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Apple Should be Careful What it Signs up For!

This article is more than 10 years old.

Image via CrunchBase

We're seeing a very steady re-casting of AAPL  in the mold of Tim Cook, with the initiation of a dividend and share buyback, and now the release of the Fair Labor Association Report on FoxConn working conditions.  The report has several labor advocates up in arms about AAPL's humungous cash balance, and all the wonderful things Apple can and must do to correct its perceived "past mistakes".  Some advocates have even called upon AAPL to change the way it operates in terms of its product design lead-time, and the demands it makes on its suppliers.

Facing up to the FoxConn controvesy is a smart decision.  Oddly, it is also smart business (from a long term standpoint) to employ fair labor practices, and demand high ethical standards from your suppliers.  However, it is not smart to take on the full burden of FoxConn's sins.  If FoxConn wants to stay in business as a trusted supplier to Global OEMs like Apple, it will need to restructure, take the hit and re-align itself with its customers.   It can't make promises of 24-hour turnaround of requests; or low-ball other supplier RFPs, and do so by consistently cutting corners.  Apple should not be expected to take on the flack and additional costs of sub-market labor pay, and other exploitative practices at FoxConn.  Of course depending on the financial burden to retroactively pay overtime, build new facilites, and raise pay, Apple might find it good business to help out FoxConn, but Apple's coffer is not Fox Conn's wallet!

Simply put, Apple, look to your Big Brother Walmart on how to manage and squeeze suppliers. Make FoxConn do the right thing, and help it do so, but go only so far.  There are always other suppliers out there, who might be a better fit longer term.  Else you will have your investors to answer to.