Apple called out for omitting factory workers from cash pile

Watchdog group SACOM says Apple isn't using $98 billion cash pile to address poor working conditions in China

A watchdog group issued a renewed call for Apple to address what this group considers poor working conditions for factory workers in China, criticizing the company for not assigning any of its US$98 billion cash pile to address the issues.

The Hong Kong-based Students and Scholars Against Corporate Misbehavior (SACOM) said the factories in China continue to underpay and violate labor rights. In a letter to Apple CEO Tim Cook, SACOM said that Apple's failure to assign cash reserves to address the issues "demonstrates the enormous greed and desire for profit of Apple and its executive[s]."

"Apple announced that it would finally share some of its $100 billion in cash reserves with shareholders. It is regrettable that Apple did not show any intention to share the revenue with its production workers whose labor helped the company become one of the most profitable corporations in the world," SACOM wrote in the letter.

Apple last week said it would use its US$98 billion cash balance toward issuing dividends and repurchasing shares. Apple acquired a substantial cash balance thanks to the success of the iPhone, the iPad and Macs, and Cook said the company expects to continue growing as the mobile markets expand at a fast rate.

SACOM has issued multiple reports over the last few years highlighting the poor working conditions of factory workers making Apple's iPod, iPhone and iPad products. The organization has alleged contract manufacturers like Foxconn underpay workers, while exposing them to health and safety risks. Issues related to the working conditions came under scrutiny again earlier this year following a New York Times story that described poor working conditions at Chinese factories operated by Apple contractors. Non-profit organizations such as Change.org are also running campaigns for Apple to address the issue and make products ethically.

Cook on multiple occasions has defended Apple's record, saying the company takes working conditions in factories that make products seriously, and is taking every step to hold suppliers responsible. Despite the concerns, Apple products continue to find millions of buyers. Apple sold over thee million new iPads in the first weekend after the product went on sale starting March 16.

It's difficult to connect the $98 billion cash reserve to resolve the manufacturing issues in China, said James Post, professor in management markets, public policy and law at Boston University.

Apple has a contract to buy finished products from contractors like Foxconn, and the suppliers are responsible for addressing concerns related to pay, working conditions and other issues, Post said. Apple is well aware of the issues, and as a big purchaser of products it can exert control on suppliers to comply the rules or lose manufacturing and assembly deals, which it is already doing, Post said.

"It's a coincidence that there's this big pile of cash at the time the supply chain issue has arisen. It takes a leap of faith to connect the two," Post said.

An argument can be made that Apple can use its cash reserve and giant profits to pay contractors like Foxconn extra to address the issues, Post said. But from a business perspective, it is naive to believe that Apple would voluntarily pay a higher price to contractors if it is possible to get products elsewhere at lower prices, Post said.

Apple's decision on how it wants to use its cash reserve may make financial sense, but there has to be accountability in the way Apple products are made, said Lior Malenboim, CEO of mobile application development company Applicasa. It is about thousands of workers being treated badly, while Apple shareholders, and Mac, iPhone and iPad owners sit at home in relative comfort, Malenboim said.

Malenboim last week suggested in an e-mail sent to journalists that Apple could have changed its public perception by offering a financial sum to improve lives of the factory workers. Malenboim said ten percent of the fund could have been used in a health plan for the approximately 230,000 factory workers, and twenty percent of the fund could be used to raise worker salaries.

"When the product that you are selling is the result of some 230,000 individuals hard work, those people deserve a fair wage as a human right," Malenboim said.

Apple did not immediately respond to request for comment.

Agam Shah covers PCs, tablets, servers, chips and semiconductors for IDG News Service. Follow Agam on Twitter at @agamsh. Agam's e-mail address is agam_shah@idg.com

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