Apple vs. Workers in Wuxi: Who is really affected by the lower cost of the iPhone 5c? (2013)

Forced Overtime, Poor Working Conditions, and Neglect of Worker's Rights: Is it worth it?

- Nathan Olsen

The Problem Itself
Apple, the company known world-wide for creating the iPhone, as well as all other "i" products has been receiving complaints in regards to their factories overseas, particularly in a Jabil Circuit, a Florida based company that produces Apple products, owned  factory in Wuxi, right near Shanghai. In September of 2013, Apple was faced with accusations regarding the plant in Wuxi, brought forth by the China Labor Watch, claiming that workers were forced to sign documents saying that the average of 69 hours per week they worked was voluntary, putting employees at risk by not providing proper safety equipment, shockingly low pay, and uncomfortable living conditions. The first issue, the amount of overtime work averaging 69 hours per week, is a hot topic for debate because Apple itself has established a limit of 60 hours per week; and not only were they working the extra hours, but they were required to sign a contract saying that the overtime was voluntary. When asked about the issue, Apple seemed to brush it off saying that employees are unable to work more than 60 hours "except in unusual circumstances"(Yan 1). The second issue at hand pertains to the lack of safety within the factory. The China Labor Watch concluded from the investigation that "staff are allegedly working without adequate protective equipment, at risk from chemicals, noise and lasers"(Garside & Arthur 1). Apple responded by claiming that they provide workers with equipment, but sometimes "workers either fail to receive it or use it in the wrong way due to a lack of risk awareness and monitoring" (Garside & Arthur 1). The response by Apple doesn't seem to make much sense because, how are they able to assure they are providing these workers with equipment if they don't know if workers will "fail to receive it" or teach them how to use it properly in order to increase "risk awareness?" The strikingly low wages and uncomfortable living conditions go together because the Jabil factory makes dormitory blocks for their workers and, in all reality they probably wouldn't be able to afford another place to live. According to "theguardian," workers live in dormitories accomodating up to 8 people per room and are accustomed to disturbed rest patterns because they tend to be mixed between night workers and day workers, living on two completely seperate schedules. Living somewhere else, most likely, crosses their mind very often; however when they are making half of the average monthly income in the city of Wuxi, it's clear that living elsewhere is not an option, unless they work 100 hours of overtime in order to make the equivalent to the average monthly income in Wuxi (Garside & Arthur 1).


Utilitarianism
 Utilitarianism, an ethical theory rooted in works by Thomas Hobbes, David Hume, Adam Smith, Jeremy Bentham, and John Stuart Mill, has had, and continues to have a profound impact on politics, economics, public policy, and especially businesses (DesJardins 29). Utilitarian ethics say that we can determine the "ethical significance" of a particular action by looking at the consequences and, in the end, the best decision is the one that maximizes "the overall good," the opposite of authoritarian policies (DesJardins 29). In the case of Apple and the Jabil factory in Wuxil, the decisions within the overall situation would be regarding the employees' pay, housing quarters, weekly hours, and the lack of safety equipment. From a Utilitarian perspective, one must take into the stakeholders of the situation, which in this case, are "iPhone 5c" customers, the 30,000 employees, and Apple's executives because regular employees and shareholders were not affected by this issue. When taking numbers into consideration, one may say the best decision was to do what Apple did because it caused the "iPhone 5c" to be less expensive to the numerous consumers; however, if these 30,000 employees were working under proper conditions and being paid a reasonable wage, consumers most likely wouldn't have even thought twice if the price when the phone came out, was slightly more expensive than it was. With this being said, Apple's decision would be judged as highly unethical through the eyes and mind of a Utilitarian and the best decision in the long run would be to pay these workers fairly, make sure they have all the proper safety equipment, and have comfortable living quarters with employees that share the same schedule; because people are going to buy Apple products even if the price of the product goes up slightly.

