Business Ethics: Analysis of Apple's Battery Gate Case

This report analyzes the case of Apple's Battery Gate, where the company deliberately slowed down old iPhones to push customers to purchase new ones. It examines the ethical implications and perspectives of stakeholders.

Business Ethics
(Part 2)

Table of Contents
INTRODUCTION...........................................................................................................................1
PART 1............................................................................................................................................1
PART 2............................................................................................................................................2
Teleological theories of business ethics......................................................................................3
Deontological theories.................................................................................................................3
Utilitarian ethical theories............................................................................................................4
Ethical theories based on rights...................................................................................................4
Virtue ethical theory....................................................................................................................5
Kantianism...................................................................................................................................5
PART 3............................................................................................................................................6
CONCLUSION................................................................................................................................8
REFERENCES................................................................................................................................9

INTRODUCTION
Business ethics refer to the standards, principles and set of values and norms which are
responsible for governing the actions and behavior of organizations and individuals working in it
(Ferrell and et.al., 2019). The present report analyses the case of Apple is referred to as the
Battery Gate case of Apple. The company deliberately slowed down old iPhones in order to
delay the life of the inefficient batters by pushing software updates on the phones of customers
(Clayton, 2020). The update led to slow down of the iPhones that causing inconvenience to the
customers and forcing them to purchase new iPhones. The case has been analyzed on the basis of
the aspect if corporate governance. Perspectives of stakeholders have also been presented.
PART 1
Corporate governance encompasses the rules, laws and processes that govern the
operations of a business and the ways in which the organization is regulated and controlled. It
comprises of both internal and external factors which play an important role in impacting the
interests of the stakeholders of the organization such as suppliers, customers, management and
government regulators (Adnan, Hay and van Staden, 2018). Corporate governance entails the
process of directing and controlling a firm through a system of rules and practices. Corporate
governance is required in an organization to mitigate the need for managing conflicts of interests
between stakeholders.
Failure to follow corporate governance can be seen in the Battery gate case of Apple.
According to the reports, the tech giant purposely slowed down the speed of working of the older
iPhones so that it can compensate for the decaying batteries. Battery gate is a term that was used
for describing deliberate slowdown of the processors on Apple’s iPhones. This was done with an
intention of preventing the shutdown of degraded batteries when put under high load. In this
case, there was planned obsolescence by apple wherein the older phones slowed down without
any explanation so that customers feel the need to upgrade their phones. This was a case where
the organization failed to follow the principles of corporate governance.
There are two aspects to be considered with respect to corporate governance. They are
principal agent conflict and principal- principal conflict. The principal agent conflict arises
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where there is difference of interests between the upper management and the shareholders. In
contrast to this, principal- principal conflict can be seen in the situations when the upper
management takes decisions on behalf of the shareholders (Bae and et.al., 2018).
Following are the principles of corporate governance:
 Rights and equitable treatment of shareholders: The organizations are required to
respect the rights of the shareholders.
 Interests of other stakeholders: With respect to corporate governance, it is the
responsibility of the organizations to recognize their legal, social, contractual and market
driven obligations towards employees, suppliers, local communities, creditors, customers
and other non-shareholder stakeholders.
 Roles and responsibilities of the board: Sufficient and relevant skills are needed by the
board to for reviewing and challenging the performance of the management (Naciti,
2019).
 Integrity and ethical behavior: This includes development of a code of conduct that
upholds integrity and ethical behavior.
 Disclosure and transparency : The organization are required to carry out disclosure of te
material matters in a timely, balanced and transparent manner.
In the case of Apple, interests of the other stakeholders were not considered by the
organization. It had a duty to recognize the interests of the customers, suppliers and creditors and
work in a balanced manner. However, the organization took to its selfish interests and slowed
down the iPhones causing a great deal of inconvenience to the customers as well as the
employees who had to deal with the customer complaints following the slowdown. Moreover, it
did not upheld integrity and ethical behavior and brought purposeful obsolescence. Furthermore,
the tech giant took decisions that did not support ethical disclosure and transparent. The
information about slowdown was not provided to the customers and other stakeholders who were
associated with the organization.
