SAN FRANCISCO (MarketWatch) -- In the wake of damaging lawsuits charging Yahoo Inc. with complicity in the jailing and torture of Chinese dissidents, the company is seeking to make amends with a "human-rights fund" dedicated to providing victims of government censorship with legal and other assistance.

Human-rights groups that once criticized Yahoo for complying with Chinese authorities' efforts to clamp down on political discourse are now praising its new, public stance on the issue.

Nevertheless, Yahoo's effort raises questions about its future in a country where companies are expected to avoid open conflict with government policies. Those questions also could conceivably apply to Microsoft Corp. in the future, should it succeed in acquiring Yahoo.

Harry Wu, a former political prisoner and human-rights advocate once deported by the Chinese government, has been charged with overseeing Yahoo's initiative. Wu said a board of roughly five members should be in place to start administering the fund by the end of this month.

"So far it's unique; there are no other big companies who have set up big funds," he commented. Both Yahoo and Wu declined to detail the fund's initial size, though Wu said the company has the option to add to it if deemed necessary.

Other groups including Reporters Without Borders, an organization that earlier this week helped disrupt the Beijing Olympics flame-lighting ceremony in Greece in protest against China, have been tapped to advise on Yahoo's fund, according to Wu.

In addition, Yahoo Chief Executive Jerry Yang indicated in a letter sent last month to U.S. Secretary of State Condoleezza Rice that bolder moves may be in store. Yang wrote that he looks forward to "seizing the opportunity presented by the Olympics to redouble our efforts in securing the release of political dissidents." The Beijing Olympics are scheduled to begin in August.

Falling afoul of the Chinese government has long been considered a dicey proposition for companies hoping to do business there.

Yahoo sold its direct presence in China in 2005, but retains a 39% stake in Alibaba Group, a Hong Kong-based holding company for a number of promising Chinese ventures including online-auction and payment services. Yang also serves on the board of directors at Alibaba.

A Yahoo spokeswoman recently said "we don't do business in China." Yet the company's assets there are widely seen as a valuable potential beachhead in a market with a rapidly growing Internet audience.

"I'm sure if Yahoo did something loud enough, Alibaba would hear about it," said Cowen & Co. analyst Jim Friedland. "But I think Yahoo's once or twice removed enough that it won't cause problems for them."

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