Gap's Labor Problems. Group 3

8/12/2019 Gap's Labor Problems. Group 3

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DE LA SALLE UNIVERSITYMANILA

Ramon V. Del Rosario College of Business

Gaps Labor Problem: A Case Analysis

In Partial Fulfillment ofthe Requirements for

BUS560M

Submitted by

Ronnell Dy (11484349)

Aubrey Famatigan (11483695)

Carmi Magno (11485868)


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GAPS LABOR PROBLEMS

I. Background of the Case

Gap, Inc. is a chain of retail stores that sells casual apparel and shoes and is quartered in San Francisco.

Almost all Gap merchandise is made under contract for the company by some 3,000 suppliers factories

that are owned and operated by foreigners in 50 developing countries.

March 2004 Paul Pressler, president and chief executive officer of Gap over looked a Social

Responsibility Report 2004 which described labor problems of the company since 1995 in the factories

that supplied its clothes.

One of the toughest issues the company had faced was the lawsuit the company had settled in

September 2002. The class action law suit that was filed on behalf of the workers on January 1999 when

Gap Inc., and 25 other retailers were accused of contracting with sweatshops on the island of Saipan, a

U.S protectorate in Southeast Asia. According to the lawsuit, Gap, Inc. violated the human rights of their

workers and deceived consumers by stating Made in the U.S.A falsely implying they were made

according to U.S labour standards.

There is a set of sourcing principles and guidelines as a code of conduct for the Company incl udes its

suppliers had to:

1) Avoid discrimination,

2) Use no forced or prison labour,

3) Employ no children under 14 years of age,

4) Provide a safe working environment for employees,

5) Pay the legal minimum wage or the local industry standard,

6) Meet all applicable local environmental regulations,

7) Allow the employees for their efforts to organize or bargain collectively,

8) Uphold all local laws.


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Before it signed a contract with a new factory, Gap sent an employee to inspect the factorys conditions

and to know had the factory owner sign its code of conduct.

II. Statement of the Problem

Is a company like Gap morally responsible for the way its suppliers treat their workers?

III. Objectives of the Case

This case aims to:

Understand the Rights of the Employees

And the Moral Obligations of the Employers

IV. Areas of Consideration

a) THE FIRMS DUTIES TO ITS EMPLOYEES

WAGES

From the employees point of view, wages are the principal means for satisfying the basic

economic needs of the worker and the workers family.

From the employers point of view, wages are the cost of production that must be kept down lest

the product be priced out in the market.

Since every employer faces dilemma on fair wages, there are factors that can be taken into

account in determining wages and salaries in most countries:

a.1 The going w age in the industry and the area.- The cost of living in the area should be

considered.


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a.2 The firms capabilities. The higher the firms profit the higher it can afford to pay its

workers.

a.3 The nature of the job Jobs that involves greater health risks, offer less security, require

more training of experience, compose heavier physical or emotional burdens, or take greater

effort should carry higher levels of compensations.

a.4 Minimum w age laws.Minimum wage laws should be respected even if government does

not enforce those minimums.

a.5 Relation to o ther Salaries. If the salary structure within an organization is to be fair,

workers who do roughly similar works should receive roughly similar salaries.

a.6 Fairness of Wage Negotiation.Salaries and wages that result from un-free negotiations

in which one sides uses fraud, power, ignorance, deceit, or passion to get its way will rarely be

fair.

a.7 Local costs of l iv ing. The goods and services that a family needs to meet their basic

needs differ from one geographical region to another.

b) WORKING CONDITIONS: Health and Safety

Employers should offer wages that reflect the risk-premiums prevalent in other similar but

competitive labor markets, so that workers are adequately compensated for the risk their jobs

involve.

The employer has the obligation to clearly and explicitly inform workers of the risks, particularly

those involve ding health and life, and an obligation to compensate workers for any injuries they

sustain.

Suitable Insurance Programs both for Health Risks and Disability should take in place for the

protection of the workers against unknown hazards.


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c) JOB SATISFACTION

Three determinants of Job Satisfaction should be considered:

Experienced Meaningfuln ess.The individual must perceive his work as worthwhile or important

by some system of values he accepts.

