Congressional representatives made it clear to Yahoo! CEO Jerry Yang that apologies wouldn't be enough to quell their anger over Yahoo's role in the jailing of a Chinese journalist (BusinessWeek.com, 11/6/07).

What the House of Representatives Foreign Affairs Committee really wanted from Yang during a Nov. 6 hearing was a pledge that Yahoo would not cooperate with future requests from foreign governments for information that might be used to punish political dissidents. At the very least, committee members wanted Yahoo to pay for its past cooperation with the Chinese government.

Financial Aid for Political Prisoners

On Nov. 13, Yahoo (YHOO) decided to pay: It settled a lawsuit with the families of imprisoned journalist Shi Tao and political dissident Wang Xiaoning, both of whom were given 10-year sentences after the Internet company turned over information—from personal e-mails and anonymous posts on Yahoo message boards—to the Chinese government. The amount Yahoo will pay was not disclosed. "After meeting with the families, it was clear to me what we had to do to make this right for them, for Yahoo, and for the future," said Yang in a statement.

Yahoo also is establishing a fund to provide humanitarian and legal aid to people serving prison sentences for expressing their opinions online. The company is still working out the details of who will be eligible for aid, how much will be offered, and how it will be administered. "At Yahoo, we believe in the transformative power of the Internet," Yang's statement said. "That's why we are so committed to working to support free expression and privacy around the world."

A Correction and Contrition

Shi Tao's mother sat directly behind Yang and Yahoo's general counsel, Michael Callahan, at the Nov. 6 hearing as both men tried to explain why the company turned over Tao's e-mail. Callahan also apologized for telling the House panel in February that the company hadn't known the Chinese government would use the information to suppress the voices of people critical of the government. Callahan said he learned later—after his February testimony to the contrary—that Yahoo's employees in China had known the government's request pertained to alleged political crimes.

Yang also apologized to the committee and Tao's family at the hearing, but his and Callahan's conciliatory words failed to satisfy the committee. Panel members asked Yahoo to pledge not to comply with politically motivated inquests by foreign governments in the future, to support a bill that would make it illegal for U.S. companies to supply foreign governments with politically incriminating information, and to aid the families of Chinese citizens jailed on the basis of information supplied by Yahoo. "One of the most hypocritical things you can do is refuse to do what you are able to do," said Representative Brad Sherman (D-Calif.). "You don't have within your power the ability to free [the prisoners]. But you do have it within your power right now to tell this committee that Yahoo will meet their humanitarian needs."

"The Right Direction"

Yang did say during the hearings that Yahoo will do something for the people serving prison sentences. But he and Callahan would not promise to reject all future requests for information relating to political dissidents. They argued that doing so would put Yahoo employees in those countries at risk of arrest for failing to comply with the laws of those governments. Regarding the proposed U.S. law, the Global Online Freedom Act, Yang and Callahan said they agreed with the spirit of it. In a separate statement, however, Yahoo said its position is that the bill, as it stands, could "effectively ban" U.S. companies from doing business in emerging markets such as China.

Representative Chris Smith (R-N.J.), who introduced the bill, said in a Nov. 13 statement that Yahoo's actions were a positive step. "At the hearing, Yahoo General Counsel Michael Callahan said the company would look into settling this lawsuit. True to his word, they did, and I commend them for taking this step in the right direction," said Smith.

Holahan is a writer for BusinessWeek.com in New York .