Ethical Issues at Gucci in Shenzhen: A Case Study

This case study discusses the violation of labor laws and severe treatment of employees at Gucci's Shenzhen store in China. It explores the ethical issues and stakeholders affected, as well as the impact on business. The company suffered a reputation crisis and had to take measures to regain its original reputation.

ACCOUNTING

INTRODUCTION
Being a part of The Kering Group, Original, Stronger and a continuous growth, Gucci is itself a
modern initiative in the fashion world. Being ruled by its new director, Alessandro Michele, the
company has faced a luxurious position and has turned out to be one of the most demanding
products in the world of fashion. Gucci products are the results of Italian artisanship and are
known for their detailed & keen attention to the quality (Siciliano, 2015)
. It is a matter of 2011 when Gucci was working towards opening as much as stores it can in the
country of China. The company had a shop at Shenzhen where the actual ethical issues arose
regarding the violation of labor laws and severe treatment of the employees working there.
CASE STUDY
It was Internet where a public letter, which was made to the top management of the company,
was circulated like a fire about how Gucci is involved in the severe treatment of the employees
working in its shop of Shenzhen in China, as on the date of 8th October, 2011. The letter was
written by five employees who accused Gucci of mistreating its employees and establishing a
strict environment. The letter stated that the excessive working hours with no payment for it
leads to a miscarriage of a female worker. Further, they maintained a strict environment like
asking for having a snack or a drink, limitations and a check on the time taken by an employee in
the washroom. The non-ethical issue was that such rules and regulations had to be strictly
adhered by the employees but not by the managers. (Wang and Snell, 2013)
Such a case came out as a highly discussed matter on the social platform. More matters of cruelty
started to come up like the matter of manipulating the records of working hours and the forced
overtime unpaid work. The system of Gucci was having a one full working day of 10 hours with
an off on the next day. But, the workers were made to sign out of the shop at the time fixed as a
end of working hours and were retained at the store for extra work that never ended before two
or three o’clock in the morning. They did this so as to establish a false record electronically so
that the management couldn't catch them of violating the concept of favorable working
environment (Seal, 2012). However, after such a case reached the top management, a statement
from the headquarters of Gucci in China came up claiming that the company wouldn't tolerate
such false allegations filed against them. The company conducted a keen and detailed

investigation as the issue wasn't personal anymore but a public matter. It imposed measures
including the replacement of persons involved.
ETHICAL ISSUES & STAKEHOLDERS AFFECTED
The ethical issue is a matter of violation of rights of the workers such as unfavorable working
environment, long working hours, no equality among the members etc (Taillard, 2013). The
striking part of this case is that it involves retail employees rather than the lower level workers.
The possible reasons of occurrence of such ethical issue are:
1. The companies, being large in size, focuses only on the economic targets, assuming that
furnishing the country with their investments would give them a good looking GDP and that
is all that matters. Thus, they ignore the labor laws.
2. The local government faces a pressure to meet the economic targets and therefore, meet up
with the international competition. They assume that the economic imperatives can override
the social responsibility concerns. Also, the local governments are afraid of implementing
strict labor laws over these MNCs, fearing that this may drive away these investors.
It is a vital need for every corporate body to establish their goals through stakeholders. The
following case involved the harm caused to both external and internal stakeholders (McLaney &
Adril, 2016). The internal stakeholder i.e. the employees, on whom the company depends for its
fruitful productivity, were deprived of their rights. The different reasons for such kind of conduct
were saving themselves from the cost of extra workers by providing no insurances, favorable
salaries, etc. The righteousness of morality was abused. Also, as a result of this, the external
stakeholder i.e. the government was blamed equally for not paying attention to the unfavorable
practices happening in the country.
IMPACT ON BUSINESS
The company suffered a reputation crisis as it impacted its international status. There is a
difference between being praised for high quality products over internet and being insulted for
inhuman behavior over the same platform (Lerner, 2009). The company, no doubt took a lot of
measures, developed a strict code of conduct that involves practices like equality in payments,

assuring of security, concern about health, anti-harassment, favorable working environment, etc
so as to gain back its original reputation and get rid of the allegations.
VIEWS ORIGINALLY BEFORE AND AFTER THE CASE STUDY
The original view, as read in the books and articles, about ethics are that ethics are considered as
the most vital requirement of any corporate business because the rule of sustainability says that
no gain if no ethics. The multinational company, Gucci clearly states in its official website that it
strictly abides by the laws and regulations and considers its workers as an asset for the company
and that they will go beyond their limits to assure a satisfactory working environment. (Girard,
2014)
But after reading such a case study, it clearly becomes evident that there is a difference between
what's written and what's implemented. The following case clearly shows the blindness of the
company towards its economic targets and the local government's hunger for a desirable
international status. The hunger for competition and turning out to be the best, whether the best
MNC or the best nation with one of the highest GDPs, could be visualized.
CONCLUSION
It is matters of concern that the employees were ‘tolerating’ such inhuman behavior until
something serious took place, that is, the female employee's miscarriage in this case. It was a
challenge for the country to break its tradition of 'bearing' and therefore, a strong awareness
should be created about the rights and protection against abuse among the workers (Piper, 2015).
They should be made aware of making their voice heard by using the platform of Internet and
thus, can attract more attention, more concern and support and the local governments could
investigate on a yearly note.

References
Girard, S. L. (2014). Business finance basics. Pompton Plains, NJ: Career Press.
Lerner, J. J. (2009). Schaum's outline of principles of accounting. New York: Schaum.
McLaney, E., & Adril, D. P. (2016). Accounting and Finance: An Introduction. United
Kingdom: Pearson.
Piper, M. (2015). Accounting made simple. United States: CreateSpace Pub.
Seal, W. (2012). Management accounting. Maidenhead: McGraw-Hill Higher Education.
Siciliano, G. (2015). Finance for Nonfinancial Managers. New York: McGraw-Hill.
Taillard, M. (2013). Corporate finance for dummies. Hoboken, N.J.: Wiley.
Wang, L. and Snell, R. (2013). A case study of ethical issue at Gucci in Shenzhen, China.
[online] Available at: https://doi.org/10.1007/s13520-012-0024-6 [Accessed 12 Apr. 2018].