Yahoo’s Business Reputation

According to a global risk management survey of 320 organizations in 29 countries:

"Executives now see reputation as a major source of competitive advantage," said Ruth Joplin, Aon Global Risk Consulting managing director. "While intangible, reputation is one of the most important corporate assets and one of the hardest to protect," she added. "The lack of preparedness reported for this and other key risks is both surprising and somewhat worrying."

The behavior of Yahoo in China and the reactions are an exemplar case.

One of those instances, most egregious, is Yahoo’s informing China’s censors of a Yahoo user’s identity who dared to challenge one-party control. Yahoo is being sued, under American laws, for this act.

The suit may not be successful, given difficulties of penetrating China’s inner sanctums. However, China’s determination to control the Internet continues unabated. With China preparing for its worldwide showcase in the Summer 2008 Olympics, efforts to control the message increase.

Chinese President Hu Jintao on Monday launched a campaign to rid the country's sprawling Internet of "unhealthy" content and make it a springboard for Communist Party doctrine, state television reported.

With Hu presiding, the Communist Party Politburo -- its 24-member inner council -- discussed cleaning up the Internet, state television reported. The meeting promised to place the often unruly medium more firmly under propaganda controls.

"Development and administration of Internet culture must stick to the direction of socialist advanced culture, adhere to correct propaganda guidance," said a summary of the meeting read on the news broadcast….

The Communist Party is preparing for a congress later this year that is set to give Hu another five-year term and open the way for him to choose eventual successors. In 2008, Beijing hosts the Olympic Games, when the party's economic achievements will be on display, along with its political and media controls.

Meanwhile, Yahoo’s annual meeting (and Google’s) will have to face a shareholders’ resolution – Yahoo losing an appeal to the SEC to avoid the resolution -- requiring it to comply with international norms for conduct.

[T]he Securities and Exchange Commission has rejected a request from Yahoo to "omit" a shareholder resolution proposed by those funds, to have Yahoo adopt anti-censorship policies….

Included in the language of both shareholder petitions is the following language: "Freedom of speech and freedom of the press are fundamental human rights, and free use of the Internet is protected in Article 19 of the Universal Declaration of Human Rights, which guarantees freedom to 'receive and impart information and ideas through any media regardless of frontiers.' Technology companies in the United States. that operate in countries controlled by authoritarian governments have an obligation to comply with the principles of the United Nations Declaration of Human Rights."

Google has been a bit more restrained than Yahoo about cooperating with the Chinese censors, placing its servers outside China in order to avoid cooperation with China's censors. Although this has reduced some of Google’s functionality, Google continues to gain in the China market.

Industry analysts say Google's handicaps in China include its failure to aggressively promote online music and to offer its G-Mail service on Google.cn. The company refrained from offering e-mail in China after the controversy over Yahoo's China arm providing information that led to a reporter's being imprisoned….

Schmidt [Google’s CEO] said Google was gaining market share but he declined to give figures. He expressed confidence that its greater financial and technical resources would help close the gap….

It may well be that corporate reputation also counts for competitive advantage, something Yahoo and other American companies ought to keep in mind as they sell out our values and impede the future freedoms of their customers.