Apple Will Profit From Doing the Right Thing

For the first time, Apple (Nasdaq: AAPL  ) will allow independent observers into its suppliers' factories around the world to monitor working conditions. Why now, and what does it mean for the company?

The high cost of cheap labor
Apple has always been famously secretive about its suppliers. But now The Telegraph is reporting that Apple has joined the Fair Labor Association, a group set up in 1999 to monitor workplace conditions around the globe. It's the first technology company to do so.

For several years now, Apple has conducted its own survey of its suppliers. The company recently released its sixth-annual supplier responsibility report, detailing audit results of factories throughout its supply chain. And for the first time, this report lists the firm's major suppliers, more than 156 in all.

Like most of today's major technology companies, Apple manufactures many of its products at overseas companies like Foxconn, a Taiwan-based company that employs over a million people in factories across the mainland, and a company that's come under severe scrutiny in recent years. In 2010, 12 Foxconn workers committed suicide, and just days ago some 150 workers at a Foxconn factory in Wuhan threatened mass suicide if they were moved to a new production line.

Suicide is bad for PR
The Foxconn employees recently threatening mass suicide were, in fact, involved in producing Microsoft's (Nasdaq: MSFT  ) Xbox, a flagship product the company is placing big bets on to stay connected, and relevant, to the next generation -- a generation that, with the current pace of innovation, may never use Windows or even MS Office.

Speaking of flagship technology products on which companies are placing big bets, Foxconn also manufacturers the Kindle for Amazon.com (Nasdaq: AMZN  ) . Foxconn is rumored to be producing the Kindle Fire 2 right now for an early 2012 launch. The giant online retailer is placing a massive bet on the product line driving substantial portions of future growth, and the company needs this new product launch to go well, undistracted by public relations disasters like the threat of mass suicide.

Way to go, Apple
No company, even industry chiefs like Apple, Microsoft, or Amazon, need the kind of bad press that can come with situations like the one at Foxconn. Consumers are becoming more and more socially conscious, and want the goods and services they use to measure up. In truth, it doesn't take much. A simple action that costs a company very little or even nothing at all can make a real difference in the mind of the consumer.

Apple has recognized this truth, has bravely joined the Fair Labor Board, and, this Fool thinks, will no doubt benefit from it, both perceptually and financially. In this day and age, the two go together. Are any companies perfect in this regard? No, but to paraphrase Voltaire, it's important to never let the quest for the perfect drive out the good. Read about two more Motley Fool favorites that are healthy, wealthy, and making a difference in their own ways in this special free report: "The Death of Wal-Mart: The Real Cash Kings Changing the Face of Retail." Get your copy while it's still available by clicking here.

Fool contributor John Grgurich thinks Apple should go and get itself a Superman cape to wear, but owns no shares of any of the companies mentioned in this article. The Motley Fool, however, owns shares of Amazon.com, Microsoft, and Apple. Motley Fool newsletter services have recommended buying shares of Microsoft, Amazon.com, and Apple . Motley Fool newsletter services have recommended creating a bull call spread position in Microsoft.  Motley Fool newsletter services have recommended creating a bull call spread position in Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a scintillating disclosure policy.


Read/Post Comments (5) | Recommend This Article (3)

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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On January 19, 2012, at 7:55 AM, jdmeck wrote:

    Just because they are a bunch crazy people in Taiwan is no reason to be blaming Apple.

  • Report this Comment On January 19, 2012, at 8:57 AM, ETFsRule wrote:

    "Apple has recognized this truth, has bravely joined the Fair Labor Board, and, this Fool thinks, will no doubt benefit from it, both perceptually and financially."

    There is nothing brave about it. "Brave" would have been making this move ten years ago. They are only doing it now because of all the bad PR they've been getting recently.

  • Report this Comment On January 19, 2012, at 9:47 AM, XMFGrgurich wrote:

    jdmeck, I think you're being a bit insensitive. Chances are, working conditions were really bad and the poor people felt "the ultimate threat" was their only way out.

    ETFsRule, fair point. Yes, Apple should have done this long ago, but at least the company is stepping up now. Better late than never.

    Thanks for the comments. Cheers.

  • Report this Comment On January 19, 2012, at 11:56 PM, beetlebug62 wrote:

    "On January 19, 2012, at 9:47 AM, TMFGrgurich wrote:

    jdmeck, I think you're being a bit insensitive. Chances are, working conditions were really bad and the poor people felt "the ultimate threat" was their only way out."

    From the reports I read, the workers were threatening suicide over unpaid overtime, not working conditions; while the factory said the workers were complaining about job transfers.

    Either explanation is not about work conditions, but about money. I doubt using "the ultimate threat" was the only way out.

    What this says is that the workers are internet savvy and understand how bad PR works against the employer, and used it against Foxconn. In fact, when this becomes better understood, perhaps the western media will recognize it for what it is.

    In China some reports believe that some of the Foxconn suicides were akin to insurance fraud in the US. You know, a person in desperate financial straits commits suicide so that his family can collect on the insurance. In China, Foxconn was compensating families of the victims. Quite handsomely by Chinese standards. Thus, the perverse incentive to commit suicide for some employees who might have a family struggling to make ends meet. These things happen in the US, why wouldn't they also happen in China?

  • Report this Comment On January 20, 2012, at 3:35 PM, paulMcFaden wrote:

    "Consumers are becoming more and more socially conscious, and want the goods and services they use to measure up."

    -- I hope so, but I'm not sure. Probably slightly more true of the affluent consuming Apple products.

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