PART 2
Business ethics comprise of the processes that depict the science of maintaining
relationships with the society in a harmonious manner (Sroka and Szántó, 2018). It also
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encompasses recognizing moral responsibility that business organizations have towards the
wrongness of actions of business conduct.
Teleological theories of business ethics
These theories lay emphasis on the concept of goodness. According to this theory, it is
consequences that determine the tightness of an action rather than the action itself. Ethical
actions are those that bring out the greatest balance of good or evil (Davani, 2020). Thus these
theories provide the basis for ordinal moral reasoning. These direct the business towards the
reasons for telling truth, being transparent and keeping promises. These theories help in making a
comparison between the different alternatives through the consequences they lead to. In this way,
these support moral decision making.
Keeping in view the perspective of teleological theories, apple did not ascertain the
consequences that actions could lead to. Neither was it permissible for the tech giant to
purposefully slow down the phone, nor were the consequences of this action taken into account.
This decision of Apple did not balance the good or evil. The batteries of the old phones were not
capable of managing the load of the new applications. Apple not only misrepresented the
information but also made false promises with the customers. They were provided phones with
batteries which were not efficient enough and in order to cover this up, the iPhones were
purposefully slowed down to prevent accidental sudden shutdown of the batteries. Thus, the
organization did not tell the truth and keep its promise.
Deontological theories
These theories lay emphasis on adherence to obligations and duties during decision
making. According to this theory, an organization is required to follow its obligations towards
the society and other individuals in order to work in an ethically correct manner. Therefore, for
following the deontological theories of business ethics, the organizations will need to be
consistent in decision making which need to be based on their set of duties (Alzola, 2017). In this
regard, it can be analyzed that apple was required to view its duties towards customers,
employees and society before slowing down the iPhones. It could have provided a choice to the
users by sending them a message through which they could have an option of either continuing
with the existing software or upgrade to a newer one. This would have enabled the tech giant to
fulfill its duties regarding providing transparent information to the customers. It would have also
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made the company deal in an ethical way by making it obtain consent from the users. According
to the deontological theories, Apple has an obligation towards its users to seek permission before
making changes with their phones.
As per the principles of corporate governance, Apple had social as well as legal
obligations to non- shareholder stakeholders. It was required to uphold those obligations by
communicating pertinent information to customers, employees and investors. However, the same
was not done and the customers were not provided information that the batteries are not capable
of taking load of the new applications and may have a sudden shut down. They were also not
informed about the purposeful slowing down of the iPhones.
Utilitarian ethical theories
These theories are based on the ability of predicting the consequences of a particular
action. According to this theory, an ethically correct choice is one that gives maximum benefits
to most of the people. Act utilitarianism lays emphasis on performing actions which provide
benefits to majority of people irrespective of personal feelings and societal concerns (DeTienne
and et.al., 2019). While, rule utilitarianism lays emphasis on law and fairness wherein the
organization needs to take decisions that benefit majority of people but through fair and just
means. In contrast to this, Apple took decisions that benefitted only the organization and covered
its faulty batteries. It took decisions that caused inconvenience to a large section of people.
Hence, the decisions were not taken keeping in mind benefit of majority of people; rather, selfish
interests were fulfilled by the tech giant.
Utilitarianism involves two aspects, namely egoism and altruism. Egoism is concerned
with maximizing own happiness. In contrast to this, altruism is associated with maximizing the
happiness of others. In this regard, it can be said that Apple solely focused on itself as a
company. It was not focusing on the maximizing the happiness of the customers.
Ethical theories based on rights
These ethical theories give preference to protecting and prioritizing the rights established
by society. As the rights are endorsed by a large population, they are considered to be valid and
ethically correct (Gallego‐Alvarez, Rodríguez‐Domínguez and Martín Vallejo, 2020).
Considering the present case of Apple, the customers had right to be informed about the slowing
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down of the iPhones. They also had the right to be able to have a choice whether they want to
upgrade or not. Ignoring the customers’ rights, Apple took a decision that was not only forcefully
imposed on the customer but also caused a great deal of inconvenience to them.
