Ethics and Compliance at Apple Inc.
Apple (NASDAQ: AAPL) is a leading global technology brand founded by legendary Steve Jobs in 1976 in California, United States. The company has grown into the largest one globally with a market cap of above $2.3 trillion under Tim Cook's leadership. Apple makes and sells iPhones, Macs, Ipads, and a range of services. The company's leadership position in the tech industry is driven by its focus on innovation and organizational culture of confidentiality, creativity, and innovation.
Apart from being a leading tech brand, Apple is known as one of the best marketers in the world. The company has maintained a strong brand image globally. Since its early days, it is known as one of the most customer-oriented companies in the world. Customer focus was an inseparable part of Apple’s organizational culture right since the days of Steve Jobs, who was known for his penchant for innovation, innovative marketing, and flamboyant leadership.
While Apple stands out from the crowd of tech brands as the leading innovator, it has also maintained its focus on business ethics and compliance. The company has achieved enormous growth in recent years, rising past $2 Trillion in market capitalization. While the tech industry has faced many challenges, technology has been driving most of the growth industry-wide. Despite its enormous growth, the tech industry is facing a wide range of challenges, including legal compliance and hyper-competition.
The US government has grown its control and oversight of big tech. A large number of laws affect the large technology brands. Companies cannot ignore these laws since the government can charge hefty fines if any big tech player does not comply. From labor to customer privacy and anti-competitive concerns, a large range of laws affect the big tech, and Apple has also faced its fair share of complexities in its history. While the pressure from the legal and government agencies has only increased with time, Apple has also consistently maintained its focus on ethics and compliance to avoid any fines or hurt its image in the market.
Creating an ethical environment and operating model requires the leadership to focus on the organizational culture and making ethics a central pillar. Apple has adopted measures to deal with challenges that can lead to unethical behavior inside the organization. It formed policies to help its employees and partners conduct business around the world in an ethical and compliant manner. In the US and overseas markets, it conducts business ethically, honestly, and in full compliance with every local law. Its business conduct and compliance policies are the basis of how the company conducts business and puts its values into practice every day. Being ethical is not always easy. However, Apple puts the customers' concerns first. So, the focus instead of remaining profitable is on being transparent and ethical.
In the words of Tim Cook,
“We do the Right thing even when it is not easy.”
Tim Cook, Apple CEO.
Apple has set out a detailed business conduct policy that lays out how the company expects its employees and partners to conduct themselves and their business every day. The primary focus areas of the operating guide for employees including employee’s rights and obligations, workplace behaviors, protecting Apple (assets and information), individual accountability, and business integrity.
Apple Guiding Principles:
Apple clearly lays out how employees are expected to behave on a daily basis while working for Apple.
There are four important principles that guide Apple’s business practices:
- Honesty: - The focus of Apple is running its business operations accountably. The company ensures that employees at all levels demonstrate honesty and ethics in their daily conduct at their workplace. The company ensures that it is honest in its dealing with its partners, suppliers, customers and even employees. It also expects its partners, suppliers, and employees to be honest in their dealings with and for the company.
- Respect: Another important business principle at Apple is respect. Respect and courtesy are important in every aspect of its business operations. Throughout its ecosystem, Apple ensures that it treats all the stakeholders, including internal and external stakeholders, with respect. It treats customers, suppliers, employees, partners, and others with equal respect and courtesy.
- Confidentiality: Apple is known industry-wide for the level of confidentiality it follows in its business operations. Since the days of Steve Jobs, everything inside the company took place behind a tight veil of secrecy. Everything remains a complete secret, from new products to new projects, until everything is finalized and set for public release. It ensures that every type of data and information remains confidential, including customers, partners, suppliers, employees, and other data. Customer privacy and confidentiality are cast into Apple's organizational culture since the company's foundation. On the one hand, it helps ensure no unnecessary fuss over things both inside and outside the organization. On the other, it also helps the company protect its assets and inventions from competitors who can otherwise benefit from information leakage.
- Compliance: Apple is also very careful about the applicable laws and regulations in all the markets where it operates. Compliance is essential due to several factors. Mainly it is essential for maintaining a clean brand image and avoiding unnecessary legal tussle. The company ensures that its business decisions comply with applicable laws and regulations in all the markets where it operates.
While Apple has established rules and regulations to guide employee behavior, it also ensures that its people are free to exercise good judgment and ask questions. They are required to follow policies since compliance is essential, but not to blindly adhere even when it hurts. Apple’s business policy sets out the ethical requirements for its employees (as outlined above).
