Integrity: A Commitment to Ethics
Steve Jobs’s
leadership exhibits a commitment to ethics in the ways he returned to Apple in
1997, terminated Apple’s philanthropic programs in 1997, returning backdated options
in 2001, re-launched philanthropic programs at Apple in 2006, and addressed the
FoxComm suicides in 2010. However, the
extent of such a commitment in his leadership differed in Project Breakout, the
2005 Google agreement, and after the Foxconn suicides in 2010.
1972 Project Breakout
One day, Steve
Jobs called Steve Wozniak at work, saying that Nolan Bushnell, the founder of
Atari, wanted to do another Pong-like game. Nolan Bushnell wanted Steve Wozniak
to do it, because he knew how good Steve Wozniak was at doing designs with the
fewest possible chips. Nolan Bushnell
had been complaining that the Atari games were rising significantly in chip
count, approaching 200 chips for a single game. He wanted them to be simpler.
Steve Jobs told
Steve Wozniak that Nolan Bushnell wanted a one-player version of Pong, with the ability to bounce the ball back to
the paddle. Steve Wozniak became
excited, because he could see that a one-player version could be much more fun
to play than the existing two-player version of Pong. Therefore, he immediately agreed to create a
design for this version of the game.
Steve Jobs then
told him that the hardware-implemented design had to be completed in four
days. Steve Wozniak estimated it would
take engineers months to complete this design.
Every single wire mattered because every single connection determined
when signals would appear on the screen.
There were thousands of little connections between chips, and they all
mattered. Steve Wozniak felt he could complete
this game in less time than other enginers, but four days was an insanely
ridiculous goal. Nevertheless, he
accepted the challenge.
Steve Wozniak began
drawing the schematics for this game, Breakout, so a TV could display light on
the screen—line by line. He neglected to
sleep for 96 hours. During the day, he
drew the game’s design on paper clearly enough so this design could be used to wire
together chips. At night, Steve Jobs
bread-boarded. Bread-boarding involved
putting all the components, including wires on a prototype board, and wiring
together the chips using wire-wrapping—a way of wiring together chips without
soldering. Because Steve Wozniak was the
only one who understood the circuit he had designed, Steve Wozniak slept very
little at night waiting for Steve Jobs to call him when he finished
bread-boarding. The project was
completed in four days, and it worked, using 45 chips.
Steve Jobs paid
Steve Wozniak half of the $700 he stated Atari had paid him for the game. The payment Steve Jobs received was based on
how few chips the game used. Steve
Wozniak discovered that Steve Jobs received a few thousand dollars more than he
had told him he had been paid, but attributed this to their being kids. Steve Jobs got paid one amount, and told him
he was paid another. Steve Wozniak
admits that Steve Jobs’s lack of integrity hurt him. However, he chose to avoid making a fuss
about it.
Ethics always
mattered to Steve Wozniak. He failed to
understand why Steve Jobs had been paid one amount, but told him he had been
paid another. He attributes this to
differences in people. In no way, did he
regret the experience with Steve Jobs at Atari.
Steve Wozniak considered Steve Jobs his best friend, indicating that, in
the scheme of things, this event added up to very little, especially, since he
and Steve Jobs became comfortable financially after establishing Apple.
For a very long
time, Steve Wozniak and Steve Jobs were the best of friends. For some time, they had the same goals in
forming Apple. However, they were very
different people.
When Steve
Wozniak starting working on the Apple I board he thought about the lives of two
people who died on the same day. The
first person was very successful. That
person had spent his entire time running and managing companies, ensuring sales
goals were always met, and that those companies were profitable. The second person had spent his life
laughing. That person had little money,
liked to tell jokes, and followed gadgets, technology, and other things he
found interesting in the world. Steve
Wozniak saw himself as the second person.
This was why he never let what happened with Project Breakout bother him
and never held it against Steve Jobs.
Steve Wozniak had this figured out before he and Steve Jobs started
Apple.
