Why Apple Isn't Among the 25 Best Companies in America
How is it possible to have a list of The 25 Best Companies in America without Apple being included? Surely there must be something drastically wrong with such a list.
We can see why readers might be confused that Apple is not on there. Our aim was to analyze over 1,700 companies to see how they addressed the interests of various stakeholders, including investors, customers, employees, and the world at large. Apple actually ranked quite high using our methodology, but we ultimately decided against including it in the top 25. Below are some arguments for and against Apple as one of the best companies in America.
The case for Apple
As the largest tech company on the planet, Apple hardly needs an introduction. The company makes Macs, iPhones, iPads, and iPods. Apple sees its products as a way to reach people and make their lives better. In a recent interview with Bloomberg Businessweek, CEO Tim Cook said, "In creating these great products we focus on enriching people's lives -- a higher cause for the product."
It's always been Apple's belief that it can make a better product by integrating hardware and software in order to offer differentiated devices.
According to Glassdoor's 2013 rankings of best places to work, Apple ranked No. 34. That was a notable drop from the No. 10 spot it earned in 2012, which was an improvement from the No. 20 spot in 2011. Cook has earned a 94% approval rating among employees posting on the site, which is down from the 97% rating he received when he became CEO in 2011. Interestingly, that was actually higher than the 95% rating that Steve Jobs had.
Universum's 2012 poll on where college grads want to work ranked Apple No. 2, just behind search giant and mobile rival Google.
Apple goes to great lengths to satisfy its loyal customer base. The whole purpose of Apple Retail stores has always been to improve the shopping experience leading up to the purchase as well as provide ongoing support after the purchase.
The company consistently scores well in consumer satisfaction surveys. Apple scored No. 1 in J.D. Power and Associates 2012 U.S. tablet satisfaction study, narrowly beating Amazon.com and its Kindle Fire, while also topping the same researcher's 2012 U.S. smartphone satisfaction study for the 8th consecutive year. The American Customer Satisfaction Index also ranked Apple No. 1 within the PC industry for the ninth consecutive year in customer satisfaction in 2012, maintaining a healthy lead over Microsoft Windows PCs.
Under CEO Tim Cook, Apple has made a lot of progress with becoming more shareholder-friendly. Cook's overall compensation packages are immeasurably higher than Steve Jobs' famous $1 annual total compensation package, but Cook is also effectively performing both CEO and COO duties now since Apple did not hire a new COO once Cook become CEO.
Additionally, it's largely thanks to Cook that Apple finally re-initiated a dividend after a 17-year hiatus, currently paying $2.65 quarterly for a 2.2% yield. Along with the dividend, Cook implemented a $10 billion share repurchase program and was upfront that the purpose was primarily to neutralize dilution from equity compensation. These are two important changes that Cook is responsible for that directly benefit shareholders.
Does Apple make the world a better place?
Just weeks after becoming CEO, Cook put in place a charitable donation matching program, matching up to $10,000 of an employee's personal donations to a non-profit of their choice. Steve Jobs had axed the program when returning to Apple in 1997 to restore profitability, but never brought it back even as Apple's fortunes rose. Apple recently donated $2.5 million to the American Red Cross for Hurricane Sandy relief. What Jobs lacked in public philanthropy, Cook is helping make up for by making Apple more charitable.
Few technology companies put such high priority on sustainability and environmentalism. The company goes to great lengths to measure its environmental impacts and reduce its carbon footprint. That can mean everything from building the largest private solar array in the country to help power its North Carolina data center to focusing on the energy efficiency of its products and meeting the latest EPEAT and Energy Star requirements. The North Carolina data center has earned LEED Platinum certification from the U.S. Green Building Council, the highest possible rating and uncommon for data centers of this size.
The company also prepares detailed environmental reports on all of its products. Former Vice President and environmental activist Al Gore sits on Apple's board of directors.
It must do better
Apple's supply chain needs to improve. The challenges it faces there are common to all multinational corporations operating in such a globalized economy, but due to its stature Apple garners more attention over labor-related transgressions at Foxconn and other manufacturing plants in China.
For example, Foxconn also assembles other gadgets like Microsoft's Xbox 360 and Samsung's competing Galaxy S III, but since those products don't carry the same volumes as Apple, they are able to avoid some of the negative publicity. That being said, Apple does bear more responsibility to enact meaningful change with labor practices because it carries more weight.
It's for that reason that Apple chose to join the Fair Labor Association a year ago, becoming the first technology company to join as a participating company. The FLA has helped improve working conditions in numerous industries from coffee to apparel. In February 2012, Apple voluntarily had the FLA begin inspections in order to audit supplier factories in China and compile detailed reports of its findings. After the investigation was complete, the FLA said it found "excessive overtime and problems with overtime compensation; several health and safety risks; and crucial communication gaps that have led to a widespread sense of unsafe working conditions among workers."
A status report published five months later showed that Foxconn had made progress with improving conditions, including areas like employee health, safety, and working hours. There's still much work to be done, as working hour compliance ticked down since August as the number of workers increased. Cook has said that while Apple is obsessed with product secrecy, it's equally fixated on supplier transparency, which is why it produces thorough supplier responsibility progress reports that detail improvements as well as shortfalls.
Apple is one of many companies that outsource manufacturing overseas, but as a leader, the company is doing what it can to improve the broader industry.
Foolish bottom line
Apple is one of the best-run companies in the world. In many ways, Tim Cook has improved Apple organizationally relative to Steve Jobs, even if Cook is less of a "product guy." The company nurtures innovation at every level and attracts talent from all over the world, while inspiring unprecedented levels of customer loyalty for a consumer electronics company.
That's all translated into incredible gains for shareholders, which now also benefit from dividends. Cook has made Apple more charitable and improved supply chain transparency and conditions, even if it still has room to improve there.
Ultimately, the supply chain issues surrounding Apple were what resulted in it not making the cut, even though Apple ranks highly among investors, customers, and employees. The company bears primary responsibility for human rights transgressions within its global supply chain, even if other companies technically contribute to the problem as well.
Supply chain transparency has become a priority for Apple and there have been signs of improvement. For example, Apple has reached a new high of 99% compliance of working hours as of January 2013. There have also been recent reports that Foxconn has been seeing higher worker retention in part due to improved conditions and wages.
If Apple can continue making meaningful progress on this front, it may earn a spot in next year's rankings.
The article Why Apple Isn't Among the 25 Best Companies in America originally appeared on Fool.com.Fool contributor Evan Niu, CFA, owns shares of Apple. The Motley Fool recommends Amazon.com, Apple, and Google. The Motley Fool owns shares of Amazon.com, Apple, Google, and Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.