Corporate governance then enables companies to figure out the framework to carry out action plans, internal controls, performance record, and corporate disclosure, to finally run productively to boost sales and revenue. Since 2013, Apple has first broken the record of the leading market position of Coca-Cola and ranks first on the list of the world’s largest companies in 2018 with a market value of 961.3 billion U.S. dollars (Statista.com, 2019). “Think Different”, the slogan “The Most Innovative Corporation” - Apple for 11 years is the most outstanding example for the priority of large technology incorporations towards innovation. And to get this amazing achievement, Apple''s corporate governance mechanism is regarded as one of the most efficient example for other companies.
APPLE CORPORATE CULTURE – THE KEY SECRET *** Task: Please select a company and conduct an external review and analysis of its corporate governance mechanisms What are the strengths and weaknesses in the company's corporate governance mechanisms? Why are they strengths and weaknesses? What changes could be made to improve the company's corporate governance? Please fully explain why the changes should be made and how your ideas for change would be good for the company's stakeholders Word limit: 1600 words ************************************************************************** Answer: I Introduction Corporate governance mechanism refers to the system and rules used by a corporation to operate its business and direct the senior management towards employees in order to function effectively (Mohamad, 2004) It is also the efficient management to balance the interests of stakeholders including suppliers, investors, employees, and even the government (Choughri, 2018) Corporate governance then enables companies to figure out the framework to carry out action plans, internal controls, performance record, and corporate disclosure, to finally run productively to boost sales and revenue Since 2013, Apple has first broken the record of the leading market position of Coca-Cola and ranks first on the list of the world’s largest companies in 2018 with a market value of 961.3 billion U.S dollars (Statista.com, 2019) “Think Different”, the slogan “The Most Innovative Corporation” - Apple for 11 years is the most outstanding example for the priority of large technology incorporations towards innovation And to get this amazing achievement, Apple's corporate governance mechanism is regarded as one of the most efficient example for other companies However, several of the governance issues are noticed as well (Waters and Menn, 2009) II Apple's Corporate Governance Evaluation II.1 Relations with Executive Leadership II.1.1 Board of Directors (BoD) Apple consists of single unitary board of directors with executive and nonexecutive directors directors who are currently appointed, are well-qualified with strong leadership skills and great vision Tim Cook, Al Gore, Robert Iger, Andrea Jung, William Campbell, Arthur Levinson, Mildred Drexler, and Ronald Sugar are supposed to serve for one year each, subject to reelection with the selection process guidelines (Investor Apple, 2014) However, the rules relating to the board members' qualities above are not strictly followed as most of the board members are engaged in numerous companies, which poses the imminent risk of interest conflicts among stakeholders For instance, Mr Levinson and Mr Schmidt were board members of two biggest tech giants - Apple and Google Inc It was only the US Federal Trade Commission's intervention in 2009 that resulted in their resignation from one of the corporations Levinson resigned from Google while Schmidt resigned from Apple (Waters and Menn, 2009) And it is the Clayton Antitrust Act breach for a person to be a board of director for two rivalry companies in conflicting interests (Federal Trade Commission, n.d.) The gender imbalance in Apple’s board members has been heavily criticized among various entities, including its shareholders as Satariano (2014) stated that no single woman has ever been appointed to Apple’s board of directors for a long time Apple’s CEOs, from the founder Steve Jobs, have also been blamed for the dogmatic approach to decision-making process in board meetings II.1.2 Board Management Committees The Audit & Finance Committee and the Nominating & Corporate Governance Committee are two cores of Board of Directors committees Apple's Audit & Finance Committee is an independent committee with the NASDAQ structure It is to review financial information to stakeholders, to appoint auditors for Apple, and evaluate the company’s accounting policies (Apple, n.d.) Meanwhile, the Nominating & Corporate Governance Committee oversees the board members appointment and succession planning The great harmony of CEO and major stakeholders will manipulate the operations of these committees Apple's decision to change their external auditors from KPMG to Ernst and Young in 2009 was extremely controversial, for example It resulted in a fierce debate between Apple's CEO and KPMG's directors II.1.3 Executive and Non-executive Remuneration Apple's executive remuneration witnessed massive criticism (Fortt, 2013) Apple used to pay its members via stocks and bonuses Apple's CEO and board directors receive the home hefty salaries, and allowances or stock bonuses based on their achievement This policy was criticized when it created disparities in the stock distribution and influenced company's major appointments as a result The executive and nonexecutive pay rates also state the massive inequality According to Shapiro (2012), board members and top executives (about 50) earn over 80% than what the nonexecutive employees (about 150,000) over the same period Moreover, in 2011, Apple's chief executives received over $440 million in net compensation, which is the same amount as the compensation received by 95,000 employees at Apple’s Foxconn manufacturing department This unfairness must be improved I.2 Relationships with Shareholders Apple as a private limited corporation is owned by active shareholders through mutual fund ownership schemes The annual general meeting with all shareholders plays a dominant role of electing members to form the board of directors, address all the shareholders' problems and propose solutions and strategy for the next one year (Investor Apple, 2014) The active engagement of Apple’s shareholders in compensation schemes has