CORPORATE SOCIAL RESPONSIBILITY

INDIVIDUAL ASSIGNMENT # 2

LEGACY AND ETHICS

TALHA NAYAB
0320138

Table of Contents
GAP INC.................................................................................................... 2
IMPORTANCE OF MORAL ETHICS AND EFFECTIVE LEADERSHIP..............10
REFERENCES.......................................................................................... 14

GAP INC.

In 1969, Donald Fisher and Doris F. Fisher co-founded GAP store,

selling entirely

Levis Strauss denim merchandise. Within a year,

sales boosted and store locations were diversified. In 1973, GAP

introduces its own labeled clothes, with additional brands to
diversify from solely selling Levis. With the continous success, GAP
became multi-branded, multinational corporation; stores operating
in about 50 countries. According to Portfolio.com, GAP became the
worlds largest apparel retailer, (Business Week, 2003), and largest
speciality apparel retailer in US.

The presence of GAP; retailing, manufacturing and distributing, are

tied up with a promise, voiced up Donald Fisher, Do More Than
Selling Clothes. According to Glenn Murphy, Ex-CEO GAP Inc., every
expansion step is considered through social and environmental
policies and with integration of cultural legacy of community
investment and support. With the expansion of merchandise base,
acquisition of Banana Republic and Old Navy, supplement corporate
and casual clothing, respectively. Capturing large portion of retail
clothing spectrum within GAP Inc., ensured growth. In 2001, GAP
began selling into international markets with chains in Canada and

Asia.. The lastest addition to the portfolio was Piperlime, online

show retailer, and acquisition of Athleta, fitness merchandise, (Joslin
et al).

The apparel industry including GAP Inc. manufacture their products

from sweatshops in developing countries such as Bangladesh, India
and Cambodia, where the industry benefit from cheap labour
markets, (The Co-operative Bank, 2003). Regardless of the industry
success, intense media coverage about modern manufacturing
processes and conditions in sweatshops has forced many leading
apparel retailers including GAP, to reconsider working conditions
and adopt fairer business practices, (Klein, 2001; Lavin, 1999). The
child labor issue with sweatshops in developing countries, primarily
affects the image of apparel retailers. Society have always
challenged apparel retailers and their labour practices, (Adams,
2002; Emmelhainz and Adams, 1999), resulting in adoption and
implementing

of

ethical

trading

principles

in

organizations

marketing strategy. Despite, the GAP Inc. being recognised as one of

the most successful apparel retailers throughout 1990s, (Lavin,
1999), and as a pioneer regarding their child labour provisions
within their code of business conduct, (Kolk and van Tulder, 2002).
GAP Inc. is among the retailers most commonly associated with
sweatshop activities, (Labour Behind the Label, 2003a; BBC
Panorama, 2000; Lavin, 1999).

GAP Inc.s success is inter-related with their presence in foreign

developing

nations.

GAP

outsource

most

of

their

apparel

manufacturing to developing nations, mostly with governmental

oversighted and limited regulations. Due to lack of regulations and
critical working conditions in these countries, GAP Inc. developed a
ethical code of conduct in 1990, (H. Iwanow et al, 2005), in
comliance with local labour laws, working conditions, and the
environment. The ethical code works collaboratively with Vendor
Code of Conduct, stating companys expectation regarding wages,
child labour, health and safety, and workers right to gain access to
trade unions. The idea and concept of Vendor Code of Conduct and
outsourcing of sustainable social responsibilty was relatively new,
the implementation process was oversighted from GAP. GAP Inc.
declare that they do not manufacture goods, they only sell
products

manufactured

companys

core

by

other

competencies

lies

companies.
in

being

Therefore,

the

designers

and

marketers,(The GAP, 2003). The failure of code of conduct was

acknowledged in 1995, when labour working conditions were
unacceptable in a factory in El Salvador. The issues involved child
labour,

an

underpaid

workforce

and

objectionable

working

conditions. When workers tried to report the issues and attempted

to form trade union, the organizers were threatened and many
workers were fired, (Charles Karnaghan, 1995). It was this issue that
provoked GAP to proactively solve the problem by setting up the
first monitoring system for foreign factory workers. The following

year, GAP created a Global Compliance Team to monitor factories

conditions and ensure that the code of conduct is being followed. A
survey was conducted, including 37 codes related to apparel
industry, identified that two-thirds do not refer to the systems of
monitoring and less than half stipulate freedom of association to join
trade union activities, (Wick, 2003). Regardless of GAPs effort to
remediate the problem and development of Code of Conduct, it was
continously scrunitized and dragged into the labour law problems. In
1999, GAP Inc. along with other companies were alleged that Saipan
factory workers are under paid and working conditions are
unbearable. GAP and its leadership realized that monitoring is not
sufficient to overcome these issue. The guidelines and complexed
monitoring program was developed, consisting of different stages.
The program was based upon the initial audit of any factory to
assess its working conditions before it start manufacturing apparel
branded by GAP Inc., (GAP Sustainability Report, 2012).

