Ethical and Unethical practices by Apple Inc.

Apple Inc. is an American multinational corporation that designs and sells consumer electronics, computer software, and personal computers. The company's best-known hardware products are the Macintosh line of computers, the iPod, the iPhone and the iPad. Its software includes the Mac OS X operating system; the iTunes media browser; the iLife suite of multimedia and creativity software; the iWork suite of productivity software; Aperture, a professional photography package; Final Cut Studio, a suite of professional audio and filmindustry software products; Logic Studio, a suite of music production tools; the Safari web browser; and iOS, a mobile operating system. As of July 2011, Apple has 357 retail stores in ten countries, and an online store. It is the largest publicly traded company in the world by market capitalization, overtopping ExxonMobil by some $60 billion, as well as the largest technology company in the world by revenue and profit, worth more than Google and Microsoft combined. As of September 24, 2011, the company had 60,400 permanent full-time employees and 2,900 temporary full-time employees worldwide, its worldwide annual sales totalled $65 billion, growing to $108 billion in 2011. Fortune magazine named Apple the most admired company in the United States in 2008, and in the world from 2008 to 2011. However, the company has received widespread criticism for its contractors' labor, and for its environmental and business practices. Established on April 1, 1976 in Cupertino, California, and incorporated January 3, 1977, the company was named Apple Computer, Inc. for its first 30 years. The word "Computer" was removed from its name on January 9, 2007, as its traditional focus on personal computers shifted towards consumer electronics.

Ethical Issues:

Google Voice controversy

Apple has been criticized over attempting to prevent iPhone users from using the Google Voice application by disabling it on the iPhone. Apple declined to approve the Google application for use on the iPhone, claiming that the application altered iPhone intended functionality, i.e., that with Google voice installation, voicemail is no longer routed to the iPhone's native application Visual Voicemail but instead is routed through Google's application, thus "ruining" the iPhone user experience. This caused controversy among iPhone developers and users, and the United States Federal Communications Commission (FCC) began investigating Apple's active decision to deny users' ability to install Google Voice from the Apple online store from where users routinely download and install iPhone applications.[11] As of November 2010, Google Voice has been made available for the iPhone.

Antitrust issue with Adobe Flash and iPhone OS controversy

With the release of iOS 4.0 SDK, Apple changed its terms of service to prohibit programs that are originally written in non-Apple approved languages from being used on the iPhone. This was criticized for being anti-competitive by disallowing use of Adobe Flash and other programs on the iPhone. The New York Times quoted an Adobe employee alleging the policy to be anti-competitive. On May 3, 2010, Ars Technica and The New York Post reported that the US Federal Trade Commission (FTC) and the United States Department of Justice (DOJ) are deciding which agency will launch an antitrust investigation into the matter. The controversy over Apple's changes to section 3.3.1 of the iPhone SDK license agreement erupted after John Gruber's April 8, 2010 Daring Fireball blog post entitled, New iPhone Developer Agreement Bans the Use of Adobes Flash-to-iPhone. Strong opposition to Apple's licensing changes spread quickly with bloggers and others. Others were quick to note that the language used in the agreement also banned other developer tools including MonoTouch, Lua, Unity3D, and many others.

The original iPhone OS 3 section 3.3.1 reads: 3.3.1 Applications may only use Published APIs in the manner prescribed by Apple and must not use or call any unpublished or private APIs. The revised iPhone OS 4 section 3.3.1 reads: 3.3.1 Applications may only use Documented APIs in the manner prescribed by Apple and must not use or call any private APIs. Applications must be originally written in Objective-C, C, C++, or JavaScript as executed by the iPhone OS WebKit engine, and only code written in C, C++, and Objective-C may compile and directly link against the Documented APIs (e.g., Applications that link to Documented APIs through an intermediary translation or compatibility layer or tool are prohibited). Steve Jobs posted a reaction entitled "Thoughts on Flash",but did not directly address any third party development tools other than Adobe's Flash platform. The "Thoughts on Flash" post drew immediate and harsh criticism with Steve Jobs being accused of outright lying by many. Jobs' assertion that Flash is not open, or closed and proprietary, attracted a great deal of attention with references to open source projects that take advantage of Adobe making the Flash specification open for developers to build on.

