Investors Can Benefit by Helping Tech Companies Keep Data Private

Google’s Eric Schmidt understands the threat that state spying poses to Internet providers’ growth prospects outside the U.S.


“You should fight for your privacy or you’ll lose it,” Google executive chairman Eric Schmidt told an audience earlier this month at the South by Southwest Interactive conference in Austin, Texas. The gathering of hipster geeks also featured a live videofrom Edward Snowden, the ex–National Security Agency contractor who leaked documents showing that as part of a sweeping surveillance program the U.S. government had been asking telecom operators for data and tapping into the servers of big Internet providers. Google and its peers know the grave threat that state spying poses to human rights everywhere from the U.S. to China. But they need help defending their data: More often than not, they can’t legally disclose government requests.

Investors should be worried too. “For companies these privacy issues pose a political, reputational and at times operational problem, but for investors they are becoming a material risk,” says Bennett Freeman, senior vice president, sustainability research and policy at $13 billion, socially responsible Calvert Investments in Bethesda, Maryland. Since the NSA revelations, “the greatest risk to U.S. Internet and telco companies is their customers and markets outside of the U.S. where the backlash continues, exactly in the markets where their potential growth is greatest,” he adds.

Freeman, who served as deputy assistant secretary for democracy, human rights and labor under former president Bill Clinton, sits on the board of the Global Network Initiative, a Washington-based nonprofit established in 2008 by representatives of Google, Microsoft and Yahoo. It is working with a handful of investors, civic society groups and academic institutions to find ways of responding to government data requests “while respecting the freedom of expression and privacy rights of their users.” GNI created standards that its members — Facebook joined last May and LinkedIn just followed suit — have agreed to meet.

In January, GNI published an assessment of its founders’ compliance; all three passed. With outside monitoring, Internet providers hope they can better push back against government overreach. More investor participation in GNI would help by encouraging other companies to join and strengthen their hand against Big Brother.