The Gap


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  • Business Ethics presentation
  • The Gap

    1. 1. The Gap's Labor Problems Prepared By Dr Muhammad Sharjeel Usman Javed Zuberi
    2. 2. <ul><li>In your view, should Gap have given in to the union's 1995 demand that it should hire a third-party independent group to monitor the Mandarin plants instead of relying on its own inspectors and the word of factory owners?  Should Gap have done anything more? </li></ul>Prepared by Sharjeel and Usman
    3. 3. <ul><li>we are of the view that GAP should not have given up to Union’s demands of hiring third party monitor. </li></ul><ul><li>Model of Rational Organization </li></ul>Prepared by Sharjeel and Usman
    4. 4. <ul><li>From bottom to up information hierarchy of Rational Organization, there was communication gap between the lower layer monitoring Gap’s factories and top management due to which top management was not aware of human rights violation issues within Gap; that is why monitoring system of Gap was not working with maximum efficiency. </li></ul>Prepared by Sharjeel and Usman
    5. 5. <ul><li>Cost of operating business </li></ul><ul><li>Profit margins of company is 6.4% which is quite low for a company like GAP. If we examine average interest rate, this will be around 10-11%. So any suggestion to increase Gap’s cost of operating business will not be feasible. </li></ul>Prepared by Sharjeel and Usman
    6. 6. <ul><li>Corporate Ethical Behavior: In the whole case, we can see that Gap (in comparison with other companies in apparel industry) has shown concerns for the Ethical aspects. For Example: Gap was resistant to go for out of court settlement for Saipan factories and tried to fight for the cause. Gap compensate people and took preventive measures to stop human rights violations in its factories when realized that charges being imposed by different NGOs are correct. </li></ul>Prepared by Sharjeel and Usman
    7. 7. <ul><li>Better strategy would be to identify and correct weaknesses of its internal monitoring system instead of giving in to the political pressure of third party monitor. </li></ul>Prepared by Sharjeel and Usman
    8. 8. <ul><li>Is a company like Gap morally responsible for the way its suppliers treat their workers?  Why or why not? </li></ul>Prepared by Sharjeel and Usman
    9. 9. <ul><li>Moral responsibility lies on following points; 1) If employer can and should improve the conditions. 2) Knows about them. 3) Is not prevented from changing them. </li></ul><ul><li>GAP has defined code of conduct for Vendors. </li></ul><ul><li>Gap has given contracts to third party vendors and signed an agreement that asks these vendors to comply with the Gap's requirements </li></ul>Prepared by Sharjeel and Usman
    10. 10. <ul><li>Based on the following arguments </li></ul><ul><li>Contractual rights. </li></ul><ul><li>Weaknesses in Rational Model of Organization. </li></ul><ul><li>We held GAP only partially responsible for the way its suppliers treat there employees. </li></ul>Prepared by Sharjeel and Usman
    11. 11. <ul><li>According the Los Angeles Times, &quot;Gap is now viewed as a leader in the small but growing corporate movement to improve conditions for some of the world's most exploited workers.&quot; The paper states that the company has wielded its buying power in Africa, Central America, and Cambodia to help improve factory conditions and is encouraging other manufacturers to follow suit. &quot;No one company created these issues, and no one company can fix it by itself,&quot; said Alan Marks, Gap's chief spokesman. Source: Los Angeles Times, Jan 17, 2005 </li></ul>Prepared by Sharjeel and Usman
    12. 12. <ul><li>Should companies like Gap attempt to get their suppliers to pay more than the local industry standard when it is insufficient to live on?  Should they pay wages in the Third World that are equivalent to U.S. wages?  Should they provide the same levels of medical benefits that are provided in the United States?  The same levels of workplace safety? </li></ul>Prepared by Sharjeel and Usman
    13. 13. <ul><li>Ethics of care: </li></ul><ul><li>Yes companies like GAP should attempt to get their suppliers to pay more then the local industry, WHEN IT IS INSUFFICIENT TO LIVE ON. </li></ul>Prepared by Sharjeel and Usman
