Unethical Issues in Apple Company - Case Study Example

Analysis of Unethical Issues in Apple and Foxconn Apple is one of the largest producers of smartphone devices in the world with annual sales of US$ 182 in the year 2014. To produce such high returns, Apple puts pressure on its suppliers to deliver many gadgets that meet market demands and the result is that employees in the contracted companies work for long hours with low pay (Lazonick, Mazzucato & Tulum, 2013). Chinese labor laws have accused Apple of violating its social responsibility code by contracting companies that employ underage people and forcing people to work for many hours without paying overtime. Two major unethical cases were with Pingzhou Electronics and Foxconn that have hired underage persons. Apple terminated its contract with Pingzhou on learning that management was aware of underage persons on the company payroll. Such actions point out that Apple has a long-standing commitment to ensure that all parties in its supply chain work in a healthy environment and that they are adequately compensated for their services. In Apple’s supply responsibility progress report for 2013, the company has stated that it has over 200 suppliers it deals with directly, majority of whom produce software with a few large ones producing hardware (Apple Inc., 2013). The company has been hit with claims of dealing with suppliers hence it came up with an idea of independently auditing its suppliers. To reduce the many cases of litigation and bad publicity, Apple decided not to deal with suppliers who employ minors or those who underpay workers. Apple said that companies employ minors since the minors do not have bargaining power and are likely to take up any amount of salary. On the case of Pingzhou, Apple entered into a contract with them to manufacture a standard circuit board for its devices. The supply chain lasted for a long time despite a number of audits done by Apple based on claims of the company employing underage employees and paying far too little to its workers. In the year 2012, Apple joined Fair Labour Association, a body that audits and makes public unethical behavior among manufacturer. Apple auditors together with FLA ones went to Pingzhou and found out the company has seventy-four minors on its wage bill, working under deplorable conditions. The company did not make attempts to make their working conditions better or call for the minors to be sent away from working is a fair manner; instead, Apple terminated the contract, absolving itself from any wrong doing. On its hand, Pingzhou had to single-handedly pay terminal dues for the minors. Most of Apple’s products come from a Chinese company called Foxconn; the company assembles the iPhones, iPads, and Mac computer (Lazonick et al. 2013). The choice for this company was informed by its capacity to produce many devices per hour while maintaining high-quality output. The company has a large number of staff members who produce these devices. Foxconn is the world’s largest single contract electronics manufacturer whose incomes are far much higher than what its contractors make. The ability of Foxconn to generate abnormal net revenues arises because the company underpays its staff, forcing many workers to live in deplorable conditions (Huvelle & Baskir, 2013). As a result, a number of workers have committed suicide with the last case being in December 2013. Most workers say that, the high number of suicide and mental cases arise from the supervisory and managerial mistreatment. Supervisors force workers to work for long hours with each worker spending more than 60 hours per week at the working station without getting an off day. In addition, more than half of the staff clocked over 36 hours of overtime every month, a case that strains them too much. Workers said that they were treated worse than machines because a machine has a replacement cost while a worker does not have; the supervisor can send off a worker without notice or warning because of a petty mistake. The same workers complain of threats of being fired as reasons giving them sleepless nights this they do not enjoy off days with peace (Huvelle & Baskir, 2013). The workers acknowledge that Apple staff come to their factory many times; they talk to the workers and check working conditions, but they do not take any action to make the situation better. At Apple HQ, one stays in probation for a short time before being confirmed or turned away but in Foxconn, an employee can remain in probation status for a long period before being confirmed, all this time earning trainee or temporary staff salary. Additionally, workers pointed out that safety measures at the company are dilapidated and that the company does not make public many accidents that take place within. The most recent accidents are a gas explosion and gas poisoning, both of which were handled internally; the worst part is that management did not put in place any measures to curb similar cases in future. The