Tuesday, November 24, 2015

Gap Inc.: Refusal of the Bangladesh Safety Accord (2013)

The Controversy
GAP Inc. logo

The controversy to be discussed came to worldwide attention when the Rana Plaza in Bangladesh, a large textile factory in Bangladesh, collapsed on 24 April 2013. The death toll in this disaster totaled to 1,129 people with another 2,515 injured. The cause of the collapse was deemed to be structural failure. However, as the investigators dug deeper into why the structure failed, it became apparent that there many issues with the textile industry safety standards that are supposed to protect workers from such disasters. Companies banded together and proceeded to create the Bangladesh Safety Accord. Many applauded the long-overdue commitment by clothing companies to abide by safety regulations for their factory workers. However, Gap Inc. and a few other companies refused to sign the Accord. Gap representatives and CEO Glenn Murphy did not provide exact reasoning on why the company refused signing the accord, only that the proposal did not “make sense” for the company. Many speculate that it is because the accord holds companies accountable by their nation’s court if the standards are not upheld. Following the refusal, Gap Inc. and a few other companies created "the Alliance for Bangladesh Worker Safety." The "Alliance", as it was deemed, was different from the Accord in the way that it did not formally bind those companies to improve the conditions and allowed for the companies to control all safety standards, a system that had failed in the past.

The primary stakeholders in this controversy are the Bangladeshi textile factory workers, factory owners that profit from the business of large clothing companies, and the employees and management of Gap Inc. The Gap stockholders are another stake-holding party indirectly involved in this controversy. After the building collapse in 2013, many sought to boycott the company after it was revealed how truly unsafe the working conditions were and how little the companies were doing to enforce regulations. This had a negative impact on the stock value of the company. If the business profits suffer enough, so can the employees through layoffs and store closings.

Women working for GAP in Bangladesh
According to the theory of Individualism, the primary goal is to maximize profits for the stakeholders and to act in their best interest. The decision to not join the Accord was made with the notion of preserving profits and not committing to an organization that could hold Gap Inc. fiscally responsible if standards were not met. Not signing the Accord maximized profit for the stakeholders but did not act in the best interest of the workers. Retaining control and internally imposing the new safety standards allowed Gap Inc. to control the inspections and essentially how they would affect productivity and profits. However, the safety of the workers was not immediately a concern as unsafe factories continued to operate while the Alliance was formed and their own standards were being developed. For this reason, the decision is deemed unethical.

Women of Bangladesh
Using Utilitarian theory, a decision would be deemed ethical if it brought happiness to the most amount of people. Many would argue that the act of refusing to sign the Bangladesh Safety Accord shows that Gap Inc. believes that the happiness and pleasure of the Bangladeshis is secondary to their profit and success as business. Being held personally accountable legally for the safety of the Bangladeshi workers would represent a commitment to the happiness and well-being of their workers and many would argue Gap Inc. has fallen short here. On the contrary, the decision to not commit to the Accord right away can be argued as an ethical decision that takes into account the happiness of the employees outside of the factories such as Gap store owners, managers, salesman, and others on the corporate side. Signing the Accord binds Gap Inc. to legal obligations that could have very negative effects on the success of the business if standards are not met. For example, if a majority of their factories are shut down immediately due to standards that Gap Inc. does not control, the supply will not keep up with the demand and the business could fail catastrophically. In this case, the happiness of all of the employees is in jeopardy if stores begin to close due to a lack of supply. Evaluating using a utilitarian theory, the decision to not join the Accord is ethical because it preserves the happiness for the most amount of stakeholders in the company.

Bangladeshi People Hold Pictures of Missing Loved Ones
Kantian business ethics theory is based on making rational decisions that are selfless in nature and are motivated purely by the desire to do right. A decision made ethically according to a Kantian would be a decision that respects the humanity of people, seeing them as an individual person and never as a means to accomplish something. Evaluating this ethical controversy using the Kantianism theory would deem Gap’s actions unethical. In refusing the accord, Gap Inc. is showing that the Bangladeshi workers are simply a means to producing their product and that other factors need to be considered before obligating themselves to regulations set forth to protect their safety. Committing to the safety of the workers no matter what the cost would be an action exhibiting a respect for their humanity, and Gap Inc. as well as other companies in the accord fail to do this. Gap Inc. does not want to follow the rest of the rules and regulations set forth by worker’s rights advocates and the Bangladeshi government. The Accord follows these rules and actively includes people from these organizations in the process of improving and monitoring the conditions of the factories. Gap Inc. wants to use their own employees to control the rules, and in essence, exempt themselves from the rules and regulations of the rest of the world. If Gap were motivated by good will, they would accept being held to a global standard to improve the regulations of the Bangladeshi Workers.

Gap CEO Glenn Murphy

Virtue Theory
Virtue theory is based on four main characteristics that must be satisfied in order for a decision to be deemed ethical. These virtues are courage, honesty, temperance, and justice. The refusal to sign on with the other companies in the accord took a lot of courage, especially in the spotlight resulting from the Rana Plaza disaster. This willingness to make sure the right thing was being done not only for the workers in the textile factories, but also for their employees in the United States, took a lot of courage from Gap Inc. leadership. The second characteristic is honesty. The actions taken immediately after refusing to sign the accord cannot be deemed dishonest as they were not meant to be deceitful, but the lack of transparency unto why Gap Inc. refused to sign the accord represents a deficiency in honesty towards the public. CEO Glenn Murphy simply told the media and public that the Safety Accord did not “Make sense” for Gap Inc. at this time. It can be speculated that the reason why CEO Glenn Murphy was so vague in his justification is because effects on the company’s profits were being evaluated against the safety for human beings. The third characteristic of temperance is met if Gap Inc. made realistic expectations and desires when making the decision of refusing the accord. Gap Inc. meets this characteristic because the company deemed the Accord to be unrealistic to their business model, and worked to develop an organization that would fit their business model while arguably still accomplishing the same objective. The final characteristic of justice deems a decision ethical if a company is fair in terms of hard work, quality products, good ideas, and fair practices. Gap’s refusal of the Bangladesh Safety Accord does not relate directly to these practices, but the resulting organization developed by Gap, “the Alliance for Bangladesh Worker Safety” demonstrated hard work because the program was developed nearly entirely by Gap and a few other companies that also refused to sign the Accord. The program, arguably, is also of great quality, with inspections being conducted and structural engineers being hired to evaluate each facility to a standard. The program also is showing promise with good ideas and fair practices as collaboration between the Alliance and the Accord increased in an effort to standardize safety standards. Although the decision made by Gap meets most of the Virtue Theory characteristics, it does not entirely meet the honesty portion due to the vague explanations to the public following the refusal, and therefore the decision is deemed unethical.

Justified Ethics Evaluation
After examining this Case study using different theories of conducting business ethically, it was concluded that the decision to refuse the Accord was unethical, but only very slightly. Gap Inc. acted ethically in terms of preserving their business and taking into account all stakeholders, including the employees in the United States. However, Gap fell short in respecting the humanity of the workers in the textile factories. The company consistently demonstrates that the workers are a means and that business must be considered over the safety of the workers. The profits are considered foremost, before the safety and best interests of the factory workers. For these reasons, it is concluded that Gap Inc.’s refusal of the Accord and decision to form their own organization to address the safety issues independently was unethical.


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