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Spotlight: Jerry Yang - China success a two-edged sword
By Richard Waters in San Francisco
Financial Times
updated 6:41 p.m. PT, Fri., Nov. 2, 2007

When Jerry Yang, chief executive and co-founder of Yahoo, appears before a congressional committee tomorrow, it is likely to be the kind of political theatre that US business leaders dread.

By handing Chinese authorities the e-mail records of one of its users, Yahoo helped to land Shi Tao, a dissident Chinese journalist, with a 10-year jail sentence. The company's chief lawyer apologised publicly last week for failing to hand over all the information he had on the affair to a House committee investigating the matter, but that may not be enough to draw the committee's sting.

For Mr Yang, an intensely private man who was an idealistic Stanford University student when he co-founded Yahoo at the start of the dotcom boom, the drawn-out controversy over the Shi case has come at considerable personal cost.

"I think this is really painful for him," says one former Yahoo executive. "Yahoo hasn't wrapped itself in grandiose language the way Google has, but he really built Yahoo to be a force for good."

Ironically, tomorrow's appearance in Washington will come on the very day that Mr Yang should be celebrating the culmination of Yahoo's new business strategy in China. According to some observers, that strategy should also serve to insulate his company in future from controversies such as this - though others believe it could instead backfire and leave Yahoo's reputation even more exposed.

The new approach to China began two years ago, when the US internet company folded its own stumbling operations there into a local e-commerce company, Alibaba. Along with a $1bn injection of cash, that bought Yahoo a 39 per cent stake.

Shares in Alibaba are set to start trading in Hong Kong tomorrow, capping the biggest initial public offering for an internet company since Google and valuing Yahoo's investment at about $3.5bn.

By reducing Yahoo's involvement in China to a minority investment, Mr Yang's deal with Jack Ma, the entrepreneur behind Alibaba, theoretically distances Yahoo from any future human rights controversies.

"It's for Jack Ma to follow local customs," says one person who has been involved in Yahoo's planning. "[The problem] does go away."

However, even though it has no direct control, Yahoo's reputation could still be on the line over Alibaba's actions. Mr Ma has made no secret of his own willingness to co-operate closely with the Chinese authorities in any investigations into his company's users.

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