Labor practices
In 2006, the Mail on Sunday alleged that sweatshop conditions existed in factories in China, where the contract manufacturers, Foxconn and Inventec, operate the factories that produce the iPod. The article stated that one iPod factory, for instance, had over 200,000 workers that lived and worked in the factory, with workers regularly doing more than 60 hours of labor per week. The article also reported that workers made around $100 per month and were required to live on the premises and pay for rent and food from the company. Living expenses (required to keep the job) generally took up a little over half of the worker's earnings. The article also said that workers were given buckets to wash their clothes. Immediately after the allegations, Apple launched an investigation and worked with their manufacturers to ensure that conditions were acceptable to Apple. In 2007, Apple started yearly audits of all its suppliers regarding Worker's Rights, slowly raising standards and pruning suppliers that did not comply. Yearly progress reports have been published since 2008. In 2010, workers in China planned to sue iPhone contractors over poisoning by a cleaner used to clean LCD screens. One worker claimed that they were not informed of possible occupational illnesses.

Problems in Chinese factories

During the international launch of the iPad news reports broke of about a dozen suicides over the past year at the manufacturer Foxconn's complex in Shenzhen,China, where products from many manufacturers including Apple, Dell, HP, Nokia and Sony are produced. Apple together with Dell, HP, Nokia and Sony have pledged to investigate the suicides. In 2011 Apple admitted that its child labor practices in China had worsened.

Foxconn employee suicides

On July 16, 2009, Sun Danyong, a Chinese factory worker employed by Apple's manufacturing partner Foxconn, committed suicide after reporting he lost a prototype model for a fourth generation iPhone. Upon filing his report on July 13, Chinese media reported that his residence was searched by Foxconn employees, and that he was beaten and interrogated by his superiors, actions illegal under both Chinese and American law. The incident raised questions regarding Apple's secrecy policy and working conditions in their Chinese factories. An Apple spokesman told reporters that the company was "saddened by the tragic loss of this young employee." Apple's relationship with Foxconn regarding corporate security has been a continuing subject of controversy since Sun Danyong's death. Apple states its policy on how it influences the corporate culture of its suppliers in its Supplier Responsibility Progress Reports. Holding suppliers accountable for their errors and omissions in their relationship with Apple is an area of concern Apple reports itself as taking seriously, and in its latest report, Apple stated that "[our] procurement decisions take into account a facilitys social responsibility performance, along with factors such as quality, cost, and timely delivery. When social responsibility performance consistently fails to meet Apple expectations, we terminate business." Apple has not announced whether it has severed business ties with Foxconn. Given Apple's stated policy, terminating relationships with such suppliers may be difficult without incurring huge financial losses. In 2009 and 2010, Foxconn factories supplying iPhones, iPads and other devices have still come under fire in the press, with one source describing conditions as a "white collar prison". In 2009, Foxconn guards were videotaped beating employees. Later in April 2010, four workers attempted suicide in a single month in the same factory. By May 2010, 12 workers had attempted suicide at a Foxconn operation in China. Apple, HP, and others stated that they were investigating the situation. In response to the suicides, workers were forced to sign a legally binding document guaranteeing that they would not kill themselves. It is not clear how employees who fail to abide by the terms of this agreement will be sanctioned.

Quality control and customer service issues

The Danish Consumer Complaints Board reported a fault with Apple's iBook product line and criticized Apple's response to the issue, indicating customer support problems at Apple. In that case, a solder joint between two components fractured after a certain number of computer restarts causing the computer to break down, with most incidents occurring

outside Apple's warranty period. Websites such as AppleDefects.com were created in response to the issue and detailed quality control issues with Apple's product portfolio. Apple has been repeatedly criticized for its unwillingness to honor its warranties and its concomitant penchant for giving any reason for doing so, no matter how bizarre: in 2008, Apple repair centers began to refuse to honor warranties of its products which had been used in an environment it deemed hazardous, i.e., that had been used around someone who smokes; and in 2009, Apple refused to honor its warranty and replace a defective battery on a machine that had a small amount of unrelated cosmetic damage that did not affect the machine's functionality, nor that of its battery.

Data security
Despite the existence of a small number of known viruses and malware designed for Apple products, a 2006 report by McAfee found a 228 percent increase in the annual rate of vulnerabilities in the period 2003-5, compared to Microsoft's products, which saw only 73 percent. Moreover, every year since then a significant number of vulnerabilities have been found and fixed through security updates. However, the public's lack of awareness of the security vulnerabilities of Apple products has led to criticism of Apple for misleading the public which has risen over the years. This criticism has also drawn attention to Apple's failure to update its products with security updates in a timely fashion. An example of this was a security flaw in Sun Microsystems's Java, which Sun fixed promptly, while Apple took more than five months to distribute the fix. That is much longer than other companies, and drew sharp criticism from experts and journalists. A recent example is a malware product called MacDefender, MacProtector, MacSecurity, or MacGuard, which is an application that can be installed in OS X by the user; ZDNet's Microsoft Blogger Ed Bott estimates that it has been installed by 60,000 to 120,000 Mac customers who thought it was legitimate anti-virus software. Overall, experts admit that Apple products are less likely to be breached by a hacker or infected by a virus/malware, though they emphasize that this is mainly due to the lack of interest by hackers in attacking Apple products. In particular they fear that Apple places its clients in danger by not taking action to inform the public of its security vulnerabilities. As David Harley, security expert from anti-virus vendor ESET said, "Any computer user who believes a system is so safe that they don't have to care about security is prime material for exploitation by social engineering." According to Secunia vulnerability rankings, Apple has led Microsoft in reported security vulnerabilities since 2007, and currently leads all other vendors in reported vulnerabilities for 2010. This ranking, however, doesn't "indicate the actual security (or lack thereof) in the different vendors products; it rather shows that vulnerabilities continue to be discovered in significant numbers in products from even the largest and most popular vendors including those who spend significant resources on improving the security of their products" according to the authors of the study.

