After hearing reports and rumors that an iPod Factory in China might be violating child labor and other laws, Apple had one of two options:

1) Deny the reports outright and question the character of anyone making such claims
2) Be open and honest about the issue, launch an investigation and make the results public

Thankfully the company chose the second approach. They created a team of employees from human resources, legal and operations teams to audit the factory and interview employees. After doing just that they found there were no major violations of their Code of Conduct (child labor, for instance, was not found to be used) but there were some places where the factory fell short either in terms of the letter or spirit of the regulations. Apple has begun working with the factory (which houses more than just Apple employees) to expand housing, clear up pay scales and make other immediate improvements. They’ve also engaged the services of Verite, which specializes in monitoring workplace conditions, to ensure ongoing compliance.

In a time when so many companies defend, defend, defend until they’re forced to acknowledge error and then scramble to fix both the problem and their reputation, Apple chose to take the narrow and more difficult path. Part of this is because they know how many MP3 players are waiting for the first sign of weakness to pounce on Apple’s market share. But I think part of it is because they realize that it’s far better to maintain a good corporate reputation than to develop a plan to fix it.