’s Labor Problems Group 4

Background of the Study

Gap, Inc. sells casual apparel also owns Old Navy & Banana Republic 2003 total sales: $15.85 billion 2003 profits: $1.03 billion in over 4000 stores

Almost all Gap merchandise are made by foreign companies under contract.

Gap’s Code of Ethics for these suppliers was updated in 1993

History of troubles

• Employing child laborers

• Workers being forced to work overtime without pay

• Paying below the minimum wage

• Harassing workers for trying to organize

• Young female workers being forced to undergo pregnancy tests

• Workers being denied access to clean water and bathrooms

Saipan itself is located in the Commonwealth of the Northern Mariana Islands (CNMI)

Most U.S. labor laws -- e.g., those governing overtime pay and worker health and safety

However CNMI was exempted from federal minimum wage laws & immigration restrictions

Saipan's garment factories are all foreign owned: mainly by Asian companies

Saipan's garment workers are 91% foreign -- mostly Asian women recruited outside CNMI

The Saipan Suit against Gap and 17 other retailers

U.S.A.

Saipan

The suit accusations

Workers were hired under false pretenses and bound to exploitative agreements

Forced to live in "company towns" - veritable shantytowns

Forced unpaid overtime

Widespread violations of U.S. health and safety laws

Deceptive advertising of the clothes as "Made in the USA" which implied to consumers that the garments were made in compliance with U.S. labor laws and guidelines

Profitability vs. Fair Labor Practices

Should GAP continue using third parties in the production of its clothing?

Ethical Dilemma

Stakeholders

1. Gap owners and stockholders2. Subcontractors3. US and the Foreign Governments of

involved subcontractors4. Employees/ Laborers5. Customers6. Competitors

Alternatives

1. Continue with the current practice of evaluation by third party providers.

2. Find other contractors that will comply with their policies and code of ethics.

3. Open fully owned and operated factories for the production of its clothing.

Evaluation of Alternatives1. Continue with the current practice of evaluating third party providers.

Advantages Disadvantages

1. No additional cost of production

1. Continued operation of sweatshops

2. Higher profit 2. More labor cases against the company

3. No direct control over the employees concerns and grievances

4. Additional cost for litigations

5. The reputation of the company will remain at risk

Evaluation of Alternatives2. Find other reputable contractors that will comply with their policies and code of ethics. Advantages Disadvantages

1. Less cost of production; more profit

1. Continued possibility of labor cases against the company

2. Help other small players in the industry

2. No direct control over the employees’ concerns and grievances

3. Healthier competition among suppliers

3. Possible cost for litigations.

4. Potentially lessen risk of unfair labor practice accusations

4. The reputation of the company may still be put at risk

5. Proper selection/ monitoring of new subcontractors to comply with the Code of Ethics of the company.

5. Additional expenses for additional manpower

Evaluation of Alternatives3. Open fully owned and operated factories for the production of its clothing.

Advantages Disadvantages

1. Direct control over the employees’ concerns and grievances

1. More cost of production

2. Full control on operations and production that will ensure safe working condition

2. It will take a long period of time before they can set up the facilities

3. Reputation of the company will be redeemed

3. Possible existence of unions

Decision

Alternative 2

Find other reputable contractors that will comply with their policies and code of ethics.

Ethical Principles

Ethics of Care - Since the company inadvertently used child labor in their production, they are ethically bound to assist the families affected.

Compensatory Justice - The company has to pay the moral and actual damages that are due to the affected parties.

Rights - The company should protect and promote the rights and welfare of the children and women. Discrimination should not be practiced and tolerated.

Implementation of the Plan1. The company will compensate the parties affected.2. Create an in house committee or a group of

representatives who will check or audit the compliance of the subcontractors to the company policies and Code of Ethics.

3. Appoint company representatives who will monitor the operations of the subcontractors.

4. Publish audit findings and implement recommendations made by the committee.

5. Create a contract that will include penalties and fines in case of violations of the code of ethics.

1. Conduct employee satisfaction surveys.

2. Unannounced visits by upper management.

3. No child laborers and discrimination cases filed against the company.

Methods of Evaluation

Thank you!