Google’s authoritarianism and China’s democracy

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[Image Source: FakeSteve]

We’re often told to take Google’s “Don’t be evil” slogan with a grain of salt.  It’s a corporation, after all, with a fiduciary responsibility to its shareholders and thus allegedly constrained in its effort to promote non-evil causes.

So how do we explain Google’s decision to leave China?  Some thoughts are rounded up:

Sarah Lacy at TechCrunch speculated they are trying to save face after failing to capture share:

Does anyone really think Google would be doing this if it had top market share in the country? [...] Google has clearly decided doing business in China isn’t worth it, and are turning what would be a negative into a marketing positive for its business in the rest of the world.

Parsa Sobhani, joining voices on WashPo, say it is just pure strategy:

While much of the media point to the ['do no evil'] slogan as the basis of the power play, one can see that the self-censorship policy simply doesn’t align with [Google's] business vision…to make information universally accessible and useful.

Danny Sullivan scoffed at the hypocrisy:

But bottom line, it was still a business move, to me. If Google just wanted to help people in China get good information, it could have spent the past four years helping to construct ways for people in China to bypass their government’s firewall. Or the past four years arguing that the US government and US-based businesses should follow its lead in staying out of China.

And Matthew Forney and Arthur Kroeber, opining at the Wall Street Journal, say its all about trust:

The reason is simple: Google’s business model requires that its consumers trust that their information will be absolutely secure. So when Google says it will “do no evil” and will never compromise on its principles or its technologies, the world must believe it.

Whatever your take, the irony of the whole thing is that Google would not be able to promote democracy in China were it not for its own fundamentally authoritarian governance structure.

When the company went public in 2004 they created a dual-class voting structure that basically gave Larry Page and Sergey Brin unbridled power and authority – outside shareholders cannot override their decisions.  Amalie Tuffin explained at the time:

Google and its selling shareholders are selling Class B common stock, having 1 vote per share in the offering; Google’s founders, its CEO Eric Schmidt, and certain others will retain Class A common stock, having 10 votes per share, after the offering. In the initial offering, only about 10% to 15% of Google’s shares will be sold to the public and thus Google’s current owners would initially retain control in any event. However, this dual-class stock structure will allow Google’s insiders to retain effective control over Google long after a majority of the company is owned by the public.

Consider the implications.  Could any other company operating under the traditional rules of delivering returns to shareholders afford to walk away from the 1.3 billion-person behemoth that is China?

Google’s IPO precedent may be replicated by Facebook and others.  And as social networking companies become increasingly important to democratic movements, we may yet see more of this sort of corporate activism in the future.

What are your thoughts?  Purely strategic?  Just business?  Hypocritical? Is Google’s stock structure fair to shareholders?  Or is it a chance to break free of corporate constraints on social responsibility?

Meanwhile others have been inspired – Dell is moving factories out of China and GoDaddy stopped registering websites on the mainland.

To keep a pulse on the availability of Google services in mainland China, click here.

Posted on April 6th 2010 in news

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