Apple's big bet on consumer trust and privacy

The Apple Watch understandably took the limelight at Apple's big launch event today. But what is becoming increasingly clear is that to really understand the company we need to see it as so much more than simply a technology company. And we have to look beyond its products, however alluring they might be.

Nowhere is this more evident than in the area of corporate responsibility. For much of the past few years, the corporate responsibility community has been focusing hard on Apple's product supply chain. And for good reason, with a spate of labour violations plaguing the company (most recently from the BBC in December last year) despite some impressive commitments to responsible sourcing. But with the launch of the Apple Watch and its extended capabilities for health monitoring, research and diagnosis, along with the rapid growth of its Apple Pay system, it is the company's capabilities in data management and security that will likely define its reputation for corporate responsibility over the next decade.

As Tim Crook noted at the launch, the Apple Watch is "the most personal product we've ever made". It is not only wearable but collects real time data on users' health and fitness, enables them to make contactless payment direct from their financial services provider, and provides the possibility for a host of other applications relying on personal data. Keeping all of this data private and secure is going to be a big test for the company. Their success now will rely just as much on maintaining the trust of their consumers as it will on wowing them with cool new gadgets.

Apple is not alone in this of course. Other technology companies such as Facebook, Sony, Microsoft and Google have already learnt to their cost the necessity for maintaining the confidence of their customers in terms of privacy and security. Apple has had its own scares with breaches of its iCloud service, but its exposure to data security risks are only going to accelerate now that it is going increasingly personal. Apple is now not just in the technology industry but also in financial services and health services where the privacy and security concerns are accentuated even further.

Apple is making a big bet on consumer trust because it has a strong reputation for digital security already (say, compared to Microsoft) and it has less of the challenges in managing privacy compared to some of its others competitors. This is because it does not rely on ad revenue (and therefore intimate knowledge of its consumers) to drive profitability, unlike say, Google and Facebook. So it is already out ahead in many important respects. Whether it can maintain that pole position will remain to be seen. But what is clear is that Apple's reputation for corporate responsibility, and indeed its success in personal devices and services more generally, will increasingly be won and lost in the area of consumer trust and privacy rather than product design and execution alone.

Image copyright Martin Hajek. Reproduced under Creative Commons Licence. 

How Apple and Facebook have taken gender discrimination to a new level

Over the last week or so we have seen a vibrant debate unfolding after the announcement of Apple and Facebook’s latest benefit: Female employees can store and freeze their eggs on the company’s dime so that they can postpone pregnancy beyond the phase where they might want to just focus on their careers.

I put the case up for debate in my undergraduate classes on business ethics this week. It was a fascinating experience. To start, we assessed the upshot. There is a surge of female professionals who attempt at pregnancy in their forties and thus a surge in in-vitro fertilization and a host of other avenues to late motherhood luckily provided by progress in obstetrics these days. But there is also a fair number of women who just have to suck it up that by the time they can put their head around having babies, that ship has sailed.

Here, such an offer seems to be a big benefit. You can progress in an environment where your commitment to the job is 24/7 – like your male colleagues – and still enjoy motherhood at a later stage. And your babies will be built out of genetic material that is as good as it would have been had you dared at the impossible of merging both, career and motherhood. This policy indeed provides women with more options, more choice to freely decide what to do with their lives, their careers and their aspirations at the personal level.

But upon further scrutiny, my students unearthed three major problems. The first is fairly obvious: what is offered as an ‘option’ by the company may quickly become the ‘default’. What will happen now at Google if a 32 year old women tells her boss she wants to go on maternity leave? Given the options, she makes a statement clear and loud that she prefers her personal priorities over the company’s. In organizations, rules prescribe roles. This new option potentially excludes motherhood from what a ‘high potential’, future executive at Google should prioritize in her most fertile years.

A second focus of discussion turned out to unveil the unsaid. What about the male role in child bearing and rearing? The tacit assumption of such a policy seems to be that not a single of Apple or Facebook’s male employees will ever need similar help or support in his career because of having children. In some ways then the policy just reflects rather problematic gender stereotypes: mothers get distracted from their careers by having children; fathers just carry on as if nothing has happened. Yes, there are different biological constraints on women; but having and rearing a child also totally involves the father – unless he is a complete moron (or Google and Facebook’s model employee?). Fair enough, Facebook also extends an option to male employees to freeze their sperms: after all, a significant threat to post-40 pregnancy is not the female egg, but increasingly the deterioration of male sperm at that age. But the message is the same: postpone that baby business!

