Business Daily Media

Apple, the $1 trillion company searching for its soul

  • Written by Thomas Clarke, Professor, UTS Business, University of Technology Sydney

Apple has become the first American company to reach US$1 trillion in market capitalisation[1] – US$1,000,000,000,000 in stockmarket value. Behind this glittering success, however, lies a series of unresolved ethical dilemmas.

The approaches of Apple and the other giant US platform technology companies (Google, Facebook, Amazon) to corporate taxation, concentration and privacy have attracted widespread criticism[2].

But as a manufacturing company Apple faces a more deep-seated problem. This involves the millions of people employed in its supply chain, which is largely located in China with the major contractor Foxconn[3].

Read more: A bloody decade of the iPhone[4]

Our research shows[5] human rights, environmental and ethical problems persist inside Apple’s vast global supply chains.

Low pay[6], poor working conditions[7] and environmental hazards[8] in supplier factories in China and across Asia are sources of long-running controversies. Suicides of workers[9] subject to the intensive work regime[10] of these factories shocked Apple into action.

Apple does address these disturbing issues in its annual Supplier Responsibility Progress Report[11]. Progress has been uneven and limited[12], but the company has created the appearance of corporate social responsibility[13]. Any reputational damage does not seem to undermine financial results.

Still, for a company as successful as Apple, the failure to find a permanent solution to recurrent environmental and labour issues in its global value chain is not acceptable.

Read more: The least-skilled workers are the losers in globalisation[14]

What makes Apple successful

Apple is not the largest smart phone manufacturer in the world (the increasingly sophisticated Samsung and Huawei are), it is just the most profitable[15]. Its profit margins have topped 20% for more than a decade[16]. While its profit has slipped in recent years, it is much higher than its competitors.

The result is a huge cash hoard[17]. Apple holds more cash than most American industries combined, and even many countries[18].

Apple’s sustained competitive advantage is not simply due to innovation, superior design and marketing. It’s also a result of its domination of the advanced consumer electronics supply chain. Apple has effectively created a closed ecosystem, controlling every part of the supply chain from design to retail.

Disaggregating the global value chain enables the most profitable activities, including design, finance, marketing and sales, to be retained in the home country. The less profitable labour-intensive activities are given to contractors in developing countries, where wages and conditions are often much poorer.

Apple sources most of its components from manufacturers in Asia[19]. The poor working conditions at the bottom of these value chains gave rise to the term “electronics sweatshop[20]”.

According to activist Li Qiang[21], of US-based China Labour Watch:

Without China, Apple wouldn’t be the company it is today. No other country can provide labour so cheaply and make its products so quickly.

Read more: What businesses can do to stamp out slavery in their supply chains[22]

But the interplay between global economic forces and local circumstances poses challenges[23] for economic security, and business accountability, transparency and integrity.

Arm’s-length morality

In its Supplier Code of Conduct, Apple states[24]:

Apple suppliers are required to provide safe working conditions, treat workers with dignity and respect, act fairly and ethically, and use environmentally responsible practices wherever they make products or perform services for Apple […] Apple will assess its suppliers’ compliance with this Code, and any violations of this Code may jeopardize the supplier’s business relationship with Apple, up to and including termination.

This statement goes a long way in explaining the normative basis on which Apple operates: an arm’s-length morality that imposes responsibility on others.

As Apple shifts the burden of cost and production, its suppliers make the labourers carry the burden[25] through low wages and unsafe conditions.

Regrettably, workers receive little protection from government or regulatory authorities. Independent trade unions are forbidden in China[26]. Labour strikes are illegal and considered counter-revolutionary (though they often occur in local disputes).

The result is a degree of labour flexibility that creates a race to the bottom, threatening the most basic labour standards and environmental standards in developing countries.

Read more: What we can learn from China’s fight against environmental ruin[27]

Ensuring integrity in the global value chain

It appears the beauty of Apple’s brilliant design ultimately rests upon the suffering of workers in electronic sweatshops, where human rights, labour standards, environmental safety and business integrity are routinely ignored.

These abuses were first brought to Apple’s attention in 2006[28]. The company has made some efforts to eradicate problems[29] and enforce higher standards.

However, there is evidence to suggest the intensity of the production regimes[30] being enforced to meet product launches often overwhelms Apple’s interventions to advance audit and management systems and improve standards in suppliers’ factories. Bleak working conditions[31] persist throughout much of the electronics supply chain in Asia.

With Apple’s vast cash reserves, the obvious question is why doesn’t it resolve these problems once and for all? The answer is that to a significant degree Apple is held hostage by the capital markets to control costs and feels compelled to disgorge tens of billions of dollars in dividends and share buy-backs or face the wrath of the hedge funds. The laser focus is on Apple’s share price, not the welfare of its contractors’ employees.

The future innovative capacity (and ethical principles) of Apple are in jeopardy[32] when value creation becomes defined as value extraction. Boards focus solely upon “returning” cash to shareholders who never provided the cash to develop the company in the first place.

As the market leader, and the most successful consumer electronics company in the world, Apple has a particular responsibility to ensure the integrity and responsibility of its value chain.

