There’s been a long, raging debate among business school types about whether a business should optimize for shareholders or think more broadly about all of its so-called stakeholders like employees and the local community. The argument on the shareholder side goes something like whatever is good for boosting profit is ultimately good for the business.
While there’s no doubt truth in that statement over the long term, a short-term focus on optimizing shareholder value can have negative consequences. That’s not really shocking news, but unfortunately it’s still happening.
The most recent victim of myopic, shareholder-first thinking was – of all companies! – Apple. I’d submit that most people when they look at the cute Apple logo on their spiffy iPad or iPhone want to think of Apple as a happy company, sort of like the Disney of computing. Sure they can cost an arm and leg, but there’s a lot of value in gadgets that look cool and work like a dream.
But the reality of Apple is much different. Underneath that shiny veneer lurks a shareholder-centric greedy beast. This was exposed with a NY Times report that Apple works it retail employee hard while paying moderate wages at best (but reaping enormous profits from each store). Similarly, Apple squeezes its suppliers in China so hard that factory workers face the type of conditions that have been outlawed in the US since the ’20s and ’30s.
What Apple is doing, of course, is perfectly legal. It might even be good business for a normal company. But this is Apple. It’s possibly the most successful and profitable company to date. It’s also the happy company we all want to love. It’s bad PR not to spread the wealth and fail to make the world a better place. Especially when it could be so easy. Ironically, the shareholders might not even have noticed.
The shareholders will notice when people start thinking twice about buying Apple products, however. After hearing a story about Apple factory workers on NPR’s This American Life, my wife was disinclined to purchase Apple products in the future, although I’m not sure workers at Samsung or Dell factories are much better off than those at Apple plants. Most consumers probably don’t care in any case about a rotten core if the fruit is ok.
From a PR perspective – and here’s where you want to listen to outside counsel – perhaps the biggest loss for Apple was the missed opportunity. By giving lowly store workers nice salaries and making life better for Chinese factory workers, Apple could have created a massive perception boost – one far greater than the comparatively minor incremental cost of doing the right thing. Apple isn’t completely tone deaf, and recent reports indicate that nice pay raises are due to store workers. It’s a step in the right direction, but it never should have come to this in the first place. We expect better Apple.