Ethical issues at Apple

Purpose of Assignment

At times, multinational corporations encounter in-country issues that if not properly addressed, could place the viability of the company at risk. Thus, it is important to promptly recognize and understand these threats so management can employ an effective solution to the problem. An in-depth analysis of this assignment will provide students with a good understanding of the potential issues involved.

Assignment Steps

Select one of the following cases from the textbook:

• Starbucks Wins Key Trademark Case in China (Ch. 2, p. 56)
• Ethical Issues at Apple (Ch. 5, p. 132)
• Corruption At Daimler (Ch. 5, p. 136)

Prepare a minimum 700-word analysis addressing the following:

• Analyze the legal, cultural, and ethical challenges encountered by the global business case you selected.
• Determine the various roles host governments played in this particular global business operation.
• Summarize the operational challenges global managers faced as illustrated in your selected case.

Format your assignment consistent with APA guidelines.

Click the Assignment Files tab to submit your assignment.

Ethical Issues at Apple

In mid-2006, news reports surfaced suggesting there were systematic labor abuses at a factory in China that makes the iPhone and iPod for Apple, Inc. According to the reports, workers at Hongfujin Precision Industry were paid as little as $50 a month to work 15-hour shifts making Apple products. There were also reports of forced overtime and poor living conditions for the workers, many of them young women who had migrated from the countryside to work at the plant and lived in company-owned dormitories.

The 2006 articles were the work of two Chinese journalists, Wang You and Weng Bao, employed by China Business News, a state-run newspaper. The target of the reports, Hongfujin Precision Industry, was reportedly China’s largest export manufacturer with overseas sales totaling $14.5 billion. Hongfujin is owned by Foxconn, a large Taiwanese conglomerate, whose customers (in addition to Apple) include Intel, Dell, and Sony Corporation. The Hongfujin factory is a small city in its own right, with clinics, recreational facilities, buses, and 13 restaurants that serve the 200,000 employees.

Upon hearing the news, Apple management responded quickly, pledging to audit the operations to make sure Hongfujin was complying with Apple’s code on labor standards for subcontractors. Managers at Hongfujin took a somewhat different tack; they filed a defamation suit against the two journalists, suing them for $3.8 million in a local court, which promptly froze the journalists’ personal assets pending a trial. Clearly, the management of Hongfujin was trying to send a message to the journalist community—criticism would be costly. The suit sent a chill through the Chinese journalist community because Chinese courts have shown a tendency to favor powerful, locally based companies in legal proceedings.

Within six weeks, Apple had completed its audit. The company’s report suggested that although workers had not been forced to work overtime and were earning at least the local minimum wage, many had worked more than the 60 hours a week allowed for by Apple, and their housing was substandard. Under pressure from Apple, management at Hongfujin agreed to bring practices in line with Apple’s code, committing to building new housing for employees and limiting work to 60 hours a week.

However, Hongfujin did not immediately withdraw the defamation suit. In an unusually bold move in a country where censorship is still common, China Business News gave its unconditional backing to Wang and Weng. The Shanghai-based news organization issued a statement arguing that what the two journalists did “was not a violation of any rules, laws, or journalistic ethics.” The Paris-based Reporters Without Borders also took up the case of Wang and Weng, writing a letter to Apple’s then CEO, the late Steve Jobs, stating, “We believe that all Wang and Weng did was to report the facts and we condemn Foxconn’s reaction. We therefore ask you to intercede on behalf of these two journalists so that their assets are unfrozen and the lawsuit is dropped.”

Once again, Apple moved quickly, pressuring Foxconn behind the scenes to drop the suit. Foxconn agreed to do so and issued a “face-saving” statement saying the two sides had agreed to end the dispute after apologizing to each other “for the disturbances brought to both of them by the lawsuit.” The experience shed a harsh light on labor conditions in China. At the same time, the response of the Chinese media, and China Business News in particular, point toward the emergence of some journalistic freedoms in a nation that has historically seen news organizations as a mouthpiece for the state.

More recent news may indicate new ethical concerns at Apple’s production facilities in China. In a 2014 story by BBC News, Apple is again the center of issues related to workers’ hours, ID cards, housing arrangements, work meetings, and juvenile workers at its Pegatron facilities on the outskirts of Shanghai. Apple disagreed strongly with the portray of the Pegatron factory’s working conditions, and stated in the BBC News article that “We are aware of no other company doing as much as Apple to ensure fair and safe working conditions.”