MGT219 Organisational Behaviour Case Study
Gap, Next and Marks & Spencer in Sweatshop Scandal

Story of case study
Gap, Next and Marks & Spencer’s suppliers in India have been found paying low wages to workers and force them to work extra long hours. Workers told the Observer that the factories are usually hire them through middlemen, from whom they are paid “as little as 25p an hour, in the case of Gap and Next, and 26p an hour for M&S”, and they are forced to work 16 hours per day with only 2 thirty-minute breaks. For workers who refuse to do extra long hours would be asked to find new jobs or even get beaten up. "We need to work for the money and if we don't the company will kick us out, said Bitthu, 26.” Since workers have to work till late at night, their children are left at home along and many are roaming on the streets. A 6-year-old girl, Bubli, told the observer that her parents were both out working and they usually leave the house at 8am and return home after 10pm. Her 11-year-old sister was left in change while their parents were working. Because of the low wages, many families cannot afford £5.50 a month (which is 10% of their salaries) to send their children to school. However, all three companies claim that they are “totally committed to ethical trading” and abuses are not allowed in their supply chains, also, certain actions had been taken to solve these problems. (The Observer 2010)

Sweatshop Definition
The U.S. General Accounting Office defines a sweatshop as “an employer that violates more than one federal or state law governing minimum wage and overtime, child labor, industrial homework, occupational safety and health, workers compensation, or industry regulation.” In this case, Gap, Next and Marks & Spencer’s suppliers, House of Pearl and Viva Global, have definitely violated more than one of the above.

Sweatshops in Organisational Behaviour subjects
The Low wages and long extra working time lead us to the discussions in organisational behaviour analysis. In this essay, it would be mainly focus on the subject of Stress and secondarily on the subject of Ethics

Stress Stress could come from many sources and symptoms of stress may be varied with different personalities and backgrounds. Ivancevich and Matteson defined stress as “an adaptive response, mediated by individual differences and/or psychological processes, that is a consequence of any external action, situation or event that places excessive physical and/or psychological demands on a person.” (Cited by Rollinson 2005, P.265) Stress could also be defined as “any circumstances that threaten or are perceived to threaten one’s well-being and thereby tax one’s coping abilities.” Which applies to the sweatshop case study would be the low wages that workers can barely support their families and also the lack of time for taking care of their children. The following diagram is a model of stress sources an individual could be facing and the outcome that might cause on the individual and the organisational they belong to.

In this sweatshop case study, we will be focusing on two aspects of stress, stress at work and stress at home.

a. Stress at work Beehr and Newman defined stress at work as “Conditions arising from the interaction of people and their jobs, which are characterised by changes within people that force them to deviate from their normal functioning.” (Cited by Rollinson 2005, P.270.)
As shown on the Cartwright and Cooper model above, stress at work could come from many sources. For the workers of the sweatshops in India, the intrinsic to their job and the relationships at work play a major part in their stress level. Because of the huge demands of production, workers of House of Pearl and Viva Global are forced to work long hours (which is the stress factor of intrinsic to job) and this creates tensions between workers and their supervisors and the middlemen (which is the stress factor of relationships at work)
Jawal Hussain, who works in the House of Pearl factory, told the observer that "There were two or three people who objected to the overtime and they were beaten up and now they have left the company." (The Observer 2010) With the fear of unemployment, workers have to bear the physical exhaustion from long working hours and accept the salaries that are lower than half of the legal minimum wages. This creates huge stress for the workers and leads us to discuss workers’ stress at home.

b. Stress at Home
Stress at home is developed because of sweatshops workers’ financial problems. Since they got really low wages from the middlemen, they can barely support their families after the monthly expenses, such as house rent and electricity bills. One worker said that his family had to rely on credits toward the end of every month because they have little money left after paying monthly expenses and it would not be enough for the family to use for the whole month. Such stress at home is caused by the chronic stressors (financial pressure of insufficient money), which according to Weiten, Lloyd, Dunn and Hammer (2009), are the “threatening events that have a relatively long duration and no readily apparent time limit.”
The stress at home forces the workers continuing to work for the factories, otherwise, they would lost their incomes which they cannot live without. "If we don't work our salary will be stopped, but the rent of the house and the children's school fees won't stop." Mohan Singh, father of two children. Another factor of stress at home is childcare. Since the salaries that factories pay is really low, parents in the families both have to go to work in order to support their families. Some parents sent their children to school but many cannot afford the tuition fees. Therefore workers have to leave their children at home alone while they are working. Workers at work have to worry about how their children are doing and hoping that their children are safe at home. This arises another stress source to the workers.

