Essay about CSR report of Baidu

(Part 2)

 

From these statements, we can see that Baidu’s CSR value is an extension form of its business mission in social aspect, which is logical and rational. But on the other hand, this view of CSR is not quite open.

The CSR concept believes that a corporation should be committed to some certain moral responsibilities beyond economic and legal aspect (Carroll, 1979). According to Carroll’s corporate social responsibility pyramid theory (1991), CSR is made up by four types of responsibilities with a hierarchical distribution. For Baidu Inc., the economic and legal responsibility from the bottom of the pyramid is basically well performed. Besides of the strong dominant market position and huge revenue growth, Baidu’s stock price performance is also pleasing as its actual earnings per share (EPS) had increased from $0.18 in Q4 2009 into $0.45 in Q3 2010 (Munarriz, 2010). Baidu believes that the corporation should comply with local laws and regulations with self-discipline and integrity (2012, p.12). Under this value, Baidu coordinated with Chinese authorities to launch “Sunshine Action” to counter online vicious and false information to prove ‘its resolution to fulfill the statutory and social responsibilities’

However, it is very complicated to state Baidu’s ethical and philanthropic responsibilities as Baidu has a disgraceful history and public relation crisis. As the major search service provider, Baidu becomes a new online advertising platform. However, Baidu’s business model is very controversial as Baidu not only provides paid web promoting service; it also deletes negative posts in order to maintain some companies’ public image for profit (Deng, 2012).

Baidu was reported again by the state broadcaster CCTV that many advertisers promote their fraudulent ads or websites on Baidu’s research result by key word bidding, including fake medicine advertises (M. Lee & A. Oreskovic, 2010). The reason which makes Baidu so notorious is that Baidu not only allows fraudulent ads to be promoted, but also it doesn’t separate the advertisement and non-promotion web page on its search result which makes the user unable to distinguish them (William Long, 2011). Once there is a fraudulent advertisement, some users may be deceived and suffer losses.

When discuss these issues and scandals, the fundamental questions are whether Baidu has a certain ethical responsibility to offer a fair and transparent online platform system for advertisers, and should Baidu be held with an obligation to make its search result information to be accurate and sufficient for the users?

 

2.2 Corporate social responsiveness

 

The answer from Baidu is clearly indicated in its disclaimer with a legal clause form. Users have to use Baidu’s reach results at their own risk as “Baidu does not promise the security, accuracy, timeliness and legitimacy of its search results” (http://www.baidu.com/duty/). This disclaimer statement is commonly used by Baidu to deny liabilities for the consequences resulting from user activities.

By applying Carroll’s social responsiveness model (1979, p. 501-502) to assess Baidu’s social responsiveness, it is obvious to see Baidu’s type is ‘defense’. Carroll indicated that defense responsiveness is to take limited responsibilities or actions, mostly for legal necessity or under administrative pressure (1979, p. 502).

For example, Baidu was put into the annual list of“notorious markets” by USTR for online music piracy in 2011 (Palmer, 2011), and was also wisely reported. In the same year, Baidu had reached agreements with record companies to dispute the issue by launching a new copyright authorized music website. By doing so, Baidu was removed from the list (Martin, 2011). This action can also be seen as a performance of consequentialism ethics. The causality will be further more analyzed to explain why Baidu finally decided to counter music piracy since it had been suited by music companies for more than five years.

 

2.3 Corporate social performance: a stakeholder approach

 

In Carroll’s framework (1979, p.499) about corporate social responsibility views, the last aspect is about how to assess corporate’s social performance. Carroll’s three-dimensional model was developed by Wood with the outcome of the reformulated CSP Model (1991), in which she indicated that the result of corporate behavior is reflected by three aspects:

– Social policies
– Social programs
– Social impacts

However, for Baidu’s case, this model has a very limited effect to show Baidu’s CSP in a more comprehensive way. According to Wood, the social program should be the implementations of social policies, and the social impacts are judged by the results of programs. But for Baidu, the social policies, or social principles, are not quite relevant to its social programs. Baidu has presented three main charity programs in its CSR report: education, environmental protection and disaster assistance. The education program is about funding rural teachers and sharing knowledge in order to benefit rural children, which is the related to Baidu’s CSR principle ‘to share knowledge and resources to benefit society’ (2012, p.12). However, the environmental and disaster program are not relevant to any of Baidu’s CSR codes. They might be a reflection of philanthropic responsibility to show Baidu is a good corporate citizen; they also just are Baidu’s promotion tactics. Due to the fact that Baidu’s last two charity programs share no relation with Baidu’s CSR principle, or Baidu’s business operation, they are isolated from Baidu’s business activities. Therefore these programs can not reflect the true corporate social performance of Baidu.

