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Executive SummaryAlthough Apple has consistently won first place as one of the world’s most admired companies, the company has had many ethical challenges and pressures which makes it an ideal firm to research. The three key ethical issues Apple faces pertain to product quality, privacy policies, and sustainability. Throughout the years Apple has been involved in several ethical dilemmas that have shed negative light on the firm’s malfunctioning products, deceptive privacy agreements, and irresponsible sustainability. Apple also faces pressure with intense industry competition against companies like Samsung and Amazon, investors and activist groups, and potential legislation such as the Fair Repair Act. Although Apple remains the most distinguished and esteemed technology manufacturer for many consumers, they have been involved in the dilemmas of ethical business practices and principles. In comparison to other industries, we believe Apple to be as equally socially responsible. We recommend Virginia Tech take CSR and ethical issues pertaining to industries and individual firms into account in its investment decisions, because it will help them build credibility and will show they are a value-based university. The reasons for this are both ethical and financial in nature because these are what sculpt a socially responsible corporation. The Virginia Tech Foundation should take a position for certain shareholder initiatives pertaining to social and ethical issues. Virginia Tech should gear their focus toward more socially responsible companies. It is up to the VTF Board of Directors to take look at which companies they feel are involved in ethical practices. We do not recommend VTF to invest in Apple due to their unethical behavior. Apple is profit driven and does not focus their efforts on being a socially responsible company.
Pressures Facing the FirmThrough its Macintosh computers, iPad, iPhone, and other products, Apple, has achieved massive success as a company despite going through a number of up and down periods since its early beginning. Apple faces pressure from intense industry competition, investors and activist groups, and potential legislation. The number of companies Apple must compete with within the technology sector is high. For example, according to, “Analyzing Porter's Five Forces on Apple (AAPL),” Apple faces intense industry competition with Google, Samsung, The Hewlett-Packard Company and Amazon (Maverick 2018). In addition to competition amongst well-established firms, Apple must research and prepare for new entry threats. Competition in this market runs high due to the relatively low costs associated with switching devices. Some would argue steep competition pressures are what force Apple to push new products so frequently to users to stay aggressive in the industry. Apple faces intense pressure to appease its investors and activist groups as well. One example of an investor pressure that Apple must take into account is children usage. The article, “Apple Faces Activist Pressure over Children’s iPhone Use,” describes how two wealthy activist investors of Apple put pressure on the company to address smartphone addiction and the consequences to mental health (Hook, 2018). Activist groups have caused increased stress for Apple to change their policies by drawing attention to Apple’s failing programs. Students and Scholars against Corporate Behavior (SACOM) began protesting Apple’s employment practices in China in 2017 citing examples of minors replacing adults because of low costs and forcing students to work to graduate (Cheng, 2017). The activists are demanding Apple be held responsible and fix their broken policies, such as rights for all workers, stopping the use of student workers, and an increase in wages to account for inflation rates. Possible legislation such as The Fair Repair Act is yet another pressure that has an influence on Apple. Over the past few years, there has been a growing movement to guarantee the right of users to repair devices on their own that has been making its way into statehouses across the country. Users argue they should have the right to fix their own device or go to another outlet to get their product fixed without using Apple as their sole option. User’s devices were disabled when a third-party source tried to repair the device (Proctor, 2017). The Fair Repair Act would expand consumer's options for repairs by making access to parts and information available. Apple has fought against this possible legislation from moving forward declaring it a breach in their security measures.
Corporate Social Responsibility AnalysisAlthough Apple remains the most distinguished and esteemed technology manufacturer for many consumers, they have been involved in the dilemmas of ethical business practices and principles. However, after being accused of purposely slowing down iPhones so customers can buy new phones, Apple has taken action to ensure that this issue will not occur in the future. In 2017, Apple addressed a letter to their customers on their website, apologizing for the recent issues with their phones, and addressing that they would never intentionally do anything to corrupt the user experience. In addition, they gave an explanation of why these slowdowns were occurring in iPhones and decided to discount the price of new batteries by $50. The letter promised to improve the user experience by avoiding slow downs the longer the battery lasts. This approach is more convincing than previous Apple statements regarding product malfunctions. When Apple faced a similar issue when Steve Jobs was CEO, he released a statement denying all allegations, blaming customers, and trying to pay off customers with free phone cases to “fix” the issue (Frommer, 2017). Apple faced the allegations in a direct manner instead of avoiding the issue. Despite all of its controversy, Apple remains to be the number one company in the technology industry. This is due to the fact that Apple’s main focus is customer experience; they aim to make their products simple and convenient for the user. In addition, they aim to build a community of creative learners and thinkers, by creating application pertaining to different skill sets that are accessible to most users. These are just a few of the many customer based experiences that Apple provides. Other industries in this area, such as Samsung, are equally active in emphasizing the goal of customer experience. However, companies show this in different ways. For example, Samsung gives users the freedom to customize the way they interact with the interface, including applications and other features of their phones. In contrast, Apple is more restrictive in this way, because iPhone features and applications appear to look the same on every device (Moorman, 2018). In comparison to other industries, we believe Apple to be as equally socially responsible. For example, Apple and its biggest competitor, Samsung, have a low corporate social responsibility in terms of poor working conditions. According to a Quartz article, recent reports have shown that Apple displays poor working conditions with illegal amounts of overtime and underpayment. Samsung has also faced controversy over their working conditions (Bhattacharya, 2016). A recent study has shown that there is a link between workers diagnosed with Leukemia and overworking in Samsung factories (Evans, 2012). Samsung and Apple both have low corporate social responsibility in the industry.