Ethical Issues- Are the suppliers of Gap, next and M&S treating their workers ethically?
Workers in the sweatshops are treated poorly. They have no choice but continue to work for these factories to support their families. The following are two analyses of ethical issues, inequality and utilitarianism.

a. Inequality
The first ethical issue in this case study would be inequality. There is a huge inequality between people who make the products and who profit from them. The workers spend 16 hours per day to produce those products and only get little money from the factories, and the retailers got much more higher profits when they sell their products. It is definitely unethical for the factories to pay as little as 25p per hour to the workers. However, if the factories raise the wages too much, it might affect the economics in India. Since people tend have lower incomes than people in the western countries.

b. Utilitarianism
As stated by Mill and Bentham, utilitarianism is “any act that is designed to achieve the greatest happiness of the greatest number.” Also, ”as long as we consider other people wants as well as one’s own we need to consider nothing else – it is a minimum commitment philosophy.” Under this theory, the two factories, House of Pearl and Viva Global, are obviously not in the category. These two factories do not consider what their workers want and forced them to work 16 hours a day with only 2 thirty-minute breaks. However, utilitarianism is not always a good way of analysing the ethical aspect of organisational behaviour. Happiness is not the only way to be ethics. Ethics may be unpleasant sometimes. Ethics could be class into two categories, descriptive and prescriptive. Descriptive ethics is what people actually do (which usually gives people happiness) and prescriptive ethics is what people should do (which sometimes might be unpleasant.) For example, factories and the middlemen should pay the workers minimum wages by law but they don’t because it would cost them to pay more money for their workers’ salaries. Therefore, utilitarianism cannot be the only theory to scale whether the action is ethical or not ethical.

Actions of the retailers
Gap, Next and Marks & Spencer all claim that they are “totally committed to ethical trading” and abuses are not allowed in their supply chains, also, certain actions had been taken to solve these problems. (The Observer 2010) However, do these retailers really taking actions long before the report come out or choose to ignore these problems when no one found out about them? Taking actions to solve the sweatshop problems definitely needs certain amount of time and resources, but it is a necessary step. With fair trading becoming a popular discussion topic, retailers have to make sure that their suppliers are following the rules; otherwise the company images might be damaged and could lead to serious trouble.

Conclusion
Sweatshops have always been a problem in the developing countries. With the stress analysis and the ethical analysis above, we can see that sweatshop workers are obviously working under huge pressure and it might lead to health problem as they work for really long hours. Also, their children have to learn to be independent at very young ages and many don’t have the chances to go to school because the workers cannot afford the tuition fees with the low wages. Gap, Next and M&S should pay more attention on their suppliers’ management on the workers. Although they do not own those factories, it is their responsibilities to make sure those people who are producing their products are being treated well.
Marks & Spencer “launched a five-year ethical trading plan, complete with a national advertising campaign under the slogan ‘Doing the Right Thing.’” This is a good example of taking actions, however, could M&S maintain its’ goal of fair trading? It is a question that could be answered in the future.

