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Apple Drops Community as a Principle of Conduct for China

Apple (AAPL) has seen a lot of change over the last few years -- moving more firmly into the consumer electronics space, growing quickly to a massive size, and even showing signs that eventually iOS will replace Mac OS, with even former Apple product executive Jean-Louis Gassée coming to the same conclusion.

And now there's a new sign of change: doing business to benefit communities in which it operates is no longer an Apple priority. Theo Francis at noticed a significant change in the principles of business conduct that Apple espoused in SEC filings. The question is why? The answer may be China.

In February 2009, Apple had the following on file with the SEC as Business Conduct: The way we do business worldwide:

Apple conducts business ethically, honestly, and in full compliance with all laws and regulations. This applies to every business decision in every area of the company worldwide.

Apple's Principles of Business Conduct

Apple's success is based on creating innovative, high-quality products and services and on demonstrating integrity in every business interaction. Apple's principles of business conduct define the way we do business worldwide. These principles are:

  • Honesty. Demonstrate honesty and high ethical standards in all business dealings.
  • Respect. Treat customers, suppliers, employees, and others with respect and courtesy.
  • Confidentiality. Protect the confidentiality of Apple's information and the information of our customers, suppliers, and employees.
  • Community. Conduct business in a way that benefits the communities in which we operate.
  • Compliance. Ensure that business decisions comply with all applicable laws and regulations.
  • Suddenly, in July 2010, Apple updated the document to drop community as one of the principles. A document on Apple's web site has this by way of explanation for the change: "Updated section to focus on four core principles of Honesty, Respect, Confidentiality and Compliance." Although there were a number of changes in Apple's business conduct policy that the document explained, this particular change was the most cryptic and didn't explicitly mention that the company cut community as one of its governing principles.

    Ethics or morality aside for a moment, what a peculiar move this seems on the surface. Given the company's actions over the years, whether lying to investors about how serious the medical condition of Steve Jobs was when his liver was failing, Apple's growing propensity to attract the attention of regulators, or its often high-handed approach to customers and business partners alike, the only principle out of the remaining four that it regularly applies is confidentiality -- otherwise known as secrecy.

    So, why drop community? It's a poor PR move if caught, as it has been. Certainly during the problems with the iPhone 4 antennas, Apple demonstrated how tone-deaf it can be when it comes to how it and Jobs come across. And yet, that was in the face of a challenge to its infallibility, which Apple holds nearer and dearer than almost anything.

    The question becomes what became the downside of dropping community. I think the timing says much when you remember what Apple was addressing at the time. Just two months before the suicides at Foxconn, the division of Chinese conglomerate Hon Hai that manufacturers much of Apple's products, became a big news story. That definition of community -- "Conduct business in a way that benefits the communities in which we operate" -- must have chafed Jobs and his management team as one report of another came about workers cheated receiving abysmal wages, cheated out of overtime pay, poorly housed, and otherwise treated badly.

    Make a priority of treating communities well and many otherwise convenient strategies and decisions come into ugly relief. It's not that the language completely disappeared. As Francis noted, it moves deeper into the document. However, when you read the new phrasing, listed under "Community Activities," the intent is clearly different:

    At Apple, we comply with all laws and regulations and operate in ways that benefit the communities in which we conduct business. Apple encourages you to uphold this commitment to the community in all your activities.
    Apple replaced conducting business at the highest level with some vague encouragement to employees. And, of course, as Foxconn is a business partner and not a group of employees, there is no need to get overly concerned just because the company says that the five four business principles apply to all that do business with Apple.


    Image: user Stephen, site standard license.