Which leads to a third objection which cuts to a deeper level. The age between 25 and 35 for a woman is the phase where biologically motherhood is the most likely. It is also the phase where most women are at the prime of their adulthood: mature enough to make tough life choices on partners and lifestyles, but also vibrant and physically energetic enough to dedicate full energy to their pursuits. By offering this option, aren’t Apple and Facebook just saying: ‘Give us the best years of your life, your kids can put up with whatever is left of you at a later stage’?

One of my students put it more bluntly: ‘If you translated this policy to other forms of discrimination in the workplace, such as racial discrimination, this would amount to saying to black people: “Look, you are very welcome here, but just to make it easier, we offer you this cream that will make your skin as white as everybody else’s here.”’ This new benefit essentially offers to a woman to be just like her male colleagues, happily stripped of all her female ‘impediments’. In some ways, that is gender discrimination at its worst.

Apple and Facebook deserve praise to recognize a common and pressing problem. Admittedly, they have policies regarding maternity benefits and childcare that are better than most other American companies. But the moral imagination they applied to this particular solution falls short of the creativity that made them billion dollar companies. If they are willing to throw $20,000 at the problem, why not offer more choice to both female and male employees? The women  (and men) contributing to the company are not just ‘human resources’ ready for maximum exploitation.

DM

Artwork by Keoni Kabral, reproduced under the Creative Commons License.

Top 10 corporate responsibility stories of 2013

Plus ça change in corporate responsibility. If nothing else, 2013 provided ample evidence that, contrary to popular belief, corporate responsibility issues, even the huge stories that dominate the media, do not exactly come out of nowhere. So many of the top CR stories of the year, like the Rana Plaza disaster, Apple's tax problems, and JP Morgan's huge fine, were already prefaced by the big stories of the previous year. Among our top 10 of 2012 were a Bangladesh factory fire, corporate tax avoidance, criticism of tech companies, and prosecutions in the financial sector. So the writing was already on the wall for most of the big stories of 2013. It would appear, as Ethical Corporation editor Toby Webb said recently, that with all the excitement about new opportunities and win-wins, companies are underestimating the importance of sound ethical risk management in the corporate responsibility equation. So, if you want to know what CR risks lie ahead for 2014, you could do worse than checking through our list of the big stories of 2013.

1. Rana Plaza building collapse
Back in April 2013, more than 1100 people, mostly garment workers, died when the Rana Plaza building collapsed near Dhaka in Bangladesh. It was probably the single worst garment factory disaster yet, in an industry that has suffered more than its fair share of needless fatalities. But Bangladesh had already seen a series of major industrial accidents leading up to Rana Plaza, which had been met with little tangible response from business and government leaders. Rana Plaza looks to have at last changed that. The Accord on Fire and Building Safety in Bangladesh, signed by nearly 100 global retailers, as well as labour unions and NGOs is a legally binding agreement to ensure worker safety through independent factory inspections, mandatory repairs, financial support, and sanctions for noncompliance. More than 2m vulnerable Bangladeshi garment workers are already covered by the Accord. A competing agreement, signed by Walmart, Gap, Target and other North American companies was criticized for having weaker enforcement and failing to involve labor unions. Nonetheless, both pacts are evidence that factory safety in Bangladesh is finally getting the concerted attention it deserves.

2. Apple's tax avoidance
Corporate tax avoidance had been a growing story in the UK and elsewhere prior to 2013, as evidenced by our top stories listing of 2012. But the issue exploded onto the public consciousness when Apple's CEO Tim Cook was forced to testify to a Senate committee in Washington back in May of this year. The company had avoided paying literally billions of dollars in tax by exploiting various loopholes in international tax treaties and funnelling its European profits through a shell company in Ireland. All completely legal, of course, but hardly what the public expects of a good corporate citizen. Now that attention to corporate tax avoidance has gone global, and with inequality and government debt the two biggest global risks today, the obvious questions are which country will be next in taking aim and which company will be in the firing line? Corporate tax reform is also undoubtedly going to loom even larger in the coming year.

