Apple Company Inc - Corporate Governance - Case Study Example

Apple Company Inc. Name: Institution: Course: Date: Apple Company Inc. Company profile Apple Company Inc. was incorporated in 1977. The company was developed to design, manufacture, market and sell personal computers, mobile communication and media devices and portable digital music players (Apple Inc 2015, p.1). Since its incorporation, the company has also been able to offer other related services such as, software development, networking solutions and third party digital applications and content. The products and services offered by Apple Company include Apple TV, iPhone, Ipod, Mac, iTunes, iCloud. Furthermore, the company also offers software applications such OS X and iOS operating systems (Apple Inc 2015, p.1). Through effective corporate governance, an innovative management and a dedicated workforce, Apple has been able to grow into one of the most successful fortune 500 companies on the global platform. The success of the company is associated with its ability to develop and market high quality and highly competitive products in the mobile, communication and networking platforms. The company has been able to manufacture products such as the iPhone, which integrates different application to enable the customer access varieties of services on a mobile phone device (Apple Inc 2015, p.1). Criteria for the review of the organisation’s governance Board leadership is an important criterion that can be used in reviewing the level of governance in an organization. This is based on the understanding that it is the responsbility of the board in an organization to provide leadership and take control (Hitt et al 2013, p.11). This entails taking responsbility on matters related to organizational performance, insisting on the provision of adequate information not only to members of the board but also to other stakeholders. Ensuring adequate leadership also requires the board to inform the management on its requirements and ensure effective communication among different levels in the organization (Hitt et al 2013, p.12). Board accountability is also another criterion that can be used in assessing the level of corporate governance in an organization. This is because it is the responsbility of the board to ensure that the management complies with organisational polices (Zylla-Woellner 2013, p. 82). This is often realized when the board ensures the presence of effective internal control mechanism within the organization. The development of risk management strategies, preparation of annual reports and financial accounts to the expected standards also forms an essential part of this criterion. Furthermore, through this criterion it is the responsbility of the board to ensure that the organization operates in accordance with the principles of equality and diversity at all levels. Allocation of responsibilities and delegation of board responsibilities is also a criterion that can be used in the assessment of the level of an organization’s governance. Under this criterion, it will be important for the board to ensure that the responsibilities of all members of the board are identified and those in charge of these responsibilities are qualified and trained in accordance with organizational expectations (Hitt et al 2013, p.14). In terms of delegation, operative corporate governance requires that only those with the ability and the capacity to execute the intended responsibilities are given the opportunity through delegation. Effective delegation is also possible when the responsibilities of the Chief Executive Officer (CEO) are defined and the chair of the board is assigned his or her responsibilities (Zylla-Woellner 2013, p. 90). The criteria used in assessing board performance, review and renewal can also be used in understanding the effectiveness of organizational governance. This is because it is through this approach that the competency levels of an organization can be determined (Zylla-Woellner 2013, p. 92). According to this criterion, it is the responsbility of the board to review the performance of board members. One way of reviewing the performance level of an organization’s board is by ensuring that it is composed of a mix of competencies and experiences. The review process provides the board with a technique of using an objective criterion in the selection of its directors and ensuring that all those selected as members of the board are active participants in matters of corporate governance (Hitt et al 2013, p.15). The director and board level of integrity also form an essential criterion in the determination of an organization’s level of corporate governance. High-level integrity in corporate governance can be ensured when the board installs a code of conduct policy for members of the board and the staff of an organization (Tricker 2012, p. 34). In addition, high integrity among board members is also possible when the organization operates on collective responsbility among members of the board. This can be realized when the board insists on director participation on issues of corporate governance while maintaining high level confidentiality on affairs of the board (Zylla-Woellner 2013, p. 110). The level of board openness is also an additional criterion that can be used in assessing the effectiveness of corporate governance in an organization. Using this criterion the board has a responsibility of ensuring that all the communication channels operate among members of the board and all the other stakeholders in the organization (Tricker 2012, p. 32). Furthermore, the board must ensure that it engages with other key stakeholders through strict policy that focuses on transparency and adequate provision of essential information (Keay 2015, p. 23). A critical review of the organisation’s governance When Apple Company is perceived in relation to board leadership, it is possible to credit the board for its relentless efforts to popularize and the ability of the company to maintain a competitive advantage in the highly competitive mobile