Table contents
Introduction
- 1.1. Background on Apple Inc.
- 1.2. Purpose, Objectives, and Methodology
- 1.3. Report Structure
Problem Identification
- 2.1. Corporate Governance Frameworks
- 2.2. Corporate Governance and Ethical Issues
- 2.3. Ambiguity in Stakeholder Identification
Critical Discussion
- 3.1. Corporate Governance Practices
- 3.2. Ethical Challenges
Conclusion
- 4.1. Summary of Findings
- 4.2. Recommendations for Apple Inc.
- 4.3. Future Considerations in Governance and Ethics
References
Introduction
Apple Inc. (APPL) is a global leader in the technology sector that has significantly influenced the market through its renowned innovative products and service offerings. This report highlights the intricate relationship between Apple’s corporate governance practices and the ethical dilemmas it encounters. The main objective of this report is to delve into the corporate governance structures of the company and demonstrate how these relate to ethical challenges, by providing examples with Apple Inc as the focus company.
The methodology employed to compile this report consists of utilising primary and secondary sources. The primary sources are gathered by examining Apple’s annual reports, reading through their corporate governance documents, and taking note of any relevant disclosures. These primary sources are interpreted through the lens of academic theories on corporate governance, such as the OECD’s (Organization for Economic Cooperation and Development) Principles of Corporate Governance (OECD, 2023) and the Stakeholder Theory, to identify strengths and gaps in Apple’s approach. Additionally, in order to provide a holistic understanding of Apple’s operations and its ethical standing, this report draws secondary research from financial databases, academic journals, and credible news articles.
This report is structured into three sections. The first section establishes the foundational concepts of corporate governance and their ethical implications. The second section then proceeds to dissect Apple’s corporate landscape by identifying key issues, as well evaluating the company’s response to these challenges. Finally, the third section is a conclusion that provides a summary of the findings and offers recommendations for Apple’s future governance and ethical strategies.
Problem Identification
Corporate Governance Frameworks
Corporate governance, as defined by the OECD (2023), is comprised of a system of rules, practices, and processes by which a company is organised and directed. Mallin (2019) highlights that corporate governance addresses both the internal dynamics of a company, such as internal controls, and the external relationships, including those with shareholders and other stakeholders. The complex interplay between various stakeholders can be broken down into six key principles: (I) Responsibility – Establishing a foundation for an effective corporate governance framework; (II) Fairness – Upholding the rights and ensuring the equitable treatment of shareholders while safeguarding key ownership functions; (III) Independence – Engaging institutional investors, stock markets, and other intermediaries; (IV) Transparency – Promoting transparency and accurate disclosure; (V) Accountability – Defining and fulfilling the responsibilities of the board; and (VI) Risk Management -Fostering sustainability and resilience (OECD, 2023).
By following these key principles, organisations are able to promote both a culture of ethical behaviour, and enhance stakeholder trust, ultimately contributing to sustainable long-term
Growth (Peregrine, 2023).
Corporate Governance and Ethical Issues
Corporate governance and ethics are inherently linked to each other. As previously discussed, corporate governance provides a framework of six key principles through which organisations can operate and make decisions to ensure a company is managed in a manner that is accountable to its stakeholders. Ethics, on the other hand, pertains to the moral compass by which these decisions are made (Dudovskiy, 2023). Incorporating ethics into corporate governance is essential for fostering a positive organisational culture and achieving long-term success (Peregrine, 2023), as it aligns to both business goals with societal values and also helps to build trust among stakeholders.
Before the collapse of Enron in 2001, which had a significant global impact, public scrutiny of corporate governance was relatively limited (Fahy, Weiner, and Roche, 2005). The downfall of Enron highlighted a significant ethical failing in corporate governance, which was further illustrated by the conviction of the company’s former Chief Executive, Jeffrey Skilling, for fraud and conspiracy (Mallin, 2019).
Conflicts of interest are a critical ethical challenge in corporate governance. These arise when either the personal interests, relationships of executives or board members compromise their ability to act solely in the organisation’s best interests (Harrison et al., 2019, p. 234). For example, a board member might hold financial stakes in a company the organisation conducts business with (William, 2024), or an executive could benefit personally from decisions that may harm the company’s long-term goals. The kinds of conflicts often result in biased decision-making, reduced transparency, and breaches of legal and corporate standards (GeeksforGeeks, 2024; Hawksford, 2024). To address these issues from occurring, effective governance must prioritise establishing clear policies, provide regular training on conflict management, and foster a culture whereby unethical conduct can be reported – i.e., whistleblowing – without fear of retaliation (Forsythe, 2023; Hawksford, 2024).
