Apple’s new leader faces ethical dilemmas at Foxconn

As Tim Cook picks up the leadership of Apple from Steve Jobs, he faces a significant ethical dilemma in Wuhan in a supplier’s company where workers threaten suicide in protest over their working conditions

THIS DEVELOPING STORY IS BEING UPDATED REGULARLY.  ADDITIONS ARE AT THE END OF THE ORIGINAL POST

by Paul Hinks

Articles recently reported that Tim Cook (Apple’s new CEO) earned $378m in 2011. He inherited a global technology juggernaut, renowned for its creativity and innovation; a business with $90 billion in cash reserves (The Guardian). Yet there are serious problems at one of its key suppliers, Foxconn, where a recent mass suicide threat posed an ethical dilemma facing Apple and its new leader.

The Telegraph reported [11th Jan 2012]:

Around 150 Chinese workers at Foxconn, the world’s largest electronics manufacturer, threatened to commit suicide by leaping from their factory roof in protest at their working conditions. The workers were eventually coaxed down after two days on top of their three-floor plant in Wuhan by Foxconn managers and local Chinese Communist party officials.

Not all measures should be financial

A lot of organisations highlight in their annual reports the progress they’ve made against various Corporate Social Responsibility (CSR) metrics. Very commendable, but it’s important to dig deeper beyond the glossy brochures and corporate fanfare. Increasingly social-economic factors come in to play, creating a conflict of priorities opposite financial metrics.

Apple is indeed well placed to influence the working conditions at Foxconn. Despite assurances from Apple on its website that it is committed to the highest standards of social responsibility across its worldwide supply chain, the evidence presented highlights that Foxconn employees are seriously aggrieved with their working conditions. In an online article published on Thursday 26 Jan 2012 Reuters noted Apple’s apparent silence on the Foxconn situation – referencing on-going investigations carried out by the New York Times, the Reuters article is an example of growing interest and awareness of the problems at Foxconn.

Difficult working conditions

The Foxconn situation has not developed overnight. The Guardian reported recently [16th Jan 2012] the problems had been developing since at least 2010:

In 2010, a total of 18 of their colleagues in the Shenzhen campus of the Taiwan-owned company did attempt suicide; 14 died. Some employees and labour organisations blamed a combination of factors for the workers’ deaths: low wages, long working hours – sometimes up to 16 hours a day – and inhuman treatment. A number of Apple products have been cited as ‘game changers’ – products that have helped to change how we use technology to live our lives – in stark contrast, it seems that the workforce at Foxconn that help to create these Apples products survive, and sadly tolerate a rather mundane existence. Loyal Apple consumers crave for their Apple products. However, it appears there is a darker, more un-savoury side to how Apple products make it to our shelves.

Leaders can’t ignore ethics

On Tuesday [Jan 24th 2012], Apple announced its financial results for its first fiscal quarter: the figures were impressive and beat analysts’ expectations. Bloomberg (& others) immediately focused on the financial merits of Apple’s results – increasing revenue forecasts & speculating on dividend payments – a few websites noted the share price increments of various Apple suppliers, including Foxconn.

This is all very good news if you’re an Apple shareholder – however will the fortunes of Apple mean anything to the workers in Wuhan?

I borrow a comment from Dilemmas of Leadership [1st edition, p196]: “For some leaders, matters of ethics arise as unwelcome intrusion in the pursuit of economic success”.

Apple’s financial strength isn’t in doubt; however Apple’s position on ethical topics such as the welfare of workers at its suppliers is clearly attracting increased interest. Continued negative media coverage of working conditions at its suppliers may begin to influence and alter customer perceptions of the Apple brand; perhaps ultimately impacting Apple’s cherished economic success?

The need for more than ethical tokenism

The Telegraph highlighted [27 Jan 2012] that Apple have been working on number of initiatives:

In response to outside pressure, Apple this year published a list of its 156 suppliers, representing almost all its supply chain, for the first time. It also joined the Fair Labor Association, becoming the first technology company to do so. Apple has also worked with Chinese labour rights advocates, environmental groups, and has agreed to allow outside monitors into its suppliers’ factories.

Hopefully, Mr Cook and Apple will ensure their corrective actions are interpreted as more than just ethical tokenism; the challenges presented at Foxconn provide an opportunity for Apple to lead by example beyond the technology forum where it enjoys such enviable success.

Background

Paul sent us updating information [Feb 14th 2012]  You can find more out about Paul in his earlier post on Antonio Horta-Osorio.

Update [LWD editors]

More than 10 people were injured in a fight that broke out among workers at a Foxconn plant in north China’s Shanxi Province, police said Monda [September 2012]

Foxconn, the world’s largest maker of computer components, faced criticism on harsh working conditions two years ago after a string of suicides committed by several Chinese factory employees. The company currently has about 1 million employees on the Chinese mainland.

The relationship between Foxconn and Apple flourishes. China Daily announced [May 2012]

Foxconn Technology Group will invest $210 million to build an Apple production line in October in east China’s Jiangsu province, local authorities announced Monday to be located in Huai’an city. Foxconn Technology Group, a top maker of products for Apple, announced [April 2012] that it will build a high-tech manufacturing base in Hainan, China’s southernmost island.

The working conditions at FoxConn have been said to have improved:

Working conditions have improved at plants owned by Foxconn, a Taiwan-based electronics giant and Apple Inc’s biggest supplier, according to a report released on Tuesday. The Fair Labor Association, a United States-based nonprofit organization, said that Foxconn, a Taiwan-based electronics giant and Apple Inc’s biggest supplier, has completed the actions it agreed to take to improve working conditions at its two plants in Shenzhen and one plant in Chengdu, which make Apple’s popular iPhone and iPad products.

