Putting Profits Before People: Just How Much Bad News can Apple’s Brand Withstand?

The damaging news just keeps flowing out of Foxconn’s “employee barracks” in China, where Apple’s iconic products are made.

In August 2012, the Fair Labor Association released the results of an investigation it had conducted at Apple’s request after reports of employees rioting and committing suicide over excessive work hours, inadequate compensation and unsafe working conditions.

The FLA reported that Foxconn had addressed most of the problems regulators said must be fixed, including ergonomic breaks and equipment redesign to prevent repetitive stress injuries, cutting excessive overtime hours and updating safety and equipment-testing policies.

But new trouble at Foxconn is creating yet more bad publicity for the Taiwan-based manufacturer – and for Apple.

The Economic Policy Institute reported earlier this month that the FLA’s assessment of Foxconn’s progress was too “rosy,” that high demand for the much-hyped iPhone 5 has essentially undone what few improvements have been made and gave a sharp criticism of the most valuable company in history:

“The paramount issue remains whether Apple will ever choose to apply its legendary business prowess and spirit of innovation, and its enormous financial clout, to the goal of protecting the basic human rights of the people who make those products."

Ouch.

The news comes at a time when the gadget giant is dealing with several PR hits it has taken over the past few 

months.

• In early September 2012, during the run-up to the big announcement of the iPhone 5’s impending release, Forbes reported that Apple’s patent court battle with Samsung was drawing criticism even from its fans, many of whom felt Apple is filing frivolous patents and is afraid of Samsung’s competition.
• Shortly after that the Maps debacle that left many befuddled iOS 6 users “iLost” dominated tech media for several weeks.
• More recently, research firm Strategy Analytics released a report showing that iPhone owner loyalty is in decline, with 75% of Western European iPhone owners planning to buy their next phone from Apple, down from 88% last year. In the US, repeat purchase intentions have also declined since 2011, from 93% then to 88% now.
• On November 8, former Apple exec David Sobotta told CNet that Steve Jobs’ successor as CEO, Tim Cook, is a technological “lightweight.”

And now there’s the latest episode in the ongoing Foxconn saga. If human rights violations continue unchecked at Foxconn, it could mean a very serious hit for Apple notwithstanding the powerful halo effect I’ve written about that seems to protect the company’s reputation and bottom line.

So I am in full agreement with the sentiment the EPI investigators expressed in closing their report. If Apple were to use its huge economic and cultural clout to force Foxconn to truly improve conditions at its Chinese factories – and I mean improvements verifiable by independent investigators, not those acting at Apple’s behest – it would not only make worker’s lives better (the most important thing), it would have the side effect of being a great PR coup for the company.

Pushing to put people before profits could protect Apple’s halo and advance its once-untarnished reputation. Will the tech behemoth put aside shareholder pressure and have the guts to do it?  I don’t think Apple will, but in this case, I would love to be proven wrong.