Kantianism
According to Immanual Kant, a German philosopher, "our fundamental ethical duty is to treat people with respect (DesJardins 38);" however, according to the power point slides, our actions must be with selfless intentions, and only fueled by the fact that it is the right thing to do. This is exemplified on the slide titled "Determining the Right Motivation," in which statements, all positive, are looked at to determine which one would be an example of Kantian ethics. Though each statement was positive, the only the third one would be considered an example of Kantian ethics because the shop owner's "motivation is from duty and is not simply self-seeking" (Salazar 1). In this case, one must not only look at the actual actions of Apple, but the intention behind them as well. In terms of Apple's actions towards the employees is clearly not respectful, which violates Kant's idea of what our fundamental duty is. Also, in terms of Kant's formula for humanity which "states to act in such a way that you treat humanity, whether in your own person or in the person of another, always at the same time as an end and never simply as a means" (Salazar 4), Apple's actions were highly unethical because Apple was using these workers' situations against them. Think of it this way: China has a booming population in which living quarters are smaller and many of the jobs are companies outsourcing because of cheaper labor rates. Apple took advantage of this by providing them with uncomfortable living quarters, half of the city's average monthly income, and dangerous working conditions, knowing that these workers needed a place to stay, and a place to work. Relating back to Kant's ideas, Apple was using these employees as a means to make huge profits, knowing that people would respond exponentially higher to a less expensive version of the newest iPhone, which violates not only the formula for humanity, but also the idea that we must act out of selflessness.

Individualism (Friedman's Economic Theory)

Milton Friedman,  is a highly influential, Nobel Prize winning economist. Friedman's idea of Individualism is that the only goal of a business is to maximize profits, which will in turn maximize profit for the stockholders or the owner of the company. Though at surface level this statement seems highly debatable, in which many don't agree, on page 55 of the text, An Introduction to Business Ethics, Friedman states,"In a free-enterprise, private property system a corporate executive is an employee of the owners of the business. He has a direct responsibility to his employers.......and his primary responsibility is to them." This quote basically states that a corporate executive is employed by the owners of that business, whether it is shareholders or privately owned, and the executives responsibility is to make their "employers" happy. He further says within the quote that their responsibility is to conduct business in compliance with the owners' desires, which is generally to maximize profits, while conforming to the rules of society, "both embodied in law and those embodied in ethical custom. (DesJardins 55)" Though focusing solely on profits is the most mentioned topic, he also chimes in that they should abide by the law and ethical standards, and the decision to do so is not Friedman's, but the company themselves. I agree with Friedman's views because if businesses did not make profits, the government would have to subsidize them in order to keep them open, but I also agree with Friedman's idea that corporate executives have a duty to conform with rules of society, as well as the law. In this case, Apple did not act in complete accordance with Friedman's Individualism because, although they were acting to maximize their profits, Apple did not abide by ethical standards. In order to act in accordance with the ideals of Individualism, Apple should abide by ethical standards and pay these employees a fair wage, provide them with the necessary safety equipment, and at least rearrange their living spaces according to the employees' shifts, so they are all on the same schedule.

Virtue Theory
Virtue Ethics is "a tradition within philosophical ethics that seeks a full and detailed description of those characteristics, or virtues, that would constitute a good and full human life" (DesJardins 41). In other words, Virtue Ethics is looking beyond if something is good or bad, and rather classifying a person or actions more specifically. These "virtues" are looked at as motivation traits that will lead us to live a meaningful life filled with happiness, or a life of unhappiness; and have been looked at in this way since the time of Plato and Aristotle. Plato's four basic virtues are prudence, which is the right judgment and actions at all times; justice, which is always giving people their rights; temperance which is practicing self-control and lastly, courage, the ability to combat fear and uncertainty. In Apple's case, they violated three of Plato's basic virtues. Prudence was violated because Apple used a selfish judgement when determining employees wages, living spaces/arrangements, and making sure safety equipment was distributed. In order to have prudence, Apple should use proper judgement to determine a fair wage, arrange their living spaces in accordance to employees' work schedules, and make sure that not only are employees receiving safety equipment, but know how to properly use it. Justice was not practiced because these employees were forced to sign a document stating their average work week of 69 hours was voluntary, even though Apple caps its work weeks at 60 hours. In order to act justly, Apple should give their employees break times where they can eat, and cap their hours to 60 a week, just like all the other employees elsewhere. Lastly, Apple did not express courage through their actions because they wanted to secure their profit margins, and even increase them, by using cheap labor to create a less expensive phone, which more consumers would react to. In order to act courageous, Apple should increase their pay and better their living arrangements and raise the price of either the "iPhone 5c" or their next model to compensate for the extra expense, or just take the reduction in profit margins, even though they will still be large.






