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Yahoo under political fire.
By Bennett Voyles

The founder of a company that gives away E-mail service might seem an unlikely candidate as the U.S. Congress’ 2007 poster child for corporate wrongdoing, but Jerry Yang seems to have this year’s contest wrapped up.

Despite a field of promising candidates (particularly in the sub-prime mortgage sector), the Yahoo co-founder and CEO has fallen afoul of Congress once again for his company’s alleged failure to give lawmakers accurate information about Yahoo’s 2005 decision to allow the Chinese government access to the E-mail records of a dissident journalist. Yahoo’s cooperation earned journalist Shi Tao a sentence of 10 years in jail, and Yang a 3 1/2 hour stretch under the bright lights of a public hearing at the House Foreign Affairs Committee on November 6.

“While technologically and financially you are giants, morally you are pygmies,” harangued Congressman Tom Lantos, chairman of the House Foreign Affairs Committee.

Yahoo’s predicament highlights a growing worry for multinationals: as more earnings come from authoritarian countries, managers will find themselves routinely making decisions with dire moral and reputational consequences.

Consider the Yahoo case a warning, urges Morton Sklar, the executive director of the World Organization for Human Rights USA in Washington, who represented Shi and another jailed Chinese journalist in a civil suit against the Internet company. Multinationals, he says, “are obliged to adopt a more careful and objective method for determining the legitimacy and legality of any requests that come to them from their host governments.” It’s not enough to claim that the company was merely following orders.

Although some governments and human rights groups are trying to come up with clear rules for enterprises doing business abroad, Sklar says, in the end the company itself needs to come up with a clear policy about how to handle such requests.

The concerns aren’t limited to E-mail and search providers such as Yahoo and Google. Nortel Networks has come under criticism for helping China strengthen the country’s Internet firewall. Another company, U.S.-listed China Security and Surveillance Technology, is providing systems to China’s security apparatus. The company’s products include video surveillance devices for Internet cafes with a live feed to police stations, and software that detect crowds forming in different parts of a city, with an eye toward preempting protests.

In the case of Yahoo, some in Congress are trying to help clarify matters with a proposal that would prohibit Internet companies from cooperating with governments when those acts would result in a major human rights abuse. Most major Internet companies oppose the Global Internet Online Freedom Act, which failed in Congress the first time it was introduced in 2006.

Of course, politicians are hardly unified on the question of corporate ethics. In the same month that Congress gave Yang his very public drubbing, it also carried on an extended debate regarding whether to grant legal immunity for those telecom companies that provided access to millions of Americans’ phone records and communications to the U.S. National Security Agency in the years since Sept. 11th.