3. NSA spying
Without doubt, Edward Snowden's whistleblowing on the US National Security Agency's (NSA) mass surveillance programs was the story of 2013. Nothing else even got close. However, the corporate responsibility dimensions still remain somewhat murky, which is why it doesn't quite make it to the top of our list. We do know, however, that telecoms companies like Verizon are required to hand over all call records  (or "metadata") to the NSA about cell phone calls made in the US. We also know that none of these companies ever sought to challenge the legality of the action. Another revelation was that the secret PRISM spying program allows the NSA to tap into the servers of internet companies like Google and Microsoft to access customer data. We also know that NSA pays millions of dollars to these same companies. We do not yet know exactly how complicit tech companies have been in the whole mess but one thing for sure is that they now realize that the NSA spying story is undermining their customers' trust and are calling for government reform. Expect much more to come in 2014.

4. JP Morgan's $13bn misconduct settlement
Our annual list of major corporate responsibility stories would not be complete without an entry from the finance industry. As we predicted at the beginning of the year, 2013 was marked by the return of government and some major financial sector scalps. None of these was bigger than the whopping $13bn fine landed on JP Morgan for misleading investors in the same of mortgage backed securities in the lead-up to the financial crisis. To date, it is the settlement ever between the US government and a corporation, and will come as some (though probably not enough) relief to those who have viewed most of the finance sector giants as getting away with the crisis relatively unscathed. On the other hand, JP Morgan is probably pretty sore about catching the flack for misconduct that was less about their own practices and more down to firms like Bear Stearns that they were encouraged by the US government to acquire at the height of the meltdown. No one comes out of this looking good.

5. Europe's horse meat scandal
At the beginning of the year, the big news was all about horse meat turning up in products it wasn't supposed to be in. Like those clearly labelled as "beef". The scandal started in the UK, quickly spread to a suspect supplier in Ireland, and soon rocked much of Europe. Customer trust rapidly evaporated as it became clear that effective oversight of the food industry was sorely lacking. Companies acted quickly to withdraw potentially contaminated products and shore up confidence but further revelations of large scale criminal activity in the food supply chain will do little to restore trust in a thoroughly compromised industry.

6. India's new CSR law
The world's largest democracy now has the world's most extensive CSR legislation. But that is not necessarily a good thing. Under the new Companies Act, passed by the Indian Parliament in August 2013, large Indian companies must spend at least 2 per cent of their net profits on CSR each year from 2014 onwards. It also requires firms to set up a CSR board committee and institute a CSR policy. The new CSR legislation has met with a mixed reaction, especially as it seems to institutionalize a somewhat backward looking approach to CSR which emphasizes philanthropic giving whilst ignoring the core strategic business of the firm. It will also be incredibly hard to enforce in a country already hamstrung by an overburdened legal system. On the plus side, the legislation does force many of India's laggard companies to finally take some responsibility for the various social problems faced by the country's citizens. For better or worse, CSR is no longer something that can be ignored in India.

7. Chevron's Ecuador pollution case
It has been a big year for Chevron and Ecuador in their long-running, aggressively-fought pollution case. In November, the Ecuadorean high court made its long-awaited appeal decision which upheld the original 2011 judgement requiring Chevron to pay $9bn to compensate for contaminating the rainforest during crude oil extraction over two decades ago. Chevron has never operated in Ecuador but inherited the lawsuit and its toxic legacy when it took over Texaco, the original operator, in 2001. For its part Chevron continues to dispute the legality of the ruling and has refused to pay. The appeal was at least partially successful for Chevron by halving the original $18bn damages bill, but not in overturning the decision. Chevron is now awaiting the outcome of a counter-suit heard last month in the US against the plaintiff's main lawyer, who the company claims engaged in bribery and fraud to secure the conviction. Meanwhile, attempts by the plaintiffs to seize Chevron's assets overseas to pay the fine also had their ups and downs in 2013. For example, Canada first denied them the rights of enforcement in May, only for a judge to overturn the decision on appeal in December. Other actions are underway in Brazil and Argentina. This has fast turned into a test not only of the Ecuadorean legal system, but of the global legal system's appetite to prosecute international legacy corporate responsibility issues.

