March 13, 2006
A dozen years after the end of apartheid in South Africa, U.S.-based firms are confronting a dilemma that may be even more complex than that faced by General Motors and others during apartheid. For General Motors, the issues had to do with employment policies and whether or not to sell autos in a repressive society. For companies like Cisco Systems and Microsoft, the question has greater political implications-whether or not to continue selling hardware or software that filters communications or facilitates their monitoring to a government that is likely to use it for both purposes. For Yahoo and Google, among others, it gets even more complex. It is whether to: (1) comply with Chinese requirements that they make available information regarding individuals using their Internet sites that could endanger users' welfare, (2) resist such license requirements, or (3) cease doing business in China.
The increased complexity arises from the fact that Yahoo, Google, and others are not simply manufacturing and selling autos in South Africa. They are utilities that handle sometimes sensitive information on a worldwide basis.
Arguments for shutting down service in China include the importance of taking a stand against an oppressive government and its policies, refusing to compromise an organization's values by acceding to objectionable policies in the name of profits, and forcing a society in need of one's services to alter its views regarding privacy. To this list one might also add the reduced cost of dealing with protests and bad press resulting from a decision to stay.
Those defending a decision to stay say that change requires involvement and participation from the inside. Even though the process may be slow and, yes, profitable, they argue that abdication negates an organization's power to foster change. Further, if all U.S. information utilities operating in China were to take organized action, according to this argument, they would have significant leverage in forcing change.
Others may conclude that staying is the only course of action, whether or not efforts are made to influence government policies. This line of thought holds that a management's first obligation is to its shareholders, not others with political agendas. Further, they add that it is more appropriate that the U.S. government take whatever action is appropriate, including passing legislation requiring compliance.
Questions posed by this dilemma go far beyond the basic arguments stated above. For example, what does it mean to "leave" a market in an interconnected world served by network-based service providers? Have the services provided by these firms become so valuable to their customers that they could defy the Chinese government and somehow get away with it? Is coordinated action by the managements of these competing U.S. companies warranted in such a situation? Should what is often the business of governments be shifted to a group of business managers? If you were an advisor to the senior managements of these U.S. companies, what would you propose that they do? What do you think?