A Case Study on “the Gap”

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In partial fulfillment for the requirements of

Lasallian Business Leadership, Ethics and Corporate Social Responsibility

A Case Study on “The Gap”

Submitted by:

Don Daniel Molina

Charles Joseph Patricio

Majid Shams Govara

Submitted to:

Dr. Kit Diongon-Bonnet

October 24, 2017

TABLE OF CONTENTS

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I. BACKGROUND OF THE CASE

In 1995, The Gap, Inc. received a lot of bad publicity for sourcing their apparels from El Salvador in North America. El Salvador workers were experiencing harsh working conditions with human rights violations and very low wages. Similar cases were being reported around the world like a workplace accident that killed several workers because of the poor safety habits.

Apparel stores like Gap would usually go for the cheapest possible options and that would usually mean depressing both wages and working conditions for the workers. Gap had adopted a set of “Sourcing Principles and Guidelines” to address this issue but it seemed like it did not identify problem areas.

From all the different cases of bad working conditions, the El Salvador Mandarin plant had the worst stories. The workers formed a union and to protest but the company responded by firing the union members. They got help from foreign journalists and other union organizations to publicize the matter. There were even workers taken around for interviews to describe the work environment they experienced.

There were a lot of efforts made by all stakeholders in the case to control the situation. The Gap company repeatedly sent managers to check if the claims were true but they could not find enough evidence to show any labor code violations by the the Mandarin company.

They continued sourcing from Mandarin company after not seeing any serious violations of their sourcing guidelines. This made the situation worse as the bad publicity continued and there were campaigns urging to boycott the Gap products.

II. CASE NARRATIVE

A. Statement of the Problem

What should the Gap management do to address the labor problems raised by the workers of the factories they source apparel from and the bad publicity surrounding the issue?

B. Objectives of the Case

1. To address the problems of the labor force? - low compensation, poor working conditions, long working hours, abuse

The objective of the case is to solve the problem of the company’s labor force. Unhappy workers lead to bad press. The company need to find a solution to make sure that the Mandarin company  obliges with the efforts of Gap.

1. To mitigate the bad public relations by the media and regain brand reputation.

The problem of Gap is really the bad press which led to bad reputation. In order to solve this, they need fix the cause of the problem which is to address the problems of the workforce. Under the ACAs we have solutions that will help the laborer’s needs.

1. To provide sustainable and effective changes on Gap’s relations with its suppliers that will address the problems of the labor force

III. CASE ANALYSIS

A. The Organization: An Organizational Behavior Perspective

The Gap had adopted a set of “Sourcing Principles and Guidelines” in order to address the concern of the working conditions of Third world countries. Some of the standards include the ff:

1. Engage in no form of discrimination
2. Use no forced  or prison labor
3. Provide a safe working environment for the employee
4. Pay the legal minimum wage or the local industry standard
5. Neither threaten nor penalize employees for their efforts to organize or bargain effectively.

Stanley Raggio was the Senior Vice President for International Sourcing and Logistics. He was in charge of the inventory which were sourced from multiple suppliers around the world. Moreover, he was responsible for the oversight and compliance of supplier companies with regard to handling of the employees. As troubles erupted on February 1995, the mandarin plant violated Gap’s rule that Union’s should be allowed to set up. It was also noted that some “guards attacked and beat some of the female workers. As Stanley visited the plant on March he found that there were no violations of the company’s  corporate sourcing policies. Stanley visited the company two more times in the wake of more problems but led to no findings. “On October 1995, Bob Herbert from New York Times interviewed the president of the mandarin plant and confirmed that  women who had worked at the plant had “left” Meanwhile, interviews with local church group and with the Government’s office for the defense of Human rights had confirmed the mass firings of union workers.

In terms of management, Stan Raggio and his group had not fulfilled its duty to protect the rights of the laborers. As the workers struggle with the unjust ways of the mandarin company, Gap had not given their best efforts to uphold their policies. The 2nd scenario would be the bargaining with the mandarin company to cover up the problems which would be more troublesome. Nonetheless, Gap’s image had been torn by the bad press. Gap should have acted swiftly and decisively by either cutting ties with mandarin company or by cleansing the system which mistreated the laborers.

B. Ethical Issues: Business Ethics Perspective

• Human rights violations and subsistence level wages in the Mandarin plant

• Claims from union workers and investigation results released by Robert Herbert of New York Times suggest, if not prove, that the Mandarin plant committed human rights and labor code violations against its workers. With human resources as a key functional area of business, these incidents (assuming they are true) reflect the Mandarin plant’s lack of recognition over a firm’s business ethics over its employees

• Responsibility of Gap towards its suppliers

• The incidents reported in the case also go against the business ethics of organizations (much more to powerful ones like Gap) to be responsible over the production of the products they make a business out of – regardless of origination.

• Issue on transparency

• The repeated visits and interviews conducted by Stan Raggio seemingly appeared to bear no fruit. Despite the cries of the employees over the abuse of the management of the Mandarin plant, Stan Raggio reported to have seen no mistreatment or abuse done by the Mandarin plant to any of its employees. On his third visit, this time with the National Labor Relations Committee (NLRC), Gap reported the same thing only for NLRC to claim the workers had not spoken with Gap out of fear. Both accounts place importance on the business ethics of transparency: Gap to completely and honestly report on the facts it gathered from its visits and for NLRC to report to Gap the truth of the matter over the employees of the Mandarin plant

C. SWOT ANALYSIS

Strengths

• Diversified number of suppliers from different countries around the world

Weaknesses

• Weak monitoring procedures in place
• Reactive crisis management

Opportunities

• The company could offer to help the mistreated workers in order to regain their image

Threats

• Bad publicity by media
• Potential weakening of relationship with other manufacturers

D. Decision Criteria and Weights

The decision criteria below were formulated to help identify the action that Brian should take. We see all of the criteria as equally important in making the decision and therefore give them equal weights. We will use numbers 1 to 3 for a low to high rating respectively.

1.        Compliant with the labor code

This criterion evaluates if there is strict adherence the labor code or if any rules are broken. The company would not want to be questioned for breaking any laws as that would also come with great fines and penalties. A company as big as Gap would be facing a multi-million dollar lawsuit if it is proven that they aided in breaking any labor codes.