Apple under scrutiny for mishandling misconduct claims

This is an audio transcript of the FT News Briefing podcast episodes: Apple under scrutiny for mishandling misconduct claims

Marc Filippino
Good morning from the Financial Times. Today is Monday, August 8th, and this is your FT News Briefing.

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The global stock sell-off is having a knock-on effect on private markets. And top gig economy companies like Uber are making more money than ever. Plus, the FT reports that when more than a dozen female Apple employees reported misconduct to HR, their claims fell on deaf ears.

Patrick McGee
Apple’s immediate concern seems to be, is this gonna hurt Apple?

Marc Filippino
The FT’s Patrick McGee will tell us what happened. I’m Marc Filippino and here’s the news you need to start your day.

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Over the past decade, low interest rates encouraged pension funds and other big global investors to pour money into private capital like buyout firms, venture capital and real estate funds. They were looking for higher returns. But in the first half of this year, research shows these investors sold $33bn worth of their stakes in private capital. That’s up from 19bn during the same period last year. Here’s the FT’s Kaye Wiggins.

Kaye Wiggins
So I spoke to the head of private equity at one pension fund. His pension fund has sold down some of its private equity stakes at a discount. And he sounded pretty disgusted about it. He said, we’ve never had to do this before, we hoped we would never have to do it. And crucially, he also said that they were going to reduce how much money they would commit to new private equity funds, both this year and next year.

Marc Filippino
Kaye, what does this mean for pension funds and sovereign wealth funds and other funds that invest in private markets?

Kaye Wiggins
So in the immediate short term, the effect is that they’re selling out at a discount. So they are expecting now to bring in less money for them, whether it’s for their pensioners, whether it’s for the governments whose money they invest. They’re expecting to bring in less money than they would have done if they had held on to those stakes. And by selling at a discount you’re saying, we’d rather just have some cash available now and we can do other things with that money rather than make potentially more money, or at least what the private equity firm itself says would be more money in the future.

Marc Filippino
Now there’s been a $33bn sell-off in the first half of this year, as we mentioned. What does it mean for private equity firms? Can’t be good, right?

Kaye Wiggins
So the biggest way in which this is a problem for the private equity firms is actually about what it says about their ability to raise funds in the future. Because if you think about it, if pension funds and other investors are saying, hang on, we want to pull out money that we had committed for 10 years, then that tells you that it’s very unlikely that they’re gonna be continuing to allocate such huge sums of money to private equity firms in the future. If they’ve not even, you know, if they’re trying to get money out, then it’s likely that they’ll also be putting less money into the next generation of private equity firms. And so what that means is that private equity firms, venture capital firms, are going to have a much harder time raising the types of mega funds that have over the past decade or so been really pretty easy to raise and which have propelled them to become a kind of huge force in global dealmaking and to make a ton of money in management fees. And all of that is looking much harder now.

Marc Filippino
Kaye Wiggins is the FT’s private capital correspondent.

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Remember how huge food delivery was in the worst days of the pandemic, when we’re all stuck at home and afraid to go out to eat? Well, pandemic restrictions have receded, and it turns out food delivery is still huge. That’s one reason companies like DoorDash and Uber are making a lot of money right now. Here’s the FT’s Dave Lee.

Dave Lee
Generally, the story is from these companies that as we open up parts of the business that had suffered during the pandemic are coming back. And then parts of those businesses that excelled during the pandemic are sticking around.

Marc Filippino
So Uber, DoorDash and Lyft have all just reported really strong earnings for the most recent quarter. Uber had its first ever quarter of positive cash flow, which means more money in than going out. But not only is demand strong for these companies, their prices are also going up.

Dave Lee
We are seeing the shift from this era where they were happy to make a loss on rides in order to get the growth in the service and worry about profits later. Well, we’re now in later, this is the later. And I mean, if you compare even just sort of pre-pandemic prices to where we are now, you can see the average price per mile on Uber has gone from $2.32 to $2.83. The average price per mile on Lyft has gone from $2.14 to $2.67. But it does seem that the era of the gig economy making things cheaper for millennials like me and you, seems to be over, unfortunately.

Marc Filippino
And there is another reason these companies’ earnings are stronger. Dave says they’ve become more efficient and pulled back on a lot of things.