Steve Jobs’s 1997 return to Apple
Unlike Project
Breakout, Steve Jobs’s discussion with Oracle’s CEO, Larry Ellison, about the
way Steve Jobs was planning to get back to Apple and get control of the company
without Larry Ellison having to buy Apple exemplifies a commitment to ethics in
Steve Jobs’s leadership. Steve Jobs explained
to Larry Ellison that his strategy was to get Apply to buy NeXT, get on Apple’s
board, and be advisor to the CEO. Larry
Ellison told Steve Jobs that without buying the company, they could make no
money. Steve Jobs told Larry Ellison
that he needed no more money, to which Larry Ellison replied that although he
may have no need for more money, no one else should make that money. Steve Jobs indicated to Larry Ellison that if
he went back to Apple and owned no share of the company, he would have the moral
high ground. At NeXT, development
continued on NeXTSTEP, NeXT’s object-oriented operating system. Apple Computer acquired NeXT and used
OPENSTEP as the basis for OS X, released in 1999, as the successor to the
MacIntosh operating system, Apple’s primary operating system since 1984.
1997 Termination of Apple’s
Philanthropic Programs
Steve Jobs’s commitment
to ethics and integrity also can be seen as a systemic movement in Apple. This systemic movement is illustrated in
Steve Jobs’s 1997 termination of Apple’s philanthropic programs. When Steve Jobs returned to Apple in 1997, he
terminated Apple’s philanthropic programs.
Steve Jobs terminated these programs because Apple was in financial difficulty
as indicated it its 10-K filing with the SEC for its fiscal year ending
September 26, 1997. The 10-K filing
showed that Apple’s 1997 net loss from continuing operations was $1.05
billion. Moreover, in 1996 and 1997,
Apple’s debt ratings had been downgraded to non-investment grade. Steve Jobs’s ethics drove him to end these philanthropic
programs on behalf of the employees and shareholders so Apple could address its
financial difficulties.
2001 Backdating of Options
It is difficult
to explain what changed between Project Breakout and now that affected Steve
Jobs’s view of integrity as a moral and practial necessity. In Apple’s 2001 backdating of options, Steve
Jobs utilized example and policy to establish an approach to ethical management
that gave Apple a reputation as an ethical leader. Backdating alters the date a stock option is
granted to a date when the underlying stock price is lower. Backdating makes stock options more valuable.
In 2001, Steve
Jobs was granted stock options amounting to 7.5 million Apple shares, without
the required authorization from the company’s board of directors. Furthermore, the option came with an exercise
price of $18.30. This price should have
been $21.10, thereby incurring a taxable charge of $20 million that Steve Jobs would
have neglected to report as income had he retained these backdated options.
In 2006, an
internal company inquiry found that this grant had been recorded improperly,
because it had been made at a special board meeting. However, this internal company inquiry also
pointed out that Steve Jobs had returned the options without exercising them.
In 2007, the
U.S. Securities and Exchange Commission (SEC) announced it would file no
charges against Apple. Rather, the SEC
filed charges against former Apple general counsel, Nancy R. Heinen, and
Apple’s CFO, Fred D. Andersen, for their roles in backdating Apple options. The Commission accused Nancy Heinen of participating
in a fraudulent backdating of options granted to Apple's top officers that
caused the company to underreport its expenses by nearly $40 million. The
Commission indicated that Nancy Heinen caused Apple to backdate a February 2001
grant of 4.8 million options to Apple's executive team and a December 2001
grant of 7.5 million options to Apple chief executive officer Steve Jobs,
altering company records to conceal the fraud.
The Commission
also stated that Fred Anderson should have noticed Nancy Heinen's efforts to
backdate the Executive Team grant, thereby failing to take steps to ensure that
Apple's financial statements were correct.
Fred Anderson agreed to pay approximately $3.5 million in penalties.
