressure can persuade the American companies to change their evil ways."

M (mail):
On this topic I'd be particularly interested to hear from those who think, a la Milton Friedman, that the only duty of the directors of a company is to maximize profits and stock value. I'm not trying to be obnoxious here or to say bad things about people. I'm honestly curious how the line is to be drawn by people who think the duty of managers is to maximize profits so that they only get cases like this one. Perhaps reference to activities that would be illegal in the US would be a way to try, though that would be imprefect, at best. I'm interested to hear ideas.
9.25.2005 11:21pm
Zed Pobre (mail) (www):
You want to hear from those that think it is their only duty, or those that think that it should be their only duty?

I find the tech industry collaboration with China to be absolutely abhorrent... but I'm perfectly cognizant of the fact that a director of a publically traded company that makes decisions placing personal ethics over corporate profit will quickly be replaced... or worse.
9.26.2005 12:24am
John Jenkins (mail):
Try this: China would have imprisoned the dissident without evidence anyway, all Yahoo! did was make it more public so people would pay attention to the fellow's plight.

By publicly telling EVERYONE what words are being blocked (or that certain words are be), people can specifically avoid those words and use others of similar meaning, or others TOTALLY WITHOUT that denotation but with a meaning among the community in question.

At any rate, the companies have a fiduciary duty to their shareholders and your sermonizing won't change that.
9.26.2005 12:31am
Richard Gould-Saltman (mail):
I, like M, am anxious to hear from "max. return on investment to shareholders, and not stealing from them, is the ONLY duty of corporate managers" free-marketers, and am anxious to hear them, (particularly those right of center who find, e.g. Google's conduct vis a vis China problematic) distinguish collaboration with the Chinese government from part corporate collaboration with, say, the Saudi, Pakistani, Indonesian, Argentinian etc, governments.

RFGS
9.26.2005 12:58am
Brandon Berg (mail):
M:
I think you're confusing two issues. Everyone agrees that corporate managers are bound to the same standards of morality as the rest of us. No one would argue, for example, that they have the right—and certainly not the obligation—to murder competitors if it will increase profits.

The claim that managers have no responsibility other than to make profits for investors is a response to the "corporate responsibility" movement, which claims that managers are obligated to use shareholders' money for charitable purposes. What we really mean is that they have no other special responsibilities that they take on as a result of their positions.
9.26.2005 2:04am
Brandon Berg (mail):
To clarify the above, I do consider not aiding tyrannical governments to be one of those standards of morality to which all of us are bound.

That said, we don't know all the facts of these cases. It's easy enough for us to sit here safe in the US and say that Yahoo shouldn't have turned over the dissident, but when a company actually has employees on the ground in China, they can't just thumb their noses at the government. I very strongly suspect that employees of Yahoo's Chinese subsidiary would have gone to jail if they hadn't turned over his name.

And even if they hadn't cooperated, it might have done more harm than good. It's possible that the government might simply have blocked access to Yahoo's mail service, or maybe to all of the major free e-mail services.
9.26.2005 2:18am
Zed Pobre (mail) (www):
Brandon:

I think the point is that Yahoo has known for quite some time that this would be the price of their profit in China. They had the option to not do business there, and they chose instead to help build the Great Firewall and repress dissidents.
9.26.2005 2:39am
pdxnag (mail) (www):
Investments by state treasurers in the offending companies should be fair game for divestment; at least so long as a state treats their public employee pension trust funds as amenable to Pension Obligation Bonds.
9.26.2005 2:44am
Bruce:
From the press reports, Yahoo's Chinese operations received a valid investigatory request for information under Chinese law and complied with it. It's not much different in form than when Yahoo here in the US turns over the IP address of a hacker to the FBI pursuant to a valid subpoena. In substance it's different, of course, because China is a repressive regime. But unless you all are arguing for divestment (that would be an interesting twist, given the usual politics of this blog), I'm not sure why Yahoo's compliance with authorities in places it does business is noteworthy, or distinguishes it from McDonald's, or U.S. tourists who visit China and spend money.
9.26.2005 3:36am
Anonymous Coward:
So we pressure Microsoft by supporting what? Linux? Considering the alternative's position is a free platform that does not discriminate based on political ideology, I'll stick with the company that at least brings tax revenue into the U.S.
9.26.2005 7:57am
C. Owen Johnson (www):
Sorry, David, you completely fail to understand anything about US IT companies and their involvment in China and you appear to have no idea how effective repression is actually carried out. In PRC may indeed have in some purely technical sense "the world's most sophisticated architecture of repression" -- though you should check out what the Russian's have been up to since about '98 -- but it's also something of a joke.

What you can't seem to understand is that the IT technology the MS, Cisco et al is introducing in China expands freedom vastly more than any attempts by the PRC leadership to restrict it. Far from being "greedy and immoral" these companies are bringing about the greatest liberation in history. They may not know they are doing so, but that is in fact what is happening.

There are serious questions about both the near-term and long-term effects IT prolifferation in China, but your artilce is ignorant of all of them. Please try to educate yourself next time before throwing around ignorant and irresponsible charges of evil behavior.
9.26.2005 9:15am
Adam:
Bruce, Brandon,

In 2002, Yahoo voluntarily chose to sign the "Internet Society of China's Public Pledge on Self-Discipline for the Chinese Internet Industry."

See http://www.pcworld.com/news/article/0,aid,103865,00.asp

So its not clear that there was even the Chinese equivallent of a lawful order.
9.26.2005 9:57am
M (mail):
Brandon,
You're right that much of the recent discussion of the duty of managers and directors to maximize profits started in the area you mention, but it's far from clear why it ends there. And it seems pretty clear that the "always maximize" side of the argument is saying that directors, in their role as such, have a different set of obligations than we do in normal life. That might even be right- I don't know for sure. But there seems to be no clear way to limit the issue to questions about, say, if a company should donate to charity or not. Assumdly violating serious laws is ruled out on the grounds that it will hurt the company in the long run, not becuase of the intrinsic morality of the situation, or else the intrinsic moralit of the situation would have to come in to many other questions (should this small competitor be crushed? Should we lay off workers who are unlikely to find decent jobs? Should we look for loop-holes in environmental regulations?) This seems to be just a more extreme version of the case. I think it's quite a hard question, in part becuase there are clearly unsettled emperical issues (is Yahoo et al doing more for freedom in China than not?), though those are perahps side-issues if you think the only purpose of the director is to maximize profits in whatever legal way he or she can.
9.26.2005 10:34am
Dread Justice Roberts:
Didn't this get solved in the first week of Contracts class? Sure, managers have a duty to maximize shareholder value, but they also have the benefit of the business judgment rule. That is, if they think that shareholder value will be increased by the public relations goodwill generated by giving to charity, then that decision is protected. If they think that the profits to be had in China are worth the fallout that may result when situations like this happen, that's protected as well.
9.26.2005 11:23am
Steve:
You must have had a strange Contracts professor.
9.26.2005 11:59am
Dick King:
The directors do not have an obligation to maximize profits.

The directors have an obligation to do what the shareholders want. Usually shareholders want to maximize profits, and if shareholders don't speak directors generally understand their obligation to be maximization of profits, but if the shareholders speak clearly enough the directors must comply.

That being said, if a tiny number of shareholders express a desire for something other than profit and they get repudiated, the directors must understand that that policy has been repudiated.

Directors can clearly understand that good corporate citezonship can be in the company's enlightened self-interest, but a case has to be made.

-dk
9.26.2005 1:06pm
pdxnag (mail) (www):
I thought someone could bank on goowill. See winstar+goodwill.
9.26.2005 5:27pm