Today, ethical issues – such as labour practices, environmental sustainability, and executive compensation – are inherently linked to governance structures and processes. For example, the personnel diversity of a board can significantly shape the ethical policies and decisions a company adopts. For this reason, it is the board’s responsibility to create and maintain a corporate ethical profile (Tricker, 2021), and thus promotes transparency to create trust among stakeholders.
A foundational concept underpinning corporate governance is the Stakeholder Theory, which emphasises the importance of considering all of parties affected by business operations, such as the employees, customers, suppliers, communities, and the environment, as well as traditional shareholders. The OECD draws many of the principles from the stakeholder theory’s framework with its promotion of broader corporate accountability and ethical considerations. The focus on stakeholder inclusivity enabling organisations to align their operations with societal values and expectations, which can enhance their legitimacy and long-term sustainability (Awa, Etim and Ogbonda, 2024). Again, by engaging with diverse stakeholders, companies can foster trust, improve their reputations, and create value that benefits both the business and the communities within which they operate (Orts and Strudler, 2002).
Ambiguity in Stakeholder Identification
While the stakeholder theory provides a comprehensive framework for understanding the interconnectivity between a business and the various communities it operates within, it is not without its limitations.
One major limitation of the stakeholder theory lies within its difficulty to identify and prioritise stakeholders. Likewise, Dmytriyev and Freeman (2023, p. 233) note the ambiguity with the way in which the stakeholder theory categorises and defines different groups of people or entities (e.g., employees, customers, suppliers, or communities), believing the theory is not specific enough in its definitions, making it harder to use effectively for research and decision-making. Scholars sharing this opinion have tried to clarify and cement the boundaries of who counts as a stakeholder, attempting to seek clarity by creating stricter definitions and frameworks (Harrison et al., 2019, p. 44), no doubt to enhance replicability.
Unfortunately, this lack of robustness can lead to ambiguity, especially when considering different managers may have varying interpretations of stakeholder importance, making it challenging to create a universally accepted list of stakeholders. Additionally, the lack of clarity can result in inconsistent decision-making that may not align necessarily with the overall corporate goals (Awa, Etim and Ogbonda, 2024). This state of fluctuating cohesion demonstrates that stakeholder identification is not a fixed concept, but rather a continually evolving one.
Critical Discussion
Corporate governance and ethics are integral to the effective management of any organisation. For Apple Inc., as a leading global technology company, these dimensions are crucial to not only maintain its competitive edge, but also for addressing its complex stakeholder environment. This following section critically examines the corporate governance practices of Apple Inc. through the lens of the stakeholder theory and its interplay with various ethical challenges. In particular, corporate governance practices and ethical challenges.
Corporate Governance Practices
Apple has established a governance framework centred around a diverse and independent board of directors. The board’s composition, as highlighted in the 2024 10-K report, demonstrates expertise diversity in the areas of technology, finance, and global operations, which are critical to Apple’s strategic direction.
- Stakeholder Theory and Ethics: Stakeholder theory posits that corporate boards must represent diverse stakeholder interests (Awa, Etim and Ogbonda, 2024). Apple’s focus on board independence ensures impartial decision-making, benefiting shareholders, employees, and consumers. Ethically, this promotes fairness and inclusivity, key principles in governance.
Apple’s leadership strategy emphasises continuity, supported by internal programs such as Apple University. CEO Tim Cook’s tenure exemplifies consistent and innovative leadership in navigating market dynamics.
- Stakeholder Theory and Ethics: Succession planning is critical for long-term value creation for stakeholders. Ethical leadership fosters accountability and transparency, reassuring stakeholders about the company’s stability and strategic foresight.
Apple actively engages its stakeholders through initiatives like annual shareholder meetings and employee well-being programs. Sustainability efforts, such as renewable energy projects, address the broader community and environmental stakeholders.
- Stakeholder Theory and Ethics: By engaging stakeholders, Apple aligns with the ethical principle of responsibility. By proactively addressing the concerns of stakeholders, trust is enhanced, demonstrating the company’s commitment to creating shared value.