Appendix
Gap, Next and M&S in new sweatshop scandal
Some of the biggest names on the British high street are at the centre of a major sweatshop scandal. An Observer investigation has found staff at their Indian suppliers working up to 16 hours a day.
Marks & Spencer, Gap and Next have all launched their own inquiries into the abuses and pledged to end the practice of excessive overtime, which is in flagrant breach of the industry's ethical trading initiative (ETI) and Indian labour law.
Some workers say they were paid at half the legal overtime rate. Gap, which uses the same factory as Next, confirmed it had found wage violations and gave its supplier a deadline of midnight last night to repay workers who lost out. M&S says it has yet to see evidence to support the wage claims.
Workers also say that those who refuse to work the extra hours have been told to find new jobs. Those in the factory supplying Gap and Next also claim staff who refused to work extra hours were threatened and fired, a practice defined under international law as forced labour and outlawed around the world. The factory has pledged to apologise and reinstate anyone who lost their job.
Next said it had found the situation to be "deplorable" and the chairman of the Indian company it uses has apologised and promised to make amends, blaming demand for workers at the forthcoming Commonwealth Games in Delhi for leaving factories short of staff.
Gap admitted wage and overtime violations and ordered its supplier to reduce working hours to within the legal limits and to refund workers who have been illegally underpaid.
Marks & Spencer admitted its supplier had been operating excessive overtime but said it had acted quickly to tackle the problem. It admitted its own audits had found a number of other violations, which it described as "high-risk issues in documentation and conditions".
The Observer investigation found the factories were using workers hired through middlemen who paid them as little as 25p an hour, in the case of Gap and Next, and 26p an hour for M&S.
Workers at the factory used by Gap and Next said they had been required to put in up to eight hours a day in overtime, for which they claim to have been paid at half the legal minimum rate required by the ETI and Indian law. Some workers at the same factory said they had to work seven days a week, a practice condemned by their union as "slave labour".
All three companies have told the Observer that they are totally committed to ethical trading and will not tolerate abuses in their supply chain. All say the problems were detected by their own auditing processes and that they have taken swift action to tackle them.
The Observer spoke to workers from some of the factories involved. House of Pearl produces clothing for Gap and Next. Jawal Hussain, 24, who works in the House of Pearl factory, said that in June he worked 133 hours overtime on top of his normal eight-hour shifts, all at the basic single rate of pay. He pocketed a total of 6,100 rupees [£83]. He and many of his fellow workers are hired through a contractor, which is responsible for paying them. "There were two or three people who objected to the overtime and they were beaten up and now they have left the company," he said.
He said they started at 9am and regularly worked through to 10pm with two half-hour breaks, though sometimes they would go through to 2am the next day and be expected to return again later in the morning.
Fellow worker Segar, 20, said he had worked every day in June, putting in 150 hours of overtime: "I like the work but don't like the excessive overtime. But we are told if you don't want to work overtime you don't work here."
The men said that by the time they had paid their rent, electricity, food and transport bills and sent a little money home to their families, they had nothing left and usually had to rely on credit to get through to the end of the month. The effects on families are clear to see in the narrow, muddy streets of the Kapashera district of south-west Delhi, close to the booming satellite city of Gurgaon and home to many of its garment workers.
Most leave their homes before 8am and many do not return before 8pm. Some children attend schools but many can be found roaming the streets for hours on end. The Observer found several children playing in the filthy streets where pigs rummage through rubbish and stinking open drains carry sewage between the tiny one-room houses.
Six-year-old Bubli, a little girl with a weeping sore on her chest, said both her parents were out working. They left at 8am and did not usually return until 10pm, she said. Her 11-year-old sister was left in charge while they were at work.
Sugriv, 10, was standing in the doorway of a relative's house. Both his parents were at work, he said; his mother usually got back about 8pm but his father was rarely home before 10pm. He played in the streets, he said, until it was time to go to school in the afternoon, and again after he got home again.
At the Rao Bir Singh school, principal Manju Yudav said parents had to pay £5.50 a month – about 10% of their salaries – to send their children to the school. Many simply cannot afford it.
"We don't want to work but are working because of our family expenses," said Mohan Singh, 25, a father of two children, who works in Viva Global's factory producing items for M&S. "If we don't work our salary will be stopped, but the rent of the house and the children's school fees won't stop."
He was speaking during his lunch break a few blocks away from Viva Global's shabby, unmarked three-storey building in Gurgaon. "If we complain to the management, they are ignoring us, nobody is paying attention. If the workers says they don't want to work, then the management says you have another option, you can leave the company." Viva Global say it has now taken steps to address workers' concerns.