been pushing the top management over transparency and led to the recent positive movement lowering the compensation disparities gap between the board managers and employees Especially, the strong Apple’s shareholders' participation in corporate affairs has enhanced the superior performance in Apple's stock market in the last two decades (Carnette, 2015) Apart from some controversies arising from compensation schemes, the good relationship between executive managers and shareholders is considered to be one of the secrets for Apple's excellent performance as the market leader in technology II.3 Relationships with Stakeholders Apple’s relationship with its shareholders is great, and it is the same case with Apple's stakeholders with its balanced interests among stakeholders (Carnette, 2015) Apple's stakeholders include the government suppliers, other investors, employees, and customers Apple's employees were found to be delight with the working environment and its promotions despite few compensation complaints (Colley, 2003) Strategic investors also benefit from the positive influence on their business affairs The fact that Apple's customers are satisfied and even proud of Apple's products reflects Apple's strong brand identity and customers' loyalty Iphone, Macbook or Apple watch and Ipod are actually expensive, but their launch is always such a hit to Apple fans - they can book in advance or queue from the midnight to be first customers having the latest products Iphone 11 launch on September 10, 2019 has got the huge attention from customers Thus the secret towards high sales revenue is also on how Apple captures and retains a really good relationship with its stakeholders III Corporate Social Responsibility (CSR) Policy In today's socially higher conscious environment, staff and customers wish to working for and spending on corporate-social-responsibility (CSR)-oriented companies (S Asemah et al., 2013) CSR is a critical business practice incorporating the sustainable development into the business model in order to foster positive influence on social, economic and environmental factors (Yee, 2012) Apple has come under much criticism in its outsourcing production operations, which concerned stakeholders, including the EU (European Commission, 2016) The operations of Foxconn, Apple’s Chinese manufacturer, was not in compliance with its supplier conduct code received criticism Low salary and dangerous working conditions with high hazardous chemicals in the laboratory at Foxconn led to the increasing number of accidents and suicide attempts This is unfair in the world's largest factory Apple’s CSR policy towards environment has also been heavily criticized as its approach has been regarded as reactive instead of proactive to mitigate the damage released to the environment (Burrows and Hesseldahl, 2009) such as no recycling facilities for old computers in most countries or toxic chemicals used in its production To deal with the criticism, recycling campaigns and plants in various countries have been initiated and modern technology to reduce carbon emissions has been invested heavily Or Apple's recent claims of tax evasion was about to €30 billion from Ireland government, which is unethical (European Commission, 2016) Therefore, Apple’s CSR should be reviewed IV Recommendations for Apple Improvements IV.1 For Internal Structure Apple has become the market leader in technology sector Decisions made by all directors are critical to a business's success (Carnette, 2015) As mentioned Apple should dismantle the dogmatic approach from the CEO and foster higher engagement among its board members, shareholders and employees in decision-making culture It can be seen that cognitive, motivational and social processes via the mutual understanding and teamwork are three key factors leading to the successful encouragement of creativity and innovation in organizational level (Paulus et al., 2012) Team collaboration enables companies to generate solutions via different methods like combining or elaborating on ideas, to reduce group motivational losses or to share generated ideas, collaborate problem-solving or engage in social comparison to figure out the optimum choice Apple should train and appoint more women to board of management to minimize gender imbalance as well Annual general meeting should deliberate feasible solutions and detailed policies to enhance the harmony among Board Management Committees and reduce the gap between Executive and Non-executive departments Pay raises and compensation to executives must be based on a consensus of stakeholders A system for shareholders to follow and report on compensation should be established to foster the transparency and to lower the inequalities in compensation activities IV.2 For Stakeholders & Apple's CSR Apple did well with a strong relationship with stakeholders, especially customer loyalty (Viswanathan, 2018) However, Apple’s CSR is not comparable to the role of a consumer electronics and cloud computing sectors leader Apple should revise its CSR policy, especially relating to the operations in Foxconn and tax evasion in Ireland The company should carry out the environment matrix to reduce the emission released and contribute to the sustainable development or "going green" Apple should deal with problems immediately as more criticism on deplorable working conditions and low salary at Foxconn and wrong environmental approaches threaten Apple's image considerably V Conclusions In brief, Apple's triumph demonstrates its effective operation and innovation Its relationship with shareholders and stakeholders is excellent, but the main concern on corporate governance is the high central decision-making process and CSR policy Apple should confront with these issues efficiently to encourage the stimulating working environment and transparency among shareholders and to enable the corporate social responsibility to be more responsive to the society's demands Word count: 1,646 words References Apple (2015) Apple Reports Record Fourth Quarter Results [online] Available at: 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[online] Lifewire Available at: https://www.lifewire.com/what-makes -apple- so-special -and- desirable-2373223... benefit from the positive influence on their business affairs The fact that Apple' s customers are satisfied and even proud of Apple' s products reflects Apple' s strong brand identity and customers'