Works Cited


DesJardins, J. (n.d.). An intodruction to business ethics (5th ed.). 

Garside, J., & Arthur, C. (2013, September 5). Workers' rights 'flouted' at
     apple iphone factory in china. Retrieved February 14, 2014, from
     http://www.theguardian.com/technology/2013/sep/05/
     workers-rights-flouted-apple-iphone-plant

Google image search

Salazar, Heather. “Kantian Business Ethics,” in Business in Ethical Focus, ed. Fritz
    Allhoff and Anand J. Vaidya (Broadview Press, 2008).

Yan, S. (2013, September 6). Apple faces new china labor allegations. Retrieved
     February 14, 2014, from http://money.cnn.com/2013/09/06/technology/
     apple-china-labor/

Olympus: Your (false) Vision, Our (misleading) Future (2012)

Olympus: Your (false) Vision, Our (misleading) Future

International optics manufacturer Olympus became target or major suspicion towards the end of 2011, after a suddenly shift in management. During May of that 2011, Michael Woodford was named president of Olympus Corporation. Months later, at the end of November, he was promoted to Chief Executive Officer of the company. Two weeks later, he was removed from the high office of the company. Later, he disclosed that his removal stemmed from no fault of his own, rather he was asking questions. Suddenly, this led to countless other questions, with finger pointing towards Olympus becoming increasingly popular. Tsuyoshi Kikukawa, former chairman, than took over the CEO title, and frankly adopted the mess that ensued. It was then discovered that the case was a tobashi scheme. A third party was helping Olympus, by illegally organizing their portfolios in a manner where company losses would be hidden. Fake accounts were developed to hide this money, and to allow their own account to look successful. One specific case, in 2008, included a $2.2 billion deal with an equipment maker. While this seems reasonable, 31% of this price was paid to a third party investment company, to keep the activity “off the books”, or in fake accounts. In another case, Olympus acquired three smaller Japanese companies. A year after the acquisition, the assets were recorded at a value of $721 million less than acquisition value. As such, they avoided huge tax expenses in the activity. Olympus defended its actions, claiming, “No dishonesty or illegality in the transaction itself”. Ironically, days later, Kikukawa resigned from any association with the company, and the next line of management admitted to the multiple examples of accounting fraud.US attorney Preet Bharara called it, “an international shell game with hundreds of millions of dollars of assets in order to allow Olympus to keep a massive accounting fraud going for years.”

           

 Individualism and The Economic Theory are two closely related concepts. Based upon these concepts, individualism is viewed as egoism + rights-based constraints. Basically, this is selfishness with restriction. More specifically, individualists argue that everyone has the power to make their own decisions in life, and do what they want. However, no one can decide for other people. In this sense, everyone can live the way they want. Milton Friedman, 20^th century thinker, claimed that the only goal of business is to maximize profits. An individualist would view the Olympus case as one in which the company was “living to fight another day” as the expression goes. They were (supposedly) making a large profit, even if they were doing so unethically. Before the scandal, the view of Olympus was one of success. Potential investors saw their huge profits and lack of mistakes or large expenses financially. After the scandal, however, this began to change. Even after the extreme overhaul in management, investors were skeptical to put their money on the line, with the negative record of Olympus. A company such as Olympus would have been very successful if they kept their accounting practices legal. Profits were there, the management was just greedy. Certain actions provide positive aspects for some, and negative aspects to others, just as Desjardins wrote,  “every business decision affects a wide variety of people, benefiting some and imposing costs on others”. The issue becomes compounding mistakes. Once you begin unethical and even illegal practices, it now seems more decent to do it again.