phone and communication market. Prior to the death of Steve Jobs, one of the founders of the company, Apple Inc. was under the control of one individual. Steve Jobs was both the CEO and Chairman of the board (Lublin 1). This meant that he played a major role in the decision making process in the company. However, after his death the board of the company was criticized for their inability to provide effective leadership to company. This was because the differences in the approaches that Steve jobs and Tim Cook used in leading the organization. Despite the perceived inabilities, the company, through its board has been able to maintain an effective competitive advantage in the mobile phone market. The ability of the board to maintain its competitive advantage is founded on the level of director independence at Apple Company (Marcus 1). It is a policy at Apple Inc. that he board be constituted of a majority of independent directors who exceed the independence requirements. The influence of the board is considered advantageous to the company especially if that board is dedicated towards the realization of organizational goals and objectives. An independent board has the ability to make decisions it considers effective in improving organizational performance. This explains the success of Apple Company in the mobile phone market. Despite the perceived success in matters of leadership, the company has been accused of using a relatively traditional approach in matters of corporate governance. This has denied junior members of the board an open platform of airing their views. Furthermore, traditional approach to governance has also made it relatively difficult for the company to groom junior members of the board as part of future leaders (Marcus 1). Board accountability at Apple Inc. extends at every level of organizational management. At the company, there is often limited confusion on who is responsible for what function. Through its Direct Responsible Individual (DRI) Model, the board at the company allocates responsibilities making it public on who is responsible (Marcus 1). However, critics of the organization have argued that DRI is a simple tool, which is only applicable on a theoretical basis, and does not provide an effective way of ensuring high-level accountability. In most cases, the DRI has been perceived to be effective when accountability is required after something goes wrong (Lublin 1). The challenges that the organization faces is in the development of an all-inclusive technique that can be used in ensuring that all members of the board are held to account for their activities. This will enhance transparency levels within the organization while at the same time ensuring that every member of the board in involved in matters of corporate governance in the company (Apple Inc 2015, p. 4). In matters of allocation and delegation of responsibilities, the board at Apple Inc. operates on a protocol, which divides responsibilities between the chair of the board and the CEO. However, despite the perceived success of the board, the chair has been accused of controlling more powers hence influencing the decision making process. The main responsbility of board committees at apple include compensation, the auditing the company and developing a corporate social responsbility strategy (Marcus 1). The board committees execute these responsibilities on behalf the board with regard to their areas of responsbility. Questions have however been raised about the ability of the board committees to work independent of the highly influential chair of the board. To this extent, the governing board at Apple Company has been accused of micromanaging the organization with limited avenues of delegation hence limiting the ability of junior members of the organisation to experience professional development (Marcus 1). In terms of assessing board performance, review and renewal, the board at Apple conducts a self –assessment of its performance and that of every members of the board. This is done in relation to the annual objectives and goals of the company (Apple Inc 2015, p. 4). In addition, the board also has the powers to evaluate the ability of the company’s CEO to execute his responsibilities in accordance with his job description and the expectations of the company (Lublin 1). The assessment of members of the board is based on the understanding that board members serving in Apple Company are required to dedicate significant attention and time to the affairs of the company. In terms of their term in office, directors at Apple Company serve of a one-year time or until a replacement are elected (Lublin 1). Furthermore, the organization believes that it benefits from the contribution of directors who have served the board overtime. This is because of the experience they possess and that can be used in the development of the organization. However, a high population of relatively old directors has been cited as a threat to the ability of the company to develop in the presence of a highly competitive and innovative mobile phone and communication market (Lublin 1). In terms of gender and racial diversity, Apple Inc. has been accused of discrimination against women and people of colour as part of its board. Apple has also been criticized for encouraging a male dominated system of leadership despite the improvements that have been experienced in terms of the increase in the population of women with qualifications to manage and participate in corporate governance (Satariano 2014, p.1). In terms of race, white males populate the board at Apple Company. This has been perceived, as an indication that the company is unwilling to hire equally qualified individuals from other racial backgrounds. Different activist groups and organizations such as the Sustainability Groups have continued to criticize Apple and demanded for a solution to its diversity issues (Satariano 2014, p.1). The level of integrity of the director and the board is considered crucial in effective corporate governance. This is because at Apple Company it is the