Misleading warranty claims in Italy

On December, 27th, 2011, Apple was fined a total of 900,000 (around $1.2m) by the Italian Antitrust Authority for failing to properly inform customers of their legal right to two years of warranty service under Italy's Consumer Code. According to the Italian agency Apple only disclosed its own standard one-year warranty and offered to sell customers AppleCare for one additional year instead of abiding by the law. The agency fined Apple 400,000 for failing to disclose the legally-mandated two-year warranty and 500,000 for selling overlapping AppleCare coverage.

Ethical measures taken by Apple Inc.:

Numerous cases of suicide at Foxconn have raised public awareness of the social responsibility Apple should bear as a huge multi-national corporation and a highly popular brand. In response to criticisms made by NGOs and the mass media, Apple published the Global Suppliers Responsibility 2011 Progress Report. In this part, I would like to summarize Apples report and take a look at how Apple presents its social responsibility. Apple claimed social responsibility is fundamental to their way of doing business. Regarding suppliers, it said all of them are required to provide safe working conditions, treat workers with dignity and respect and use environmentally and responsible manufacturing processes. The Apple Supplier Code of Conduct involves five areas: Labor and human right, health and safety, the environment, ethics and management commitment. Apple said it would monitor the social responsibility performance of its supplier and terminate business with those who fails to meet Apples expectation consistently.

Apples social responsibility programs in 2010: Extended the compliance monitoring program: increased the no. of facilities audited Expanded its training initiative: have trained more than 300,000 workers on their right and protections under local law and Apples code Dedicated additional resources to protect workers from other countries: searched for right violations and reimbursed overcharged recruitment free Prevented the hiring of underage workers: provided age-verification tools, educated facilities to manage third-party recruiters, required suppliers to return underage workers to school and finance their education Mapped the use of potential conflict minerals

Apple said it executed compliance monitoring program which included factory audits, corrective action plans as well as verification measures to ensure suppliers compliance to its code of conduct. Audits were done by Apples auditor

and supported by third-party auditor. During audits, auditors cross-referenced date, reviewed records and inspected factories plants, dormitories and dining areas as well as conducting interviews with workers. Then, auditors would evaluate facilities level of compliance and identify areas of improvement in the underlying management system. Facilities are required to implement corrective action plan if violations were found. Corrective actions plans addressed not specific violation problems, but also the management system led to those problems. There are also verification audits to ensure the corrective action plans were executed. Here is an extract of Apples 2011 audit results: Labor and human right: 72 % practices in compliance Health and safety: practices 72% in compliance Environmental Impact: practices 80% in compliance Ethics: practices 95% in compliance Management commitment: practices 64% in compliance

2011 core violations: Involuntary labor: excessive recruitment fees paid by foreign contract workers ) Underage workers Worker endangerment: exposure to n-hexane; performing activities at height without guardrails or safety harnesses Falsified records: payroll records and interview answers Bribery: offered cash to Apples third-party auditors Coaching workers on how to answer auditors questions: false payment information Apple presents itself as a responsible corporation. It seems that Apple not only addresses individual violation problems, but also aims at improving management systems which are fundamental to these problems. When Violations are found, it would suggest corrective action plans to the management of suppliers. Business would be terminated only when continuous violations are found. This can ensure suppliers to comply with its code of conduct and motivate them to make improvement if they fail to. However, more information is needed for further evaluation. Although the code of conduct seems comprehensive, concrete standards or measurements used in the auditing process should be revealed. Also, the audit result should be shown with more details, such as the audit result of individual suppliers and how many businesses are terminated because of the social responsibility violations. Only with the above details can the Apples report be more convincing. Finally, Apple should be able to explain how issues like Foxconn suicides and the use of H-Hexane can happen with all suppliers strict compliance with its code of conduct.