How Good Business Can Lift Apple’s Share Price
This post appeared in Bloomberg on April 15, 2012.
By Kellie McElhaney, Faculty Director, Center for Responsible Business
Early this month, Adrian Kingsley- Hughes made this prediction on Forbes.com: “It seems quite possible for Apple stock to hit four digits in the next couple of years, barring any missteps.”
The author probably imagines future missteps such as overheating iPads, a possible unsuccessful foray into the television-set market, or the failure of the company’s new chief executive officer, Tim Cook, to live up to the legacy of Steve Jobs.
Yet it is easy to imagine a whole different set of problems, such as more worker suicides or deaths from explosions at Apple Inc (AAPL)’s lead sourcing factory in China, Hon Hai Precision Industry Co., known as Foxconn Technology Group (FOXCGZ).
The biggest misstep, however, would be for Apple to fail to recognize that it now has an opportunity for the kind of productive sweeping self-examination that Nike Inc. (NKE) undertook in the previous decade after its reputation was tarnished by reports of poor work conditions and child labor at its manufacturing subcontractors in the developing world.
Unfortunately, I fear Apple’s executives won’t “look up” at their SR problems (which the company defines as supplier responsibility, but I define as social responsibility, to encompass environmental issues). Instead, they may continue to “look down,” as they skillfully and sometimes arrogantly have with most problems, which they try to solve through the brilliance of their design, innovation, engineering and attention to detail of their products.
It is tempting to dismiss sustainability as irrelevant to Apple’s steady ascent toward $1,000 per share. That would be a mistake: Just ask any put-out-to-pasture top executive from Nike, BP Plc, Enron Corp. or WorldCom Inc. about the linkage between corporate responsibility and corporate value.
If I were to play corporate-sustainability doctor, here is some “iRX” for Apple’s leaders:
— Approach the current challenges not simply as short-term risks, but rather as a significant business opportunity linked both to protecting current value, and to creating more. Tackle them with the same meticulous attention to detail, design brilliance, engineering prowess, market-winning aggression and customer-gripping innovation you bring to all things Apple.
— Recognize that while your current culture and strategy of secrecy, paranoia, fear, message control and arrogance work well in other areas, such as product development, pipeline and launch, they don’t serve you well when it comes to SR, no matter how you define it.
— Dedicate some — perhaps even $1 billion — of your current $100 billion cash reserve to SR programs, and broaden the scope of your action beyond your supply chain.
— Understand that a significant proportion of your employees care about making the world a better place. Engage and deploy these employees, who are one of your most powerful assets, to this purpose. They care. These days, some of them may be embarrassed by and ashamed of their employer. They may even be disengaged, unproductive, and dissatisfied.
— After engaging your employees, recruit your huge customer base in your sustainability quest. Expand your comprehensive Apple Care program to a new one called “Apple Cares,” for example. Incorporate your SR caring into your brand’s out-of-the-box experience, make it part of Siri’s knowledge bank, part of your cult-like following, part of your app world.
— Cook, the new CEO, shouldn’t try to step into his legendary predecessor’s shoes, or cultivate his aura. After announcing Jobs’s death, Cook sent out his first internal communication to employees with the introduction of a not-so- ground-breaking employee-donation-matching program. I know this because a former student of mine, who had recently joined Apple, excitedly e-mailed to tell me. He was relieved that his new employer, the world’s first $1 trillion company, might begin to move from being a laggard in sustainability to a leader.
The sustainability reputation of the company matters to this employee, as it does to the majority of his fellow Millennials. My former student took a risk by leaving a very sustainability-minded rival company in the hopes that Apple was waking up. Cook is the first Apple CEO to actually visit China and engage with Foxconn and its leadership. Fantastic start. Keep going.
— Add a new position to your executive leadership team: a senior vice president of corporate sustainability. Choose a bold, tough-minded and temperedly radical woman (since the rest of your team is male).
— With this new executive, leverage your scale, your leadership position, your design perspicuity, your global reach, your opiate-of-the-masses status, your engineering expertise, your educational-market aptitude, to develop an integrated corporate-sustainability strategy that is linked to your business objectives and core competencies, and is embedded in your business strategy and corporate culture.
— Bring your top designers to the factories and dormitories in China, and, together with Foxconn leaders, develop less socially isolated working and living conditions. Bring your top engineers over, too, and design less monotonous, more aesthetically pleasing processes, factories and villages for employees.
— Press the Chinese government — in fact, all governments — to improve laws and accountability on child labor, minimum wages, and mandated working conditions.
— Engage your education-business development unit to penetrate the digital textbook and educational markets and, in particular, the underrepresented sustainability-teaching market. There is an urgent need to develop efficient, creative and simple information on all things sustainability.
Apple is the perfect company to do it.
(Kellie A. McElhaney is the Alexander Faculty Fellow in Corporate Responsibility at theUniversity of California, Berkeley’s Haas School of Business and a contributor to Business Class. She is the author of “Just Good Business.” The opinions expressed are her own.)