Virtue ethical theory
As per the virtue ethical theory, judgment about the ethical decision is made on the basis
of character rather than the action. Therefore, an organization that has a reputation of misconduct
will be judged harshly for any action that is perceived to be unethical. In this regard, the
organization will not be judged on the basis of the action taken by it. As per the principles of
corporate governance, an organization needs to be fair, accountable, responsible and transparent
(Sun and et.al., 2019). Accountability refers to the ability of being able to provide a explanation
for the actions and conduct undertaken by the organization. This goes hand in hand with
responsibility whereby the board is supposed to accept full responsibility of the authority and
powers that has been given. Transparency is another principle of good governance which
requires the organization to inform its stakeholders about the activities of the business. In the
chosen case of Apple, the principle of transparency was not followed. The customers did not
have access to clear and factual information about their batteries that would shut down due to the
load of new applications. Further, the company was also not transparent to them about slowing
down their iPhones. It can be critically evaluated that the purpose of transparency is to ensure
that the stakeholders have confidence in the organization’s processes for decision making and
management.
The virtue theory focuses on four characteristics namely courage, temperance, honesty
and justice. On analyzing the given case, it is found that Apple lacked each of these four
characteristics. The courage to deal with customers in an honest manner was not demonstrated
by Apple. They did not disclose to the customers regarding the consequences of updates for their
iPhones. Also, as Apple had hidden valuable information from the customers, it also did not
fulfill the characteristic of justice.
Kantianism
According to the Kantian business ethics theory, there are four basic principles, namely:
 Act rationally
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 Allow and empower people so that they can make rational decisions Respect people, their needs, differences and autonomy Consider goodwill as a motivation
On analyzing Apple’s case with respect to the Kantian theory, it can be said that Apple made
decision to withhold important information from the customers regarding updates. As a result of
this, the customers were not in a position to make their own rational decisions and exercise their
right to autonomy. It can be analyzed that iPhones were used by different customers for different
purposes. Slowing down of the iPhones presented the customers from doing various tasks. This
would compel them to purchase a new phone. From the case it can be analyzed that apple was
not motivated by goodwill.
PART 3
On analyzing a case related to business ethics, it is important to consider the perspectives
of the stakeholders. The stakeholders are affected by different aspects of the business. Some of
the significant stakeholder groups comprise of customers, employees, investors and suppliers
(Weiss-Blatt, 2021). There are various perspectives associated with the controversy of Apple
related to slowing down its iPhones. The stockholders invest their money in the tech giant owing
to the trust that they have in it. However, the information about this case was not provided to
them. A decrease in the worth of the organization, as a result of this controversy would also
negatively impact the stockholders. This is because the price of the stock will eventually
decrease.
The deliberate slowing down of the iPhones led to high inconvenience among the
customers. The perspectives of the customers were associated with considering this controversy
as a betrayal. They felt that the organization betrayed them. The customers were disappointed
with the lack of transparency that was depicted by the organization. The users of Apple iPhones
felt they were cheated by the tech giant. Due to this, the customers realized that they have a right
to object. According to them, this step by Apple was a misrepresentation with which the
consumer was induced to enter into a contract. It is due to this misrepresentation that the
customer felt they were entitled to a remedy.
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On analyzing the perspective of consumers, it can be analyzed that with the software, the
customer makes an entry into the license agreement with the company. Therefore, the problem
exists in the lack of notice on part of Apple. The organization did not notify its customers that on
using its licensed software, the hardware components of the users’ phones will be affected
(Allyn, 2020). Therefore, the customers perceive that they have the right to file lawsuits against
the organization.
Further, expensive products are sold by Apple to the premium segment therefore; the
organization relies heavily on the brand image. However, on analyzing the chosen case, it can be
said that customers no longer view it as an ethical company. This may have impacted their
perspective about the organization and may act as a reason to not to pay significant premiums for
the products. The confidence of the customers has been rattled after the confessions made by the
tech giant.