References

  1. ^ first American company to reach US$1 trillion in market capitalisation (www.theatlantic.com)
  2. ^ attracted widespread criticism (ec.europa.eu)
  3. ^ Foxconn (asia.nikkei.com)
  4. ^ A bloody decade of the iPhone (theconversation.com)
  5. ^ Our research shows (rdcu.be)
  6. ^ Low pay (digitalcommons.ilr.cornell.edu)
  7. ^ poor working conditions (www.nytimes.com)
  8. ^ environmental hazards (www.businessinsider.com.au)
  9. ^ Suicides of workers (www.scmp.com)
  10. ^ intensive work regime (www.somo.nl)
  11. ^ annual Supplier Responsibility Progress Report (www.apple.com)
  12. ^ uneven and limited (www.somo.nl)
  13. ^ appearance of corporate social responsibility (www.sbs.com.au)
  14. ^ The least-skilled workers are the losers in globalisation (theconversation.com)
  15. ^ the most profitable (appleinsider.com)
  16. ^ profit margins have topped 20% for more than a decade (www.bloomberg.com)
  17. ^ huge cash hoard (www.investopedia.com)
  18. ^ even many countries (www.cultofmac.com)
  19. ^ sources most of its components from manufacturers in Asia (doi.org)
  20. ^ electronics sweatshop (www.telegraph.co.uk)
  21. ^ According to activist Li Qiang (www.bbc.co.uk)
  22. ^ What businesses can do to stamp out slavery in their supply chains (theconversation.com)
  23. ^ poses challenges (doi.org)
  24. ^ states (www.apple.com)
  25. ^ make the labourers carry the burden (www.nytimes.com)
  26. ^ forbidden in China (theconversation.com)
  27. ^ What we can learn from China’s fight against environmental ruin (theconversation.com)
  28. ^ brought to Apple’s attention in 2006 (www.macworld.co.uk)
  29. ^ some efforts to eradicate problems (articles.chicagotribune.com)
  30. ^ intensity of the production regimes (www.bbc.co.uk)
  31. ^ Bleak working conditions (www.imdb.com)
  32. ^ are in jeopardy (hbr.org)

Authors: Thomas Clarke, Professor, UTS Business, University of Technology Sydney

Read more http://theconversation.com/apple-the-1-trillion-company-searching-for-its-soul-101030

Business Today

Malaysia Airlines Launches Bonus Side Trip Campaign

Malaysia is ready to safely welcome back the influx of international travellers looking to explore its beautiful sights and natural wonders, as it reopened its borders on 1 April 2022. To further ignite the spirit of travel, M...

Business welcomes an Albanese Labor government

Australia’s largest employers congratulate Labor leader Anthony Albanese on his election as Australia’s 31st Prime Minister, Business Council chief executive Jennifer Westacott said. “Business congratulates Labor on it’...

Company attracts key FMCG experts to drive global growth

Food and beverage industry entrepreneur Scott Mendelsohn has signed on to assist authentication and customer insights platform Orijin Plus to build its premium brand portfolio ahead of launching into international markets late...

1 in 6 US kids are in families below the poverty line

The official child poverty rate is about the same today as in 1967.More Than Words Photography by Alisa Brouwer/Moment Open via Getty ImagesCC BY-NDIn the United States, children are more likely to experience poverty than people o...

Hunt and Brew launches Australia-first cold brew coffee

Australian boutique coffee maker Hunt and Brew has announced it will be sourcing the beans for its new “Australia” cold brew coffee from far north Queensland in a move that will make the company one of the largest buyers of ...

What you need to know about the Defense Production Act – the 1950s law Biden invoked to try to end the baby formula shortage

Biden invoked the Defense Production Act to help end the shortage of baby formula. AP Photo/David J. PhillipU.S. President Joe Biden on May 18, 2022, announced he is invoking the Defense Production Act to help end the shortage of ...

Business Daily Media Business Development

Malaysia Airlines Launches Bonus Side Trip Campaign

Malaysia is ready to safely welcome back the influx of international travellers looking to explore its beautiful sights and natural wonders, as it reopened its borders on 1 April 2022. T...

Business Daily Media - avatar Business Daily Media

Business welcomes an Albanese Labor government

Australia’s largest employers congratulate Labor leader Anthony Albanese on his election as Australia’s 31st Prime Minister, Business Council chief executive Jennifer Westacott said. ...

Business Daily Media - avatar Business Daily Media

Company attracts key FMCG experts to drive global growth

Food and beverage industry entrepreneur Scott Mendelsohn has signed on to assist authentication and customer insights platform Orijin Plus to build its premium brand portfolio ahead of l...

Business Daily Media - avatar Business Daily Media

the supermarket business model is too fragile to shield customers from rising food prices

Shutterstock/photocriticalFood prices, like almost everything else, are rising fast. There have recently been warnings of “apocalyptic” costs, and a declaration that the “e...

Lisa Jack, Professor of Accounting, University of Portsmouth - avatar Lisa Jack, Professor of Accounting, University of Portsmouth

How soaring inflation can be particularly harmful for young people

Shutterstock/SpeedKingzInflation rates have become almost impossible to ignore. In the UK, inflation has soared in recent months, now reaching 9% – the highest rate for 40 years. The B...

Shampa Roy-Mukherjee, Associate Professor in Economics, University of East London - avatar Shampa Roy-Mukherjee, Associate Professor in Economics, University of East London

it won't control interest rates and inequality will widen

The UK local elections in May saw gains for nationalists in Scotland and Northern Ireland, raising the prospect of increased debates over the future make-up of the country. In Scotland, Firs...

Eoin McLaughlin, Senior Lecturer in Economics, University College Cork - avatar Eoin McLaughlin, Senior Lecturer in Economics, University College Cork



NewsServices.com

Content & Technology Connecting Global Audiences

More Information - Less Opinion