Every Apple employee is required to certify that he read the code of business conduct and understood it. Apple employees should complete the certification every year. The company takes violations seriously, which can result in disciplinary action, including losing their job. However, while it is the employees’ responsibility to follow the code of conduct and all the applicable policies, they must speak up if required. Apple employees must notify the managers, legal team, people team, or the business conduct team if they notice a violation of the business conduct policy in Apple’s operations.
Many compliance functions are deeply integrated into Apple’s business operations. The business compliance and global team at Apple focus on business conduct, political compliance, export and sanctions compliance, health compliance, antitrust compliance, and anti-corruption compliance. Accountability is important for large businesses otherwise, their public image would suffer.
Apple also ensures that its business operations are carried out accountably. The company carries out internal and third-party assessments to ensure that its programs are effective. Since trends keep changing and the industry environment also changes fast, the company updates its policies regularly to keep them up to date. A Chief Compliance Officer at Apple offers regular updates to the Audit and Finance committee of the board of directors.
Anti discrimination policies at Apple:
Apple is committed to offering its employees a secure and discrimination-free work environment. The company has formed policies that ensure Apple's work environment is free from harassment, including sexual harassment or discrimination based on a personal trait. The company has outlined a long list of personal traits in this regard - race, color, ancestry, national origin, religion, creed, age, mental and physical disability, sex, gender, sexual orientation, gender identity or expression, medical condition, genetic information, marital status, military or protected veteran status, or any other characteristic protected by law. It applies to both employees and nonemployees.
The company is dedicated to maintaining a creative, culturally diverse, supportive, and inclusive work environment. It does not tolerate harassment or discrimination of employees or nonemployees with whom the company has a business professional or non-professional relationship. It applies to all types of interactions that a person has with customers, employees, applicants, and suppliers where he represents Apple. If someone has been subject to harassment or discrimination inside Apple or has witnessed such behavior, he must report immediately to someone in the people team or a supervisor or manager, or someone in the Business Conduct team.
Apple has laid out detailed policies in this regard in the Equal Employment Opportunity Policy and the People Policies for various regions. Apple does not tolerate any kind of violence at the workplace either and has laid out a detailed policy regarding workplace violence. A person found in violation of its workplace violence policy will face disciplinary action.
Confidentiality Policies at Apple: Protecting Assets and Information
Apple employees play a key role in helping the company protect its assets. Apart from the physical assets like cash, inventory, equipment, and supplies, assets also include proprietor information like intellectual property, confidential business plans, unannounced product plans, sales and marketing strategies, and other trade secrets. Employees are required to follow some key rules like what they are talking about, protecting the company's assets they have been entrusted with, and modeling exemplary behavior in this area. Employees have to remain extremely cautious about letting out the company's secrets. So, they are trained to watch around that anyone does not get to learn or overhear any important fact.
Apple values its product information the most, including information related to its future product offerings or the products in the planning stage. Employees are required to release any information only after verifying with a manager or supervisor that it would be appropriate to do so. They should do this. Before releasing confidential, operational, financial, trade secret, or other business information.
Apple is very secretive and selective in this regard even when disclosing information to its suppliers, vendors, or other third parties. Before disclosing information before them, they have to enter a nondisclosure agreement with the company. Confidential information should not be shared inside the company without an appropriate reason and must be shared only when there is a real need to know. When new employees join Apple, they are required to sign an Intellectual Property Agreement. The agreement outlines the employees' duty to protect the company's information.
Non Disclosure/Confidentiality Agreements (NDA)
Apple employees should not share confidential information about products or services without their manager's approval. If there is a business need to share confidential information with a vendor, supplier, or any other third party, the employees must not offer more information than required to address the need at hand. Apart from that, any confidential information that the employees share outside the company is covered by a Non Disclosure/Confidentiality Agreement. Employees must contact the legal department on their region to obtain the agreement. In the United States, this agreement is available through the company's legal website.
Customer and Third Party Information
Privacy is a fundamental human right. At Apple, it’s also one of our core values. Your devices are important to so many parts of your life. What you share from those experiences, and who you share it with, should be up to you. We design Apple products to protect your privacy and give you control over your information. It’s not always easy. But that’s the kind of innovation we believe in.
The company's business conduct manual also mandates that the employees maintain honest and accurate records, which are critical to conducting Apple's business operations successfully. This applies to all types of reports and records kept by the company. Employees must not misstate facts, omit critical information, or make modifications to records or reports in a manner that can mislead others. If anyone intentionally manipulates Apple records, it is a form of fraud. Employees must observe the same practices when preparing expenses reports and applying for reimbursements.
