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Now that Apple has announced that an outside organization, the Fair Labor Association, will audit the working conditions at most of the plants that build Apple products, will the growing protests over the exploitative practices at those plants start to die down?
Over the last six weeks, news coverage, especially in the New York Times, a theater piece by activist actor Mike Daisey that was broadcast on National Public Radio, and an online petition drive and coordinated protests at Apple stores on four continents, have put increasing pressure on Apple, which has been criticized for years for relying on Chinese suppliers that abuse workers.
Among the revelations: One of the largest factories, run by Foxconn Technology in the southern Chinese city of Shenzhen, has strung nets around its plant, to catch workers who try to commit suicide by jumping from the roof. Some employees are as young as 11 years old, and many work shifts that extend to 14 or even 24 hours. One worker died after toiling for 34 hours at a stretch. Last year, two explosions at Chinese iPad factories killed four people and left 77 injured. Many other technology companies, including Dell, Hewlett-Packard, Motorola and Sony rely on Chinese factories with harsh working conditions, but Apple, with its $475 billion market cap, has been the main target of scrutiny.
According to two crisis consultants and a management professor at Northwestern’s Kellogg School, Apple has moved too slowly to address the labor problems in its supply chain. But yesterday’s move was an important step in the right direction, and the company has plenty of reputational leeway, because it is beloved by consumers. Washington, D.C. crisis consultant Richard Levick calls it a “trust bank.”
“Apple is not just an innovative company,” says Levick. “It’s a religion. People believe in Apple the way they believe in family.” Even while the supply chain controversy has heated up, Apple stock has continued to rise, breaking $500 before the company announced the audits. Harris Interactive also released a poll yesterday that showed Apple has the best reputation of the 60 most visible U.S. companies.
Levick says it was a smart move for Apple to post a link to previous audits in yesterday’s press release announcing the new effort, and wise of CEO Tim Cook to send an email to all Apple employees today, saying, “We care about every worker in our worldwide supply chain.” The email goes on: “We are attacking problems aggressively with the help of the world’s foremost authorities on safety, the environment, and fair labor. It would be easy to look for problems in fewer places and report prettier results, but those would not be the actions of a leader.”
CEO Cook also appeared at a Goldman Sachs technology conference today and was quoted as saying, “We think that the use of underage labor is abhorrent — it’s extremely rare in our supply chain, but our top priority is to eliminate it.”
Eric Dezenhall, who runs a crisis communications firm in Washington, D.C., says the company has what he calls the “Apple Immunity.” Says Dezenhall, “Apple consistently violates every law of crisis management to its benefit.” Examples: late CEO Steve Jobs’ rude and abrupt manner with colleagues, his silence about his illness, the company’s secrecy about its products. Companies are supposed to be transparent about top executives’ health and the development of new gadgets. But Apple didn’t suffer at all for breaking the rules.
Now that Jobs has passed away and there is heightened scrutiny of harsh labor conditions however, the company will have to shift its strategy. Apple must not only monitor conditions in foreign factories, but it will have to make changes, say both Dezenhall and Levick. “But I don’t think this will kill them the way it would kill an oil company in three seconds,” adds Dezenhall. “This is a chronic problem for them but it won’t be their undoing.”
Daniel Diermeier, a management professor at Kellogg and author of Reputation Rules: Strategies for Building Your Company’s Most Valuable Asset, compares Apple to other companies that have had to face scrutiny of their supply chain, including Nike, McDonald’s and Wal-Mart. “You can outsource operational risk and financial risk,” says Diermeier, “but you cannot outsource reputational risk.”
Diermeier also points out that Apple’s customer base is younger, more socially engaged and more plugged into social media than customers of many other companies. “If you lose their trust, things can turn sour very quickly.” Evidence: Change.org and SumOfUs.org, two online “slacktivist” organizations, gathered 250,000 online signatures on petitions protesting Apple supply chain labor conditions in less than one week, and then last week, organized distribution of the petitions to six Apple stores around the world, including in San Francisco, New York, London and Bangalore.
Apple’s decision to rely on the Fair Labor Association for the audits has already drawn criticism. “The FLA has a long track record of being a mouthpiece for corporations,” says Taren Stinebrickner-Kauffman, founder and president of SumOfUs.org. The New York Times reports today that the group was founded in 1999 by universities, nonprofit groups and by companies, including Nike, that were trying to address supply chain worker conditions in the face of criticism from anti-sweatshop groups. Corporate representatives sit on the FLA’s board and companies help fund the group, though the FLA insists its inspections are independent.
Supply chain monitoring presents a huge challenge to companies doing business overseas. Though Nike committed to fair labor practices more than a decade ago, it still faces problems, including a report by the Associated Press last year that workers for its Converse brand in Indonesia were being slapped by supervisors, forced to stand in the scorching sun for hours at a stretch as punishment for not meeting quotas, and insulted as dogs and pigs by bosses.
Dezenhall, Levick and Diermeier agree that the scrutiny of Apple’s labor practices presents an opportunity for the company to step up and take a leadership role in the electronics industry. If they do it well, “it will go from enterprise risk exposure to a benefit,” says Levick.