Experienced Respons ibi l i ty. He must believe that he is personally accountable for the outcome

of his efforts.

Know ledge of resul ts . He must be able to determine, on some regular basis, whether the

outcome of his work is satisfactory.

The Companys Labour Cases

a) El Salvador, Central America

b) Honduras

c) Philippines

d) Saipan, Commonwealth of The Northern Mariana Island (CNMI)

e) Lesotho, Africa

f) Thailand and Indonesia

g) Cambodia

V. Alternative Courses of Action


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ANALYSIS OF ALTERNATIVE COURSES OF ACTION

ALTERNATIVE

COURSE OF

ACTIONS (ACA) ADVANTAGE DISADVANTAGE UTILITARIANISM RIGHTS

JUSTICE &

FAIRNESS

ETHICS

OF CARE

VIRTUE

ETHICS

1.Engage an

independent

investigator on the

case and enter into

Collective

Bargaining

Agreement (CBA)

with UnionRepresentatives

1. Key

stakeholders will

be able to get to

the bottom of

the matter

through an

independent

investigator.

Gap could gain

back the

confidence of

the consumers

and better

approval from

the National

Labor RelationsCommittee.

1. Might affect their

financial stability

that may result to

cost cut some of the

unnecessary

transactions and

officers in theorganizations. 1 1 5 1 1

2. Gap should

EVALUATE their

Business Partners '

Salary

Standardization

considering theseven (7) factors in

determining wages

and salaries.

1. Will boost

morale and

enthusiasm to

all their workers

across

developing

countries.

1. Will increase the

overhead cost.

3 5 2 1 1

2. May promote

good image of

the company

and can

strengthen the

values andharmony of the

workers in all

their factories.

3. Workers will

be happy and

will produce and

work efficiently.

3. Provide Suitable

Health Insurance

and Disability

Insurance

Programs.

1. All employees

will be

protected and

their families

will be ensured

of their safety.

1. Will increase

their operational

cost.

1 5 2 1 1

4. Dis engage the

services of

Mandarin

International and

refrain from

outsourcing labor-

intensive jobs in

Third-World

countries.

1. Concernsrelated to unfair

labor practices is

farfetched since

wages and

working

conditions in the

US is regulated.

Gap can also

lessen the cost

1. Savings inimportation will be

offset by higher

labor cost in the US.

Workers in various

countries

outsourced by Gap

will lose jobs and

would need to cut

ties with their 3 2 1 1 1


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of importation. business partners

off shores. Families

of the lay off

employees will be

affected.

5. Strengthening

Controls and

Procedure on

Selection of

Business Partners

to ensure that

Gap's Code of

Conduct is fully

implemented and

strictly observed by

all its business

partners.

1. Will eliminate

claims on

unhealthy

working

environment.

1. Might slow down

the business

engagements since

thorough reviews

and standards

should be observed

and evaluated first

before contract

signing. 2 3 4 5 1

6. Consider to offer

a staff house that is

conducive and safe

for all their foreign

workers to uphold

safety, respect and

mutual care

between the owner

of the company

and the workers.

1. Will response

to the Firms

duties to the

employees to

provide and

uphold proper

treatment of

their employees

and will be

morally

responsible and

sensitive to their

basic needs.

1. Will increase

operational cost. 2 3 4 3 2

Total 12 19 18 12 7

VI. Recommendation

We have ranked our alternatives based on Ethical Framework with Five (5) as the highest and one (1)the lowest:

Alternatives ScorecardAlternative 1: 9Alternative 2: 12Alternative 3: 10Alternative 4: 8Alternative 5: 15Alternative 6: 14

We therefore recommend to Strengthen Gaps control on selection of their business partners so as to

maintain their integrity, their moral obligations to their workers and employees.

Gap should support and push all the owners of factories to pay attention to their workers rights and

keep the factories to follow the Gaps code of conduct since; they are morally responsible to their

workers.

References: Business Ethics Manuel G. Velasquez (Sixth Edition)


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Gap's Labor Problems. Group 3