8. Rosia Montana mining protests 
2013 saw major protests against mining operations all over the world, including Australia, Canada, Columbia, Greece, Niger, Peru, even Tibet. But the biggest of the lot was probably in Romania, which saw a mass protest movement arise in response to plans to mine around the town of Rosia Montana. If approved, it would be Europe's largest gold mine but critics claim that it would inflict untold social, environmental and cultural damage. Mass street protests erupted after the government proposed a new law that would enable the Rosia Montana Gold Corporation (majority owned by the Canadian mining company Gabriel Resources) to finally start operations after years of failing to acquire the necessary environmental permits. At stake here then is not just the proposed mine but the legitimacy of the democratic process, which protesters feel has been fatally undermined by the hastily forced through legislation. As one protester put it: "People today confront a corrupted political class backed up by a corporation and a sold out media; and they ask for an improved democratic process, for adding a participatory democracy dimension to traditional democratic mechanisms."

 9. New UN Global Compact 100 Index
There were several entrants to the new corporate responsibility standards and guidelines category in 2013, with the G4 guidelines of the Global Reporting Initiative probably being the most talked about. But September's launch of the Global Compact's new stock market index, the Global Compact 100, for us represented the most significant development. First, as John Entine noted, it offered a welcome new development in a social investing field "hungry for innovation and dogged by ideological correctness". But more than that it showed just how far the UN was willing to push the needle on its voluntary approach to corporate responsibility that heavily prioritizes incentives rather than enforcement. While many are still criticizing the Global Compact for not having sharp enough teeth to weed out laggards and green washers, the new index makes it abundantly clear that the UNGC is moving in a very different direction. Ten years ago it would still have been unthinkable, but the reality is that the UN is no longer just in the business of accords, declarations, and principles but is now also firmly in the finance industry.

10. South Korea's nuclear corruption scandal
GSK's corruption scandal in China may have got most of the headlines, but in our book, the corruption scandal that has engulfed South Korea's nuclear industry this year tops it for potential impact. Two short years after Japan's Fukishima disaster, neighbouring South Korea is also facing a devastating loss of confidence in its nuclear industry which supplies about a third of the country's energy needs. The scandal has centred on a swathe of faked safety certificates that have been issued for critical nuclear reactor parts over the years, and the bribes that have allegedly been paid to look the other way. Most commentators pin the blame on the closed structure of the nuclear industry in South Korea with only a single national operator and close ties between the operator, suppliers and testing companies. The prime minister has likened the industry to the mafia. A number of reactors have been shut down, trust in the industry has plummeted, a national energy shortage is underway, and now some 100 officials have been indicted for their part in the scandal. Corruption that compromises the safety of the nuclear industry is probably about as bad as it gets. And its unclear yet whether South Korea can really turn this one around.

Photo by rijans. Reproduced under Creative Commons licence

A sneak peek at the new edition of our CSR textbook

The new second edition of our textbook, Corporate Social Responsibility: Readings and Cases in a Global Context is due out a little later this year. Above is a first look at the cover, featuring a shot by Lucas Schifres of workers crimping stones on silver in a jewelry factory in Panyu, Guangzhou Province, China.

The photo is part of Schifres' Faces of Made in China series, which was featured on the New York Times "Lens" blog last year. The purpose of the series is to "consider the otherwise anonymous people who produce our essential possessions ...to put a face to labor in China". Whilst most of the photos in the series are simple portraits of Chinese workers, the cover shot shows more of the context in which Chinese-made goods are manufactured.

Schifres didn't only photograph the workers but also interviewed them too. One of the more surprising things he found was, despite concerns from the West about the social responsibility issues evident in many Chinese factories (as exemplified by the Foxconn/Apple controversies of the last few years) they actually found a real sense of pride among workers. As the NYT blog reports Schifres saying, "The answer was always, ‘Oh, we’re very proud; we’re happy that the products go all around the world' ... ‘This is good for China; this is good for our generation.’” “They have absolutely no idea about controversies around the world about the Made in China products,” he said.

This for us captures one of the central questions in CSR - i.e. what exactly is responsible corporate behavior in a global context? Different parts of world have different rules, standards, and expectations concerning social responsibility, but global corporations have to traverse this variety in developing their programmes and need to ensure that their global supply chains meet acceptable standards for working conditions, environmental impacts and other social considerations.

These and many other issues are covered in the book. It's designed for Masters students and advanced undergraduates studying Corporate Social Responsibility courses. The new edition will feature all new cases  (on Vodafone, HSBC and Tata), many new readings, and fully updated editorial content from ourselves and our co-editor Laura Spence. It's also going to have a great new companion website with all sorts of materials for students and instructors. We'll provide more details soon. The book will be out in the summer.

