Introduction

Apple is ranked as the most valuable company in the world by Forbes and their net
worth is about half a trillion. In year 2014, Apple recorded a net sales of $ 182.8 billion. In
recent years, globalisation of world economy has allowed businesses to expand or relocate
their manufacturing plant to countries with lower labour costs and search for suppliers from
all over the world. Globalisation is widely used to described a variety of cultural, economical,
social and political changes that have shaped the world from much celebrated revolution in
information technology to the diminishing of national and geo-political boundaries in an ever
expanding, transnational movement of goods, services and capitals (Guttal, 2007). This has
allowed Apple to build up a supply chain starting from raw material supply to manufacturing
of finished goods in many different countries such as China, Japan and Taiwan. However,
BBC Panorama recently conducted an undercover investigation on Apples manufacturers
Pegatron in China and tin suppliers in Indonesia and the results are compiled into a video that
bring shocks to the world. Apples manufacturers are found exploiting the workers, providing
poor living conditions and forced to work long hours. While Apples tin suppliers in
Indonesia are found to buy tin from illegal mine. These findings have dampened the image of
Apple as what their suppliers and manufacturers did were not complying the supplier code of
conduct of Apple. This has lead to peoples perception that although Apple has put in effort in
ensuring ethical code in supply chain, what they did is insufficient or there is probability that
Apple did not enforce their supplier code of conduct unlike what they told the public. This
essay includes the justification of Apples behaviours using shareholders and stakeholders
theories and whether people should continue to buy Apple products. In the end the essay will
look into whether company should be held to a higher, lower, or the same standard of
behaviour as individual consumers

1.0 Can Apple justify their behaviour? Use the shareholder and stakeholder theories of
corporate social responsibility to evaluate Apples behaviour and frame your answer

Corporate social responsibility (CSR) generally refers to actions taken by firms with respect
to their employees, communities and the environment that go beyond what is legally required
of a firm (Barnea & Rubin, 2010). It is one of the most significant corporate trends and
companies are allocating more resources to meet public expectations. In the video, it is
mentioned that Apple has made enormous profit over the past few years through their
products. Despite Apple mentioned that they have put in effort in ensuring suppliers
complying with their ethical codes and helped set up non-government organisations to reduce
the number of illegal mining, the results showed that Apples suppliers have violated the
ethical codes set up by Apple. Although Apple are not directly in both of the situations, it is
debatable whether can Apple justify their behaviour and whether should Apple be
accountable for these issues.
Shareholder theory is proposed by Milton Friedman and considered as narrow view
of CSR. In this theory, Friedman (1962) mentioned that the one and only social responsibility
of a business is to use its resources engage in activities designed to increase its profits so long
as it stays within the rules of the game, which is to say, engages in open and free competition
without deception and fraud. The corporate has no duty to exercise social responsibility, and
the exercise of social responsibility would often deviate from the maximization of profits
(Schaerf, 2007). The corporate executive would be spending someone elses money for a
general social interest (Friedman, 1970). .Only individual can be said to have social
responsibilities as the free choice of the individual is at the basis of his moral principles
(Mansell, 2013).

Apple can justify their behaviours under shareholder theory. The fundamental of
shareholder theory is that shareholder should be the priority of the corporation and their profit
must be maximised as long as it is within the law. Over the years Apples sales have been
increasing every year and this lead to higher net profit available for distribution to the
shareholders. It is in line with the one and only social responsibility mentioned by Friedman.
Although Pegatron did not treat the workers in accordance to the suppliers code of ethics of
Apple, there is no prove that they had violated any laws neither in China nor other countries.
In Indonesia despite Apples suppliers may have bought illegal tins, there is no evidence to
link Apple to the behaviour of their suppliers, which mean that Apple is still operating and
maximising profit of shareholders within the law.
However under stakeholder theory Apples behaviour is unjustifiable. Stakeholder
theory is considered as the wide view of CSR advocated by Edward Freeman. Unlike
shareholder theory which only take into account the interest of shareholders, stakeholder
theory takes into account the interest of a much wider range of stakeholders. Stakeholders are
persons or groups that are impacted or have impact on the organisation (Frost, 1995). For
example stakeholders can be employees of the organisation, customers, employees from the
supply chains of organisation, environmental organisations and general public. Stakeholder
theory' is the doctrine that businesses should be run not for the financial benefit of their
owners, but for the benefit of all their stakeholders (Sternberg, 1997) . Under stakeholder
theory corporation is required to redistribute benefits to stakeholder and redistribute
important decision making power to stakeholders (Stieb, 2009).
As shown in the video, Apples suppliers in China are mistreating their workers by
disallowing leave application and providing low quality living conditions. Under stakeholder
theory, Apple should have solved these problems by communicating with their suppliers and
ensuring that they comply with their supplier ethical codes. Apple cannot defend themselves

by saying that they have done their best or these issues are none of their business because
they are not directly involved in the operation of their suppliers. As mentioned above Apple
should take care of the interests of all stakeholders including the workers in their supply
chain by ensuring the workers are not exploited. Furthermore, Apples suppliers in Indonesia
are buying raw materials from illegal sources. Again Apples behaviour is not justifiable
under stakeholder theory as they are responsible to ensure that their suppliers comply with the
rules of the industry. Therefore, Apple cannot justify its behaviours under stakeholder theory,
but justifiable under shareholder theory as they are maximising the profit of their
shareholders.