Apple integrates environmental, social, and governance (ESG) considerations into its strategy. The 2024 report highlights Apple’s goal of achieving carbon neutrality across its supply chain by 2030 and its focus on diversity metrics.
- Stakeholder Theory and Ethics:Transparent ESG practices reflect accountability to stakeholders and adherence to ethical stewardship. By addressing environmental and social responsibilities, Apple strengthens its social license to operate.
Ethical Challenges
Apple has faced criticism over labour conditions in its supply chain, particularly concerning excessive working hours and low wages at Foxconn (Bukhari, 2021; Smith, 2022; Mahmood, 2023; Maharani and Mursitama, 2023). To mitigate these issues, Apple enforces a Supplier Code of Conduct and conducts regular audits.
- Stakeholder Theory and Ethics: Ethical supply chain management prioritises worker’s rights, which aligns with the stakeholder theory’s emphasis on fairness and equity. Addressing labour concerns reinforces Apple’s commitment to minimizing harm and fostering ethical responsibility.
Apple’s privacy initiatives, such as the App Tracking Transparency (ATT) policy, position the company as a leader in protecting user data. However, regulatory challenges and user concerns about data collection persist (Newsroom, 2022).
- Stakeholder Theory and Ethics: Privacy is a fundamental ethical obligation to consumers. By safeguarding user data, Apple fulfils its responsibility to this critical stakeholder group, ensuring trust and security in its digital ecosystem
Apple’s commitment to sustainability is evident in its use of renewable energy and recycling initiatives like the Daisy robot. However, managing e-waste remains a persistent challenge.
- Stakeholder Theory and Ethics: Environmental stewardship benefits all stakeholders by ensuring long-term ecological balance. Ethical principles of sustainability guide Apple’s initiatives, aligning its operations with broader societal values.
Apple faces allegations of tax avoidance and regulatory scrutiny, particularly in the EU, requiring adjustments to its App Store policies and tax practices (Bukhari, 2021).
- Stakeholder Theory and Ethics: Legal compliance is essential for ethical governance. Fair taxation and adherence to regulations demonstrate Apple’s commitment to societal well-being, balancing shareholder returns with broader public interests.
Applying the stakeholder theory provides insights into Apple’s governance and challenges. The theory sheds light on the importance of considering the interests of all stakeholders, not just shareholders. Furthermore, by integrating stakeholder theory and ethical principles into its corporate governance, Apple not only addresses its immediate challenges but also establishes a framework for sustainable and equitable growth, ensuring the company maintains its resilience and reputation across an increasingly complex global landscape.
Conclusion
This report has explored corporate governance and how it relates to ethical issues. More specifically, this report has examined the relationship between Apple Inc.’s corporate governance structures and the ethical challenges it faces. These ethical challenges were uncovered and evaluated through the application of frameworks like the OECD Principles of Corporate Governance and the Stakeholder Theory. Through critical analysis, several key findings have emerged. Namely, Apple demonstrates a strong commitment to maintaining governance with a diverse and independent board, well-defined leadership strategies, and comprehensive ESG initiatives. These practices employed by Apple align with the principles of fairness, transparency, and accountability, albeit nurturing trust and inclusivity among its stakeholders.
However, it should be highlighted that ethical challenges persist within the company. These notable concerns surround supply chain labour practices, privacy fears, environmental sustainability, and regulatory compliance. Even though Apple has taken steps to address these issues, such as implementing a Supplier Code of Conduct and revising privacy protections, there is a still a need for ongoing scrutiny to ensure the upkeep of continuous improvement.
Lastly, in order to strengthen its corporate governance and public ethical standing, it is suggested that Apple focus on the following recommendations:
- Enhancing Supply Chain Oversight: Increase transparency and accountability in supplier audits to ensure continued compliance with ethical labour practices.
- Fostering Sustainable Innovation: Accelerate efforts to mitigate e-waste and achieve carbon neutrality while expanding circular economy initiatives.
- Balancing Stakeholder Interests: Continue refining policies to address regulatory concerns, particularly in taxation and data privacy, while maintaining transparency with all stakeholder groups.
By addressing these recommendations, Apple can further demonstrate its commitment to ethical governance, ensuring long-term value creation for stakeholders and aligning its operations with both current and evolving best practices. By integrating ethical principles into its governance framework not only amplifies Apple’s competitive position on the global stage, but it also enhances its places Apple as pioneering leader in the technology sector.
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References
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