UPDATE
The book is now published. See our post on this and the new free download of Chapter 1

Top 10 Corporate Responsibility Stories of 2012

This year may have lacked the huge catastrophes that have dominated the corporate responsibility headlines of the last couple of years (such as BP's oil spill in 2010 or TEPCO's nuclear disaster at Fukushima in 2011), but 2012 has probably been more packed with serious incidents than any of the previous years. We had real trouble putting these in any kind of order and even getting down to just a top 10 of big stories was tough  - and meant we had to jettison a few favoured good news stories about corporate responsibility just to be able to capture all of the bad news. So it nearly became the Top 15 Corporate Irresponsibility Stories of 2012. But in keeping with tradition, here's our view of the top 10 of the highlights and lowlights of a jam-packed year of corporate responsibility stories. And if you think we've got it wrong, or want to change up the order a bit, do add your comments below.

1. Apple's supply chain odyssey
If there is one thing that seems to be guaranteed now, it's that the tech giants will be at the forefront of the corporate responsibility agenda for the forseeable future. If nothing else, it's simply a function of their size, power and ubiquity. In 2010 we had Google facing human rights issues in China; last year was Facebook's privacy battles. And this year, Apple's ongoing supply chain issues really exploded into the public consciousness, thanks in part to the New York Times stories that kicked off the year. Worker suicides, factory fires, poor labour conditions - none of this was exactly new, but one way or another 2012 saw Apple take over from Nike (and tech take over apparel) as the poster child of inhumane supply chains. Apple reacted fast once the tide had turned, but for many it was too little, too late. Even their own internal audits provided evidence of widespread breaches of their policy. As the bad news rolled in, the company that so-often seemed immune to criticism started to show signs of serious reform. Instead of secrecy, it started moving towards greater transparency, joined the Fair Labor Association and initiated third party inspections, and now reports monthly on the working hours of over a million workers. In what may turn out to be the most significant move yet, the company has begun manufacturing some of its Macs not in China, but in the US.

2. The LIBOR scandal
2012 was a bad year for a finance sector that seems increasingly incapable of holding onto whatever public trust is left after the financial crisis and its aftermath. Whilst the US regulators' continued clampdown on insider trading gained yet more scalps, most prominently former McKinsey head Rajat Gupta, it was the arcane field of inter-bank lending rates that dominated the financial front pages. Most of us probably didn't even know what a LIBOR was until this year, but revelations of deliberate fixing of interest rates among major banks in Europe during the late 2000s means that we all now know more than we want to. First, the CEO of Barclays was forced to resign in the wake of investigations by UK regulators. Now, the Swiss bank UBS has agreed to pay $1.5bn in fines to the Swiss, UK, and US regulators for manipulation of interest rates that according to Britain’s Financial Service Authority, was so “routine and widespread” that “every LIBOR and EURIBOR submission, in currencies and tenors in which UBS traded during the relevant period, was at risk of having been improperly influenced to benefit derivatives trading positions.” Investigations continue, and it is clear that other banks and possibly brokerages will be drawn into the fray. Perhaps the major legacy of the scandal though will be the startling picture it has provided us of the "horribly rotten, comically stupid" alternate moral universe that traders inhabit.

3. HSBC's money laundering fine
If the LIBOR scandal wasn't enough, HSBC's record breaking $1.9bn settlement with US regulators for money laundering in Mexico really capped a year that demonstrated how readily financial services companies could deliberately flout the rule of law, and bypass their own control systems with impunity. The HSBC settlement followed similar (though smaller) money laundering settlements against foreign banks including ING and Credit Suisse. What was particularly remarkable with HSBC was the fact that despite having strong evidence the authorities elected not to indict the bank out of fears of possible financial collapse.  The message? Four years on from the financial meltdown, some financial institutions are still too big to fail ... but their licence to operate looks increasingly at risk.

4. Bangladesh factory fire
The death of 112 workers in the Tazreen fashions factory fire of November marked probably the saddest moment for corporate responsibility in 2012. It also provided a powerful reminder that the global apparel industry still had not got its house in order regarding working conditions in the product supply chain, despite two decades  of codes of conduct and factory audits. Tazreen was making clothes for global brands such as Wal-Mart and Sears, who remarkably did not even know that their products were being manufactured there. All in all, a devastating wake-up call for the world of supply chain monitoring.