Undermining the guidelines, in 2000 GAP was again involved in child

labour issue in a Cambodian factory. During this situation GAP Inc.
took a ethical decision, GAP quit outsourcing to the particular
factory but remained operative in Cambodia where other apparel
companies elected to leave the country. Hence, GAP made selection
method of factories and age verification of workers in the
Cambodian factory more stricter. This decision from GAP, did not
leave all the foreign direct innvestment from the country. And it

helped the current workers to maintain there standard of living.

Nonetheless, it took 20 years for GAP to fully integrate the
monitoring system into outsourced factories. Regardless of initial
inspected, the monitoring team visited the factories reportedly and
unreportedly. The factories was then rated and any negativity or
voilation of rules were negative rated, they were reported to the
factory and was assessed for root causes. According to Institute of
Global Labour and Human Rights, GAP Inc. is the first apparel
company to independantly monitor third party of its overseas
contracting operations.

GAP Inc. made concerted efforts to publicize their positive activities

overseas. GAP is promptly fixing their public image and doing so
allowed more time to focus on actual labour management rather
than public relations management. GAP Inc. published a social
responsibility report, allowing stakeholders to view and assess their
policies. GAP Inc.s 2003 Sustainability report was recognized as a
first in the apparel industry for its honesty and overall transparency,
(GAP Inc. Sustainability Report, 2012). GAP worked diligently to
reverse their negative image and even turned their problems into
solution, that the world can see. According to GAP, their reporting is
based

upon

three

principles;

honesty,

accountability

and

transparency. GAP believe that value of reporting can only be fully

captured, when reporting frankly discusses success and failures,
challenges and opprtunities. What GAP believes was visible, when in

2007 child labour incident occurred again in India. GAP took full
responsibility of the incident publicly and cancelled the order from
that factory, (CNN, 2007).

Regardless, of the issues damaging the companys image, GAP

continued its work for the society and labour reforms. GAPs public
relation motif was, to continue doing the good work but to keep
quiet about the companys efforts and get caught doing well.
During Superstorm Sandy, GAP Inc. made a marketing effort that
was effectively criticized, (Daily News, 2012), which blindfolded
customers perceptions that even a humanity work was considered
as a cover up. During the storm more than 70,000 employess
voluntered for the relief of the affectees, with a corporate donation
of $1 million in fund and clothes.

In Bangladesh, the labour safety and workign conditions were

compromised, undermining the country safety record. GAP Inc.
invested time, money and efforts to bring out the lasting change for
industry workers. After considering the working conditions and
safety in bangladesh factories, GAP Inc. implemented the four-point
fire safety system in factories that made their products, (GAP Inc.,
2012). It was the first time, that the outsourcing company invested
for the safety for its foreign factory.

In examining GAP Inc.s history with child labor from an ethical

perspective, it is readily determined that GAP Inc.s true intentions

were to be; and to act in an ethical manner. GAP did not manipulate
facts for the sole purpose of public approval. It seems that from the
beginning GAP was not overtly focused on strictly public image, but
more so the principle of their actions. Due to these policies and
principles, GAP Inc. proved to be utilitarian. GAP Inc. demostrate
utilitarianism while reacting towards Cambodian child labour issue.
According to business perspective, most retailers would have cut
and run from working with the country absoulety. However GAP Inc.
decided to remove themselves from the particular factory involved
in child labour, but not the country as a whole. GAPs approach was
historical, stating that when all companies withdraw from a specific
country with production factories, the children dismissed from those
factories are often left in a worse position.

When companies pull

out their work, the underage workers may not be compensated for
the efforts of their previously completed labor and their future
employment is placed in jeopardy. GAP Inc. was not only thinking of
their public image, but the livelihood of Cambodian citizens. While
its image significantly tarnished with the decision, few appreciated
that GAP Inc. had a larger picture in mind. It was after this incident
that they changed their management style to include not just
monitoring, but remediation of and response to the situation with
some key principles in mind. The statement that best describes
GAPs utilitarian view is, we work to fix what we find. The value of
monitoring extends far beyond uncovering problems; it includes all

of the actions we take to facilitate remediation in a sustainable

way,. This principle concisely details that GAP Inc. focuses on
people more than just public image. According to Utilitarian view,
GAP focuses on the ends regardless of the means. GAP Inc.s goal is
to provide assistance to millions of factory workers that manufacture
their product, while providing their customers with quality products
and working towards the intentions of their executives and
shareholders.

