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Yahoo in China

The issue of internet privacy and security has been extremely topical over the past few years, if not decades, and has given rise to heated debates and countless discussions. This issue has been even more controversial and urgent with respect to such authoritative countries as China and Western multinational corporations working there. International companies that render various internet-related services, including Yahoo, Google, and the like, have been in the limelight with respect to their operation in China multiple times over the years. The case under review concerns a scandal with Yahoo in China in 2005. This instance is not the only one in which Yahoo has been involved since it entered the Chinese market. The current paper is aimed at critically analyzing the case of Yahoo in China with a view to determining ethical issues that need to be addressed as well as offering alternative solutions of the case. Besides, the behavior of Yahoo in the case may be deemed as a reprehensible breach of its users’ privacy and security in the internet in addition to involvement in human rights violation by the Chinese government.

The facts of the case under review are as follows: in 2005, Yahoo revealed identity of one of its users, namely Shi Tao, to the Chinese government after he anonymously posted information on the Democracy Forum website about the Chinese government’s intention to censor and prevent celebration of the anniversary of Tiananmen Square events (Shaw and Barry 224). Although the information this journalist provided was largely known in China, the State Security Bureau wanted to learn his identity in order to detain and jail him. At first, Yahoo denied its knowledge of the purpose of such request and claimed that it had no other choice but to comply with the foreign government’s request since it was obliged to follow the Chinese laws (Shaw and Barry 224). However, in April 2007, a lawsuit against the company was filed in the California court by the families of Mr. Shi and another person named Wang Xiaoning, whose identity had been revealed by Yahoo under similar circumstances. Then the company acknowledged that the Chinese government informed it of the purpose of the request but still denied its fault (Business & Human Rights Resource Center). The US Congress held a hearing relating to the case and, just like many business and public representatives, questioned the Yahoo’s preference of profit over morality and ethicality of conduct. In this respect, Yahoo is often compared with other multinational companies presented in the Chinese market such as Google. However, in 2010, Google virtually withdrew from the Chinese market after a series of hacker attacks intended to learn identities of some users who were supposedly anti-Communist activists from China (Shaw and Barry 225).

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The case under consideration concerns some ethical issues that need to be discussed on individual, organizational, and societal levels. First of all, Yahoo breached privacy of Mr. Shi and other persons, who were titled dissidents and traitors after their identities had been revealed. These users trusted the company with their personal information and in turn expected anonymity and a high level of personal internet security. Yahoo’s conduct has been repeatedly condemned in the world, especially in the USA, since it has resulted in imprisonment and potential torture of several Chinese activists. Besides, internet security and privacy have been highly controversial issues in the world as different countries have different laws in this respect, and it is essential for multinationals to comply with them. Thus, at the organizational level, Yahoo “continuously stressed that it had no alternative but to comply with legal requirements set by the Chinese authorities” (Kunming 38). Financial Times summed up a response of Yahoo’s critics to this statement:

As a general principle, companies choosing to operate in a country should be prepared to obey its laws. When these laws are so reprehensible that conforming to them would be unethical, they should be ready to withdraw from that market. (Shaw and Barry 224)

Hence, it is supposed that in this case Yahoo put profit above morality and provided information upon the first request of the Chinese officials to avoid potential profit losses should it be made to leave the market (Shaw and Barry 224). As Tom Lantos, a chairman of the US House Committee on Foreign Affairs, said in response to the case, “While technologically and financially you are giants, morally you are pygmies” (Kunming 38). However, supporters of Yahoo often emphasize that the company had to think about its shareholders and their profit in the first place, while public image and clients take the second position in the list of its priorities. Furthermore, Yahoo might not have been in control of the situation at the time. It concluded certain agreements with the Chinese government when it tried to capture a larger share of the internet market in the country. The company entered into “a partnership with China-based company Alibaba, in which the Chinese state still maintains a 40 percent stake” (Kent 51). On the societal level, ethical issues of the case are rather complicated. On the one hand, Yahoo sort of betrayed anonymity of customers and sided with the dictatorship regime in a fight against free-speaking and pro-democratic activists, which makes its conduct worthy of indignation and reprisal. On the other hand, if the company had left the Chinese market after a denial to fulfill the request, it would have refused the population access to information in the internet no matter how censored it was (Shaw and Barry 225).

