Internal and External Environment of Apple - Article Example

Management: The Journal article “A Critical Analysis of internal and external Environment of Apple Inc, Name: Institution: Management: The Journal article “A Critical Analysis of internal and external Environment of Apple Inc.” by Usman A. Khan, Mohammd N. Alam, and Shabbit Alam Corporate governance can be described as the processes, mechanisms and relations through which corporations are directed and controlled. The journal article “A Critical Analysis of internal and external Environment of Apple Inc.” by Usman A. Khan, Mohammd N. Alam, and Shabbit Alam concentrates on the crucial analysis of the company’s corporate governance and corporate social responsibilities. The article discusses and draws a conclusion for the management, control and directing techniques in the business institution. Using a variety of tools for evaluation of both the internal and external environment the article draws a conclusion on the company’s management techniques, control, and business strategies. The article illustrates a serious argument for large enterprises, business corporations and rich business people evading tax in the recent past. It also explains that some of the giant tech companies have also been on the watch by tax authorities (Apple Inc, 2012). According to the author, Apple is one of the corporations accused of business multi-practices such as tax evasion. Issues relating to corporate governance include executive remuneration practices, transparency and disclosure, shareholder rights and committee composition, board directors and the quality of the managers, corporate social responsibility, auditing, risk management and internal control (Apple Inc, 2012). These issues are discussed in the journal article relating to the giant tech company, Apple. Other issues raised in the reports include the confusion about its structural organization, the transparency, and disclosure of its operations such as gross and net incomes and the amount of tax they pay to the governments. The findings of the article show that the board of directors can access Apple’s officers and employees at any time. The report also shows that the board of trustees arranges for meetings with the employees whereby the CEO is the chidef initiator (Khan, Alam and Alam 2015). According to the article, Apple’s corporate governance policy assures each director a compensation, which is determined by the board in reviewing the nominating and corporate governance recommendation about the director. The Nominating and Corporate Governance Committee carry out an analysis of the compensation of the director every year. In the year 2012, Gore Ex-Apples was accused of excessively compensating its executives and influencing the signing of the contract of a hydrogen power plant Apple Inc, (2012). Apple’s shareholders also accused the green goal of Apple as the shareholders were in conflict with long-term goals set by the company. As a result, to respond to the issues the company tightened the corporate governance policies on executive remuneration and compensation of employees. The findings of the article also delineate how the Board of Directors carries out an annual evaluation of the Committee so as to determine the effectiveness and functionality of the committees. The Nominating and Corporate Governance Committee are given the responsibility to coordinate and oversee the evaluation process for the board on the annual basis. On assessment activities, the article shows that every year an evaluation of the performance of the directors including the CEO is carried out to ensure that there is effective leadership and control of the company’s activities. The corporate governance policy outlines the codes of conduct and ethical behavior that every director is expected to possess (Apple Inc, 2012). The board of directors hopes that the directors, officers and the employees as well, act ethically to the best of their knowledge at all time and adhere to Apple’s code of conduct. As a result, no waiver in the company’s ethical policy is permitted. According to the view of the authors on the current role of the board of directors, it has a standing committee composed of four committees: the Nominating Committee and the board of governance committee, compensation committee, and the Audit and Finance Committee. The nominating committee is responsible for the nomination of new candidates for the position of board directors Apple Inc. (2012). The governance committee is responsible for the formulation and policies for the running of activities and recommending new directors. At times, the board forms new committees for various functions when appropriate and each director I expected to serve a limit of one term. According to (Apple 2014), the criteria for selecting members of the board of trustees are regarded as unfair and unjust. Another area where the article criticizes Apple is a lack of appreciation of diversity and, therefore, recommends the inclusion of female directors on its board of trustees. The board of directors is dominated by males hence gender inequality and lack of variety. On the other hand, the dominant male board of directors recommended that the board should comprise of people from diverse backgrounds, skin color, and ethnicity to contribute towards the success of the global giant tech company (Khan, Alam and Alam 2015). The article also states that Apple is a global and giant tech company with branches widespread around the world. On the roles of Boards of Directors, the article explains that the company’s boards of directors act as an oversight committee for the CEO and the other senior management officials. According to Apple’s corporate governance policy expects that the board of trustees implements proactive and focused approach in their positions, setting the standards that will ensure the company meets its goals and objectives (Vines 2014). The board of directors also ensure that they act proactively to satisfy their duties while maintaining high standards of corporate responsibility and ethical behavior (Apple Inc, 2012). The governance structure of the board of directors is designed to ensure that principle-oriented actions, efficient processes of making decisions, and compliance and performance are monitored appropriately. On Corporate governance activities of Apple Inc, the article explains the role of nominating prospective candidates who can be directors. The board then recommends the candidates after taking into consideration the background of the individual, skills and abilities gained and if the characteristics qualify the person to meet the needs of the board (Vines 2014). The qualities that director candidates are expected to be equipped with include independence, age, demonstrate diversity financial literacy and experience in the profession. Board directors do not have a limit on age because the company prefers that the directors have an insight on the company and linger experience (Apple Inc, 2012). The policy restricts the number of board directors to be at least five and not more than nine. At the moment, the company has six members on the board of trustees. The definition of the Corporate Social Responsibility according to the article is the obligations of the company to exert a positive influence and