Google in China: For most companies, profit trumps human rights
You can find the clearest statement about what’s happening with Google and its threat to quit China over the country’s human rights record in Xinhua, China’s state-run news service – seriously.
“It is still hard to say whether Google will quit China or not. Nobody knows,” an unnamed official told Xinhua. Here’s another comment from the story: “It will not make any difference to the government if Google quits China, however Google will suffer a huge economic loss from leaving the Chinese market.” That’s from Guo Ke, a communications professor at Shanghai International Studies University.
And that’s what you need to know: Google is taking a stand, challenging China to bring its human rights record into line with what it considers its most important tenet: “Don’t be evil.” Now everyone wants to know if other companies also will discover the ethicist inside them and find a purpose more important than making money for shareholders.
It’s unlikely that they will.
What we probably will hear is an unprecedented level of noise as companies reaffirm their commitments to the definition of human rights that most of the western world embraces, and that will be that.
It is difficult for companies to justify to shareholders anything other than bringing in profits that, if things go well, steadily increase over time and outperform Wall Street analysts’ expectations. Sure, Google gets a small amount of revenue now from China, but it has been investing there and sees more money in China a few years down the road. So does everyone.
Most investors don’t care about human rights any more than they care about the quality of our food, water and the air, or the way other people live or if they live. If they did, you would see companies working much harder and spending a lot more money to make a living and produce profits in ways that don’t harm the earth as much as they do. They don’t care (or at least, don’t care as much as they could) because they see their primary goal as an obligation: improve returns for investors. They see that not only as a job, but a moral obligation. That obligation trumps most other concerns until the point where a large enough group of people with money say it must change.
Today’s Reuters story illustrates the shareholder situation:
Several analysts, in reports issued on Wednesday, noted that Google draws between $300 and $600 million in revenue from China, or less than 5 percent of its sales. The bigger concerns, they said, are Google’s prospects down the road, given the size of China’s market and the potential for advertising sales there. “For investors this is clearly a negative,” Broadpoint AmTech analyst Benjamin Schachter said in a research note. “The obvious concern is that China’s growth has been solid and its market potential is enormous.” Early on Wednesday, such concerns pushed investors toward Chinese search engine Baidu Inc, which leads Google in China’s search market with more than 60 percent share. Shares of Baidu jumped 12 percent to $432 in early trading, while Google shares slipped 2 percent to $579.
As the song says, this is how we do it.
If companies like Google forsake money so they can feel good about themselves, they risk shareholder revolt and potentially lawsuits. They also risk putting good people out of work. The end result is to cut it down the middle, which is what we’re seeing here. Look at this quote from FBR Capital Markets analyst Heath Terry in Bloomberg’s coverage:
Google is still a “long way away from getting out of China,” Terry said. The company can threaten to leave the country because China accounts for such a small piece of Google’s sales, he said. “This is their way of opening up this important conversation,” Terry said. “This is their way of starting to move the conversation forward.”
That’s another way of saying they’re trying to have it both ways. If they don’t, there’s another song that says: “If I don’t do it, you know somebody else will.” Morality might create a vacuum in China, but Google’s competitors won’t have trouble filling it. In the end, everyone will go back to work. The end.