In cynical circles, corporate ethics are considered an oxymoron and a series of mega-scandals have reinforced this point of view. Minus cynicism, corporate ethics remain complex — the rights of shareholders and stakeholders must be balanced against larger social imperatives.
When corporate ethics intersect with wider issues of human rights, the tangles can be agonising. In WW-II, giants like Mercedes, Siemens and Volkswagen used slave labour. Shell was deeply embarrassed by Ken Saro-Wiwa’s execution.
A few companies do possess the courage to act against their own short-term interests. While many MNCs sought ways to evade apartheid sanctions, Polaroid voluntarily exited South Africa. It refused to provide technology to create a ID-pass system to restrict movements of non-whites. Google has made an equally momentous decision. On January 12, the official Google blog published a post, A New Approach to China, authored by its Chief Legal Officer David Drummond. This explained that since mid-December, Google had been investigating cyber-attacks originating from China. The attacks targeted “at least 20 other large companies”.
Drummond claims, “A primary goal was accessing Gmail accounts of Chinese human rights activists. We discovered the accounts of dozens of US, China and Europe-based Gmail users who are advocates of human rights in China appear to have been routinely accessed by third parties.” The “surveillance uncovered — combined with attempts to further limit free speech on the Web — has led us to conclude that we should review the feasibility of our business operations in China. We have decided we are no longer willing to continue censoring results on Google.cn. We recognise that this may well mean having to shut down Google.cn, and potentially our offices in China.”
The public statement makes a compromise unlikely, if not impossible. Once it burnt its bridges, Google has also acted fast. Searches for images of “Tiananmen Square” used to fetch different results on Google.cn (happy tourists) and Google.com (graphic images from the 1989 massacres). Now, Google.cn yields the same pictures, suggesting the China-engine is no longer being censored.
Baidu.com, a Nasdaq-listed company based in Beijing, held 58.4 per cent of the Chinese search engine market in the last quarter, while Google had 35.6 per cent (Analysys International). Citigroup projects that Baidu will log $900 million in 2009 revenues while Google’s 2009 China revenues were about $350 million (1.5 per cent of its global revenues). The exit leaves an open goal for Baidu. Yahoo! quit China in 2005, instead taking 40 per cent stake in Alibaba Group, which now runs what was the Yahoo!China subsidiary. Microsoft has huge China exposure but search engine Bing is not the most important item in MS’ China portfolio.
The decision appears to have been driven by ethics alone. It potentially surrenders all leverage and revenues in the world’s largest internet community (300 million). It was not forced by global opinion — every MNC has China exposure.
Can it be spun into a marketing coup? It’s worth a try. Ethical businesses can receive a premium. For example, food, beverages, paper and other agri-products can often justify price markups by being organic and eco-sensitive. In Google’s case though, the returns could come in terms of both better stock-valuations as well as increased respect in regions, where free speech is respected.
The exit comes after several years of increasing frustration. Youtube (a Google property) has been blocked in China since Tibetan Nationalists started using it. Search result censorship should go deeply against the tenets of any engine-operator. When Google agreed to abide by censorship in order to become a player in the tightly controlled environment behind the Great Firewall of China, it compromised its principles. It’s good to know that when push finally came to shove, the company decided to live up to its motto.