          

  Utilitarianism combines the ideas from egoism and altruism, into one idea of maximizing happiness in you, as well as in others. Further, happiness and pleasure is considered the only thing necessary. A utilitarian would argue that Olympus actions’ were intended to emit happiness in all involved. They were putting their reputations on the line, for them to feel happy, for stockholder’s to feel happy, and for customers to feel happy. This leads to one major shortcoming of utilitarianism that ends don’t justify means. The benefit to the actions of Olympus is obviously the money. The company profits more, stockholders are paid out more, customers are provided necessary products, and society if unaffected. However, the costs, as Olympus found out, highly outweighed the benefits once the truths were revealed. The major cost was clearly the $687 million payout to the Securities and Exchange Commission. Further costs included distrust in the performance of the business following the scandal. Stockholders had difficulty trusting that their dividends would be paid out. Desjardins refers to utilitarianism as “the greatest good for the greatest number”. Clearly, the greatest number of society did not get the greatest good in this case.

            Kantianism consists of four main parts. First, it states that people need to act for a reason and purpose. These actions must be consistent, and no one is an exception to this rule, even the top management of a company. The second part continues that individuals must promote others to make rational decisions. The third part simply states that individuals must respect one another and their differences, while the final concept implies that humans must be motivated in their actions by Good Will. In other words, doing what is right because it is right. Desjardins introduces two main topics, claiming, “…we are required to treat people as subjects, not as objects” and “…(humans) should not be treated simply as a means to the ends of others”.   Kant’s ideas are summarized in his Formula of Humanity, in which he states, “Act in such a way that you treat humanity, whether in your own person or in the other person of another, always at the same time as an end and never simply as a means” (Kant, MM 429). It is clear that Olympus acted for a specific purpose and reason, as selfish as it may have been. The top management supported one another in these decisions at the time, which is why the truths were not revealed until new management members were announced. The actions begin to take a turn in Kantianism with the third part, respecting others, and definitely the final part, being motivated by Good Will. With false audits, reports, and records, Olympus was lying to its investors, many of whom ended up losing a great deal of money following the scandal. By acting with more regard to long-term consequences, Olympus would have conformed to this idea of Kantianism. Instead, they fully focused on maximizing short-term profits. In her Kantian Business Ethics report, Salazar writes, As members of humanity, we each have value that stems from our rational and moral capacities and we all ought to act so as to show appreciation for that value”. The moral capacity referred to here is a large missing part of the actions of Olympus.

           

Any successful business if often said to run like a “well-oiled machine”. Many people take many different interpretations from this. Virtue theory is in many ways one of these interpretations. Anything functioning properly has certain characteristics, called virtues. In business, philosophers use four main virtues. They are courage, honesty, temperance, and justice. Olympus is a great example of one extreme end of the spectrum, the one businesses attempt to avoid. It begins with courage, which involves taking risks and standing up for the right ideas and actions. Clearly, the right ideas and actions were not supported by Olympus, because they themselves did not even practice them. Honesty is possible the most obvious, because they admitted to filing false audits. The next is temperance, which was not demonstrated by Olympus because they did not have reasonable expectations of their potential profit, both short-term and long-term. Finally, part of justice, the last virtue, includes fair practices, which once again was a large part of the scandal. Better planning, part of the temperance part, most likely would have led to better goals, and they could have avoided having to file any false paperwork. Instead, they are stuck “playing from behind”, as the saying goes, to prove to investors and society that they are beyond the effects of the scandal.

References

DesJardins, Joseph R. "Corporate Social Responsibility." An Introduction to Business Ethics. 5th ed. NY, New York: McGraw-Hill Companies, 2014. 49-78. Print

Eavis, Peter. (2012, December 20). U.S. makes arrest in Olympus scandal. New York Times. Retrieved February 10, 2013 from http://www.nytimes.com/2012/12/21/technology/us-makes-arrest-in-olympus-accounting-scandal.html?ref=olympuscorporation

Greenfield, Karl T. (2012 February 16). The story behind the Olympus scandal. Bloomberg Businessweek. Retreived Febrary 10, 2013 from http://www.businessweek.com/articles/2012-02-16/the-story-behind-the-olympus-scandal

 Salazar, Heather. Business Ethics, Economics, and Individualism