Wood’s reformulated CSP Model is considered of lacking stakeholder impacts (Waddock, 2004). Besides of that, Wood’s model is criticized as ‘it nevertheless failed to address the needs of practicing managers charged with implementing CSR/CSP programs and crucially measuring their impacts’ (Meehan et al, 2006). Therefore, it is necessary to take Baidu’s stakeholder management into account of its corporate social performance.

In Baidu’s CSR report (2012, pp.24-38), there are four types of main stakeholders have been identified as following:

– Employees, who develop, operate and promote Baidu’s services;
– Users, who use Baidu’s services and bring network traffic to Baidu;
– Clients, who put advertisements on Baidu and pay for the ads promotion;
– Partners, who help Baidu to integrate other resources, such as web applications, music and books.

Figure 1: Baidu’s main stakeholders (Baidu CSR report, 2012)

However, Baidu didn’t mention some other important stakeholders, even though it might realize the importance of some of them:

– Investors, who buy Baidu’s share on stock market;
– U.S. Securities and Exchange Commission, who supervise Baidu for financial fraud;
– Chinese government and authorities, who supervise Baidu for obeying local laws and regulations;

– Media, who report stories and help to supervise Baidu;
– Baidu’s managers.

In dealing with Baidu, different stakeholders have different level of interests involved and different level of power to engage. Obviously, government and regulators are the most influential stakeholders for Baidu. Not just by obeying the laws and regulations, but also Baidu need to coordinate the authorities to implement the policies, in order to maintain a good relationship to stay in the market; however, they are not the stakeholders with the most interests involved. The fundamental stakeholders, who directly involved with Baidu’s business, are users and clients.

To provide search service to users is the core competency of Baidu strategy, Baidu also recognizes that the company is developed by constantly improving user experience in order to access information more conveniently. Based on this concept, Baidu developed a series of search related services, like Baidu maps, Baidu web applications, Baidu elderly search, Baidu Encyclopedia, etc. Baidu also mentioned about launching ‘Sunshine action’ against fraud or illegal websites in order to protect users’ rights and interests. However, Baidu didn’t mention how to eliminate the phenomenon completely. What’s more, Baidu didn’t bring up any explanation of how its keyword bidding system and censorship influent the search accuracy and user experience, or how to protect user privacy for accurate advertisements, or how to improve communication channels with users besides of conferences.

For clients, the most concerned issue is the keyword bidding system for online promotion. The fundamental question for clients is how to increase fairness for all clients in this promotion system, how to avoid vicious keyword bidding phenomenon? These issues increase the doubts of Baidu’s capacity to manage stakeholder issues. The purpose of stakeholder management is to bring a competitive advantage based on mutual benefits (Jones, 1995). Without the win-win situation, the stakeholder management is pointless, and the relationship between Baidu and its clients is unsustainable.

 

3. Normative ethical theory approach

 

Human judgments sometimes come out very subjectively. If the prejudice is already made before the analysis, the result will be unconvincing. In order to glimpse Baidu’s business ethics, two cases are analyzed by applying four normative ethical theories.

The first case is censorship. Like many other IT companies operating in Mainland China, Baidu is required to censor user contents in order to prevent sensitive information. In the views of consequentialism ethics, to coordinate censoring, or even to make self-censorship, is the precondition to stay in Chinese market, even though censorship might decrease user experience. Robin Lee, the CEO and founder of Baidu, said ‘net censorship is a fact of life in China, I don’t have any other choices’ (Perez, 2010). Baidu takes censorship as one its legal duties by the deontological ethics view. By doing so, Baidu successfully made a virtual agreement with one of its most important stakeholders to increase its competitiveness against Google. Another social contract is also made between Baidu and most Internet users, because since Google left China in 2010, Baidu occupied over 70 per cent market share and became the biggest search engine, users tend to use Baidu, not because its censorship offers a better experience, but for being able to use a more stable service in China, in another way, users use Baidu also sign a social contract with Baidu in recognizing Baidu’s censorship. The only thing certain is that censorship is definitely not based on any virtue ethics; it is very controversial in China.

The second case is piracy. Since 2005, Baidu had been suited by providing illegal copies of music and books for free downloads. Until 2011, Baidu finally made agreements with record companies to set down copyright disputes (Martin, 2011). In consequentialism ethics view, Baidu’s piracy did increase its Internet traffic, attracted more users, and eventually attracted more advertisers. However, by that time of 2011, the market was already changed: Internet users had grown copyright sensitivity and started to be willing to pay genuine music; media constantly criticized Baidu’s piracy; the copyright law for online music was also becoming mature. Therefore it is the right moment for Baidu to change in order to rebuild its corporate reputation. In deontological ethics view, piracy is not only immoral, but also illegal, because Baidu failed to fulfill its legal responsibility. In virtue ethics’ view, piracy is against to virtue of respect and fair-mindedness (Lombardo, 2011).