Sunday 7th October 2012

There is growing interest internationally in the Foxconn situation. China Daily commented as follows:

A major supplier for tech giant Apple on Saturday denied reports that thousands of workers making components for the iPhone 5 went on strike at the company’s plant in Zhengzhou, Henan province.

The strike was said to have started at 1 pm Friday [5th October 2012] and continued to 11 pm, involving workers mainly from assembly lines and quality-control inspectors.

“Foxconn raised overly-strict demands on product quality without providing worker training for the corresponding skills. This led to workers turning out products that did not meet standards, and ultimately put a tremendous amount of pressure on workers,” China Labor Watch said in a statement.

October 12th 2012

A new story is developing which suggests harsh treatment of an employee after a near-fatal accident.

October 18th 2012

Latest allegation in Western media is of Foxconn using underage students to work in one of their factories.

November 26th 2012

Foxconn has begun its scheme to replace workers with robots which have been called Foxbotts. Scheme was announced in 2011

March 8th 2013

Major report claims Foxconn factories are ‘Labour camps’

April 2nd 2013

Foxconn profits jump aided by manufacture of Apple components. However, The adverse publicity continues with a denied report about a further suicide attempt as a Foxconn factory.

May 21st 2013

Apple leaders including Tim Cook defend the Corporation’s tax arrangements to a Senate Sub-Committee.

October 5th 2013

Two years after the death of Steve Jobs, leaders present and departed at Apple are compared.

February 17th 2014

Stories are emerging of Apple’s interest in diversification, specifically into acquiring electric car business Tesla. ‘Clean green’ image may appeal to Apple as brand strengthening. Foxconn also indicates wish to diversify away from intensive factory manufacturing with a Billion dollar investment into Indonesia for more automated manufacturing processes.

March 3rd 2014

Cook displays his ethical and environmental credentials and concerns Says business is ‘not just about making a profit.

April 18th 2014

Apple blunders in attempt to avoid ethical threats to its image.

May 7th 2014

Big golden hello of $67 million to new retail boss from Burberry.

June 20th 2014

Suggestion that Cook should make CSR a priority

July 4th 2014

Apple CEO’s Cook’s statement at Investors’ meeting has become a matter of debate

July 18th 2014

Apple faces charges of illegal price-fixing of e-books

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9 Responses to Apple’s new leader faces ethical dilemmas at Foxconn

  1. Prashanth says:

    When we are reading all the stories so far, yes Apple needs to do more than Eithical Tokenisum, but on their way to ‘Do More’ than ethical tokenisum, Apple may not be having a plan B to fall back on. The kind of supply chain Faxconn has provided, Apple may not be able to get that from any supplier. So I feel Apple is at the mercy of Faxconn to a certain degree. I see that as another dilemma for Apple.

  2. Thank you Prashanth

    Yes, it is a dilemma, mayone one which can be seen in terms of influencing without a great deal of direct authority.

    One opportunity may be to find ways of collaborative procedures and agreed changes involving both organizations.

  3. Paul Hinks says:

    Hi Prashanth – thanks for the post back …

    The protests at Foxconn’s Wuhan site suggest workers are seriously aggrieved about their working conditions – as you mention, this introduces dilemmas for the Apple leadership team.

    Foxconn help contribute to Apple’s success – which is to the credit of Foxconn and their workforce.

    I do hope Tim Cook & Apple embrace the challenges Foxconn face at Wuhan and the two organisations work together to address the problems.

    Apple’s creativity, innovation and passion around technology deserve success in my mind – hopefully this success will transcend beyond Apple’s financially orientated goals.

    Tudor’s suggestion of a collaborative approach sounds like a sensible first step.

  4. Prashanth says:

    Hi Tudor, Paul,

    Collaboration, what a beauitful thought. It is indeed a real good approach to get things sorted to a greater extent. I feel Apple need to collaborate not only with Faxconn but also with People who worked on the project.

    Today I read a story in Strait Times, Singapore, Mr. Ken Grenda of Grenda Corp – AU, sold his transport company to a buyer for A$400M. Now he is called – The Most Generous Boss of Australia, because of a great gesture he should to his fellow men, by distributing A$15M as bonus. Many families were in tears for this act.

    In line with today’s story, when I was discussing this blog with a friend of mine, he was suggesting, “When Apple is sitting on $90B profit, and when, from each iPhone when Apple got couple of hundred buck profit and when Faxconn employees get some USD17-20 a day lastly when they are suffering so much, Apple could give out at least USD100 worth of contribution on each employee to the betterment of the people who are indirect contributors”.

    Very conservative company like Apple, be generous to some extent, where they will be called as The Most Generous Employer (may be indirectly).

    I know this is an interesting and i guess never ending topic of discussion. I feel, Apple should not forget the society that evolved from.

  5. Paul Hinks says:

    Hi Prashanth – I’ve just googled the Grenda story – thanks for flagging it up. Great way of recognising the contribution made by his workforce!

    Nice story to end the week on :o)

  6. Paul Hinks says:

    For anybody still following this story, The Telegraph published an on-line article earlier today providing a progress update:

    http://tinyurl.com/7mt88tl

    regards,
    Paul

  7. Joseph Issac says:

    Do you have any further information on this matter? Did Apple initiate any ethical decisions to resolve this issue?

  8. TT says:

    What decisions have been made for further change.

  9. There are still stories developing. I will be updating soon.

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