minimize the negative impact on society. For years Apple has shown high commitment on suppliers by providing safe working conditions, ensuring maximum working hours and awarding fair wages and avoiding child labor (Vines 2014). Despite the efforts Apple has put to ensure CSR, various scholars and reporters have documented Apple’s poor CSR performance due to some conflicts such as the Foxconn factory blasts and the long working hours the company subjects the Foxconn workers. Some of the workers were also found to be underage, forced to work overtime and even worked for more than sixty hours. Apple engages the communities especially those surrounding its premises in controlling and directing the activities of the corporation (Apple Inc, 2012). To ensure community participation, Apple conducts research study programs, promotional activities and involvement of the community in running the organization as employees. The conflict of underage workers at Foxconn is one of the issues that provoked community engagement in Apple. Various scholars and reporters have also accused Apple of lack of participation in its activities. For example, in the year 2016, the public Relations officers asked Apple to adopt Human Rights policies. The major theme that dominated the journal article is the tax evasion strategies employed by Apple and the responses given by the Apple managerial staff on the same (Vines 2014). The response so far has been to target businesses that shift property or revenue to tax refuges such the Cayman Islands with the sole purpose of precluding tax payment. For instance, the article points out that in Australia, the Tax administrative center has often collaborate with wealthy individuals in their quest to evade tax (Apple Inc., 2012). Nevertheless, the article indicates gives an analogy of a situation whereby “the pickpockets are targeted while bank robbers are left to continue with impunity” (Apple Inc, 2012). A bigger task to tax revenue is income fluctuating with the aid of multinational enterprises similar to Apple. These organizations have often shown intentions of not paying corporate tax and are as well defiant with regards to facing criticism. In a recent report by compiled by the Organization for Economic Co-operation and progress (OECD), addressing these problems gave light to the initiation of a set for “action plan”, which is encouraged by a significant number of finance ministers associated with the world’s richest countries ahead of the G20 leaders’ summit which will take place in September. OECD Secretary-basic Angel Gurría stated general tax ideas aimed at guaranteeing corporations don’t pay taxes in two nations (Vines 2014). He said that the situation was laudable as the rules were being misused to allow the permit for double non-taxation. The various methods used for tax evasion in Australia by Apple include; Tax Avoidance, whereby the company uses perfectly legal techniques in order to limit their income tax liability. Furthermore, they also declare their entire income but takes advantage whenever there is an opportunity to maximize any available deductions as well as credits hence ends up paying less tax. For example, they also appeal to the local township authorities or county tax department in Australia to have the value of their products lowered hence they lower their real estate taxes (Khan, Alam and Alam 2015). Apple also deducts expenses used in connection with their investment activities in Australia, and they decide to hold on capital assets for approximately more than a year in order to take the advantage of lower long-term capital gains tax rates. In a recent report titled “Apple Avoids Paying $17 Million in Taxes Every Day through a Ballsy but Genius Tax Avoidance Scheme”, the study shows how the multi-billion business company uses ballsy and genius tax avoidance scheme. For example, lawmakers heavily criticized for its alleged tax avoidance schemes in Australia. A subcommittee report submitted revealed that an Ireland-based subsidiary earned $22 billion in 201 but paid taxes worth $10 million. This company holds about 60% of Apple’s profits but because of the Irish law the company claims itself to be a non-taxing resident. The heated exchange of words had started days after the national hearings with the Apple Australian Managing Director Tony King and Google Australia Managing Director Maile Carnegie, as well as Microsoft Corporate Vice President of Worldwide Tax Bill Sample having denied having detailed knowledge of strategies to shift profits overseas. The Australian government came up with a law aimed to combat tax avoidance and to change from profits (Vines 2014). The business practice can be termed as an unethical because the three companies; Microsoft, Google, and Apple are all foreign multinational with annual global revenues exceeding A$1 billion with most of the capital income derived from sales made to Australian customers. Secondly, the companies avoid booking the sales income in Australia. Lastly; the structures are designed with a core and “principal purpose” of avoiding Australian income tax which is higher compared to other locations, especially the tax havens in Singapore and Cayman Islands. This actions of greed and unfair competition as these companies are undermining the Australian government its fair share of the business revenue which it uses to run the country and in the provision of public services such as infrastructure through which these companies benefit directly or indirectly. It will not be therefore wrong if I term such practices unethical (Vines 2014). When Apple was questioned over its tax strategies, Apple explicated that AOI was incorporated in Ireland in the early 1980s but has never declared a tax residency in Ireland or as well as other states which indicates that it has never paid any corporate income tax to any government or state for last five years or more. The European Commission (EC) is launching a formal investigation into Apple’s tax strategies in Ireland, Ireland being the giant tax haven for Apple (Guenette 2012). The investigation will majorly focus on why and how Ireland allows companies like Apple to evade global tax payment. The heated debate over the series of conflicts facing Apple has been discussed on media severally because of various reasons. The company is therefore expected to conduct itself ethically and ensure good reputation. The discussions have been carried out to solve the issues as Apple is one of the sources of government revenue in various countries. Secondly, the conflicts could easily lead to a decline in company performance and lose trust with its customers. References Apple Inc. 2012. Corporate governance guidelines Of Apple Computer, Inc. Who's Legal? 2014. The Latest Legal News, Research and Legal Profiles - Who's Who Legal. [Accessed on 8th March 2016]. Khan, U.A., Alam, M.N. and Alam, S.,2015. A CriticaL Analysis Of Internal and External The environment of Apple Inc. International Journal of Economics, Commerce, and Management, United Kingdom, Vol. III, Issue 6, June 2015. Web. Vines, S. 2014. Conflict of interest: shareholders versus staff. [Accessed on 8th March 2016]. Khan, U.A., Alam, M.N. and Alam, S.2016, A Critical Analysis of Internal and External Environment of Apple Inc. |. [Accessed on 8th March 2016]. Read More