Dealing with Inventions, Patents and Copyrights
Apple has a robust patent program in place for protecting its innovations related to the current or future products and services. Before making any disclosure, Apple employees must submit their invention disclosure to the Apple patent team via the Apple Patent System. In this regard, Apple has highlighted a best practice which is to submit one's invention disclosure well in advance before sharing an invention outside Apple. Employees must do so even if under a Non Disclosure Agreement because sharing invention information may in one way or the other compromise Apple's patent rights.
Apple has laid out the policy for its employees
You may pursue, for your own personal ownership, inventions that (a) are not developed using Apple equipment, supplies, facilities, or proprietary information; (b) did not result from and were not suggested by work performed by you, Apple, or Apple proprietary information; and (c) are not related to Apple’s current or anticipated business, products, research or development.
Apple Policy for sharing information on inventions and patents.
Apple employees are also asked to remain alert about the possible infringement of Apple's inventions and patents. They should notify the legal team if they come across any possible infringements. If an employee has created original material for Apple requiring copyright protection, for example, a piece of software, he must place Apple's copyright notice on the work and submit copyright disclosure form to the legal team. You can read about Apple's policies on intellectual properties here.
Apple has also outlined policies that the employees must follow and the areas where disclosing information may violate Apple's confidentiality policy. For example, Apple employees must obtain management and legal approval before getting involved in activities related to technical standards, open source software, public speaking, press inquiries or when publishing articles and making endorsements.
Apple Policies Related to Business Integrity
Government as a customer
For Apple, the government is a unique customer with unique bidding, pricing, disclosure, and certification requirements. When Apple employees are dealing with the government, they need to partner with the legal team when bidding for business. They also need to contact the business conduct team for questions related to compliance.
Hiring government employees
Certain precautions need to be kept when hiring government employees to work for Apple as employees or consultants. Laws limit the types of duties that the government employees can perform, especially with regards to the types of duties that they were involved in while working for the government. Such employment is subject to legal restrictions and disclosure requirements and especially so when the government employee has been involved in a matter involving Apple's interests. These things fall within the jurisdiction of the political compliance team and one must contact it before hiring a government employee. One cannot hire any individual in exchange for securing business or for any other form of improper advantage. Any special preference should not be given to a person in exchange for any special treatment either.
Apple policies regarding corruption and bribery:
Apple clearly spells out in its business conduct policy that corruption in any form is absolutely unacceptable inside the company. It has formed strict policies so that corruption does not flourish inside the company at any cost. While corruption can take various forms, the most common form of corruption is bribery. Apple has created an elaborate anti-corruption policy that states Apple's stand regarding bribery and kickbacks. A bribe means offering or giving a person anything of value that is being offered or given to obtain or retain business or to secure some other form of improper advantage. Apple employees cannot offer or receive bribery in any form, including cash, and cash equivalents, or some other thing of value from a public official or private entity. The company does not offer employment or internships to acquire improper advantages or retain business. Some types of favors may be permissible under the local and international anti-corruption laws, such as customary business gifts, meals, and hospitality but need to be given according to the company policy.
Kickbacks are also prohibited by Apple. They occur when a person at Apple is offered or given money or some other thing of value by a third party in exchange of providing something like internal information, trade secrets or other type of favour. Apple strictly prohibits kickbacks.
Facilitating payments that are generally demanded y low level officials in exchange for providing a service that is ordinarily and commonly performed by the official. Apple strictly prohibits such payments but makes certain exceptions under conditions where there is an imminent threat to health or safety. Such. situations must be reported to the business conduct team immediately.
Apple Policies regarding Competition and Trade Practices
Competition and innovation both are the core of Apple's culture and DNA. The company vigorously competes to develop the very best products for its customers. Apple does not try to reduce or eliminate competition by forming illegal agreements with competitors. Globally, the agreements the company forms with competitors are subject to rigorous scrutiny. Apple's leadership position in the market also attracts additional scrutiny even its dealing with the distributors, resellers, and suppliers.
The employees must never do the following things:
- Agree with or exchange information with competitors regarding price, policies, contract terms, costs, inventories, marketing plans, capacity plans, or other competitively significant data.
- Agree with competitors to divide or assign sales territories, products, or dedicate customers.
- Agree with resellers on the resale pricing of Apple products without legal approval. Resellers are free to determine their own resale pricing.
- Violate fair bidding practices, including bidding quiet periods, or provide information to benefit one vendor over other vendors. (Apple Business Conduct Policy)
All these things can give rise to government investigation regarding anticompetitive practices and land Apple in legal disputes. So, Apple prohibits its employees from doing any of the above. However, antitrust and competition law is a complex area of law, and employees must consult the competition law team if they have a question. If an employee violates Apple's policies in this area, he may face disciplinary action and risk losing his employment at Apple.