responsbility of every members of the board to uphold the codes of ethics while at the same time ensuring that all the other stakeholders allied to the organization act in accordance with the expected standards (Marcus 1). Despite the existing codes of conduct, the board has however faced criticism from the company’s shareholders and the Institutional shareholder service for its decisions to allow excessive executive compensation. This in the view of the stakeholders is an indication that the board is less focussed on the financial development of the company. Instead, the company focuses on the growth and development of individuals (Marcus 1). This explains why the shareholders, in 2013, approved a proposal that will ensure that the compensation package given to the executive is closely tied to the stock. In such a situation when the company’ stock are lower, the executive compensation package will also be lower. This in the view of the shareholders is the only way through which the organization can ensure that the board and the executives dedicate more attention to the wellbeing of the company (Satariano 2014, p.1). Board openness guarantees that all stakeholders will be provided with information that is integral for the wellbeing of the company. This is because, the management, through the board has the responsbility of proving information to the stakeholders. One way by which Apple has been able to demonstrate its level of openness is through the timely preparation and availability of annuals financial reports to all the stakeholders (Satariano 2014, p.1). Despite the perceived level of openness, the board at Apple Inc. has been accused of limited disclosure with regard to the future prospects of the company in the mobile phone communication market. This in the view of the board is attributable to the need to preserve the company’s designs from possible emulation by rival companies in the international market (Marcus 1). Recommendations For the company to improve on its corporate governance, it will be important to reconstitute its board with relatively young, knowledgeable and experienced individuals. This is because to maintain a competitive advantage in the mobile phone, communication and technology market the company requires creative and updated minds to assist in the development of its strategies (Zylla-Woellner 2013, p. 125). In the process of reconstituting its board, Apple must be gender sensitive and include qualified individuals from racial backgrounds other than white. This is because populating the board with more gender, cultural and generational diversity improves on the financial perfume and the effectiveness of corporate governance. Furthermore, it promotes the feeling of inclusion among members of the society hence improving on the company’s corporate social responsbility strategy (Solomon 2013, p. 18). Harmonization of executive compensation packages is also a critical aspect in enhancing Apple’s corporate governance. The shareholders are the owners of the company and this makes them part of the decision making team. As representatives of the shareholders, the board has a responsbility of ensuring that the process of harmonizing executive compensation packages must be done in relation to the performance of the company in the stock market. This will be the only way through which the executive will be dedicated towards the realization of the financial goals and objectives of the organization (Tricker 2012, p. 106). The chair and CEO at Apple Company must ensure that they exercise control of governance matters according to the powers and privileges provided for by the policies of the organization. This will enhance the levels of transparency and openness when handling crate governance matters. In addition, it will also improve on the ability of junior board members to voice their concerns and demonstrate their capabilities as future directors of the organization. The use of controlled power also facilitates the development of delegation strategy among the directors hence improving on the level of division of labour in the organization (Zylla-Woellner 2013, p. 120). There is need to create platforms for training of board members on matters related to corporate governance and upholding of integrity. These platforms are important in improving the efficiency of the board because they increase their level of awareness on organizational and societal expectations. Through such levels of awareness, effective governance can be guaranteed to the organization (Tricker 2012, p. 29). References Apple Inc. 2015. Corporate Governance Guidelines. https://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=2&cad=rja&uact=8&ved=0ahUKEwjOmp-7h-HKAhUDPhQKHSiHArYQFggjMAE&url=http%3A%2F%2Fblogs.darden.virginia.edu%2Fcts%2Ffiles%2F2012%2F05%2FApple-Company-Overview.pdf&usg=AFQjCNFnTaIcOVEyeYz_1YXRJEGCGaZvLw&sig2=smAZ2vmvbqrjxtVNa8ZZOA Apple Inc. 2015. Apple Inc. (AAAPL.O). http://in.reuters.com/finance/stocks/companyProfile?symbol=AAPL.O Hitt, Michael A., R. Duane Ireland, and Robert E. Hoskisson. 2013. Strategic management: competitiveness & globalization. Mason, OH: South-Western Cengage Learning. Keay, Andrew. 2015. Board Accountability in Corporate Governance. Hoboken, United States: Routledge. Lublin, Joann. 2011. Apple Board Faces Scrutiny. The Wall Street Journal . http://www.wsj.com/articles/SB10001424052970204294504576615381967617082 Marcus, Lucy. 2011. What’s next for Apple’s board? Corporate Governance: Reuters. http://blogs.reuters.com/mediafile/2011/10/06/whats-next-for-apples-board/ Satariano, Adam. 2014. Apple Facing Criticism About Diversity Changes Bylaws. Bloomberg Business. http://www.bloomberg.com/news/articles/2014-01-06/apple-facing-criticism-about-diversity-changes-bylaws Solomon, J. 2013. Corporate governance and accountability. Hoboken, N.J.: Wiley. Tricker, R. Ian. 2012. Corporate governance: principles, policies and practices. Oxford: Oxford University Press. Zylla-Woellner, Judith. 2013. Corporate strategy for apple inc company. [S.l.]: Grin Verlag Ohg. Read More