The Commission
also said it would bring no enforcement action against Apple, because the
company swiftly, extensively, and extraordinarily cooperated in the
Commission's investigation. Apple's cooperation consisted of prompt
self-reporting, an independent internal investigation, the sharing of the results
of that investigation with the government, and the implementation of new
controls designed to prevent the recurrence of such fraudulent conduct.
2005 Agreement Between Google and
Apple
Unlike that
exhibited after Steve Jobs’s return to Apple and the termination of Apple’s
philanthropic programs in 1997, and the return of backdated options without
their exercise in 2001, a commitment to ethics and integrity in Steve Jobs’s
leaderhip differed during the 2005 Google agreement. The exhibit of a commitment to ethics and
integrity in Steve Jobs leadership during the 2005 Google agreement was similar
to that in Project Breakout.
Google and Apple
had explicit agreements to refrain from hiring or recruiting each other’s
employees shown in emails and phone calls in 2005 between Eric Schmidt, Sergey
Brin, and Steve Jobs regarding recruiting for the team working on Apple’s
Safari browser. Steve Jobs called Sergey
Brin to enforce this agreement, which Sergey Brin goes along with in an
email. In 2010, Google and Apple settled
a U.S. Department of Justice investigation into agreements to refrain from
competing for each other’s staff and thereby hold down salaries for tech
workers.
Philanthropic Programs at Apple
Beginning in 2006
As the 1997
termination of Apple’s philanthropic programs illustrates a systemic movement in
Apple, exemplifying a commitment to ethics and integrity in Steve Jobs’s
leadership, so does the restarting of philanthropic programs at Apple in
2006. That year, Steve Jobs announced
Project RED. Project RED helped launch
an initiative U2’s Bono and Bobby Shriver created to donate contributions from the
sale of each PRODUCT RED product to The Global Fund. Funds from The Global Fund are used to help
those women and children in Africa HIV/AIDS affects.
Steve Jobs was
also involved in a joint philanthropic effort announced in 2011 with eBay, HP,
Intel, Intuit and Oracle to help Stanford Medical Center build its new $2
billion hospital. Stanford University invited
Steve Jobs to speak at its 2005 commencement,
treated Jobs during his battle with cancer, and served as the location for
Steve Jobs’s memorial after he died.
2010 Foxconn Suicides
As the 1997
termination and 2006 restarting of Apple’s philanthropic programs illustrate
systemic movements in Apple that exemplify a commitment to ethics and integrity
in Steve Jobs’s leadership, so does the company’s response to the Foxconn
suicides. The Foxconn suicides occurred
at the Foxconn City industrial park in Shenzhen, China. 17 Foxconn employees attempted suicide,
resulting in 13 deaths. Foxconn is a
contract manufacturer for Apple’s iPhone.
On May 26, 2010,
Apple released a statement regarding the Foxconn suicides, saying that the
company was concerned about these suicides.
In addition, Steve Jobs had the following to say about the Foxconn
suicides.
“I think that
Apple does one of the best jobs in the industry and in any industry of
understanding the working conditions in our supply chain. We’re extraordinarily diligent and
extraordinarily transparent. You can go on
our website and read our report published once a year. We go into these suppliers and we go into
their secondary and tertiary suppliers—places where nobody has ever gone before
and audited them before. We’re pretty
rigorous about it. So, I can tell you a
few things that we know, and we are all over this. Foxconn is not a sweat shop. You go to this place and it’s a factory, but,
my gosh, I mean they’ve got restaurants and movie theatres and hospitals and
swimming pools, and I mean, for a factory, it’s a pretty nice factory. But they’ve had, if you count the attempted
suicides 13 so far this year...They have 400,000 people at this place. So, 13 out of 400,000 are 26 per year so far
for 400,000 people or 7 per 100,000 people.
That’s still under the U.S. suicide rate of 11 per 100,000 people, but
it’s really, really troubling …We’re over there trying to understand what’s
happening, and more importantly, trying to understand how we can help, because
it’s a difficult situation. They’ve got
a lot of workers who’ve left very poor rural areas, coming to these factories
away from home for the first time, 19 years old. They’re probably less prepared to leave home
than your typical high school student, going to college in this country. So, I think there’s some real issues
there…We’re trying to understand right now.
