SUMMARY OF GUCCI’S CASE STUDY

An anonymous letter was posted on the Web on October 8, 2011. This document was written by
five former Gucci Shenzhen Flagship Store employees. They claimed in the letter that staff
contracted an environmental sickness, that one miscarriage was caused by massive working time,
and that no reimbursement was provided for these losses. Furthermore, they claimed that there
were severe controls on employees' conduct, such as the requirement to ask permission before
having a drink or food, and stringent restroom time limits. They said that while the limits were
severely enforced for all front-line workers, including one was pregnant, they were not enforced
for supervisors. The letter further suggested that the employees were responsible for any
merchandise that was stolen or went missing, despite the fact that these high-end items were
already insured. They also chastised Gucci's merchandise exchange procedures, which looked to
be random and based on the mood of the management. Overall, they charged Gucci with a lack
of methodical and compassionate administration, alleging that their rights and respect had been
infringed. This research sparked substantial debate among Internet users once it was made
public. Further evidence has surfaced, hinting that the case also included the manipulation of
work records and the installation of forced, unpaid working overtime. Gucci adopted a system in
which employees worked one full day and then took a day off. . Officially, a day's labor lasted
around 10 hours. The workers, on the other hand, said that on their days of work, they were
forced to check off at a set hour to create a fake computerized record, then continue counting
products until 2 or 3 a.m. without being paid. Gucci was dubbed a "sweatshop" by some internet
users. Many people believe that certain multinational corporations' and brand owners' labor
management methods do not reflect their worldwide standing. Gucci's China headquarters
released a statement a few days later, saying, "Gucci does not and will not condone or accept the
alleged malpractices”. “Gucci also indicated that it has performed comprehensive investigations
and taken a number of steps, including the removal of the shop manager and assistant store
manager. However, the Human Resources Department of Shenzhen's Luohu District's Legal
Department announced that the issue will be investigated further. Gucci and the former
employees finally reached an agreement with the Shenzhen Federation of Trade Unions on
October 26, 2011.

 Gucci took action:

Dispatch is a labor management paradigm in which recruiting and employment are separated.
Relationships are depicted in the dispatch system. Employee leasing firms have labor contracts
with their employees, and they ship them to other companies where they really work. The
employee leasing businesses and sent workers have a labor contract connection, but the real
working connection is between the employees and the firms where they work. In this type of
employment, the firm that actually "uses" these individuals is solely responsible for paying
salary, while the staff leasing company is responsible for all other elements, such as social
welfare and separation compensation. The labor dispatch arrangement reduces the costs and
contractual obligations of the user firms for the employee. They are not obligated to make state
welfare preparations and can incur lesser training expenditures. This employment paradigm is
frequently adopted in China because of these characteristics. The Gucci boutiques in Shenzhen
used an even more complicated dispatch system, including at least three Shanghai-based staff
leasing organizations. One legal problem is that, despite the labor dispatch system's formal
adoption as a method of organizing seasonal work only, Gucci utilized it to hire workers for
periods of more than two years. Another factor is that so many of Gucci shop personnel are
women, and pregnant women are entitled to special labor protection under the law. Female
employees should not engage in the state's third-grade physical hard job during their pregnancy,
according to the "Labor Contract Law." Such labor is judged unsuitable for female employees;
no extra work should be demanded of female employees who are more than 7 months pregnant,
and they should not be asked to perform night shifts. Moreover, it is a mandatory that such
personnel be provided with enough rest intervals.