workers single out Apple as the source of their problems given the speed and urgency with which it wants its products delivered. Apple, on the other hand, does not seem to care about improving the working conditions for these workers or contract an additional company to reduce pressure on Foxconn. On Apple’s website, the company has indicated policies and regulations it ensures all partners comply with before Apple contracts or renews contracts with them (Apple Inc. 2013). Such regulations show clients and the public that Apple cares about the source of its products by that winning their loyalty and respect. Consumers have largely embraced Apple products as demonstrated by the large profit margins the company makes. Of recent, Apple customers and the public have petitioned the company to look into its future by carefully choosing partners in China, monitor, and take decisive actions against any malpractices they perform. As a company, Apple has largely ignored the working conditions of workers in its supply chain with its main objective being to increase production at lower costs. According to Apple Inc. (2013), Apple closely monitors the working conditions of suppliers and shall address any violations as they arise. Apple has been aware of Foxconn scandals since 2010, and it has done little to change the situation given that it is the leading beneficially from Foxconn operations. Apple is aware that with the current working conditions at Foxconn, it makes a large profit margin given that an average Foxconn worker receives $145 PM while an Apple device retails for $200 each (Chan, Pun & Selden, 2013). The decision to continue trading with Foxconn is illegal given the large number of mistreated and underpaid workers. In addition, Apple should ensure Foxconn adheres to Chinese labor laws on overtime, salaries, and general working conditions. As Apple continues holding onto this contract with Foxconn, the company is supporting mistreatment of workers and other companies can easily see this as the way forward to making abnormal profits. Unless Foxconn improves working conditions, the media will continuously talk about the mistreatment resulting to consumer knowledge about this whole issue. The result is that Apple sales will decline if people decide to boycott buying its products. In its defense, Apple says that Foxconn has high ability to scale with high rates of cost efficiencies, for a single company. He said this with respect to the large number of staff (1 million) Foxconn employs of which 710,000 are devoted to producing Apple products (Chan et al. 2013). It is evident that Apple management knows too well that Apple, on its own, cannot employ, train and sustain employees at such low rates hence the decision to outsource and further still, that is the reason Apple does not give ultimatums to Foxconn. To make up for its injustices at Foxconn, Apple has sponsored a number of staff to take up relevant on the job training courses whose main aim is to increase productivity. To the employees who get selected to study, they appreciate and consider this a noble move given that a majority does not have the means to pay for any professional training before securing any job. In another defense, Apple claims to help modernize China by employing many people besides promoting enterprise and trade (Chan et al. 2013). Critics have supported the idea of creating employment, but they are faulting the company on the cost of that employment to each worker of Foxconn. The continued relationship between these two companies has demonstrated that both are at fault ethically since Apple knows how much it pays Foxconn informing its decision to remain silent on the issue of Salaries and overtime. It is high time both companies work on their relationship to make sure they compensate adequately the cost of labor and improve the working conditions of their staff members. As a result, both companies should review this business method to make sure that all stakeholders are happy and that there are no suicide cases or complaints relating to poor working conditions. The bold step Apple took by terminating its contract with Pingzhou could have served as a lesson to its over 200 minor suppliers who engage in unethical behaviors were the company to take stern action against Foxconn. References Apple Inc. (2013). Apple Supplier Code of Conduct. Version 4.0 Apple Inc. (2013). Apple Supplier Responsibility. 2013 Progress Report. Chan, J., Pun, N., Selden, M. (2013). The Politics of Global Production: Apple, Foxconn and China’s New Working Class. New York: John Willey & Sons. Huvelle, J.G., & Baskir, C.E. (2013). A Fair Labour Future for Foxconn? The 2012 Audit of Apples’s Largest Chinese Supplier. Peking University School of Transnational Law. Lazonick, W., Mazzucato, M., & Tulum, O. (2013). Apple’s Changing Business Model: What Should the World’s Richest Company Do with All Those Profits?. The Academic Industry Research Network, Cambridge, Massachusetts. Read More