Business Ethics - Apple - Case Study Example

Business Ethics Case Study: Apple Business Ethics Case Study: Apple Background Information Apple Inc., commonly referred simplyas apple is a company that deals with the designing manufacturing and marketing of mobile devices as well as digital musical players and personal computers. In addition, the company also designs and sells software, peripherals, digital applications and content as well as networking solutions. The company’s products are known world over and have become popular particularly with the young upwardly mobile class of individuals. Apple Inc., is a multinational corporation based in Cupertino, California. The company was formed in April, 1976 and become Apple Computer, Inc., in January 1977. The original founders of the company are Syteve Wozniak, Ronald Wayne Gerald and the most famous Steve Paul Jobs (Business News Daily, 2012). In January, 2007, the term ‘computer’ was formally removed from the name leaving it as Apple Inc. On very day, Steve Jobs, the founder, introduced the newest product iPhone which has become its most popular product. Products and Services The iPhone was intended to reflect the company’s shifting focus to consumer electronics.. Some of its products include the iPad, iPhone, iPod, Mac and Apple TV. It is important to note that the company’s most famous hardware products include the iPhone Smartphone, the iPad tablet, the Mac computers as well as the iPod music player. The company also manufactures and sells services including iCloud, the OS X operating system as well as the iOS. In early 2013, Apple obtained a Silicon Valley startup, called the WIFI slam, which creates mapping applications used on smart phones. In the same year the company acquires Locationary Inc., Hopstop.com Inc, AlgoTrim AB, PrimeSense Ltd., and Topsy Labs Inc. all which are instrumental in ensuring the company grows to greater heights. In January, 2014, the company acquired SnappyLabs. All these acquisitions totaled to about $ 2.23B. Coming second only to Samsung Electronics, today Apple is one of the largest IT companies in the world. It is also ranked third in the size of mobile phone makers’ league coming second only to Nokia and Samsung. In 2008, the Fortune Magazine categorized it as the company in the United States with the greatest number of admirers. In contrast, Apple Inc. has retained this title in the world from 2008 to 2012 (Business News Daily, 2012). In 2013, the company beat Coca-Cola and was named the most valuable brand in the report called ‘Best Global Brands’ compiled by Omnicom Group. It has been reported that in 2013, the company earned more than $400,000 per employee in terms of profit which is more than all the big companies including Exxon Mobil, Google or Goldman Sachs. Ethical Issues Apple Outsourcing in China Apple’s biggest market for the products is the United States, but most of the production is in China. As a matter of fact, Apple is only one of the many companies, though based in the US outsource cheap labor from China. Some people may argue that this curtails the economy of the United States. However, the company maintains that it is not their business to boost the economy of the USA. The biggest issue is that the supplier companies in China have tainted the good name of the international company. Amongst others, the outsourcing companies have been accused of over working and underpaying the employees. The particular company that has been put in the spotlight is Hon Hai Industry Co. which is commonly known as Foxconn (Business News Daily, 2012. This company, which has many smaller companies all over China, has been accused of treating their employees improperly; making them work overtime, up to 15 hours a day, for no pay as well employing underage workers. Nevertheless, the employees slept in dormitories that had three bed bunks not to mention complete lack of privacy. Apple tried to excuse the behavior but it continues. Soon afterwards, in 2009, suicides began rampant in Chinese plants. Although it can be assumed that this was common since at the time China was experiencing suicides among employees at a high rate. In 2010, I was announced that the worker’s wages would get a 33% increase. In 2011, 3 workers died in an explosion because of accumulated dust. This was caused by the company’s misconduct therefore they closed their companies so as to conduct investigations. In 2007, Apple’s engineers finally came up with a method to cut strengthened glass to use it on screen of the iPhone. When the first batch of cut glass reached Foxconn in the middle of the night, workers wore their uniform and started assembling the phones by hand. In less than three months, the company had sold up to a million pieces. In 2013, Tim Cook took over the reins of Apple. At this point, the situation improved. A responsibility report was released by the company. It reflected the negative situation in Apple as pertaining workers’ rights, environmental impact as well as ethical regulations in the company. Do the Outsourcing Issues facing Apple really concern customers? The issues regarding outsourcing should indeed concern the customer. One would not like to use a phone that the production process has led to the suffering of many others. One would like to be comfortable in the knowledge that through buying the phone then another person’s life has been made better. Additionally, the events that take place during the production process trickle down to the consumer. Therefore, although people have rated the Apple iPhone as faultless, it could be because they do not know the issues underlying therein. They should be equipped with the correct knowledge through publicizing the auditing report as regards the company. Apple joined the list of company big wigs such as Intel, Hewlett-Packard as well as Nike when they made public their audit report. The 2011 audit states that in 2011, the compliance rate for the rights workers was 74% (The New York Times, 2012). The companies were found guilty of discriminatory practices with good examples being hepatitis screening as well as pregnancy tests. 50% of the companies were found to make the employees work for overtime without increasing their pay. Additionally, fair treatment of workers was ranked at rated at 93, prevention of underage labor was rated 97% while protection of juvenile rights was rated at 87%. Therefore, the greatest problems as concerns workers was being over worked and underpaid. Indeed, these are the two greatest factors that are important to an employee. The investors should be concerned by the company’s insatiable greed for money. Nonetheless, profits though huge may not reflect in gain. What is important is for a company to balance profits and social responsibility. Every investor wants to feel that they are helping promote human rights and dignity as opposed to suppressing them. It is also imperative to note that investors are concerned with a company’s good reputation. In the case that the company has a bad reputation, it is inevitable that at some point the company will start making losses. This remains an investor’s worst nightmare. Since Steve Jobs death, it appears that Apple has become more transparent with what officials publish about the company (The New York Times, 2012). Steve Jobs may have been a profit driven individual. For him to make the profits that he made at Apple, he may have done so through some unscrupulous ways. This can be seen when he describes the factories as a ‘pretty good.’ Additionally, he may have noticed all the negative effects but was reluctant to bring them to light in order to save the good name of the company. The company, which was his brain child was dear to him and he wanted it painted in the best light possible. Underpaid American Workers As soon as Apple announced that the company would investigate the issue regarding the employees in China being mistreated, another report was released that the retail workers based in America were underpaid. Indeed the company is the only major one not to be named as one of America’s most favorable companies to work for. The employers have been accused of micromanaging the employees and of being paranoid. Ironically, the best rewarded employees at Apple are those at the top. Tim Cook, Apple’s current CEO obtained stock grants totaling up to $247 million and at the same time his salary rose to $1.4 million. This indeed is the epitome of capitalism. Avoidance of paying tax The Company also recently announced that it had avoided paying tax because the American tax is too high. It is surprising that a company that earns revenue of $108 million, an amount larger that all the state budgets for New Jersey, Massachusetts and Michigan put together would be involved in evasion of tax (Duhigg and Bradsher, 2012). It is however important to note that the technology giant avoided paying the tax legally. However, not every legal move is ethical. The company has been avoiding paying billions of income tax to the United States’ Government. The company was brought before the Senate in order to explain its actions. It was discovered that the company considers three major subsidiaries that are based in Ireland as without tax jurisdiction. ASI (Apple Sales International), one of its Irish affiliates, reported that it had a sales income of more than $74 billion in four years but had paid almost no tax at all. Specifically, ASI reported pre-tax earnings of more than $22billion and only pain $1o million tax which translates into a 0.05% rate. This can be attributed to Apple’s keen attention on its taxes. Since the tax today is muddled, apple legitimately shielded its income earned from without the borders of US. Secrecy Another of Apple’s greatest sins is the secrecy. Since the time that Steve Jobs was CEO the company’s affairs were shrouded in a lot secrecy, a fact that has not changed in recent years. Inside Apple’s own offices, there are black cloaks put in order to hide the products that are undergoing development. Whenever a report is published regarding the company, it goes without saying that the company will refuse to comment. When iCon, a book about Steve Jobs, was published, all titles by John Wile and Sons were banned from Apple Stores just because the then CEO did not like the book. At one point, the company sent policemen after a blogger who allegedly released photos of an iPhone before it’s official release date. In addition, when the CEO fell ill the company did not disclose his illness even if this could have affected investors choices regarding investing in the company. Action steps that the company could take to improve their behavior and impact on the world The new CEO seems keen on changing the tides at apple (Duhigg and Bradsher, 2012). He is keen on sharing information about the company to the rest of the world. The best step that he has taken so far is the publishing of the Fair Labor report on the Chinese report. This report has highlighted the China crisis and how it is being tackled. This has helped the company to share information with the rest of the world in order for the company to be more transparent. The company should make a point of increasing salaries for all its employees both in the US and outside. They should consider stagnating the salaries of the big wigs at the company but raising the salaries of the under dogs. They should also cut down on overtime hours. In reality, the apple brand may have done as much branding as is necessary. This is to mean that most people buy their products not for their efficiency but simply for the brand. Therefore, if the company keeps producing excellent products, than the customers will indeed keep coming. Its profits are high and even with these changes these will not change much. The focus of apple needs to shift from mere profit making to concentrating on the employees and customers. As regards outsourcing jobs and not giving them to US citizens, the company needs to work hand in hand with the government to see that this correction is done. A good example is that the government should restructure visa programs such that they aid in the hiring of foreign engineers. The education system also needs to be redone such that many mid level technical programs are made available to the Kenyan citizens. This means that there should be more schools that offer technical training. At a dinner with President Obama, Steve Jobs quipped that it would be possible for Apple to bring skilled manufacturing back to US if the government aided in training more engineers in America (Duhigg and Bradsher, 2012). The reason why the big companies outsource labor is because such skill is unavailable in the US. However, the company on its part should do a better job in ensuring that its priorities are not too capitalistic. Finally, the US government is urged to give ‘a tax holiday’ in order to bring profits from overseas back to the country. These profits would in turn be used to create more employment opportunities. The company should start a foundation that caters for needy children who have technological prowess. Like Bill Gates started a foundation, it would be wise for Apple to consider a charitable cause in order to be on the good side of the American people. This foundation can act as a breeding ground for future engineers and software developers at the company. Reasons why these actions would be smart and actions to take These actions are the smartest to take. The ethical issues at the company put off the company. This results in sales dropping because people will stop using its products. The company needs to preserve its good name by focusing on its reputation. This way, the company will retain its cult like following and in the process get even more customers. These steps will make the company appear more charitable and thus attract more customers. It is essential for all consumers not to feel like they are part of unethical moves. References Business News Daily. (2012). Is it ethical to own an iPhone? Retrieved from http://www.businessnewsdaily.com/1979-owning-iphone-ethical.html Duhigg, C., & Bradsher, K. (2012). How the US Lost out on iPhone Work. Retrieved from http://www.nytimes.com/2012/01/22/business/apple-america-and-a-squeezed-middle- class.html?pagewanted=all&_r=0 The New York Times. (2012). In China, human costs are built into an iPad. Retrieved from http://www.nytimes.com/2012/01/26/business/ieconomy-apples-ipad-and-the-human- costs-for-workers-in-china.html?pagewanted=ll&_r=0 Read More