The perspectives of investors were similar to that of customers. They also had views that
apple was not transparent with the customers. Instead of providing information to the customers
or replacing the batteries, it pushed a software update to extend the life of the batteries thereby
causing inconvenience to the customers. The investors had perspective that a large tech giant like
Apple can take decision as per it will but it is its duty to inform consumer about it. However, the
investors also had perspective that the issue could have been prevented had information been
provided by Apple to its customers about problems related to battery performance. The
investors also had perspective that this business practice of apple can be regarded as extremely
risky. This is because, the customers may get tired of buying new products which are more
expensive and not durable which would eventually make them switch to Android. This may risk
the sales of the organization which may decrease leading to a loss.
In the chosen case, the employees have perspectives of not being informed or notified
about the slowdown. This is because of the secretive strategies of Apple, that the business does
not disclose complete information to the employees as well. Hence, they unknowingly were a
part of the scandal.
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CONCLUSION
From the report, it can be concluded that apple showed a failure of compliance with the
principles of corporate governance by deliberately slowing down the users’ iPhones. This was
done in order to compensate for the life of the old batteries which were not capable of handling
the load of the new applications. The principles of fairness, accountability, justice and
transparency were breached make this a business ethics scandal. Further, the right to autonomy
of customers as well as the right to informed decision making could not be accessed by the users.
Eventually, they customers felt cheated and betrayed as well as the investors considered this as a
risk business behavior. Business ethics require organizations to be transparent and responsible
for its actions. The case could have been prevented by adopting the above mentioned principles
and notifying the customers about the slowing down of batteries.
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REFERENCES
Journals and books
Adnan, S.M., Hay, D. and van Staden, C.J., 2018. The influence of culture and corporate
governance on corporate social responsibility disclosure: A cross country
analysis. Journal of Cleaner Production. 198. pp.820-832.
Alzola, M., 2017. Character-based business ethics. In The Oxford handbook of virtue.
Bae, S.M. and et.al., 2018. A cross-country investigation of corporate governance and corporate
sustainability disclosure: A signaling theory perspective. Sustainability. 10(8). p.2611.
Davani, M.R.E., 2020. Business ethics (pp. 182-199). De Gruyter Oldenbourg.
DeTienne, K.B. and et.al., 2019. Moral Development in business ethics: an examination and
critique. Journal of Business Ethics. pp.1-20.
Ferrell, O.C. and et.al., 2019. Business ethics, corporate social responsibility, and brand
attitudes: An exploratory study. Journal of Business Research. 95. pp.491-501.
Gallego‐Alvarez, I., Rodríguez‐Domínguez, L. and Martín Vallejo, J., 2020. An analysis of
business ethics in the cultural contexts of different religions. Business Ethics: A
European Review. 29(3). pp.570-586.
Naciti, V., 2019. Corporate governance and board of directors: The effect of a board composition
on firm sustainability performance. Journal of Cleaner Production. 237. p.117727.
Sroka, W. and Szántó, R., 2018. Corporate social responsibility and business ethics in
controversial sectors: Analysis of research results. Journal of Entrepreneurship,
Management and Innovation. 14(3). pp.111-126.
Sun, Y. and et.al., 2019. Li-ion battery reliability–a case study of the apple iphone®. IEEE
Access. 7. pp.71131-71141.
Weiss-Blatt, N., 2021. Big Tech–Big Scandals. In The Techlash and Tech Crisis
Communication. Emerald Publishing Limited.
Online
Allyn, B., 2020. Apple Agrees To Pay $113 Million To Settle 'Batterygate' Case Over iPhone
Slowdowns. [Online]. Available Through:
<https://www.npr.org/2020/11/18/936268845/apple-agrees-to-pay-113-million-to-settle-
batterygate-case-over-iphone-slowdowns >. [Accessed on 21 April 2021].
Clayton, J., 2020. Apple to pay $113m to settle iPhone 'batterygate'. [Online]. Available
Through: <https://www.bbc.com/news/technology-54996601 >. [Accessed on 20 April
2021].
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