DE LA SALLE UNIVERSITY MANILA

Ramon V. Del Rosario College of Business

Gaps Labor Problem: A Case Analysis
In Partial Fulfillment of
the Requirements for
BUS560M



Submitted by

Ronnell Dy (11484349)
Aubrey Famatigan (11483695)
Carmi Magno (11485868)



















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 includes 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.
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 wage in the industry and the area.- The cost of living in the area should be
considered.
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 wage laws. Minimum wage laws should be respected even if government does
not enforce those minimums.
a.5 Relation to other 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 living. 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.

c) JOB SATISFACTION
Three determinants of Job Satisfaction should be considered:
Experienced Meaningfulness. The individual must perceive his work as worthwhile or important
by some system of values he accepts.
Experienced Responsibility. He must believe that he is personally accountable for the outcome
of his efforts.
Knowledge of results. 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

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 Union
Representatives
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 Relations
Committee.
1. Might affect their
financial stability
that may result to
cost cut some of the
unnecessary
transactions and
officers in the
organizations. 1 1 5 1 1
2. Gap should
EVALUATE their
Business Partners '
Salary
Standardization
considering the
seven (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 and
harmony 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. Concerns
related to unfair
labor practices is
farfetched since
wages and
working
conditions in the
US is regulated.
Gap can also
lessen the cost
1. Savings in
importation 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
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 Scorecard
Alternative 1: 9
Alternative 2: 12
Alternative 3: 10
Alternative 4: 8
Alternative 5: 15
Alternative 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)