A big black eye for the IOC

The International Olympic Committee has emerged with a big black eye from the recent controversy over censorship of journalists' Internet access at the Beijing Games. Reporters last week were unable to access "sensitive" sites, like Amnesty International's home page -- a restriction long familiar to Chinese web users.

The Chinese government's move runs counter to its pre-Olympic commitments to allow media freedom. But instead of calling Beijing to account, the IOC appears unfazed by this blatant promise-breaking. During a press conference Saturday, IOC President Jacques Rogge refused to apologize for the censorship, which continues on some sites. It's all in stark contrast to the noble ideals the Olympics are supposed to represent.

Fortunately, there's a better solution than merely bemoaning the IOC's lack of willpower: Treat the IOC as the business it is, tax it, and let it get on with the very big business of running a major global sporting event.

Like the IOC, many Western companies play ball to varying degrees with the Chinese government as the cost of doing business there. Cisco found itself in the spotlight for selling Beijing hardware that can be used to filter the Internet. Yahoo has come under fire for handing over identifying information on account holders Beijing was investigating for political crimes.

In these and other cases, the companies have received unwanted media attention -- and sometimes even a congressional hearing or two. But they've also been able to muster a defense that's at least plausible: Their job is to look out for the interests of their shareholders, not to change the world.

The IOC, however, can make no such argument in its favor. It calls itself a "movement," implying lofty ideals rather than the motivations of traditional corporations. It compounds that error in its charter, especially the six "Fundamental Principles of Olympism." No. 2 on that list: "The goal of Olympism is to place sport at the service of the harmonious development of man, with a view to promoting a peaceful society concerned with the preservation of human dignity."

It's hard to see how complying with censorship by an authoritarian government is consistent with that statement. But it's also hard to see how the IOC could not comply. What exactly would be its alternative? Canceling the Beijing Games in protest of Beijing's failure to live up to the Games' ideals?

Of course not. There's simply too much money involved. In the full quadrennium through the 2004 Athens Games, the International Olympic Committee raked in $4 billion by selling broadcasting rights, corporate sponsorships, tickets and product licenses. Once the dust has settled on the current Olympiad, expect the total to be even higher. Then there's all the other money related to the Games: the businesses that pop up to serve athletes and spectators in the host cities; construction companies that build the venues; corporate sponsorships for individual athletes; the list goes on. The financial repercussions of a cancellation would be widespread, and severe. Everyone knows this, which is why the IOC finds itself powerless to enforce its will on Beijing.

For a business, there wouldn't be anything inherently wrong with any of this.This is how businesses create jobs and prosperity. That includes complying with local laws, even when the businesses might not like them. Indeed, companies' bargain with society is that instead of having to look out for the broader common good, they pay taxes so government can do so.

The IOC's problem is that it's not legally a business, so its bargain with society is different. The IOC and many of its national affiliates are afforded special treatment by governments -- including special tax treatment -- on the theory that the IOC performs a public good in advancing its principles. It's the same implicit bargain underlying relations between government and all untaxed not-for-profits: Not-for-profits will serve the public good, and government will consider that service a form of "tax" paid directly to society without taking any cash for government coffers.

The IOC's principles themselves are certainly in the public good. A "peaceful" China that "preserves human dignity" through democracy and respect for human rights is in everyone's interests. The IOC implicitly recognized this in 2001, when it claimed to have exacted pro-freedom commitments from Beijing as a condition of hosting the games. If the Olympic Movement were forcing China's government to follow through, it would be worth every franc or penny of tax exemption it gets from the Swiss government in its home, or that the U.S. Olympic Committee gets from the Internal Revenue Service.

But the IOC's financial ties are preventing it from enforcing its principles, just as if it were a normal company. So let's stop kidding ourselves. The Games are a business, not a philanthropy. Let's treat them as such. In place of a "movement" and a "charter" let's have corporate bylaws. Instead of a tax treatment predicated on the belief that they perform a public service, let's tax them as the corporations they might as well be.

In this new world, we could sit back and enjoy great athletes performing great athletic feats. And the IOC could carry on its perfectly respectable business of delivering a world-class sporting event, minus the idealistic baggage that causes indignity eruptions like the Internet censorship furor. This might lack the idealism we still associate with the Games. But it's more honest than an outfit that pretends to deliver a public good and fails thanks to its financial conflicts of interest.

© Reprinted from The Wall Street Journal Asia 2008 Dow Jones & Company, Inc. All rights reserved.