Dave Lee
Uber used to have a self-driving division, they got rid of that, sort that off. I mean, at one point, Uber was even trying to look at a flying car, for crying out loud. So now the investors are saying, how about we don’t spend so much money? We’re seeing hiring slowdowns. We’re seeing hiring freezes in some cases. So that Lyft, companies, you know, are budgeting like any person would. They’re just making sure that their numbers add up by saving where they can.

Marc Filippino
That’s our San Francisco correspondent, Dave Lee.

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For much of the past year, the FT’s Patrick McGee has been speaking with more than a dozen current and former employees at Apple. They worked, or worked in different divisions and different states, and they all say they were harassed, mistreated or even sexually assaulted. When they went to Apple’s human resources department, they said they hit a wall.

Patrick McGee
Apple treated the claims as well, what’s the risk to our reputation here?

Marc Filippino
Patrick joins me now to talk more about this story. Hey, Patrick.

Patrick McGee
Hi Marc.

Marc Filippino
So one of the women you spoke to had an awful story, right? She said she went out for platonic drinks with a colleague one evening. She ends up at home, she falls asleep, and she wakes up to find him, snapping photos of her with her shirt off. He had taken her shirt and bra off. She eventually reported this to Apple’s HR department. What happens next?

Patrick McGee
Yeah. So she went to HR and she wasn’t asking for, you know, him to be punished or anything like that. It was actually years after the fact and it was after the #MeToo movement. And she literally just wanted to give HR a heads-up. But the conversation really turns rigid and defensive, in which Apple’s immediate concern seems to be, is this gonna hurt Apple? And so they say to her, “. . . as an Apple employee, he has not violated any policy in the context of his Apple work. And because he hasn’t violated any policy, we will not prevent him from seeking employment opportunities that are aligned with his goals and interests.” And right, she’s just flabbergasted by this response. Like, there just seemed to be this tin ear when it came to, like, empathy.

Marc Filippino
So Patrick, you spoke to 14 other women, 15 in all. What was your broad takeaway from their stories?

Patrick McGee
Yeah. So the common thread when these women went to HR was that they lost their job, you know, months later, ostensibly for something different. They didn’t feel at all that they had the right to, even though it’s a legal right to speak about workplace harassment and discrimination, to go public. You just got this sense over and over that no matter their geography, no matter the department, if a woman had a particular claim of misconduct against a colleague or against a manager, Apple’s HR department was more interested in burying it, in protecting the manager , rather than truly listening to the employee.

Marc Filippino
How big of a problem is this, Patrick? I mean, you talk to 15 women and Apple has more than 150,000 employees globally. Is this a pervasive problem?

Patrick McGee
Yeah. I mean, I don’t think Apple has a persistent problem here. I think they have a distinct problem. I’m not saying Apple’s whole culture needs to be overhauled or something like that, right? Like Apple’s top leadership and Tim Cook, I mean, they win various awards and I’m sure they deserve it. But again, this is a massive organization and when you go six levels deep in the organization, you know, where managers are not household names.

Marc Filippino
What about culturally? Is there a larger cultural problem at Apple?

Patrick McGee
So you’re absolutely honing in on the most important thing that I had to deal with in my reporting, which was that what became really meaningful was to speak to a former HR professional at Apple who talked about the dark sides, as he called them , to Apple’s secretive culture, right? Apple has a famously secretive culture. It doesn’t want you to know what the next iPhone is gonna look like. But the broad claim from lots of people is that they’ve extended that shroud of secrecy into areas like workplace harassment and discrimination. And so women having a problem with their manager, for instance, had a natural tendency to think there was something wrong with them, right, rather than a problem with managers at Apple and training processes. And maybe I should point out Apple, in responding to those allegations, has pledged to change its training and processes as a result of the article. And, you know, if that’s a genuine statement, right, then one should feel encouraged by that.

Marc Filippino
Patrick McGee is the FT’s San Francisco correspondent. Thank you so much for your reporting, Patrick.

Patrick McGee
Cheers, Marc.

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Marc Filippino
You can read more about all of these stories at FT.com. This has been your daily FT News Briefing. Make sure you check back tomorrow for the latest business news.

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