The EC's decision was unprecedented, and its severity has been met with surprise by many. However, the fact that a big corporate has been punished for its tax practices is not entirely unexpected.
Several large corporates have come under fire in recent years and this kind of punitive action is surely just the start.
But this news also throws light on a much more fundamental issue: what is or isn’t an ethical brand?
Apple's ethical branding
Apple has always made bold and extensive claims regarding its position as a fair, ethically focused business. Its official values state that "we expect to make this world a better place to live.
"As a corporate citizen, we wish to be an economic, intellectual, and social asset in communities where we operate."
Now that Apple’s tax practices have been deemed questionable enough to warrant this historic penalty, this statement and the company’s status as an ethical business have to be called question.
Stating that you adhere to some form of ethical behaviour is a basic for most businesses of any scale. The highest ranked 'value' across FTSE 100 companies is 'integrity' at 31 per cent, but on its own, this claim is largely meaningless.
If ethics aren't translated into a set of clear commitments, subject to external scrutiny, what does integrity really add up to?
Promises need to be clear and tangible, with really effort put into communicating expectations and impacts to staff on a sustained basis. Holding yourself up to external scrutiny is also important, and signing up to something with real substance like the UN Global Compact is a good place to start.
Start with credibility
Last week’s tax scandal issue is nothing new – revelations about tax practices have been discussed in the media for years and in the boardroom for even longer – but what the Apple story teaches us is a valuable lesson in credibility.
If you’re going to label yourself as an ethically minded business, live by this claim or be willing to come under fire if your actions don’t live up to these claims. It’s clearly going to take a lot for consumers to fall out of love with the seductive products and services delivered by established brands, but reputation still plays a crucial role in long-term success.
Put another way, decisions such as Apple's tax ruling risk costing companies far more than just money. Brand power comes from consumers wanting to align themselves with the qualities a brand embodies. And questionable tax practices are rarely one of them.