Many companies in the past, including Gap, have been criticized for not monitoring factory conditions. To address the criticism, the firm set standards for its manufacturers and developed a thorough factory inspecting system. Gap’s vendor compliance officers inspect factories around the world and check compliance with Gap factory standards. These standards include suppliers not employing anyone under the age of 14 years and factories not permitting physical or nonphysical abuse. Gap will terminate its business relationship or require the factory to implement a corrective action plan if this code is violated. In fact, since 2003, Gap has closed around 200 factories owing to persistent or severe violations of standards.

1. Is it ethical and socially responsible for Gap to revoke contracts, causing poor workers to lose their jobs?

2. Is it ethical and socially responsible to Gap’s stockholders to pay higher labor costs than necessary, thus possibly reducing profits and their dividends?