While this utilitarian view of GAP Inc.s principles makes sense on

the surface, in analyzing further, it is difficult to discriminate if their
utilitarian efforts create negative affects for their stakeholders in US.
Consumer may not be comforting to

purchase clothing made by

children in far away factories with unimaginable conditions. Even

knowing that GAP does their best to prevent such problems, they
still place the burden of uncertainty on the consumer. It contradicts
with consequential thinking, as utilitarianism requires that we assign
values to the benefits and harms resulting from our actions and
compare them with other actions. But its often difficult, if not
impossible, to measure and compare the values of certain benefits
and costs, (Velasquez et al, 1989). It is difficult knowing as a
consumer that GAP continues to work in countries where child labor
will most likely always exist. Overall, GAPs utilitarian approach to
foreign labor does actually produce the best outcome for the most
people; factory workers can keep their jobs and are paid relatively

fairly in manageable working conditions; GAP executives are no

longer under constant scrutiny and can take pride in their labor
endeavors; and shareholders and consumers can invest reasonable
amounts of money in products and ownership that is not too
expensive and funds socially responsible efforts. It may not be a
perfect system, but the outcome is purely utilitarian by producing
the most beneficial outcome for the highest number of stakeholders.

IMPORTANCE

OF

MORAL

ETHICS

AND

EFFECTIVE

LEADERSHIP

In a broder perspective of the ethical role of manager, managing

and leading can be said to be inherently ethics-laden task because
every managerial decision affects either people or environment.
While making decision impacts and affects needs to be taken into
consideration. A narrower perspective of the ethical role of manager
is to meet fiduciary obligations to maximize shareholders wealth
that is embedded in the law, (S. Waddock, 2007). While some
skeptics claim that business ethics is a figure of speech, but in
reality when a leader or manager makes a decision; or due to his
behaviourial activities have an impact on society and environment,
there are ethical aspects to the decision or situation. Thus, ethics

and leadership cannot realistically be teased apart.

Leadership is a relationship between people. Therefore, the ability to

ethically influence others is a major determinant of effective
leadership, (J. Waggoner, 2010). For effective leadership, leader
must have goals ans instrumental values.
Instrumental values are, the means to accomplish the ends a
person strives towards, (Hitt, 1990). A leader must combine
consistent means to desired goal to achieve a unified value system,
(J. Wagonner, 2010). However, values a far too vague to have
meaning in ethical analysis, (Cooper, 1998). Thus a leader must
combine values to principles to achieve ethical effective leadership.
It is assumed that every CEOs intention is to build an ethical
organization. However, many underestimate the importance of
understanding ethics, leading by example and implementing a plan
of action. These are created through the personal practice of good
ethics and an organizations ethical culture. Most companies start
with ethical theories, but few are able to successfully turn theory
into practice for the long-term. The organizations that are able to
initially turn theory into practice quickly lose the ability to continue
and ethics slips back into a exhausted state of theory due to holes in
personal ethics and the design of the companys plan for ethical
conduct.

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Ethics and effective leadership function as a cause and effect

relationship. Effective leadership is a result of ethical behavior. Good
ethics promote all the characteristics necessary for effective
leadership, and it is deemed required today. Followers accept
leaders they can trust. Trust is considered the glue of leadership and
promotes long-term success. Trust is usually gained two ways. A
trustworthy past and present is realistic with good ethics. A leader
with an understanding of ethics, a history of ethical decision-making
and the ability to develop and execute plans of action shows
stability, empathy, integrity and resolve. All of these traits shown in
a leaders track record will infuse a greater sense of trust within
followers. Current behavior also affects trust developed between
leaders and potential followers. Good ethics build and continue from
prior behavior that enforces the positive characteristics that
promote trust, (J. Wagonner, 2010). This identity developed with
good ethics promotes long-term success because more trust equals
more effective leadership.
Societys complexity increases the need for leadership to be seen as
a ethical and trustworthy. One type of leadership style may be ideal
for one situation, but not another. Instead of good leadership being
a style of leadership, it needs to be seen as the starting point for a
leaders development, (Ciulla, 2004). This suggests the problem
with leadership today is a lack of ethics. With a decrease in ethical
conduct and todays increasing interactions with networks, leaders

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have no true direction and are less accountable for their actions,
(Bennis et al, 1994). Leadership will become ethical and effective
once ethics are adopted as the backbone of good leadership. Some
leaders may be highly ethical but are not very effective. Others are
very effective at serving the needs for organization but are not very
ethical, (Ciulla, 2003).
The distinction between ethics and effectiveness is not always
visible. Sometimes being ethical is being effective and sometimes
being

effective

is

being

ethical.