Before we go in and say we know the solution, we need to understand what
the problem is…We send over there our own people that have been going over
there for a long time, and are very familiar with them. And, second, we’ve hired some outside folks
as well.”
Apple’s Supplier
Responsibility Progress Reports for 2009-2012 discuss results from audits of
the labor conditions of Apple’s suppliers.
While the names of specific suppliers are omitted, the reports indicate
that relationships with suppliers have been severed due to their neglecting to
comply with Apple’s code of behavior.
In addition,
Foxconn installed suicide-prevention netting.
Buddhist monks were brought in to conduct prayer sessions inside the
factory and employees were asked to sign no-suicide pledges.
However, Foxconn
employees being forced to sign legally binding documents, guaranteeing that
they and their descendants would refrain from suing Apple because of unexpected
death, self-injury, or suicide exemplifies a different commitment to ethics and
integrity. In addition, a Steve Jobs
email and Steve Jobs’s remarks contradicted the statement Apple had released on
May 26, 2010, because they downplayed the loss of life at Foxconn. The email indicated that Foxconn’s suicide
rate was well below the average for China.
Steve Jobs’s remarks stated that Foxconn’s suicide rate was below that
of the United States.
Source Notes
One day, Steve
Jobs called Steve Wozniak at work, saying:
Wozniak, S.
(2006). iWoz Computer Geek to Cult Icon:
How I invented the personal computer, co-founded Apple, and had fun doing it.
New York, New York: W.W. Norton & Company
A commitment to
ethics in Steve Jobs’s leadership is exemplified in Steve Jobs’s discussion
with Oracle’s CEO, Larry Ellison, about:
Isaacson, W.
(2011) Steve Jobs. New York, New York: Simon & Schuster
Steve Jobs
terminated these programs because Apple was in financial difficulty as indicated: Sorkin, A.R. (2011). The Mystery of Steve
Jobs’s Public Giving. New York Times.
Retrieved from http://dealbook.nytimes.com/2011/08/29/the-mystery-of-steve-jobss-public-giving/?_r=0
In 2001, Steve
Jobs was granted stock options amounting to 7.5 million Apple shares, without the
required authorization from the company’s board of directors: Worstall, T. (2011). Steve Jobs Obituary: the
Backdated Options Scandal. Forbes. Retrieved
from http://www.forbes.com/sites/timworstall/2011/10/06/steve-jobs-obituary-the-backdated-options-scandal/#63a366ae2da7
In 2007, the
U.S. Securities and Exchange Commission (SEC) announced it would file no charges
against Apple: SEC (2007). SEC Charges Former
Apple General Counsel for Illegal Stock Option Backdating Commission Also
Settles Claims Against Former Apple CFO for $3.5 Million. Retrieved from https://www.sec.gov/news/press/2007/2007-70.htm
That year, Steve
Jobs announced Project RED.: Dilger,
D.E. (February 2, 2012). Tim Cook exposes the lie that Steve Jobs ignored
philanthropy. appleinsider. Retrieved
from http://appleinsider.com/articles/12/02/02/tim_cook_exposes_the_lie_that_steve_jobs_ignored_philanthropy_.html
Google and Apple
had explicit agreements to refrain from hiring or recruiting each other’s employees
shown in emails: Edwards, J. (2014).
Emails From Google's Eric Schmidt And Sergey Brin Show A Shady Agreement Not To Hire Apple Workers. Business Insider. Retrieved from http://www.businessinsider.com/emails-eric-schmidt-sergey-brin-hiring-apple-2014-3#ixzz3l0q0QsBZ
The Foxconn
suicides occurred at the Foxconn City industrial park in Shenzhen, China.: Mozur, P. (2012). Life Inside Foxconn’s
Facility in Shenzhen. Wall Street Journal.