Social/Ethical Investment Policy RecommendationsWe recommend Virginia Tech take CSR and ethical issues pertaining to industries and individual firms into account in its investment decisions, because it will help them build credibility and will show they are a value-based university. The reasons for this are both ethical and financial in nature because these are what sculpt a socially responsible corporation. It is ethical in nature because Virginia Tech is a value-based university. They follow the Principles of Community, which inherently states they treat everyone with mutual respect and understanding, as well as rejecting any form of prejudice or discrimination and being responsible in finding ways to eliminate it. Moreover, Virginia Tech has a certain standard for their students: to act with a high sense of ethics and by following the Principles of Community (Virginia Tech Principles of Community, 2005). How can they expect to invest in an industry with low CSR if they have high expectations of their students and faculty? However, building credibility and being value-based is financial in nature, because investing in a company with low CSR and many ethical issues, could result in a lack of funding from foundations and other companies, which could tarnish the reputation of the university. Therefore, we believe it is appropriate for an institute to be willing to sacrifice some expected financial return for ethical reasons. Universities, such as Virginia Tech should avoid investing in companies that have low corporate social responsibility and a rise of ethical issues. For example, Papa Johns is a good example of a company our university should not invest in, because of the recent controversy they have faced in terms of racism. Associating a university with a company like Papa Johns, by serving their food in dining halls, will send the wrong message to faculty, staff, students, and outside parties that universities do not find an issue with their low ethics. Another industry that universities should not invest in is the Cancer industry, because those million dollar companies profit from cancer patients. Events such as Relay for Life is an example of a campus-wide investment that should be avoided, because most of the money raised for cancer research does not go towards cancer research. Investing in the cancer industry is a good financial decision, however, ethically it is not, because those in need are not being helped. However, there are more socially responsible corporations that universities, such as Virginia Tech, should invest in that would promote education, university values, and benefit financially. Many universities spend money on companies that help them build new campus buildings or companies that provide technology (computers, laptops, tablets, etc.) to students for temporary usage. These are industries that universities should not invest in as much, because it does not benefit the university as a whole and most importantly, the students. Especially, the technology that is rented out or for temporary use, only one student can use them at a time. This is a waste of resources, which does not benefit the university financially or promote educational values. Industries that universities should invest in are educational software programs (Davis, 2014). The educational software provides students with the tools necessary to learn new skills. For example, today's software allows students to rewatch class lectures or have online tutoring, which both increase learning. Universities need to invest more in this form of technology and not spend money on buildings and other forms of investing that do not truly benefit students and the community. The Virginia Tech Foundation should take a position for certain shareholder initiatives pertaining to social and ethical issues. According to VTF’s mission statement, the purpose of the foundation is to fund university programs that promote the growth and welfare of the university (VTF). Majority of the university is its students. Providing them with optimum education while reducing their tuition rates- which majority of that money goes into the construction of new buildings on campus- allows for a successful university. The recommendations described above reflect the core values of Virginia Tech. According to the Principles of Community, Virginia Tech is committed to teaching and learning, as well as the importance of community. Investing in companies that not only benefit the university financially but more importantly, the students academically and ethically, is worth it (Virginia Tech Principles of Community, 2005). The Virginia Tech Foundation does a significant amount of work to ensure that their students and staff are cared for. For example, VTF provides scholarships for students so they can achieve their academic goals (VTF).