2.0 Will YOU continue to purchase Apple products? ( Please answer HONESTLY) If so
why? If not why not?
Ever since their introduction of Ipod, Apple had attracted numerous customers from
all over the world due to their elegant design, high performance and strong reputation. These
are the few reasons why Apple still remains as one of the best selling company among many
competitors. Despite Apples suppliers are involved in controversy such as mistreating the
workers and buying from illegal sources, Apple can argue that their acts are justifiable under
utilitarian. According to Utilitarian the morally correct action is that action with most good
consequences and least bad consequences where all of the consequences on all of those
affected by action are taken into account. The presence of Apple has brought income sources
for the residents around the mining sites, legal or illegal and workers working in the
manufacturing plants. Without Apple, these stakeholders welfare may be worse off. Maitland
(1997) indicated that the standards of wages and labours of a country may follow its classic
liberal standard. According to this standard a practice is ethically acceptable if it is freely
chosen by informed workers. Therefore Apples tin suppliers in Indonesia cannot be held
responsible for the usage of child labour and dangerous work conditions because the workers
including the child are well informed about the risks of working in an illegal mine.
However, after evaluating the arguments against Apples behaviours, I decided not to
continue to buy Apple products. Fundamentally it is because of their immoral treatment of
their workers in the manufacturing plants. Santoro (2000) argued that multinational
corporations are morally responsible for the way their suppliers and subcontractors treat their
workers. Although Apple are not directly in charge of Pegatron, they are ethically responsible
to ensure workers in Pegatron are treated fairly and not exploited. At minimum MNEs have a
duty to ensure that their offshore factories, and those of their suppliers and subcontractors, are
in full compliance with local laws (Arnold & Bowie, 2003). In fact Apples tin suppliers were

buying resources from illegal mine, which has violated the law of Indonesia, though it is not
enforced. Indeed Apple has failed to comply with the OECD guidelines. As mentioned in
OECD (2014), multinational companies should contribute to the elimination of all forms of
forced or compulsory labour effective and abolition of child labour. This is shown in the
video when child labours are used at the illegal mine and workers are forced to work
overtime and disallow to take leave. Although OECD guidelines are pure recommendations
and not legally enforceable, Apple is expected to follow them since they are the leading
company in the world. Apples behaviours are unacceptable under both views of
multinational obligation. As mentioned by Bowie in Relativism and the Moral Obligations of
MNCs, MNCs are obligated to follow the moral minimum and the morality of the market
place. Market-place morality requires MNCs to honour their contracts and must not free-load
on the rules of the market. Therefore Apple should have ensured that their suppliers fully
comply with their ethical codes and local laws, instead of letting them exploit the workers
and buying illegal tin. Apples behaviours are also criticised under the human rights approach
by Arnold (Arnold, Beauchamp & Bowie, 2013). Arnold argues that human rights should be
the foundation for minimum ethical obligation to which MNCs should adhere. MNCs should
respect the right to freedom of movement and fair treatment. Thus in accordance to this Apple
should ensure their suppliers do not violate the human rights of workers in the plant which
they failed as in the video workers were not allowed to take leave and forced to work
overtime.

3.0 Should companies be held to a higher, lower, or the same standard of behaviour as
individual consumers? Use your answer to 2. to reflect upon and critique your answer to
1. In framing your answer consider the arguments for and against self-regulation
presented in lectures.
Companies should be held at a higher standard of behaviour as individual consumers.
Companies used to have a sole purpose of maximising profit of shareholders in the past.
However in recent years the call for companies to take up social responsibility has increased
as consumers and investors are demonstrating increased interest in supporting responsible
business practices and are demanding more information as to how companies address risks
and opportunities relating to social and environmental issues (Kercher, 2007). As mentioned
by Clarke (2005), in 1932 E Merrick Dodd argued companies, like individuals, should strive
to be good corporate citizens by contributing to the community to a greater extent than is
generally required and therefore the corporation as an economic institution has a social
service as well as a profit making function.
The reason why companies like Apple should be held at a higher standard of
behaviour is every company has vast amount of stakeholders which may be affected by every
decisions made by the company. A company has an evolving set of obligations to its
customers, neighbours, employees, shareholders and other investor (Casey, 1972).

