You are on the management team of a rapidly growing apparel company that had $780 million in sales last year and is projecting an additional $150 million in sales this year. You have been invited to a meeting of the CEO and other members of the top management team to discuss the company’s employment practices. The company has succeeded by targeting a niche market that pays more for fashionable styles, making speed and flexibility of operations more important than price. The company also is unique in its employee policies. Poor working conditions are common at many apparel factories, and the industry is besieged by public criticism of how labor is treated. Yet a fundamental tenet of the company has been the belief that apparel manufacturing should be profitable without exploiting workers. Management has worked hard since the company’s inception to treat its employees as well as possible. The company is respected within the industry for its labor practices. At the meeting to which you have been invited, there are a number of items on the agenda. 

Agenda Item 1—Seasonal employment: This summer, the company was not able to keep pace with the orders; thus, it added a second shift and hired 750 new employees, bringing the total number of its employees to 3,500. During the summer months, all the employees worked full-time (8-hour shifts, five days per week), and often overtime, to meet the sales needs and replenish the dwindling inventories. But the company’s inventories are growing too large, and it must determine how to reduce production over the next 20 weeks to only two thirds of full capacity. Typical industry practice would be to lay off excess workers under such circumstances, with no severance pay or other assistance and no promise of being rehired. However, if the garment company made such a move, it would violate its code of conduct, which calls on it to treat its employees as “valued partners.” Also, it has invested several thousand dollars in training each employee, and if workers are laid off, there is no guarantee it can rehire the same people when they will be needed again in spring.

Agenda Item 2—Expanding production abroad: Should the company start to produce more of its goods abroad? Until now the company has made almost all of its apparel in the United States. Because it sells fashionable items, price has not been the primary concern. However, it is unsure how long it can stick to this policy. Given the company’s values, this presents a problem. The media has been filled with stories about other garment companies exploiting child labor. A practice that is common in other countries where this company may go is that children aged 10 to 14 years work in filthy factories 50 or more hours per week. Their wages help their families to survive. School in these countries is viewed as a luxury, and a child attends only until he or she is able to work in one of the country’s many factories. Competitors like Levi Strauss, The Gap, Esprit, and Leslie Fay have received considerable negative publicity for contracting out their production to factories in such countries. They have lost sales because of the revelations about their child labor practices. When asked at the meeting, what do you recommend the garment company should do to address these issues?