A case study of ethical issue at Gucci in Shenzhen, China
Li Wang
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Robin Stanley Snell
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R. S. Snell Lingnan University
, Room 209/3, 2/F, Simon and Eleanor Kwok Building, 8 Castle Peak Road, Tuen Mun,
Hong Kong
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) Lingnan University
, 12D, Block B,
Chong Yip Center
, Whitty Street, Hong Kong Island,
Hong Kong
Gucci is a multinational company with over 270 directly operated stores worldwide, serving customers of elite goods, and generating billions of dollars revenue per year. It has an iconic, even noble, luxury brand image in the Greater China region, where its revenue increased by 35.6% in the first half of year 2011. Gucci has expressed its intention to accelerate the process of opening stores on the Chinese mainland. Recently, however, the company came under fire after five former employees from its flagship store in Shenzhen revealed information online about inhumane working conditions and labor mistreatment in the company. This paper focuses on events that took place in a Gucci flagship store located in Shenzhen, China. This paper has two main research objectives. The first is to analyze why labor abuses (as exemplified in the Gucci case) are allowed to occur and persist in foreigninvested firms that are located in the People's Republic of China (PRC). The second is to develop a multi-stakeholder approach to preventing further abuses of this kind. The next section provides a description of the case, focusing on the ethically problematic labor management practices and arrangements and noting some legal violations. We shall then present three propositions regarding why some foreign firms operating in the PRC and host local governments ignore and/or tolerate labor abuses of this kind. We follow this with a section in which we apply two different approaches, traditional Confucian ethics on the one hand and modern labor rights
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theory on the other, to provide a robust ethical basis for stakeholders to argue from,
while taking action to persuade others that such malpractices are ethically
unacceptable. Next, after identifying four stakeholders for the Gucci case, we suggest how
each of them may play a role in discontinuing and/or preventing future labor abuses.
We conclude with some further theoretical and managerial implications.
On 8 October 2011, an open letter<A Public Letter to the Top Management
of Gucci from Former Employees who resigned collectively> was spread on the
Internet. This letter was written by five former employees of the Gucci
Shenzhen Flagship Store. In the letter, they alleged that employees caught an
occupational disease, that there was one miscarriage attributable to excessive
working hours and that there was no compensation for these hardships.
Moreover, they stated that there were excessive restrictions on employees behavior,
including the need to obtain permission before getting a drink or a snack, and
strict limitations on toilet time. They stated that, while the restrictions were
applied strictly to all frontline employees, including one who was pregnant,
they were not applied to the managers. The letter also claimed that the
employees had to pay compensation for any product that was stolen or went missing,
even though these luxury products had already been insured. They also
criticized Guccis goods exchange policies which appeared to be arbitrary and
dependent on the managers mood. All in all, they accused Gucci of lacking
systematic and humane management and complained that their rights and
dignity were being violated.
Once revealed online, this report aroused widespread discussion among Internet
users. Further information emerged, suggesting that the case also involved
falsification of records about working hours, and the imposition of forced, unpaid overtime
work. Gucci implemented a system of working one full day, followed by a day off.
Officially, 1 days work was about 10 h. But the workers complained that, on their
working days, they were required to clock off at a certain time to establish a false
electronic record, and then continue their work, counting goods until two or three
oclock in the morning without compensation.
Some netizens labeled Gucci as a sweatshop. Many opined that the labor
management practices of some multinational companies and brand owners failed to
match their international status. Several days later, the Gucci headquarters in China
issued a statement, saying that Gucci does not and will not endorse or tolerate the
alleged malpractices. Gucci also stated that that the company had conducted
thorough investigations and had implemented a series of measures, including the
replacement of the store manager and assistant store manager. Meanwhile, the Human
Resources Bureau within the Legal Department of Shenzhens Luohu District said
they would further investigate the case. On 26 October 2011, Gucci and the former
employees eventually arrived at a settlement in conjunction with Shenzhen
Federation of Trade Unions.
How Gucci used the labor dispatch system
Dispatch is a labor management model which sepa (...truncated)