Retrieved from http://blogs.wsj.com/chinarealtime/2012/12/19/life-inside-foxconns-facility-in-shenzhen/
17 Foxconn
employees attempted suicide, resulting in 13 deaths: Tam, F. (2010). Foxconn factories are labour camps. South China Morning Post. Retrieved from
http://www.scmp.com/article/727143/foxconn-factories-are-labour-camps-report
Foxconn is a
contract manufacturer for Apple’s iPhone:
Pomfret, J., Yan, Huang, and Soh, Kelvin (2010). Foxconn worker plunges
to death at China plant. Reuters. Retrieved
from http://www.reuters.com/article/2010/11/05/us-china-foxconn-death-idUSTRE6A41M920101105
On May 26, 2010,
Apple released a statement regarding the Foxconn suicides: Kingsley-Hughes, Adrian (May 26, 2010). Apple
"saddened and upset" at Foxconn suicides. ZDNet.
Retrieved from http://www.zdnet.com/article/apple-saddened-and-upset-at-foxconn-suicides/
Steve Jobs had
the following to say about the Foxconn suicides: Jobs, Steve (2011, September 29). Steve
Jobs-Foxconn [video file]. Retrieved from https://www.youtube.com/watch?v=2gOu50HaEvs
Apple’s Supplier
Responsibility Progress Reports for 2009-2012 discuss results from audits of the
labor conditions of Apple’s suppliers: Apple’s Supplier Responsibility 2009 Progress Report. Retrieved from https://www.apple.com/supplier-responsibility/pdf/Apple_SR_2009_Progress_Report.pdf
Apple’s Supplier
Responsibility 2010 Progress Report. Retrieved from https://www.apple.com/supplier-responsibility/pdf/Apple_SR_2010_Progress_Report.pdf
Apple’s Supplier
Responsibility 2011 Progress Report. Retrieved from https://www.apple.com/kr/supplier-responsibility/pdf/Apple_SR_2011_Progress_Report.pdf
Apple’s Supplier
Responsibility 2012 Progress Report. Retrieved from https://www.apple.com/supplier-responsibility/pdf/Apple_SR_2012_Progress_Report.pdf
Foxconn
installed suicide-prevention netting:
Von Buskirk, E. (2010). Foxconn Rallies Workers, Leaves Suicide Nets in
Place (Updated). Wired. Retrieved
from http://www.wired.com/2010/08/foxconn-rallies-workers-installs-suicide-nets/
Buddhist monks
were brought in to conduct prayer sessions inside the factory. Employees were asked
to sign no-suicide pledges and forced to sign legally binding documents,
guaranteeing that they and their descendants would refrain from suing the company because of unexpected
death, self-injury, or suicide: Malone,
A. and Jones, R. (2010). Revealed, Inside the Chinese suicide sweatshop where
workers toil in 34-hour shifts to make your iPod. Daily Mail. Retrieved from http://www.dailymail.co.uk/news/article-1285980/Revealed-Inside-Chinese-suicide-sweatshop-workers-toil-34-hour-shifts-make-iPod.html
In addition, a
Steve Jobs email contradicted the statement Apple: Viticci, Frederico (May 30, 2010). Steve Jobs Email Conversation About Foxconn Suicides. MacStories.
Retrieved from https://www.macstories.net/stories/steve-jobs-email-conversation-about-foxconn-suicides/
Moreover,
employees were asked to sign no-suicide pledges: Malone, A. and Jones, R. (2010). Revealed,
Inside the Chinese suicide sweatshop where workers toil in 34-hour shifts to make your iPod. Daily Mail. Retrieved from http://www.dailymail.co.uk/news/article-1285980/Revealed-Inside-Chinese-suicide-sweatshop-workers-toil-34-hour-shifts-make-iPod.html
Excerpt from: Universal Characteristics in The Leadership of Steve Jobs
Available at http://www.amazon.com/dp/B081J113NT
How else might integrity be demonstrated?
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