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Baidu Inc (ADR) (BIDU): Should Companies Have a Soul?

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No amount of money is worth the unnecessary loss of even just one human life. On the other hand, at what point should people take responsibility for their own lives, and not assume everything they read on the web is true and complete?

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Source: Simone.Brunozzi Via Flickr

It's a question that's been haunting Baidu Inc (ADR) (NASDAQ: BIDU ) CEO Robin Li since May 2, when China's internet community collectively ganged up on the web-search company following the death of a young man who may or may not have received the best possible treatment for his synovial sarcoma … a rare form of joint cancer.

See, the young man learned about the treatment choice he ultimately made by performing a web search using Baidu's search engine. What appeared to be one of the many entries in his search results was actually an advertisement placed by a hospital that offered a treatment which may or may not have been as effective as suggested .

To be fair, Baidu search results are packed with more advertisements and sponsored search results than most users of Google and other popular Western search engines are accustomed to. And it's even more difficult to distinguish between advertisement and actual search results at Baidu.com.

All the same, to what extent can anyone reasonably expect Baidu - one of the web's most-trafficked intersections - to police and verify every claim its advertisers make online?

Meet the New and Improved Baidu

It's a debate that's already been largely addressed, by Li as well as China's regulators. The nation-state's internet authorities have ordered Baidu to limit its search results pages to no more than 30% advertising . But, even without the mandate, Li has already been planning big changes in the way Baidu does business.

Earlier this week in a letter delivered to Baidu employees, Li plainly said the company's "values have been squeezed out of shape" by the organization's efforts to grow the top and bottom lines.

It wasn't just an observation of how and where Baidu may have crossed the line of decency and tiptoed into questionable territory, though. Li also made it clear every aspect of the company's operation would be re-evaluated , fixed to put users first, or ended if that piece of the organization couldn't meet Li's new standards.

It's an admirable mindset. And, not that Baidu and Li were profit-hungry animals before, but the new corporate mantra represents a sizable swing toward the other end of the public-service/profitability scale.

The question remains, though: Do Li, Baidu, and any other for-profit entity actually have this degree of responsibility to the public? Should corporations have an actual soul?

As is so often the case, the answer is yes … and no.

Walking a Fine Line

In the most basic sense, yes, of course Baidu has a responsibility to its users to put forth its best effort at ensuring its advertisers are being forthright and fair with the message they're delivering through Baidu's search engine. The company also has the responsibility to make it clear which search results are advertisements, and which are not.

Moreover, Baidu also should accept the unspoken reality that it also performs a public service, connecting users to the world around them in a way that may not always generate revenue.

And yet, one can't help but wonder if Robin Li has moved too far to the other extreme, adopting a set of policies that will eventually prove disadvantageous to the company's owners:

BIDU shareholders.

Anyone who holds Baidu stock must (well, should ) understand that short-term pain is sometimes a necessary evil in the interest of long-term gain. Li even made a point of saying in his letter "I believe this is the right way! It's the long-term way!"

Baidu logo

Then there's the legal, philosophical aspect of the matter:
Should a reasonable person assume anything found on the internet is
absolutely true? Wouldn't a reasonable person at least have some
degree of responsibility to dig deeper into important matters such
as therapies that claim to save lives?

But finding the fair balance between social responsibility and accountability to shareholders isn't easy, and investors aren't always particularly patient.

Then there's the legal, philosophical aspect of the matter: Should a reasonable person assume anything found on the internet is absolutely true? Wouldn't a reasonable person at least have some degree of responsibility to dig deeper into important matters such as therapies that claim to save lives?

With millions of websites to scour, the average web user has to assume at least some of them are going to offer less-than-perfectly honest information. That's nothing new.

The Answer

To answer the question of whether corporations should have a soul of sorts (the kind with a conscience), no, companies don't need a soul, for a lot of reasons. The biggest of those reasons is the eventual confusion that will arise; is the company a charity, or is it a for-profit. It's first and foremost a profit-making, dishing out gains to shareholders to let them decide to what extent they wish to be a humanitarian.

Companies do need to understand, however - even if just for the sake of protecting the future - they should make a deliberate effort to fault-proof their products even if that means making a little less profit.

In the aforementioned case, Baidu couldn't have reasonably anticipated the hospital in question was disseminating questionable information. But it could have made it crystal clear the link was an advertisement rather than an actual search result.

That's not a dig on Li's new corporate spirit that seems to go above and beyond fixing a small handful of clear problems. As dramatic as his recent employee letter was, even Li acknowledges the end-goal is survival. He just wants to ensure that survival by doing things the right way - one that endears the company to its customers rather than disturbs them.

Let's just hope BIDU investor patience grows as much as Li's love of its users has. Ultimately, shareholders decide how much "soul" any company is allowed to have or not have.

As of this writing, James Brumley did not hold a position in any of the aforementioned securities.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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