Today Yahoo Chief Executive Jerry Yang and General Counsel Michael Callahan were shamed in the House Committee on Foreign Relations. Yahoo was raked over the coals for turning over information to the Chinese government in 2004 which led to the incarceration of Chinese dissident Shi Tao. Callahan specifically was hammered for evading questions in a 2006 hearing about Yahoo’s knowledge of what the Chinese government was up to when it asked for information about Shi Tao’s online activities. The Chairman Lantos’ statement, Yahoo! Inc.ââ?¬â?¢s Provision of False Information to Congress pulled no punches in condemning Yahoo:

Yahoo provided false information to Congress. Despite the sworn testimony before the Committee that Yahoo! did not know the nature of the investigation into the Shi Tao case, Yahoo! employees did know that the Chinese government wanted information related to Shi Tao because of a so-called ââ?¬Å?state secretsââ?¬Â? investigation in order to imprison him.

Later in the Statement, Lantos asserts that Yahoo didn’t have to roll over for the Chinese government. After all, Yahoo is a big, powerful company and has been doing business with the Chinese government for some time:

A company of Yahoo!�s resources and sophistication operating in the Chinese milieu should have taken every conceivable step to prevent the automatic compliance with a request from the Chinese police apparatus.

The Representatives were angry with Yahoo’s evasiveness for good reason. But the issue of Internet companies doing business in China is broader than the Shi Tao case. It is well known that Yahoo is not alone in its complicity with the Chinese government’s censorship policies. When representatives of Cisco Systems, Google, Microsoft, and Yahoo testified in the February, 2006 hearing, they pointed out that they have to abide by the laws of the countries in which they do business. I’m not sure what “every conceivable step to prevent automatic compliance” means. Does that mean that big American companies should do business in China, but they should drag their heels in abiding by Chinese law? Ultimately dragging your heels becomes willful violation of the law. The Chinese government isn’t likely to blithely allow such violations. Companies either abide by Chinese law, or they won’t be allowed to do business in China.According to the Congressional Research Service (PDF), U.S. companies exported $41.8 billion to China in 2005. The Chinese government is buying, and so are Chinese consumers. Is it realistic to believe that the leaders of a publicly-traded company are going to forgo doing business in the huge Chinese market on the basis of human rights concerns, even if the company “does no evil” or builds “The Human Network”? In the era of the Cult of Shareholder Value, no CEO who ditched the Chinese market would last long. For years, American companies have been assisting the Chinese government in creating its own walled off SinoNet. Anyone in Congress who is startled by this news hasn’t been paying attention. Now Yahoo’s mistakes have raised Congressional hackles, but the U.S. government is still sending a decidedly mixed message to Silicon Valley companies that do business in China. So far, the message seems to be this: Make lots of money in China, but if you’re going to help the Chinese government, please be more discreet about it.