Ethical and Governance Issues Raised free essay sample

Table of Contents 1Introduction2 2Discussion of case study2 2. 1Identification of the Ethical and Governance issues raised in the case study2 2. 2Critical analysis of the main ethical and the governance issues raised in the case study5 2. 3An evaluation of the conditions that enabled the issues identified to arise7 2. 4Recommendations to the company9 3Conclusion11 4References12 Introduction Apple is one of the most successful companies to date, they have dominated most of the markets they have entered, and all of this was able to become a reality because of Steve Jobs, the founder of Apple. He is seen as a somewhat genius when it comes to business, and his employees seem to be very satisfied, but what most people dont actually see are manufacturer workers of Apple, the employees in China who supply Apple’s products. We will delve into issues which have occurred at its suppliers over the past few years and will also investigate what Apple has done to rectify these problems. We will write a custom essay sample on Ethical and Governance Issues Raised or any similar topic specifically for you Do Not WasteYour Time HIRE WRITER Only 13.90 / page Finally we will present recommendations which Apple can implement to better the quality of life at its suppliers and thus become more socially responsible. Discussion of case study Identification of the Ethical and Governance issues raised in the case study The main ethical issue raised in the case study is whether it is right for companies such as Apple to be solely focussed on profit maximisation rather than also bettering the lives of its stakeholders. Apple has been highly successful in the past decade, having seen its share price soar thanks to its innovative products such as the iPod and the iPhone. In creating such products, they have become market leaders in their segments, and thus have been able to charge premiums for their products, which has translated into large profits for Apple. Steve Jobs, Apple’s CEO, has been credited with creating products that understand the needs of its customers before they even know they need it. With such a strong focus on its products’ human interaction and user experience, it is unfortunate that Apple has forgotten about the companies that have helped make it so successful, namely the Chinese manufacturers of its products. In the drive for larger margins and lower product prices, Apple has forgotten to protect the quality of life of workers of its Chinese sub-contractors (Rein 2010c). The case study focuses on one such company, Foxconn, where six of its workers have committed suicide this year. This is widely presumed to be caused by the sub-standard working conditions. Last year, a worker accused with stealing an Apple iPhone prototype killed himself after being beaten by security guards (Rein 2010c). Physical abuse aside, there has also been reports noted in Apple’s 2010 audit that manufacturers are also making their workers exceed maximum stipulated working hours, not meeting occupational safety and health standards and are paying less than the minimum wage (Branigan 2010). The most recent outrage against Apple has been caused by the poisoning of at least 62 workers at Wintek, another Apple sub-contractor, due to the introduction of an unsafe chemical in the name of efficiency (Harvey 2010). The case study notes two reasons why Apple should care about the issues brought up. The first is that Apple’s reputation has taken a severe media beating due to the events noted. However, this has yet to translate to any conclusive loss of sales or decrease in share price, and therefore Apple has not needed to swiftly act upon this. In addition, although publications on ethics and corporate citizenship rankings exist, there is a lack of consistency between lists that creates confusion and effectively devalue their importance and guidance (Coster 2010). For example, a company may be able to be noted as an ethical company by in large paying to be on the list. Nevertheless, the world is becoming more mindful of its ethical responsibilities, as seen with the push for corporate social responsibility, so there is a real risk that these issues could cause considerable damage to Apple in the future. Secondly, there is a supply chain risk associated with the increasingly bad reputation of the Chinese manufacturers, given China’s rapidly changing labour market. Younger workers are becoming overly optimistic in their career options and are not willing to work in factories (Rein 2010a). With the growing bad reputation of the factories, the manufacturers are finding it increasingly difficult to recruit employees and retain good staff. As a result, maximum production outputs may not be utilised and there are greater costs and loss of efficiencies involved with worsening quality control of production due to staffing difficulties. Apple’s executives have been short-sighted in their drive to maximise profit. Shaun Rein (2010b) notes that â€Å"true leadership is about bettering the lives of the people around you† rather than simply making money at any price. While it can be argued that Apple can only do so much, for example, set out strict agreements on code of conducts of manufacturers, Apple can also be blamed for the lack of regulation of these agreements and pursuant action taken on breaches. Given the cases noted above, it is clear Apple’s executives can do more in its governance to become great leaders. It is also noted that evidence exists that governance to the ends of bettering the lives of stakeholders, as seen with Nike, may actually lead to profit maximization rather than be an overbearing cost on companies. 2 Critical analysis of the main ethical and the governance issues raised in the case study We will critically analysis the following two issues: (1) profit maximisation vs. orporate social responsibility; and (2) what has Apple actually done in regards to ensuring that its Chinese suppliers comply with Apple’s values. Corporations such as Apple, are constantly under pressure to maximise shareholder wealth, as shareholders are the ultimate owners of the company. A key proponent of this view was Nobel-Prize winning economist, Milton Friedman. Friedman states in a New York Times article (1962) that managers’ key responsibility as agents was t o the act in shareholders’ best interests; this was management’s social responsibility. By acting in the interest of others, such as the interest of society, management are not fulfilling their duty to shareholders and are effectively imposing a tax on shareholders, who could more efficiently allocate their resources to this purpose rather than rely on corporations. However, modern theory known as corporate social responsibility (CSR), has complicated the situation in that stating that companies are not only responsible to its shareholders, but also to the stakeholders which its actions may impact (Freeman 1984). While this may seem to contradict the mantra of profit maximisation, Russo and Perrini (2010) suggest that in today’s conscience-minded society, success is based not only on maximising profit but also on a corporation’s stakeholder relationships, which include social and environmental issues. The important factor in understanding CSR is that organisations do not implement every possible aspects of CSR. Russo and Perrini (2010) state that CSR is now focused on a stakeholder model, although this is extremely dynamic in response to organisational changes.