A case study of ethical issue at Gucci in Shenzhen, China

Asian Journal of Business Ethics, Jul 2013

Li Wang, Robin Stanley Snell

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A case study of ethical issue at Gucci in Shenzhen, China

Li Wang 0 Robin Stanley Snell 0 0 R. S. Snell Lingnan University , Room 209/3, 2/F, Simon and Eleanor Kwok Building, 8 Castle Peak Road, Tuen Mun, Hong Kong 1 ) 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 - 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)


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Li Wang, Robin Stanley Snell. A case study of ethical issue at Gucci in Shenzhen, China, Asian Journal of Business Ethics, 2013, pp. 173-183, Volume 2, Issue 2, DOI: 10.1007/s13520-012-0024-6