5. Lonmin mine shootings
Described by the BBC as the bleakest moment faced by South Africa since the end of Apartheid, the shooting of 34 striking miners by police at the Lonmin Marikana platinum mine demonstrated the escalating difficulties of doing business in the global mining industry and in an increasingly fractious South Africa in particular. Lonmin tried to remain above the security crisis, which in total claimed some 44 lives, but a company that not so long ago had the highest CEO:average worker pay gap on the FT 100, operating in one of the most unequal countries on the planet was bound to breed resentment.  Unfortunately the more fundamental reform required to significantly ease the tensions at Marikana looks unlikely.

6. Wal-Mart's Mexican corruption scandal
Wal-Mart wasn't the only company put under the corruption microscope in 2012. Canadian engineering firm SNC Lavalin, among others, was another high profile casualty of increased vigilance among national prosecutors. But the Wal-Mart de Mexico story makes it into our top ten a) because it marked such a sudden reversal of fortune for the company after its much vaunted CSR makeover of the past few years; b) because retail, unlike construction, is rarely a site for major bribery.  Many of the facts are still to come out, but a devastating investigation by the New York Times points to Wal-Mart's Mexican business being a "an aggressive and creative corrupter", systematically using bribery to obtain store permits for its rapid expansion and subverting democratic processes and regulatory safeguards in the process. Critically, the company was also found to have deliberately hushed-up the problem to protect its burgeoning reputation, closing down an internal investigation in 2006, and failing to report any of the illicit payments to the authorities. Suddenly all those nice sustainability initiatives don't look quite so pretty.

7. The BBC's Newsnight sex abuse fiasco
With the fallout of the News International phone hacking scandal still very much a part of the UK media landscape, the last thing the sector needed was a scandal at the most trusted media organization of them all, the BBC. But when the 2011 decision to terminate a Newsnight investigation into sex abuse claims against the recently deceased, former BBC presenter Jimmy Saville came to light this year, it because clear that something was wrong at the redoubtable British media organization. It was left to a rival broadcaster to finally break a story that has since become probably the largest serial sex abuse case in UK history. The BBC then spiraled further into disaster when Newsnight broadcast sex abuse claims against an unnamed senior establishment figure that were very quickly discovered to be untrue. The Director General of the BBC resigned amid the panic and confusion whilst a subsequent report into the BBCs handling of the Saville investigation labelled the organization "incapable and chaotic" with a culture of distrust. It's better than "immoral and deceitful", but hardly a ringing endorsement of responsible management.

8. Starbucks' "voluntary" tax payment.
After bubbling away for a few years, 2012 was really the year that tax justice broke into the mainstream consciousness. Campaigners have targeted various companies over the years, but when the spotlight fell on Starbucks, along with Amazon and Google, for their failure to pay tax on millions of dollars of profits in the UK, activists, politicians and consumers called for change. Not that any one suggested that any of the companies had broken the law, merely that such aggressive tax avoidance didn't align with many people's conceptions of fair play. Starbucks' offer to make a "voluntary" payment of $30m to make up for the shortfall suggested that they could read the message in the coffee grinds about where the debate was headed - towards greater expectations placed on companies to be "good citizens". But clearly the onus is also on politicians to beef up the rules ... rather than just criticize companies who are able to take advantage of their shortcomings.

9.  The Super PAC election
The US election was one of the big news stories of the year, and one of the main corporate responsibility issues swirling around the election was about the role of corporate money in politics. This was the first US national election since the 2010 Citizens United legislation which effectively removed any cap on political donations by companies. No surprise then that the election was the most expensive in history with corporate money aggressively channelled to candidates through super PACs (political action committees). Even though this was expected to benefit former hedge fund boss Mitt Romney, Obama came out ahead, perhaps demonstrating that money can't always buy elections. But when even the Harvard Business Review blog starts carping on about getting corporate money out of politics, you know that a tipping point could be fast approaching.

10. BP oil spill aftershocks
Just because it was our no.1 story two years ago, that doesn't mean the BP oil spill isn't still telling us something new about corporate responsibility. This year, we saw the company slapped with a record $4.5bn fine from the US Justice Department after it admitted to criminal responsibility for the explosion that led to 11 deaths on the Deepwater Horizon well. The company could still face a bigger fine following a civil suit for the damages caused by environmental pollution. But maybe the most significant aftershock of the spill was the decision by the US Environmental Protection Agency to suspend BP from bidding for federal contracts over their "lack of business integrity". Although it's still unclear how long the suspension will last, this suggests a potentially significant shift in the government's strategy for dealing with irresponsible companies. Or maybe it just means that BP didn't get its lobbying strategy right!