 Possible Solution:
 Step-by-Step Explanation
Gucci may take the lead in developing and executing business and global codes of ethics,
resulting in a complete set of clear norms and expectations about ethical standards. In both
industrialized and developing countries, this code must apply to everyone branch offices and
retailers. Toys, textiles, and electronics sectors have all successfully incorporated similar codes.
These are the kind of things that are sold at mass marketplaces. It's a bit of a paradox that Gucci,
which sells high-end goods, has a horrible working environment in China; certainly a firm like
this is even more scrutinized by the public yet under public pressure to adopt stricter standards.
  We don't mean to suggest that employees in mainstream market businesses should be handled
any worse, but high-end suppliers may be supposed to take a more ethical leadership role in
raising labor standards across the world. Every branch and store of enterprises in the luxury
industry should be required by the code to adopt ethical concepts and incorporate them into
management systems, policies, and internal review procedures.
This code may include items including the use of documented employment agreements with all
employees, attempting to avoid abuse of the tracking system, equal pay for equal work, banning
of mandatory and unpaid labor, ability to adhere to laws and rules on business hours,
requirement of pay and pensions not below minimum standards, anti-discrimination, and so on,
based on similar regions of worker protections discussed in the study on international labor
management ethics.
Furthermore, establishing a socially conscious management system should include an assertion
of socially responsible objectives and targets, as well as sufficient financial resources to make
sure that these objectives are communicated clearly, that framework is standard quality, and
there are methods for regular auditing and reporting of the system, as well as remedial action in
the occasion of shortfalls. It is insufficient to just implement an industry code.
Gucci's headquarters in Italy should advise and encourage its Chinese operations to follow the
appropriate ethical standards (and every other host country). Because Chinese executives may try
to justify their actions by claiming that the code would be prohibitively expensive or impossible
to apply due to cultural obstacles, considerable encouragement is required. Impartial third
companies, such as NGOs, may be hired to audit the headquarters. Otherwise, enforcement may
be sluggish or non-existent.

 Implications for theory and management:

This situation has several important theoretical and managerial ramifications. The first of them
concerns the virtue-based approach to corporate ethics as it's been implemented in China, as well
as its limits and potential biases. While some managers may realize that a morally Confucian
corporation should seek harmony by demonstrating compassion to its workers, who would return
with loyalty and appreciation, when faced with modern economic pressures, several fundamental
parts of this strategy can be overlooked.
Confucian ethics is founded on the notion of disparity between both the experienced and new
parties in a relationship, and the trainee party is anticipated to do the same with whatever care
they obtain without direct protest. This may be recalled by management. What managements
may forget is that all of this is based on the concept that senior party must consider, respect, and
respond to the junior party's requirements. Without a conduit for hearing and a strong motivation
to listen, such empathetic care is unlikely to emerge.
In their absence, all strong managements grow desensitized to their employees' concerns,
resulting in labor violations. A second implication may be drawn from this. It is vital to establish
robust, legally based systems for enforcing and defending labor rights in the PRC in order to
avoid labor abuses. One important stage in this direction is to grant legal negotiating powers to
labor groups that approximate to their autonomous trade union equivalents in the West. The
second critical step is for the PRC's national governments to work together to give corporate
social responsibility a higher priority, rather than seeing it as an afterthought or a meaningless
phrase.
This indicates that foreign companies and countries have a role to play. Cross-national
conversations inside firms as well as between foreign entities and the PRC government are
expected to be required to strengthen legal safeguards for worker rights in Chinese organizations.

 Conclusions:
Abuse of labor practices by multinational corporations is not a new phenomenon, although it has
traditionally been associated with industrial operations in developing nations. This research
focuses on a less-well-documented occurrence involving abuses at a retail business—flagship
Gucci's store in Shenzhen. Gucci, in particular, exploited the dispatch system, a labor system
with Chinese elements, and disregarded certain important worker rights. We studied certain
global interpretations of worker rights while taking Confucius and the One-Party State, that are
essential components of China's society and organizational structure, into account when
examining how an MNC might function ethically in China.
We have provided suggestions for MNCs and other parties, such as workers, the Chinese state, or
even foreign countries, to take action against MNCs with headquarters in their countries. We've
also hinted at the prospect of a synthesis of Confucian virtue ethics with Western reasoned
methods to the assertion and preservation of labor rights in the not-too-distant future, as well as
the significant empirical and academic consequences that would entail. (google, n.d.)

References
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