There are several alternative solutions of the case. Yahoo could have denied access to personal information of Mr. Shi. The government would either make it leave the market or let it be. However, this alternative depends on Alibaba’s attitude to the case, which would still provide information as it is state-owned. Nonetheless, Yahoo’s executives should have acknowledged their fault in the case and explain the situation as it is to the public, which would lessen the criticism. They should have apologized before the Chinese public. Besides, they could have warned Mr. Shi and other accused dissidents that the government was interested in them, which would allow them to escape the country in time. Another possible alternative concerns the US government, which could have passed respective laws that would provide Yahoo and other multinationals with an excuse not to comply with the Chinese government’s requests in similar cases. With respect to the latter alternative, various companies could “attempt to develop coherent, enforceable, and specific codes of conduct that discuss issues of censorship and privacy regarding the internet, their customers, and foreign governments” (Kent 64). The most probable and enforceable alternative would be for Yahoo to deny providing requested information and warn Mr. Shi and others about a threat of imprisonment. It could have created disagreements with Alibaba and the Chinese government and even result in Yahoo leaving the market, but it would prove ethicality of the company and its loyalty to customers. Besides, it could have had a positive impact on the situation in China since the government cannot afford losing all multinationals as it might leave the country behind the rest of the world and have a detrimental influence on business.

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In case Yahoo had chosen the latter alternative, it would have been perceived as a highly ethical company with a moral code of conduct. The company might have suffered some economic losses, but they would have been compensated by customers’ loyalty as well as international support, which would enhance its operations in other countries. The society would have taken this alternative positively as the company would have protected its customers at the expense of possible economic losses. Besides, Yahoo would have proven its pro-democratic orientation, which could have possibly increased its market share in democratic countries. Human rights defenders would have been a special interest group with a positive perception of the alternative. The only stakeholder that would have negatively accepted the alternative would be the Chinese government, as it would have lost an opportunity to suppress freedom of speech in the country.

However, two primary constraints make this alternative unfeasible. The first one is the attitude of the company’s executives and shareholders to the case. They were unwilling to lose their profits and favorable position with the Chinese government and in the market. The possible loss of the Chinese market would have resulted in millions of lost profit, which would not be to the liking of Yahoo’s shareholders. The second constraint is the fact that, at the time, the company was in partnership with the state-owned company Alibaba and it had to follow its partnership agreements out of fear of legal repercussions.

Nonetheless, this alternative seems to be the best solution of the problem in the case. Besides, if Yahoo really had no other choice but to reveal Shi’s identity, they could have warned him of the threat, which would give him a chance to escape imprisonment. This way, the company would have complied with legal requirements and ethical requirements and at the same time avoided future lawsuits and allegations relating to immorality. The society would have positively perceived this alternative as it would have meant that the company protected its customers against intrusion in privacy and interference with their confidentiality. Besides, it would have prevented human rights violation and torture, which resulted from imprisonment of Mr. Shi and like-minded individuals. The organization could have had some problems with its partner and Chinese authorities, but, being a multinational giant, it could have afforded a little turbulence for the sake of ethicality, morality, and loyalty. Besides, its employees and customers’ loyalty would have been enhanced, hence having a positive impact on the company’s reputation and performance.

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However, Yahoo failed to follow the above presented alternative and became subject to criticism from the public, human rights defenders, and some governments from all over the world. As a response to the negative feedback, it set a fund aimed at helping victims of state repressions in China. Nonetheless, the fund was later in the center of a scandal related to money appropriation by its manager, which only contributed to the negative image of Yahoo. Thus, the company should develop some strategies to overcome the issue. First of all, it should acknowledge its fault in the case and promise not to repeat its past mistakes in the future. Secondly, it should develop and strictly adhere to a code of ethical conduct applicable in all its international branches. Thirdly, it should help families of people imprisoned and persecuted due to its fault. Fourthly, it should remedy the situation with the fund in order to boost customers’ confidence in the company. Finally, it could become an initiator of negotiations with other multinational giants operating in the sector, including Google and Microsoft, with a view to developing regulations governing internet security and privacy.

Thus, in the case under consideration, Yahoo breached privacy and betrayed trust of its customer, which resulted in his imprisonment and international scandals. Yahoo failed to deal with the ensuing negative feedback in a decent way. The company seems to put its profit above morality, which is likely to lead to similar instances and conflicts involving the company in the future unless it develops and implements some new policies and regulations.