Photo copyright meteo. Reproduced under Creative Commons Licence

What the hype around Steve Jobs really says about us

Let me confess this right upfront: I have never been an avid user of Apple’s products. I briefly owned an iPod in the mid 2000s but when it fell into my toilet (true!) one day I didn't really miss it. So writing about Steve Jobs this week feels a little like an atheist writing an obituary for the pope.

This said though, the remarkable expressions of sympathy for Steve Jobs’ untimely death wasn’t lost on me. They are extraordinary in number (2.5m tweets in the first 13 hours), source (e.g. Obama) and nature. It all reminds me a little of what happened when Princess Diana or JFK died, I guess. The question here of course is: what is it that causes millions of people to respond so emotionally and affectionately to the death of this business tycoon?

It is obvious that most of the usual features of these icons of popular culture do not really apply to Jobs. He was hardly a charismatic business leader with big PR value such as Richard Branson (Virgin) or Jack Welch (GE). In fact, many of his co-workers actually describe him as rather awkward and geeky in personal interactions. It also can’t be his generosity to society which has given business leaders such as Bill Gates or Warren Buffet some more charisma these days: up to now Steve Jobs has only engaged rather reluctantly in charity and so far has refused to join Gates’ initiative to pledge large parts of his personal wealth (at least $6.5bn) to social causes.

Talking of responsible business practices, in fact there might be a group of people who are actually a tad gleeful about seeing Jobs go: Chinese factory workers in Suzhou poisoned two years ago by toxic chemicals at Apple’s touchscreen factory wrote to Jobs directly, asking for his help in getting medical care and compensation for their illnesses and lost work time. Jobs never even cared to reply.

Much of the hype focuses on his ‘vision’, his ‘innovation’, his ‘genius’ etc. But is that really true? One of the first ‘inventions’ credited to Steve Jobs – the computer mouse and the clickable workspace (later adopted by Microsoft Windows) were initially invented at the Xerox PARC laboratories in the late 1970s. Jobs saw these ideas there first, and then just went on to commercialize them. All in all, Apple in this sense lives with ‘creation myth’, as Malcolm Gladwell recently put it.

Was it his business acumen? Maybe, but even here, until he was fired from Apple in 1985 the Macintosh PC was a niche product. It was rather Bill Gates who played that phase of the game to perfection. And as Robert Reich points out in Supercapitalism (Chapter 2) Steve Jobs and the entire Silicon Valley phenomenon was by no means initiated by all that ‘American entrepreneurship’ or ‘True spirit of modern capitalism’ which is now touted on all the American TV networks reminiscing about Jobs’ life. The American IT boom was initiated mostly by whopping defence contracts from the Pentagon and NASA – i.e. good old ‘socialist’ government money – in a quest to keep up in the cold war arms race in the 1970s and 80s.

So – what is it really? At a time when IT has become a key instrument not just for work but for most areas of our life many of us ‘consumers’ are pretty gutted by the quality of products we are ‘forced’ to use. Who of us has not despaired over the dismal quality of his Office software or the unreliability of his Windows browser? Who among us has not gone ballistic at the slow speed of their hardware at times or been incensed that the next ‘generation’ of software now forces us to by yet another, faster computer? Or utterly despaired when ploughing through an incomprehensible user manual or trying to install the new TV or some software on the PC for the umpteenth time?

One thing Steve Jobs obviously had understood is this: that consumers are actually happy when they use products that are suited to them: easy to operate, fun to use, opening new experiences or simply making life easier. Apple’s recent products - and the real beacons of Jobs’ fame and commercial success - are different in this one aspect: they put the user and his preferences first. And even as a heathen in the church of Apple followers I am ready to admit that the iPhone or the iPad provide an ergonomics and a scope of service which is really phenomenal. Especially compared to what is otherwise on offer.

So, in somewhat cynical terms, what is the real regret about Jobs’ untimely death? We will miss a CEO who put consumer interests first. It is that simple. While this should be a normal thing in a free market economy the reaction to Jobs’ death in my reading just goes to show how modest we have become as consumers. This is particularly true in the world of IT, where we rely in many areas on just one monopolist (Microsoft). Who has treated us over the years not exactly well. To a degree that the one entrepreneur, who really gave us our money’s worth, who offered us products and services which really add value to our life - we no longer see this as the normal result of free consumer choice in a competitive market, but as a gift bequeathed to us by a god-like figure of divine foresight, clairvoyance and care. St. Steve, as it were.