Workers at the Viva Global factory in Gurgaon said they produced clothing for the M&S Girls' Limited range, billed as a "fun and fashionable new range" for girls aged six to 14. They said that until recently workers had been required to stay for up to 16 hours a day on single pay. Viva Global says that orders have dried up and that there has been no excessive overtime for at least three months.
One worker, Subhash, 35, said they could not feed their children on their 5,000 rupees [£69] a month basic wage. Pappu, 28, and Rajesh, 32, said they had worked from 9am to 10pm for a basic 4,600 rupees a month, with overtime paid at single rate. "We need to work for the money and if we don't the company will kick us out," said Bitthu, 26.
In a statement Next said it had already started its own investigation into abusive practices at the Pearl factory, including excessive overtime and underpayment of workers. A spokesman described the situation as "deplorable". The company warned that it would drop the factory unless conditions improved rapidly.
"It goes without saying that we were extremely concerned about this situation and are working actively with the supplier's management to improve conditions at Pearl," the spokesman said.
Gap said all its factories had to stick to comprehensive and strict standards, which it said were non-negotiable. It said its staff had uncovered violations around excessive overtime and overtime wage payments in June. A spokesman said Pearl had been ordered to pay back all the outstanding money and reduce working hours to the legal limit. But it said that firing its supplier would only hurt the workers. "We are conducting a full investigation, including a review of related documentation to ensure that the workers are paid in accordance with the law. If we find any areas of non-compliance, as is our policy, we will ensure that appropriate action is taken, including back payment of wages as appropriate," said a spokesman.
Last year M&S launched a five-year ethical trading plan, complete with a national advertising campaign under the slogan Doing the Right Thing, and new chairman Marc Bolland last month pledged to put the ethical policy at the heart of its business model.
A spokesman for M&S said that it was essential to the retailer that its suppliers upheld strong ethical standards and that this was a condition of doing business with the company. He admitted that excessive overtime had been worked at the Viva Global factory earlier this year and said the company was taking action to deal with the problem.
"Viva Global is a factory we have had issues with as it has fallen short of the high standards we require and are in the process of working closely with it (and the union) to do what we can to address them," the spokesman said.
"We also believe it is important to do this to improve conditions for the workers and put right any wrongs that we have uncovered. On the issue of excessive overtime at Viva Global, further investigations at my end have uncovered that this had been a problem at the factory but on an irregular basis in the months preceding April."
He said that the company had worked with Viva Global for five years and it was only this year that problems had surfaced. Since April the company had carried out 11 factory visits, six unannounced, and was confident that there had been no excessive overtime in the past two months.
M&S said Viva Global was one of 92 factories it sourced from in India and that it accounted for 1% of its output from the country. It said it had hired an experienced human resources manager at its request and improvements had been made.
"Excessive overtime and not paying workers the correct overtime rate can also be an issue in Gurgaon. This is one of the reasons we have a large team on the ground in Delhi and among the strictest ethical standards in the world to prevent it becoming an ongoing issue at the factories we source from," the spokesman said.
Venu Nair, the company's south Asia head, said M&S expected high standards and was constantly checking on working conditions to ensure those standards were met: "If we ever find instances of non-compliance, it's always our policy to work hard with our suppliers to try and fix the problem."
House of Pearl chairman Deepak Seth apologised and described recent trading conditions as a "nightmare". He said that a combination of demand for workers for projects related to the Commonwealth Games, which will be held in October, and the annual return of workers to their home villages for the wedding season, had left the factories 40% short of their normal number of workers and they had responded by increasing overtime beyond the maximum two hours per day allowed by law.
"I do agree that excessive overtime has happened... and going forward we are not going to allow it, and whoever has worked more than two hours, and not been paid as per the wages, we are going to correct that situation," he said. "I've been talking to my factories everywhere that this kind of a thing has to stop because it is not fair to expect workers to work more than two hours a day overtime."He also promised to reinstate any workers sacked for refusing to put in the extra hours. Sudhir Kumar Makhija, chief operating officer for Viva Global, said the company was committed to ethical trading. "We are working closely with M&S and whichever issues they have raised in the past we have ensured that all have been rectified and we are saying that for the past three to four months there's been no excessive overtime here."
He claimed that some workers may want to harm the company by making unsubstantiated allegations. He added that he was aware of workers who did eight hours in his factory and then another eight in another factory, but denied that any workers had put in 16- hour days in the one unit.
"We love our employees. They are the source of our existence and their concerns of any nature are our priorities," he said. But he acknowledged that workers had complaints and said the company had hired an experienced HR manager "to address workers' grievances". (source: http://www.guardian.co.uk/world/2010/aug/08/gap-next-marks-spencer-sweatshops)
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