February 28, 2006
Wooly thinking Part 2
Liu Kin-ming of The Standard goes to Congress's hearings on American companies and China's internet and comes out angry. So angry as to make no sense. The upshot of the opinion piece is that America's technology firms are evil for obeying China's laws because China isn't the rule of law but rule by law. How defying these laws helps improves matters is left unanswered. Later, there is this:
It's really infuriating to see these companies, which have prospered in an environment only because of the principles enshrined in a constitution adopted in 1787 and the functioning of the greatest democracy, to compare China to the United States. To suggest what they're facing in China is no different than what they may face in their own country, the companies' logic smacks of the kind of moral equivalence which is prevalent in anti-American crowds.In terms of bows, this is an extremely long one. The tech companies were pointing out that even the United States has laws it expects companies operating there to comply with. Clearly China is no USA, but is ignoring the demands of police in China easier than those in the USA because of that? If a company goes into a country, it must follow that country's laws. And if a company ignores a growing market such as China they are breaching their duty to their shareholders, a legally enforceable fidicuiary duty to manage the company in the best interests of its owners.
The rest of the opinion piece slams the various questioners, such as:
Some Democrats were trying to lessen the guilt of the Internet companies. Adam Smith, from the state where Microsoft is based, asked: "Let's assume for a moment that no US tech company does business in China. Does it get better? Is it less repressive? Does China move forward? I don't think so."Apparently the views of duly elected representatives from Washington state don't matter as much as those from elsewhere. Yet this is the most crucial question in the debate. It's a shame the article doesn't even try and address it. Will China's home grown internet and technology companies be held to the same standards and criticisms? Is China better or worse off thanks to these companies and their operations in China? Do you see the world in black and white or in shades of gray? Is an absolute ideal better than pragmatism? The problem with doing what's right is that what's right differs between people, cultures and countries.
I wonder if Congress will ever call up some Chinese internet users for their views?posted by Simon on 02.28.06 at 09:05 AM in the China internet category.
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I largely agree, but I have to take issue with this:
"And if a company ignores a growing market such as China they are breaching their duty to their shareholders, a legally enforceable fidicuiary duty to manage the company in the best interests of its owners."
I've heard a few people say this, but it strikes me as, frankly, bullshit. Can someone show me a single example of a company being sued for not expanding into China? Can Ben & Jerry's, The Body Shop et al be sued for not seeking the lowest cost provider of products and ingredients? Surely if they can get it cheaper in China, they are legally required to, right?
I've started companies and served on boards. No one has ever hinted that I could get in trouble for not doing business with a regime I dislike.posted by: Derek Scruggs on 02.28.06 at 10:47 AM [permalink]
I would also question whether getting involved in the China market as a content or communications company, which is what internet companies are, really makes any sense from the perspective of "fidicuiary duty."
If you own stock in these companies, you expect them to develop the business as best they can. China is a fast growing and potentially large market. Now that's not to say going into any market, let alone China, is an easy decision. But it would be negligent for a company to not expand the business if the opportunity is there and if, in the mind of management, the benefits outweigh the costs. Putting China in the too hard basket is not an excuse.posted by: Simon on 02.28.06 at 05:25 PM [permalink]
I'm not sure I agree it's a breach of fiduciary duty. Any management decision involves weighing up a number of options, such as whether to reinvest or return profits to shareholders. With China investments there's a number of risks that can be sensibly argued (damage to reputation, risk of IP theft, competitors' preference for market share over profit etc). If shareholders object to management staying out they can always vote with their feet...posted by: Duncan on 02.28.06 at 05:54 PM [permalink]
But it would be negligent for a company to not expand the business if the opportunity is there and if, in the mind of management, the benefits outweigh the costs. Putting China in the too hard basket is not an excuse.
Until you can show me an example of someone getting sued over it, it's definitely an (legitimate) excuse. Jeezus - even Rupert Murdoch is cutting back in China. Show me a single cutthroat Western captalist taking someone to court over this - Kirk Kerkorian, Donald Trump, T. Boone Pickens - and I'll buy the "you-have-to-enter-this-market-it's-your fiduciary-duty" argument. Otherwise it's a bullshit justification.
(I speak as someone who is bullish on China and believes Google is doing the right thing. I just don't buy this line of reasoning.)posted by: Derek Scruggs on 03.09.06 at 01:41 PM [permalink]
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