Apple (NASDAQ:AAPL) has made the most of good PR. The company’s relentless propaganda machine has transformed it from a geeky C-list specialty house into a nigh-messianic harbinger of technological bliss in just under a decade. The iPhone, iPad, Siri, the App Store, iTunes—Apple has been telling people that they make you better and that they will make the world a better place to live in.
People have bought into the message. Need proof? Look at Apple’s sales and the $100 billion in cash it’s sitting on.
But the reality is that Apple is no harbinger of an enlightened technological future. It’s just a company, albeit a profoundly successful one, and like most companies it forged its identity in a relentless pursuit of profits. That pursuit is why the company’s business was built on the cheap labor, low tax liabilities, and highly adaptable manufacturing systems offered by its manufacturing partners in China, including Foxconn (NYSE:FXCNY). That labor has turned out to be extremely cheap. Unfortunately, reports about working conditions at Foxconn indicate that its employees are treated as expendable cogs and reportedly work in inhumane conditions that have resulted in many worker deaths and injuries in recent years.
Due to increasing press coverage of these labor practices, Apple has on its hands, in addition to a crushing human rights problem, a real PR problem.
A fire that’s hard to put out
Apple has been doing itself no favors either. The company has been plagued by comments by unnamed former executives that affirm reports about manufacturers’ labor abuses. “We’ve known about labor abuses in some factories for four years, and they’re still going on. Why? Because the system works for us,” one former exec told The New York Times. In response, Apple has told people not to worry about it. Chief executive Tim Cook asserted in an email sent to Apple employees that the accusations were false and that Apple’s partnership with the Fair Labor Association indicates that it has done due-diligence in preventing labor abuse.
Apple’s precious consumers haven’t been mollified. As Apple investors pushed the company’s stock to all-time highs on Thursday, protestors gathered at Apple Stores in cities across the U.S., United Kingdom, Australia, and India to demand that Apple take further action. Petitions from groups like SumofUs.org have been signed by hundreds of thousands of people calling for ethical iPhone manufacturing.
Scrutiny brings more scrutiny
Apple has taken steps to improve the situation. An initial audit of the 229 manufacturing facilities used by Apple performed by the FLA in January found that 62 were not compliant with Apple’s policies on maximum work hours and physical conditions. Apple in turn broke ties with two suppliers that were deemed repeat offenders. According to the Washington Post, Change.org petition organizer Mark Shields noted that the FLA partnership and audits were laudable steps.
The proverbial cat is out of the bag, though. Scrutiny of labor practices at Foxconn and other manufacturers across Asia is only increasing. The problem isn’t only Apple’s. Microsoft (NASDAQ:MSFT), Dell (NASDAQ:DELL), Nokia (NYSE:NOK), Lenovo (PINK:LNVGY), Motorola (NYSE:MMI), and a veritable fleet of other technology giants use Foxconn as a manufacturer. If Apple and these other companies expect their businesses to thrive, they will need to take collective action to guarantee that workers treated with respect in safe environs produce smartphones, tablets, and laptops.
In Apple’s case, though, its reputation as an exemplary corporate citizen, cultivated during its financial rise over the past decade, is damaged. The shine is quite literally off the Apple. What’s unfortunate is that it likely won’t diminish the company’s value one red cent.
As of this writing, Anthony John Agnello did not own a position in any of the stocks named here. Follow him on Twitter at @ajohnagnello and become a fan of InvestorPlace on Facebook.