Has the corporate's unethical behaviour really made some difference? (Blog 6) 30.11.2019

Has the corporate's unethical behaviour really made some difference? (Blog 6)

In this week's lecture, Dr. Binam use some interesting examples to explain some concepts of corporate ethics, such as corporate governance,  common ethical rationalizations and etc. We also  had a lots of discussion about these topics and concepts. But what makes me wonder is whether the unethical behaviour of the company really has an  impact on the stock price, on the performance of the company, whether it really has an impact on the purchase of consumers. Therefore I decide to make some research at two companies in this blog.

The basic contradiction about whether a company is ethical

First of all, in the author's opinion, there is basic contradiction in corporate ethics. Is the purpose of the company to make the society better or, as the author wrote in his original blog, to maximize the wealth of shareholders? In lecture, Dr. Binam also explain that, people who take a moral stance may appear immature. Those who oppose them seem clever and sophisticated. What is the purpose of business, or what an ethical company should look like? There is no consensus about when people talking these questions. But no matter whether a company conforms to the ethical standards, they all care about the corporate image. The existence of public relations department is a good proof. In lecture, Dr. Binam mentioned an concept called Customer Perceived Ethicality (CPE), it is a new stream of research, which aims at understanding and measuring how consumers perceive the level of ethicality embodied in objects relevant to their behaviour (Bezençon, 2014). The research of Chernev and Blair (2015) also state that, prosocial behaviour by corporate is enough to change product evaluation, even if consumers can directly observe and experience the product. On the contrary, does this prove that corporate unethical behaviour has a significant impact on consumer's perceptions of companies and even stock prices?

Apple's and Foxconn's unethical behaviours

The author chose Apple and Foxconn as the research objects. About Apple, the author selects that, The Chicago sun-times reported Thursday night that two Illinois residents wore the smartphone, ranging from an iPhone 5 to an iPhone 7, along with residents in Ohio, indiana and north Carolina. The filing said apple had taken a "deceptive, unethical and unethical" approach and that the update to iOS 10.2.1 was designed to "intentionally slow down or 'throttle down' the performance speed of the iPhone 5, iPhone 6 and iPhone 7." The filing alleges that apple violated consumer protection laws on deceptive business practices. What the filing doesn't mention is that the update prevents the iPhone 5s, iPhone 6 and iPhone SE from unexpectedly shutting down due to depleted battery chemicals. Batteries are considered expendable, and after apple's one-year warranty expires, or after AppleCare+ is purchased for the device, the user is responsible for the battery's state. The lawsuit alleges that apple deliberately imposed restrictions that forced users to buy new phones and "unnecessarily forced consumers to buy newer, more expensive iphones, when replacing the batteries would have allowed consumers to keep using older iphones." However, despite the claims, a $79 replacement battery actually keeps the device running at full speed.

In this case, I think it is an immoral act for Apple to force consumers to replace their iphones by reducing the frequency. 

However, when I looked up Apple's stock price before and after the event, I found that the stock price did not decline significantly, and even reached more higher as 180 in January 2018. 

Such share price trends make it clear that consumers or investors will choose the corporate that is most profitable for them, even if the corporate is behaving unethically.

Then there is Foxconn, according to the BBC news (2011), The observer, a left-leaning British newspaper, ran a front-page investigation on May 1st alleging that Foxconn, a big electronics maker that makes smartphones such as the iPhone and ipads for apple, USES its workers as "machines". More than half a million Foxconn employees in the Chinese cities of shenzhen and chengdu survive "unusually" long hours and "harsh" management practices, the report said, citing research by two international ngos. The report also said Foxconn had "forced" employees to sign a pledge not to commit suicide. The report cites some instances where Foxconn employees put in as many as 98 hours of overtime per month on their payroll. Other examples include workers at a factory in chengdu who say they have a day off every two weeks and some places where a room in a staff dormitory sleeps 24 people.

This is also a very bad unethical case of labour exploitation, but I checked Foxconn's stock price before and after the 2011 incident, it shows that Foxconn's share price has not been affected by the negative news, even reaching its peak in 2011, even though it has attracted huge attention from human rights groups in China and around the world.

The author think that these two tables show some obvious choices.

Conclusion and personal opinion

According to the stock price after the two companies to make unethical behaviour, the author concluded that, although in many street interviews, people do not stingy your criticism and condemnation for unethical businesses, but obviously the performance of share proces, most consumers, investors will choose these they are profitable company, it depends on many aspects, such as Apple high-quality product and customer service, Foxconn's cheaper price and etc.

In author's opinion, there is no such thing as a completely ethical company, unless the purpose of the company is not to make a profit, and I think people should look at whether they can make a proper choice after the unethical behaviour of the company before evaluating whether the company is ethical. At the same time, I think the most intuitive and easy to investigate is whether an corporate is ethical in terms of its contribution to the surrounding community.

References

BBC news. (2011). British media: foxconn employees suffer "inhuman" treatment. Retrieved 30 November 2019, from https://www.bbc.com/zhongwen/simp/world/2011/05/110501_ipad_china_media

Bezençon V. (2014) Consumer Perceived Ethicality of Products, Categories, Brands and Countries: A Networked Perspective. Retrieved 30 November 2019, from https://link.springer.com/chapter/10.1007/978-3-319-10951-0_197

Chernev, A., & Blair, S. (2015). Doing Well by Doing Good: The Benevolent Halo of Corporate Social Responsibility. Journal Of Consumer Research, 41(6), 1412-1425. doi: 10.1086/680089