Apple: Top Brand or Murky Money?

In 2014 Apple beat Google and Samsung to become the world's most valuable brand at $119 billion. And now the iconic company made $18 billion in three months. But how did Apple produce those record earnings? A report by the German weekly Spiegel Online shows four of the tech giant's questionable practices. Should brand value be tied to ethical practices, or does it not matter how you make profit?

Just to be clear: I am a big Apple fan. I love my MacBook Air and my iCloud, my wife loves her iPad, she and our daughters love their iPhones and MacBook Pros. All of us watch movies on iTunes, and the girls are lobbying me to get Apple TV. 

There is much to be admired about Apple: It's "Think Different" commercials, its sleek product suite, its Apple stores with their Genius Bars and their savvy and socially competent staff, Steve Jobs' inspirational commencement speech at Stanford.

The Apple co-founder had a genius in sensing the hidden needs and desires of the consumer. But already years ago, when I read Walter Isaacson's biography of Jobs, the slick veneer started cracking a bit. I blogged about Steve Jobs' dark side.

Before even co-founding Apple, in his very first job to design software for Atari, Jobs tricked Steve Wozniak out of his rightful share in the earnings. 

After coming back from a trip to India to find himself, he threw his girlfriend out of their shared apartment when she told him she was pregnant with his child, and subsequently denied being the father for many years. 

One way of examining the culture of a company (or a nation for that matter) is to examine the values of its founders. The good ones and the bad ones. 

And as my friend and colleague Nick Wolfson likes to put it, "The fish stinks from the head."



So it would not be all that surprising if Apple cut a few corners here and there. 

Here are four questionable business practices of Apple: 

1. Tax Tricks. At the end of 2013 a subcommittee of the US Senate found that Apple was not content to move profits into low-tax jurisdictions, but had sought the "Holy Grail" of tax evasion. The company had pushed down its tax burden by one-third from 35% to 20%. It had used a three-step model where profits are pushed around the globe so many times that finally virtually no taxes are due in any country. For this process, Apple had created a network of offshore firms. Legally, of course. And with the kind of perfectionism that Steve Jobs had been known for. 

2. Stock price cosmetics. Analysts are wondering whether Apple's innovation engine is gone after the death of Steve Jobs. At least the R&D budget rose under Cook from 2% to 3.2% (but that is still much less than IBM's 6%) of total budget. It remains to be seen if Tim Cook can demonstrate innovation with the new Apple smart-watch. Cook is known more as a financial manager than for his creativity. For example, Apple bought back massive numbers of its own shares to drive up its stock price. 

3. Questionable data security. More than one-fifth of Apple's revenues come from China. According to Beijing News (report in Chinese), Tim Cook made a deal with China's internet czar Lu Wei that allows China security checks of Apple devices. Analysts fear that China will get access to the source code of Apple's operating system iOS, which the Chinese government could use for censorship or espionage.  

4. Exploitation in production. I already reported here in May 2010 about the suicides at Foxconn, the Chinese company that assembles the iPhone6, among other things, and which depends on 40-50% of its revenues on producing Apple devices. And here I showed the hidden costs of producing iPads and asked whether Apple is right to produce in China at all. 

In September 2014, Xu Lizhi became officially the eighth Foxconn worker to kill himself. Apple stands accused of producing its gadgets under exploitative conditions. 

The tech giant counters that conditions have improved. But according to China Labor Watch, another assembler of Apple near Shanghai, Megatron routinely breaks Apple's maximum 60-hour work week. 

BBC reporters posing as workers reported having to work 18 days in a row or 16-hour days, despite repeated requests for time off.

Gamechangers500.com is out to change all that. An alternative to the Fortune 500 list that shows the 500 most profitable companies worldwide, Gamechangers500 carefully selected a range of 9 indicators (called "badges") that companies can earn, including profitability but going beyond mere money. 

The 9 badges are: depth of impact, scale of impact, meet the mission, exceptional work environment, empowered employees, everyone wins, earth-friendly office, eco-design, and replenish the planet.

Companies that earned some or all badges include Google (all 9), Patagonia (all 9), or the French utility EDF (6).

The question is how Apple's brand would fare if it were held up to Gamechangers500 standards.

What do you say? Should Apple's brand value be measured to reflect standards like clean accounting practices, fair trade, environmental protection etc.? I look forward to your comments, here or on my blog http://thomaszweifel.blogspot.com/.

Dr. Thomas D. Zweifel is a strategy & performance expert and coach for leaders of Global 1000 companies. His book The Rabbi and the CEO: The Ten Commandments for 21st Century Leaders was a National Jewish Book Award and Foreword of the Year Award finalist. 

> To find out how your company could qualify for the GameChangers500 list, visit Gamechangers500.com and/or email  Tal Ronen at tal@ykcenter.org.