    14. 14. <ul><li>BUT the wages in any given economy should be based on the following factors rather then comparison with the United States or where the head quarter of company located. </li></ul><ul><li>Productivity level of employees. </li></ul><ul><li>Revenues made by the company. </li></ul><ul><li>Living wage and living cost in that nation. </li></ul><ul><li>Local labor markets. </li></ul>Prepared by Sharjeel and Usman
    15. 15. <ul><li>Retail Price do not always reflect the ability of a company to pay wages (as shown in the case). </li></ul><ul><li>Number of the wage earners in a family. </li></ul><ul><li>Minimum Wage Laws of the country, there comes the systemic ethical issue as in the developing nations such laws are not enforced properly. </li></ul><ul><li>NO laws for Work Place Safety in most developing nations. </li></ul><ul><li>Where they are present, they are not implemented. </li></ul>Prepared by Sharjeel and Usman
    16. 16. <ul><li>Developing a business unit outside the country of business where it is selling its goods or services is called Off shoring. One of the main factors influencing the BEGININGS of the offshore outsourcing movement were a combination of pressures to reduce labor costs, save on operational cost such as payroll, administrative cost, utilities and to improve productivity, and an expanding, economical labor in other countries. When companies outsource the idea is to save money if they can keep the prices of their product lower. </li></ul>Prepared by Sharjeel and Usman
    17. 17. <ul><li>So by Ethics Of Care companies like GAP should force their suppliers to provide maximum work place safety, by eliminating job risks, compensation for high risk jobs and full awareness of the hazards of a job to employee. </li></ul>Prepared by Sharjeel and Usman
    18. 18. <ul><li>In your view, is Gap's use of the labels &quot;Made in the USA&quot; or &quot;Made in Northern Mariana Islands (USA)&quot; deceptive?  Explain. </li></ul>Prepared by Sharjeel and Usman
    19. 19. <ul><li>Technically Saipan was declared US territory in 1975. But Saipan was exempted from Federal minimum wages and immigration laws. So the ethical dilemma rose. </li></ul><ul><li>Technically Gap was correct, however ethically questionable. </li></ul><ul><li>There is more prominent Systemic ethical issue . Intentions of US govt. for not declaring Saipan its territory with minimum wages and immigration laws, as applicable in USA. </li></ul><ul><li>By Rights theory, GAP has full right on its products and this is not deceptive as long as Saipan is included in US territory. </li></ul>Prepared by Sharjeel and Usman
    20. 20. <ul><li>In your view, and in the light of the fact that Gap's own monitors had not reported the sweatshop conditions and unpaid overtime in its Saipan factories that these were in compliance with all applicable worker health and safety laws, was it right for Gap to settle the lawsuit?  Should Gap have settled the lawsuit?  Explain. </li></ul>Prepared by Sharjeel and Usman
    21. 21. <ul><li>Incorrect reporting of monitors of Gap is a weakness in Rational Model of Organization , which needs improvement, as we are supporting it from the beginning. </li></ul><ul><li>GAP was initially resistant for an out of the court settlement and tried to fight the case. Later, Gap felt that out of court settlement was eminent due to ineffective performance of monitoring department of The Gap. </li></ul><ul><li>This shows in overall, the rational and ethical behavior of a business organization. </li></ul>Prepared by Sharjeel and Usman
    22. 22. <ul><li>Utilitarian Argument </li></ul><ul><li>Compensatory and Retributive Justice </li></ul><ul><li>Rights Theory </li></ul>Prepared by Sharjeel and Usman
    23. 23. <ul><li>In light of the long history of labor problems that Gap has had to contend with, what recommendation or recommendations would you make to Paul Pressler concerning what the company should now do to deal with these and future problems?  Explain how your recommendations will effectively solve these problems for Gap. </li></ul>Prepared by Sharjeel and Usman
