LEVI STRAUSS & COMPANY
The question we are asked in this case study is whether or not we would buy shares of stock in Levi Strauss knowing that its managers are willing to trade off some economic efficiency to operate according to their collective view of what is “ethical”. On the surface, it appears that Levi Strauss & Co. upholds the highest ethical standards. However, what is ethical to some may not necessarily be ethical to others.
Like any business, Levi Strauss strives to position themselves well in the minds of stakeholders and they have maintained their good name and position in the market. “The company’s approach to ethical management is as familiar to business leaders as its jeans are to teenagers” (Jackson, Schuler, & Werner, 2012, p. [Page 69]). Levi Strauss unmistakably has a distinct company culture in that they provide strong guidelines for how their employees should act. Their company values include empathy, originality, integrity and courage. These values direct how employees are to be treated and how they are expected to treat others. Empathy means to have compassion, originality means to make every effort to be innovative and unique, integrity means to have strong moral principles, and courage means to be brave and stand for what you believe is right. These are impressive values for any company to assume! Along with these extraordinary values, Levi Strauss takes “an active role in international trade, labor, environmental sustainability, [and] nondiscrimination” (Bergh, 2014). Part of the strategic importance of managing human resources is satisfying multiple stakeholders. Levi Strauss is visibly working hard to do that. If you take a look at their website, they appear to be one of the most socially responsible companies in the world! The company is represented as socially responsible leaders in the community. The website is formatted to make
Case Study 1
it easy for users to find a vast amount of information about their ethical practices and sustainability (Bergh, 2014.), and their jeans and other products, well they speak for themselves! At Levi Strauss economic globalization is an important factor in the external environment. Labor markets and country cultures have added to the diversity in the workplace. They have adapted well to the global marketplace with operations in North America, Latin America, Europe/Middle East and Asia/Pacific” ("Around the World," 2013). Levis Strauss has employed a global labor force and has had to learn to adapt to other country cultures and legal practices that differ vastly from the ones here in America.
On their website, I learned that “For more than 10 years [Levi Strauss & Co. has] worked closely with the International Labor Organization’s Better Factories Cambodia program… to improve the well-being of Cambodian apparel workers” the next bullet on the list reads, “Levi Strauss & Co. is …participating in – and funding – the Better Factories Cambodia one Change Campaign to address …workers fainting in apparel factories” (West, 2014). This multi-billion dollar company has been working for more than ten years with the ILO Better Factories Cambodia program, and workers are still fainting in their factories? These statements made me question those great values of empathy, integrity and courage I’d previously read about. Is this the same company that’s aspiration statement says that it aspires to be “a company people can be proud of”? Are their employees in Cambodia too hungry to work their shift and fainting because of it? Again, what is ethical to some may not be to others, and this is a reason that I would not buy shares of stock in this company.
Case Study 1
In Case Exhibit 2.1 we are shown that one of the criteria that are considered when assessing performance in their social audit: the “wage and salary levels and equitable distribution” (Jackson, Schuler, & Werner, 2012, p. [Page 70]). However, the non-profit organization “Labor Behind the Label” who “works to improve conditions and empower workers in the global garment industry” stated that Levi Strauss & Co. is among the companies that declined to respond to their survey. This survey asked companies to “provide very practical, concrete information about their work in a number of areas, from trainings to buying incentives, and wage benchmarks to transparency issues” (McMullen, 2014). “Minimum wages, usually defined by governments, are set in the context of ferocious competition and consequently often fall well below these governments' own poverty thresholds. Furthermore, a minimum wage is often well below what is required for a living wage, and research indicates that many suppliers do not even pay this legal minimum” ("The Right to a Living," 2014). Levi Strauss declined to respond to this survey which makes me question once more what they believe to be ethical. For me, it’s not ethical to invest in a company knowing that they are employing people in Cambodia and paying them less than sixty-five US dollars per month, yet state in their performance assessment criteria that they review wages, salary and equitable distribution. Levis Strauss isn’t coming close to the cost of living index in Cambodia. To get a wage you can live from is a basic human right. Does Levi Strauss uphold high ethical standards? It may look like it on the surface. Something that the managers at Levi Strauss are overlooking is that there are members of society that would view their organizational culture as immoral and/or unethical. Levi Strauss was one of the pioneers to offer insurance benefits to employees’ unmarried domestic partners. Potential employees and customers may not hold the same views and find them not to be an
Case Study 1
ethically sound company. Additionally, Levi Strauss’ liberal employment strategies and noncompliance to surveys about wages may cause some people not to seek employment with their company or purchase their products. As we learned from the text, another important part of the HR role is to assist the company in gaining and sustaining a competitive advantage. With all the competition in the market, customers that share similar conservative views may choose to buy their jeans from other companies. Additionally, consumers may choose to talk about these issues on social media which could potentially create an undesirable image in the eyes of stakeholders. Lastly, there are more than a few competing companies out there. I would recommend that Levi Strauss become more transparent about participating in the next survey that Labor Behind the Label invites them to participate in. Rather than congregating with the ILO for another ten years, perhaps they can do something to improve the situation in their Cambodian factories like increase the $5/month cost of living increase to $20/month or something that is more realistic. Management needs to be continually conscious of the external environment in order to remain competitive.
Most investors would be smart to invest in this company if they went public because of their great public image, their place in the market, the longevity of the company and the fact that they look great on paper. As far as Human Resources Management goes, it appears that the HR Triad at Levi Strauss & Co. has a good understanding of the changing external and internal environments and have developed their human resources model with these environments in mind. Would I buy shares of this company? Not at all. Not only do they not adhere to what I see as ethical behavior, they are making a ton of money off the backs of poor people in other countries and operating under the guise of being a socially responsible company.
Case Study 1
Around the World. (2013). Retrieved September 11, 2014, from http://global.levi.com/
Bergh, C. (2014). Who We Are. Retrieved September 11, 2014, from http://www.levistrauss.com/who-we-are/#message-from-the-ceo/ Jackson, S. E., Schuler, R. S., & Werner, S. (2012). Chapter 2 [Case Study]. In Managing human resources (11th ed., p. 69, 70). Mason, OH: South Western/ Cengage Learning.
McMullen, A. (2014). Tailored Wages UK - Report. Retrieved September 11, 2014, from Www.LabourBehindTheLabel.org website:
http://www.labourbehindthelabel.org/campaigns/itemlist/category/294-report The report profiles 40 companies on the extent to which their actions are having a positive real effect on workers’ wages in garment factories. The Right to a Living Wage. (2014). Retrieved September 11, 2014, from Www.LabourBehindTheLabel.org website: http://www.labourbehindthelabel.org/ issues/item/736-wages
West, A. (2014, July 25). Agents of Sustainable Change. Retrieved September 11, 2014, from http://www.levistrauss.com/unzipped-blog/2012/10/ one-link-our-supply-chain-Cambodia/
Case Study 1