Why the Chinese Worker Abuse Stories May Take the Shine Off Apple's Reputation

The reaction to the revelations about worker abuse at Chinese factories making Apple products elicited a quick and revealing reaction from the company and the rest of the tech world. And apologies were neither first nor foremost.

Apple CEO Tim Cook was indignant: 'This is not who we are,' he said in an email to employees which was released to the media.

The tech blogosphere responded to the abuse complaints with the electronic equivalent of a grade schooler caught not playing nicely with other children at recess: 'they did it first;' 'they all did it, not just me;' and when those clearly werent gaining traction, 'they're actually better off because I did it.'

The embarrassed and pained reaction is reflective of the damage this may do the holier than thou image that tech has enjoyed. It is not considered a mere business like finance or manufacturing. It is a calling. And Apple is the greatest exemplar of that exalted status. That the tech media felt compelled to trot out decades-old stories about garment factories as if that would deflect attention or shift blame seemed pathetic and desperate. And that it claimed this problem is the American consumers' fault for wanting lower prices, so therefore a societal issue was similarly clueless.

Such arguments fail to address the real point. Worker abuse is as old as work. What advanced societies and companies do is correct it when they find it. Fast. That is why there are child labor, minimum wage, working condition and health laws. And that is why companies chip a little bit off their gross margins to monitor the situation so their workforces will not be abused and the company will not be embarrassed.

When it comes to reputation, the strongest accusations always stick to those companies whose professed values are in direct contrast to their behavior. Apple has worked assiduously to promote the image that it is more than a little bit better: more creatively designed, more innovative, way cooler. It's brand strategy is predicated on providing such features and communicating that which enhances the notion that owning an Apple makes one the envy of friends and acquaintances. Its margins require maintenance of that reputational premium.

But when you choose to live at the top, you have to invest to stay - and you have to behave like you belong. Other companies like Nike and Walmart, who once dominated their markets, were hurt by revelations that they tolerated worker abuse. And it affected their performance. If Apple does not fix this quickly - and with a modicum of uncustomary humility - it risks damage to its core competitive advantage. JL

Ceylan Yenginsu reports in the International Business Times:

Apple celebrated the second birthday of the iPad on Friday, but the tablet's success has been overshadowed by a recent report from the New York Times that exposes labor violations at Apple's supply chain in China.

The poor working conditions at Foxconn have been exposed for some time; even Apple published a report about some of its own labor violations. But Mike Daisy's first person account of Foxconn labor practices in an episode of "This American Life," followed by two New York Times articles, has brought the issues into sharp focus.
The New York Times article set the scene for the harsh and dangerous conditions workers were subjected to on a daily basis. "The explosion ripped through building A5 on a Friday evening last May, an eruption of fire and noise that twisted metal pipes, as if they discarded straws," they wrote describing one of two iPad factory explosions that killed four and injured 77.

After speaking to worker advocates and employees inside the plant, the Times discovered that the plant's environment posed serious health and safety issues.

Two years ago, 137 workers were injured after using a poisonous chemical to clean iPhone screens, The Times reported. Some would work excessive overtime, enduring physical punishments for not keeping up the pace, while others would be made to stand for so long their legs would swell, making them unable to walk.

These accounts look even worse in the face of Apple's recent quarterly report, which shows revenue surging 74 percent from the previous quarter, to a record $46.3 billion. In fact, the tech giant sold more iPhones, iPads and Mac computers in its last quarter than any other in its history.

"If Apple was warned and didn't act, that's reprehensible," Nicholas Ashford, a former chairman of the National Advisory Committee on Occupational Safety and Health, told the New York Times. "But what's morally repugnant in one country is accepted business practices in another, and companies take advantage of that."

Apple's CEO Tim Cook, responded to the criticism his company has faced. He explained Apple's position in what has been claimed to be an authentic email to Apple employees by 9to5Mac:

"As a company and as individuals, we are defined by our values. Unfortunately some people are questioning Apple's values today, and I'd like to address this with you directly. We care about every worker in our worldwide supply chain. Any accident is deeply troubling, and any issue with working conditions is cause for concern. Any suggestion that we don't care is patently false and offensive to us. As you know better than anyone, accusations like these are contrary to our values. It's not who we are...."

The email futher claimed that every year Apple inspects more and more of the factories in its supply chain. "As we reported earlier this month, we've made a great deal of progress and improved conditions for hundreds of thousands of workers. We know of no one in our industry doing as much as we are, in as many places, touching as many people...," it said.

The email emphasized that Apple would continue to dig deeper and would not be turning a blind eye to any of the problems that are discovered in the supply chain. "On this you have my word,' the email added.

While the New York Times acknowledged Apple's efforts in their report, they found that significant problems remain. More than half of the suppliers audited by Apple have violated at least one aspect of the code of conduct every year since 2007, according to the report.

Apple is not the only company that has been accused of violating labor conditions. Dell, Hewlett-Packard, I.B.M, Lenovo, Motorola, Nokia, Son and Toshiba have all had similar reports against them.

The reports have been successful in elevating discussion on the topic and making the voices of Chinese workers heard, after years of repression.