Implementation of Social/Ethical Investing PolicyIn the past Virginia Tech has been criticized for not focusing on the socially responsible aspect of investing. According to the National Association of College and University Business Officers Endowment Study (NACUBO), they found out that institutions with assets ranging from 100 million to 500 million, 76.8% do not have socially responsible investing criteria for investments. Therefore, we should reconsider how we approach the companies that Virginia Tech invests in. Investopedia defines Socially Responsible Investing as “an investment that is deemed socially responsible due to the nature of the business of a firm “(Investopedia). Therefore Virginia Tech should be abiding by these values, which include avoiding investments mainly involved with Tobacco, alcohol and gambling. We believe that Virginia Tech should take an Environmental, Social and Governance approach, which refers to the 3 central factors in measuring sustainability and the ethical impact of investing in a firm. In order to ensure that Virginia Tech is investing in a socially responsible company we must have a set of criteria for VTF to follow. Firstly, VTF must go through a screening process in which they can weed out certain companies that have consistently shown to partake in unethical practices. Additionally, Virginia Tech needs to focus on companies that are known for their transparency, meaning we should invest in the companies that have a clean background and are not constantly involved in scandals. Some examples of socially responsible firms that VT should focus on are companies that promote sustainability for the environment, consumer protection and human rights. These companies could have a huge impact on the community and help make the earth a better place. Many schools around the country have already began divesting in major oil and fuel companies due to the harsh impact on the environment. For example in 2016 University of Massachusetts became the first major public university to end direct investments in fossil fuels (Woll, 2018). On top of Massachusetts, the university of California also just divested $200 million worth of assets in the oil industry (Woll, 2018). These are major steps in the right direction that schools are starting to take regarding socially responsible companies. In order for Virginia Tech to promote to the community as well as the university it is also imperative that we make sure to invest in local businesses around us. We believe that all big financial decisions should be made by VTFs board of directors mainly, although they should be open to suggestions from students and teachers who are interested in getting involved with VTFs program. That being said, all major decisions will still be in the hands of VTFs board of directors but we feel that students could give helpful insight on the social responsibility of certain firms. Students are an effective resource when it comes to understanding which companies partake in unfair practices and which ones are known to be involved in unethical behavior. We believe that students may have a better insight on the companies that could make the university grow as a whole as well as the companies that are known for being more socially responsible.
Firm Investment RecommendationsTherefore, we do not believe that Virginia Tech should invest in Apple. There have been too many cases of corrupt and unethical practices within the corporation. We firmly believe that VTF should only focus their investments on socially and ethically responsible companies. As previously mentioned Apple sent out an apology letter to all of their customers explaining how they were caught slowing down the older version of iPhones in order to get customers to buy the newer version of their phones. On top of this the company was caught infringing on their customers privacy rights by abusing their location services. Although Apple is one of the most successful technology companies, they have proven multiple times the unethical practices they partake in. Apple is more focused on their own profits than its customers. Virginia Tech should gear all of their investments to companies that will help the community and the environment while still getting returns on their investments. Virginia Tech already uses their investments for socially responsible causes within the school. For example the VTF website states they use some of their earnings for new technology in our libraries, decreasing tuition prices as much as they can, as well as updating or constructing new buildings on campus for faculty and students. Socially responsible investments go much beyond just profits but also focus on making the world and the community a better place. Virginia Tech should not invest in Apple, instead they should seek to invest in companies that are both socially and ethically responsible.
- “Apple Inc.’s Ethical Success and Challenges.” Daniels Fund Ethics Initiative, pp. 1–8.
- Bhattacharya, A. (2016, August 26). Apple is under fire for "excessive overtime" and illegal working conditions in another Chinese factory.
- Business Conduct: The way we do business worldwide. (2010, July). Retrieved November 10, 2018
- Davis, D. (2014, October 13). Why colleges should stop splurging on buildings and start investing in software.
- Evans, J. (2012, March 27). Not just Apple: Working life at the Samsung iPhone factory.
- Fontinelle, Amy. “Community Investing 101.” Investopedia, Investopedia, 3 Apr. 2012
- Frommer, D. (2017, December 29). Apple's response to its iPhone slowdown controversy is good - and a lesson to be more proactive about communicating.
- Kris Cheng. “Activists Protest against Apple Supplier 'Labour Abuses' as Tech Giant Launches Latest iPhone.” Hong Kong Free Press HKFP, 5 Nov. 2017.
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- Moorman, C. (2018, February 16). Why Apple Is Still A Great Marketer And What You Can Learn.
- Proctor, Nathan. “COUNTRIES ARE TAKING APPLE TO COURT OVER RIGHT TO REPAIR — AND SOMETIMES, THEY’RE WINNING.” U.S.PIRG, UNITED STATES PUBLIC INTEREST RESEARCH GROUP, 9 July 2018.
- Virginia Tech Principles of Community. (2005, March 14). https://www.vtf.vt.edu/our-services
- Woll, Lisa. “Naylor Association Management Software.” The Forum for Sustainable and Responsible Investment, Naylor Association Management Software, 8 Jan. 2018
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