In

other

words,

ethics

is

effectiveness in certain instances. There are times when simply

being regarded as ethical and trustworthy makes a leader effective
and other times when being highly effective makes a leader ethical.
In the famous Tylenol case, Johnson & Johnson actually increased
sales of Tylenol by pulling Tylenol bottles off their shelves after
someone poisoned some of them. James Burke at Johnson & Johnson
were effective because he was ethica, (P. Steven, 1986).
The moral failures of leaders are not always intentional. Sometimes
moral failures are cognitive and sometimes they are normative
(Price, 2000). Leaders may get their facts wrong and think that they
are acting ethically when, in fact, they are not. For example, in 2000
South African president Thabo Mbeki issued a statement saying that
it

was

not

clear

that

HIV

caused

AIDS.

He

thought

the

pharmaceutical industry was just trying to scare people so that it

could increase its profits (Garrett, 1995).

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In this complex world, with immense flow of information and

techonology at every hand, it is difficult to assess the decision of
leader. The decision made maybe based upon biased information.
Hence, in this era we need leaders who can access the information
and can easily the distinguish between the right and wrong
information. Due to complexity in the world today, we can not be
judgemental to the leaders decision. The ethical leader is who make
decision at the right time with effectiveness.

REFERENCES

(The) Co-operative Bank (2003), Ethical Purchasing Index, The Co-

operative Bank, Manchester.

BBC Panorama (2000), Gap and Nike: no sweat?, Panorama,
available

at:

http://news.bbc.co.uk/

1/hi/programmes/panorama/archive/970385.stm

(accessed

24

March 2015).

Bennis, W. G., Jagdish, P., & Lessem, R. (1994). Beyond

Leadership:

Balancing

Economics,

Ethics,

and

Ecology.

Cambridge, Massachusetts.

Business Week (2003), The 100 top brands, Business Week,

available

at:

www.businessweek.

com/pdfs/2003/0331_globalbrands.pdf (accessed 24 March 2015).

Ciulla, J. (2004). Ethics, the Heart of Leadership . Westport,

Connecticut: Praeger.

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CNN, (2012). Gap: Report of kids' sweatshop 'deeply disturbing'.

GAP Inc., (2012). Gap Inc. Announces Comprehensive Building and
Fire Safety Action Plan for Bangladesh Apparel Facilities.

Garrett, L (1995) The Coming Plague: newly emerging

diseases in a world out of balance. Harmondsworth: Penguin.

H. Iwanow M.G. McEachern A. Jeffrey, (2005),"The influence of

ethical trading policies on consumer apparel purchase decisions",
International Journal of Retail & Distribution Management, Vol. 33 Iss
5 pp. 371 - 387

H. Iwanow M.G. McEachern A. Jeffrey, (2005),"The influence of

ethical

trading

policies

on

consumer

apparel

purchase

decisions", International Journal of Retail & Distribution

Management, Vol. 33 Iss 5 pp. 371 - 387

Kernaghan, C. (1995). URGENT ACTION ALERT / Request for

Immediate Solidarit. [email].

Klein, N. (2001), No Logo, Harper Collins, London.
Labour Behind the Label (2003a), Wear fair, (online), available at:

www.labourbehindthelabel. org (accessed 26 March 2015).

Lavin, M. (1999), Press accounts of sweatshop atrocities: the
potential for consumer negative evaluation of retailers, Conference
Proceedings, 10th International Conference on Research in the

Distributive Trades, August, Institute for Retail Studies, Stirling.

Prokesh, Steven (1986-02-19). "Man in the News; A Leader in Crisis:

James E. Burke". The New York Times (New York City).

Roberts, C. (2012). Using Hurricane Sandy to promote sales prompts

backlash for online retailers like American Apparel, Gap. Daily News.
Terry L. Price, (2000) "Explaining ethical failures of leadership",
Leadership & Organization Development Journal, Vol. 21 Iss: 4,

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pp.177 184
Velasquez, M. (1989). Calculating Consequences: The Utilitarian
Approach

to

Ethics.

[online]

Scu.edu.

Available

at:

http://www.scu.edu/ethics/practicing/decision/calculating.html
[Accessed 28 Mar. 2015].

Waddock, Sandra. "Ethical Role of the Manager." Encyclopedia

of Business Ethics and Society. Ed. . Thousand Oaks, CA:
SAGE, 2007. 786-91. SAGE Reference Online. Web. 30 Jan.
2012.

Wagonner, J. (2010). Ethics and Leadership: How Personal Ethics

Produce Effective Leaders. CMC Senior Theses. Claremont McKenna
College.

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