    24. 24. <ul><li>Implementation of a Rational Model of an Organization. </li></ul><ul><li>Improvement in internal monitoring system. </li></ul><ul><li>cram the reasons behind futile performance of monitoring department. </li></ul><ul><li>Strong compliance of vendor code of conduct by suppliers, take account of their history of working conditions, beforehand. </li></ul>Prepared by Sharjeel and Usman
    25. 25. <ul><li>In your judgment, how effective would you expect the release of the company's Social Responsibility Report 2004 to be?  From an ethical point of view, in the light of the company's responsibilities to its various stakeholders, should the report have been released? </li></ul>Prepared by Sharjeel and Usman
    26. 26. <ul><li>Gap's 40-page report attempts to take the sweatshop issue head on. The result of a collaboration with several &quot;social investment&quot; and corporate responsibility organizations, such as the Calvert Group and the Interfaith Center on Corporate Responsibility (ICCR), the document provides data on conditions in 3,010 factories in over 50 countries were the company's garments are made. </li></ul>Prepared by Sharjeel and Usman
    27. 27. <ul><li>The report has earned Gap genuine, if measured, praise from a variety of leading anti-sweatshop organizations. </li></ul><ul><li>&quot;We've had our differences with Gap in the past, and we may in the future,&quot; says Bruce Raynor, President of UNITE, the textiles and needletrades union. But he cites the report as a move to &quot;create positive change for workers.&quot; </li></ul><ul><li>Gap was one of the winners of the 16th Annual Business Ethics Awards , announced on December 13, 2004 by Business Ethics magazine. Gap received the Social Reporting Award for &quot;unprecedented honesty in reporting on factory conditions&quot; in 2004 Social Responsibility Report. ( Source: CSRWire) </li></ul>Prepared by Sharjeel and Usman
    28. 28. <ul><li>Nikki Bas, executive director of Sweatshop Watch, explains that &quot;it's pretty remarkable that they are showing not just what they are doing in terms of monitoring, but also what they are finding.&quot; Many of these discoveries corroborate activists' portrait of an industry that often fails to respect basic rights. </li></ul><ul><li>As a frequent target of corporate campaigns in the past ten years, Gap's name has been closely tied with the growth of the anti-sweatshop movement. &quot;No one company created these problems,&quot; Gap spokesperson Alan Marks fairly notes. But Gap's energetic branding of its products as embodiments of a young, hip lifestyle have made it vulnerable to activists who question the economic realities behind the brand image. </li></ul>Prepared by Sharjeel and Usman
    29. 29. <ul><li>Synopsis ,it was ethical to release such a repot in that prevailing scenario. </li></ul><ul><li>Ethical behavior of the corporation which was respected, even by labor unions. </li></ul><ul><li>Enhancement in marketing image and customer confidence by various awards. </li></ul>Prepared by Sharjeel and Usman
    30. 30. <ul><li>From an ethical point of view, assess Kernaghan's ending statement concerning the issue of unions.  Should Gap require unions? </li></ul><ul><li>In economies that are paying poverty wages, when people have no rights and no power, what you end up monitoring are well-run prisons,&quot; he says. &quot;Sure, factories will be cleaned up. They'll have bathrooms where the water runs. But when it comes to wages, when it comes to having a democratic voice on the shop floor, monitoring and codes of conduct are a dead end.&quot; </li></ul>Prepared by Sharjeel and Usman
    31. 31. <ul><li>Organization in unions, is the right of employees in a corporation just as managers have the right to connect and interact with each other and organize in a Political model of an Organization. </li></ul><ul><li>SO we hold that GAP should allow labor unions that way not only employee will receive benefits and a systemic way of raising there voice instead of screams and clamor by human right organizations and a hot story for news papers. </li></ul><ul><li>But that will further fortify image of company and it will also receive appreciation by society. </li></ul>Prepared by Sharjeel and Usman
    32. 32. Thank you Prepared by Sharjeel and Usman