Weekly Walk of Fame: Google

The Weekly Walk of Shame series usually examines things that just aren't right in the world of finance and investing. Today, though, we're replacing the "Shame" with "Fame." Feel free to spread the love in the comments section below. 

Today's subject: In the rough-and-tumble world of business, it can be tough to stay on the side of the angels. However, Google (Nasdaq: GOOG  ) co-founder Sergey Brin recently took a huge step toward living up to his company's famous "don't be evil" mantra when he put the brakes on the search giant's Chinese operations.

Why would Brin blow off a huge, highly coveted market for growth-oriented American companies? According to The Wall Street Journal, his stand stemmed from the Chinese government's iron-fisted censorship, which Brin compared to the totalitarianism that drove his own family to flee the Soviet Union.

Brin's decision seems based largely on principle, not near-term profits -- which means, Fools, that it's time to celebrate.

Why you should cheer: Shareholders should be glad when their companies' managers voluntarily stand up for what's right, rather than following the easy path to short-term lucre. Executives who wuss out on ethical considerations can expose their companies to high levels of risk and long-term pain.

Economist Milton Friedman famously argued that the only social responsibility of business is to increase its profits. Perhaps he was wrong on that one.

Antisocial behavior is a lousy policy for people and corporations alike. When companies go overboard pursuing short-sighted gains, they risk destroying their reputations and long-term viability, and both society and shareholders can ultimately suffer.

Thankfully, some corporate leaders run their businesses with rock-solid principles. Compared to most retailers, Costco (Nasdaq: COST  ) offers its workers higher wages and better benefits. CEO Jim Sinegal has famously bucked pressure from Wall Street analysts to slash that generosity for the sake of higher earnings. Happy, healthy employees mean less turnover and more goodwill from workers and shoppers alike, making Costco a better business for the long haul. 

Whole Foods Market's (Nasdaq: WFMI  ) founder and CEO John Mackey similarly preaches conscious capitalism, which contends that the best businesses know all stakeholders matter: not only shareholders, but also employees, suppliers, and customers. Mackey even once debated Friedman regarding businesses' social responsibility.

In Google's case, Brin's decision may cost the company some growth for now. However, Google's strength lies in the Internet, an exemplar of creativity, democracy, and ultimately, freedom. The Chinese government's restrictions on the flow of information and communication might ultimately hurt Google's long-term returns, since the company flourishes by finding better ways to organize the free, dynamic flow of information.

Continuing to play ball with China might also have plunged Google even deeper into a moral quagmire. Almost five years ago, Yahoo! turned in a dissident journalist to China's government. To me, that sort of business decision carries far too high a price.

What now? The pressure on businesses to do the wrong thing for the sake of immediate profit has been awfully intense in recent years. Look no further than the damage inflicted by the financial sector. Many of us now wish we'd never heard of AIG (NYSE: AIG  ) , Lehman Brothers, Fannie Mae (NYSE: FNM  ) , or their misbehaving ilk. At some point, "everybody else is doing it" stops being a viable excuse.

With noble behavior in short supply, we should celebrate stances like Brin's. It's courageous to take a stand and shun easy money when everyone else seems to be racing to the bottom.

Ethical, principled leaders build businesses that last, and make them great. Companies with such leaders are far less risky, and have a far better chance to thrive for decades to come. More importantly, shareholders can feel proud to own them.

Check back at Fool.com every Wednesday and Friday for Alyce Lomax's columns on corporate governance. 

Costco is a Motley Fool Inside Value selection. Google is a Motley Fool Rule Breakers pick. Costco and Whole Foods Market are Motley Fool Stock Advisor recommendations. The Fool owns shares of Costco. Try any of our Foolish newsletters free for 30 days.

Alyce Lomax owns shares of Whole Foods Market. The Fool has a disclosure policy.


Read/Post Comments (8) | Recommend This Article (13)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On April 14, 2010, at 5:18 PM, vriguy wrote:

    I think it is a good decision, but I question why Sergey's beliefs are being thrust down all the shareholders' throats. This was not an urgent matter and they could easily have put the matter to shareholder vote with a management recommendation for withdrawing from China? I suspect if put to the vote, most shareholders would have agreed with Sergey. And Google could have conducted the poll over the Internet - every shareholder uses Google. IMHO Google lost an opportunity to invent a new paradigm for shareholder participation when determining companies' social policies or values.

    Disclosure: I do not own Google Shares except through mutual funds.

  • Report this Comment On April 14, 2010, at 6:57 PM, mountain8 wrote:

    Vriguy,

    I disagree with your "not urgent matter" idea. Censureship is what causes wars and revolution and subjegation of the populus.The only way to inprove the business area (and essentially life for the population) in China is to stand up like Google did. If all foreign businesses followed suit, they would soon lose their wonderfully increasing economy. China would have to move more toward a capitalistic ethic and away from a dictatorial government. They need the world to survive, but like us, they bully the rest of the world at the expense of everybody.

    Rah for Google. I'm looking for a point to buy in now.

  • Report this Comment On April 14, 2010, at 6:59 PM, mountain8 wrote:

    It's nice to see somebody in business with some strength of ethis for a change. Sure they could have done it differently. If you don't like it, buy the stock and vote him out. That's what freedom allows. That's what China misses.

  • Report this Comment On April 14, 2010, at 8:40 PM, plange01 wrote:

    google the online phone book gets more desperate by the day to maintain its failing status.any new device on the market seems to shortly bring a cheap google copy! like the old saying says you cant get ahead by following...a strong sell on google...

  • Report this Comment On April 15, 2010, at 12:11 AM, daodell33 wrote:

    The true heart of the argument here is: Does the stock market cause shortsightedness on the part of the companies and pose barrier to making the right decision? Can they really make long-term decisions that benefit shareholders beyond the next quarter?

    The mere fact we are discussing the possible "de-valuing" consequences for a company that "does the right thing," is really a question to ponder for the ages. This dilemma may truly be the Achilles heal of capitalism, if not democracy . . .

  • Report this Comment On April 15, 2010, at 12:28 PM, DJDynamicNC wrote:

    Go Google! I'm an unashamed Google fan boy, and it heartens me to have this bit of cognitive dissonance removed.

    Good ethics = good business in all but the shortest of terms. Google is widely regarded as a force for good, which makes the millions of people who view that as a positive gravitate towards the powerhouse company.

    Throw in an extremely smart business culture and business sense (Google has figured out how to turn a profit from almost everything, and continues to turn out technologies and products that define a large subset of the internet culture) and this is a buy-and-hold worth grabbing, even at the current price.

  • Report this Comment On April 15, 2010, at 9:58 PM, Pandorabelle wrote:

    In an afterhours trading sell-off tonight that took GOOG down almost 5%, seems the positive earnings report and format, in Schmidt's absence no less, has caused folks to disregard the "do the right thing" ethics. Hope the long folks stay...and those looking for entry...may have a great opportunity early Friday morning. It won't be down long.

  • Report this Comment On April 16, 2010, at 1:40 AM, Clint35 wrote:

    Hats off to Mr. Brin and others like him. It's nice to know that some business leaders care as much about doing what's right, as they do about making a profit. Pursuing profits at any cost will eventually lead to a company's collapse. Therefore, I have to disagree with Friedman.

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