For

example, investors depend on the information provided by the company to make investment
decisions. Employees depend on the companys performance for their salaries. Companys
operation may affect the living condition of general public around its manufacturing plant.
Due to these situations hence companies are required to take up more responsibility than
individuals. Any failure of the company to behave responsibly may have serious effects on
the stakeholders. If a company fails to provide correct financial information for both
shareholders and investors, it is difficult for shareholders and investors to make investment

decisions and may lose money. If a company bankrupts and shut down, all its employers will
lose their income sources and will lower their living conditions. If a company did not operate
according to the environmental demands, the environment around the plants may be
destroyed temporary or permanently, affecting living conditions of public living around.
Therefore it is important to ensure that companies behave according to the standards and laws
and do not put the benefits of stakeholders in stake.
Companies, simply due to their size, have the ability to significantly influence
domestic and international policy and the communities in which they operate (Kercher,
2007). They have more resources, financial and non-financial and more influential compared
to individuals. As their revenues are generally derived from the public and they are allowed to
do business under the law of the country, they are expected to take more responsibility
compared to individuals. For example Apple should involve in promoting human rights in
China especially when their suppliers have huge number of employees working under them.
With Apple should utilise their influence and power on their suppliers to follow the ethical
codes published by Apple. Should suppliers fail to comply Apple should take action by
imposing fine or reducing business with the suppliers. This is in line with the stakeholder
theory where employees in supply chain are one of the stakeholders. With its influences
Apple can also set up non-governmental organisations to convert those illegal mine in
Indonesia to legal or encourage people from the illegal mine to work in legal mine. They
should also introduce new mining technology and provide training at the legal mine to
improve safety of workers and reduce workplace accidents.
In the effort of regulating involvement of companies in social responsibility, self
regulation is normally used. For example, OECD provides guidelines for MNCs to follow
when operating in foreign countries. There are mere guidelines and not legally enforceable.
Self regulation is defined as regulatory process whereby an industry-level, as opposed to a

governmental- or firm-level, organization (such as a trade association or a professional

society) sets and enforces rules and standards relating to the conduct of firms in the industry
(Gupta & Lad, 1983). There are several benefits which self regulation can bring to both
companies and stakeholders. Self regulation reduces risk of over regulation in the industry
(Castro, 2011). Unnecessary rules and regulations will increase cost of production which in
the end is borne by the consumers. As regulations proposed under self regulation do not
require agreement from the parliament which takes a lot of time, the process of rulemaking,
monitoring, enforcement and remediation can be faster. With self regulation, Apple knows
clearly which part of the company and the supply chains require regulations and able to
propose and implement it faster as they as the players in the market have more information
than government regulators. Self regulation also provides a more flexible regulatory
environment than is typically found with state regulation (Caste, 2011). For example OECD
guidelines are developed by experts after detailed research and the guidelines continue to
evolve over time in response to feedback from industry leaders. This may allow firms to
operate more efficiently and minimizes compliance costs. Self regulation avoids sovereignty
problems while still propagating rules beyond national borders (Bernstein & Cashore, 2007).
However, the limitation of self regulation can be seen in this case of Apple. As self
regulation provides guidelines rather than legal rules, companies can choose whether to
follow or not, but the guidelines are set for the whole industry, including companies that do
not follow the guidelines. This lead to free-rider problem (Maitland, 1985) where these
outsider firms obtain all of the benefits of the regulatory regime without paying any of the
costs (Castro, 2011). Therefore when Apple produced their supplier code of ethics, there are
still suppliers who do not bother about violating the codes. Under self regulation, competitive
pressures may prevent firms from acting responsibly even where it would be in their
economic interest to do so (Maitland, 1985). If the firms are not assured that other

competitors will commit the same amount in social responsibility, they may not follow the
guidelines as they fear they may lose their market share. Self regulation may also lead to an
outcome where companies are not acting on behalf of the societys interest but mainly to
protect their own interests.

Conclusion

As seen in the video, Apples suppliers have been mistreating the employees and
involved in illegal tin buying. It is hard for Apple to say they should not be any responsible
on them. Apple may be able to justify their behaviours during the past where shareholder
theory is the main trend. This is due to both the issues in the video are involved in
maximising the profit of shareholder of Apple without violating any law, despite their
Indonesia suppliers had breached the law, they may argue that their suppliers are different
entities from them. However in recent years the demand for companies to improve their
social responsibility has increased. This is in line with the trend of upholding stakeholder
theory where companies are required to take care of the welfare of stakeholder instead of just
shareholder. If Apple continues to neglect the facts that their suppliers are misbehaving, they
may risk losing some of their loyal customers who take social responsibility of firms into
account when buying their products. Self regulation may have various benefits when
regulating the social responsibility of companies. However as companies are required to have
higher standard of behaviour compared to individuals, self regulation is exposed to
limitations and it is suggested that although self regulation should be continued, government
need to monitor the companies strictly to ensure they are complying with the guidelines.

(2906 words including citations)

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