(DM)

Artwork by Cea, reproduced under the Creative Commons Licence.

Will privacy and security be critical differentiators in cloud computing?

The debut this week of Google's new web-only Chromebook laptop, coming hot on the heels of Sony's massive data security breach just a few weeks ago suggests that data security is becoming increasingly critical for the success of technology companies. Google, no stranger to accusations over infringements of privacy, is upping the ante with the release of a computer that, rather than running software and storing files on its own hard drive, will instead rely predominantly on cloud computing. Yes, that means everything that you'd usually keep stored on your laptop will actually be held somewhere in a vast data center run by Google ... and of course, everything that you do can be tracked and recorded because you're signed-in and doing it online.

Although the Chromebook itself may not become quite the challenger to Microsoft and their Windows operating system that Google hopes it will be, the shift to cloud computing (which anyone using Picasa, Google Docs, Dropbox or numerous other applications is already very much part of) is sure to continue apace. But cloud computing raises a number of troubling ethical issues. On the one hand there are the environmental problems associated with running servers capable of storing such huge amounts of data. And then, of course, there are the privacy and data security issues that are faced by any company storing so much personal data online.

In recent weeks, consumers have been made all too aware of these privacy and security issues because of several high profile data disasters. Last month, for example, Amazon, which has been a leader in cloud computing, was forced to shut down its service for several days. A number of companies using its services were paralyzed and some even lost potentially valuable data. Then Sony's travails with hackers reached a new zenith when the company was forced to concede that more than 20,000 of users of its online gaming system had their financial details stolen. Osama bin Laden even got in on the action when a swath of spam Facebook messages purporting to be photos and videos recording the death of the former Al Qaeda leader turned out, according to the Financial Times, to be malicious malware designed to phish for passwords and financial data from infected computers. Ironically, even as we tried to publish this post, Blogger experienced a service disruption that meant that we were unable to publish for more than 24 hours. So much for the instantaneity of social media! All of this added up to bad news for technology companies looking to convince customers of the safety and security of their products and services.

This then raises the question of whether data security and privacy protection will increasingly become critical areas of competition between leading technology companies, especially those relying on cloud computing, rather than just being a kind of necessary evil for everyone concerned. Microsoft, whose operating systems and internet software had long been plagued with security problems, certainly seemed to be thinking this way when it launched its Windows 7 operating system. The company has long been compared unfavourably in terms of security to Apple's Mac OS - but appears to have regained some ground with its latest version. But as more and more personal data moves to the cloud, and companies like Facebook and Google become increasingly involved in recording, using and selling data related to our usage stats and preferences, this is likely to affect a wider range of companies ... and potentially in an even more significant way. Yesterday's revelations that Facebook employed a leading PR company to plant negative stories in the media about Google's privacy policies gives some indication of just how high the stakes are becoming. And nothing focuses corporate attention more than the threat of multiple lawsuits, which is the latest ignominy faced by Sony in the fall-out from its hacking attack.

Despite all this, there are still reasons to doubt whether security and privacy will ever become major differentiators in the battle for technology market share. Unlike speed, performance and design, security is a tricky intangible that is difficult to evaluate up front. And besides, despite their criticisms of technology companies, most end users in practice tend to display a fairly carefree disregard for security issues, and even for their own privacy protection. After all, how many people actually read all of those terms and conditions when they download another Facebook app or install a new piece of software? With commercial users the equation is different, of course, but for the average Joe, security is a concern but not one that yet impacts significantly on their technology choices.

In the end, a better way of looking at this might be for technology companies to start looking at privacy and security as pre-competitive issues. That is, rather than competing on the quality of their privacy protections, why not collaborate with one another to improve standards across the industry. After all, a major hack at Sony, an outage at Amazon, or a spate of malware at Facebook threaten the reputation for security across the board not just for the individual company that is targeted. Problems at one company can spell reputational damage for the industry as a whole. Sure, healthy competition can drive innovation in new security systems. But so too can healthy cooperation. And in the long run it might just be more effective, and provide a better service for skeptical consumers unsure of how far they want to put their trust in tech companies.

Picture by samplereality. Reproduced under Creative Commons licence.