By reviewing these two examples, it is obvious that Baidu’s business ethics is mainly consequentialism oriented. There is no evidence to suggest that censorship or piracy can increase the total interest or happiness of all, no doubt Baidu didn’t achieve a respected reputation from those.

 

4. Conclusion

 

In conclusion, even though Baidu have achieved a market leader position in China, the performance of its corporate social responsibility and stakeholder management doesn’t support that Baidu is a good corporate citizen. The result of four normative ethics theories analysis provides more evidence to suggest that Baidu needs to enhance its stakeholder-concern capacity in order to achieve mutual benefits. And Baidu also needs to face squarely to its ethics and stakeholder management issues. By doing so, Baidu can start to make real improvement on CSR and get respects.

 

5. Reference

 

Analysys International (2012), Analysys International: Baidu, Google China, Sogou Hold Top 3 in China Internet Search Market 2011Q4 [Online].

Baidu (2012), Baidu Corporate Social Responsibility Report 2009-2011.

Carroll, A. B. (1979), ‘A Three-Dimensional Conceptual Model of Corporate Social Performance’, Academy of Management Review, 4, pp. 497-505

Carroll, A.B. (1991), ‘The Pyramid of Corporate Social Responsibility: Toward the Moral Management of Organization Stakeholders’. Business Horizons.

Deng, Jingyin, (2012), Baidu staff delete posts for cash, Global Times [online] August 6.

Hille, K. (2011), Baidu’s shares fall after attacks by CCTV. Financial Times, [online] August 19.

Ge, K. (2012), Ambition of Baidu on Global expansion.

Jones, T. (1995), ‘Instrumental stakeholder theory; A synthesis of ethics and economics’, Academy of management review, 20 (2), p.404.

La Monica, P. (2012), Baidu: Is China’s Google better than Google? [online] CNN.com February 13.

Lee, Melaine (2011), China to punish Baidu for illegal music downloads. Reuters, [online] April 25.

Lee, Melaine, Oreskovic, A., (2012), China’s Baidu looks to mobile search for growth. Reuters, [online] February 1.

Lee, Melaine, Oreskovic, A., (2010), Baidu promotes fake drug sites-Chinese TV station, Reuters [online] July 19.

Lombardo, T. Ph.D. (2011), Ethical Character Development and Personal and Academic Excellence.

Long, William (2011), CCTV continuously criticizing Baidu promotion’s inside story, williamlong.info [blog], August 16.

Marin, E. (2011), Baidu Removed From U.S. ‘Notorious Markets’ Piracy List After Music Pact [online], Bloomberg.com December 21.

Meehan, J., K. Meehan and A. Richards, (2006), ‘Corporate Social Responsibility: The 3C-SR Model’, International Journal of Social Economics, 33(5/6), pp.386–398.

Millward, S. (2011), Baidu Japan Posts Losses Totaling RMB 700 million since 2008 [Online], Available from: URL http://www.techinasia.com/baidu-japan-losses/, [Accessed December 2, 2012]

Mozur, P. (2012), Chinese Writers ‘Win’ in Lawsuit Against Baidu. WSJ China Real Time [blog] September 18.

Munarriz, R. A. (2010), 3 Questions for Baidu in 2011, [Online].

Palmer, D. (2011), U.S. calls China’s Baidu “notorious market” Reuters, [online] February 28.

Perez, J.C. (2010), Baidu CEO: ‘Net Censorship a Fact of Life in China [Online].

Rao, Leena (2012), Chinese Search Engine Baidu’s Q4 Revenue Up 82.5 Percent To $711M; Net Income Up 77 Percent. Techcrunch.com [blog], February 16.

Tighe, M. (2012), Baidu to Build Southern China Office in International Push. Bloomberg [online], January 16.

Waddock, S. (2004), ‘Parallel Universes; Companies, Academics and the Progress of Corporate Citizenship’. Business and Society Review 109 (1), pp.5-42.

Wood, D. (1991), ‘Corporate Social Performance Revisited’, The Academy of Management Review 16 (4), pp.691-717.

Wu, Jason Ng (2010), Google to withdraw China is a foregone conclusion, and so begins the smear campaign. Kenengba.com [blog], March 23.

Wu, Jason Ng (2010), Kenengba.com is blocked again by DNS cache poison. Kenengba.com [blog], May 5.

 

 

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