Paper 2: Eileen’s Ethics – Proving Socially Responsible Practices Are Possible


The garment industry has been receiving widespread criticism for their production overseas. Many companies have been criticized for their unethical business practices and the inhumane treatment of their employees. For example, Nike has been historically scrutinized by the media for poor conditions in factories, exploitative wages, and overall human rights violations. All of these concerns have accumulated to illustrate Nike’s disregard of social responsibility within their overseas factories. (Wilsey 2012) In response to Nike’s unethical practices as well as other unethical players in the garment industry, many consumers and social advocates have demanded that businesses not only make a profit but also consider the social implications of their activities. (Incorporated 2012) More recently, companies within the fashion industry have faced controversial decisions on whether to intervene in the production of their textiles overseas, which would gain the support of both the media and stakeholders, or ignore the issue at hand, prioritizing profits as well as the support of the company shareholders. (Incorporated 2012) Eileen Fisher has successfully engineered a way to mediate their relations with their overseas factories. They have demonstrated that companies can take initiative in abroad facilities in spite of the distance. Through strict regulations and key partnerships, Eileen Fisher has become a model of overseas mediation and ethical business practices, consistent with their overarching prioritization of social responsibility.

The Beginning

As the company became tremendously successful in the few years following its inauguration, Eileen’s vision of corporate governance expanded. She unselfishly wanted the people that were working for her to benefit in terms of happiness and prosperity. Reflecting her personal philosophy of individual growth and wellbeing, collaboration and teamwork, joyful atmosphere and social responsibility, she developed the framework for which employee and management policy would be grounded. (Lewin 2003) As the company grew from $40,000 in revenue in 1986 to $225 million national retailer and wholesaler in 2006, it committed to making a positive impact on women’s lives beyond its clothing line. It was recognized for its contributions to charitable organizations and civic participation including Willis Harman Spirit at Work Award (2002), Top 500 Women Owned Businesses (1999-2001), One of 25 Best Small to Medium Sized Company to Work For (2004-2012). Currently, Eileen Fisher employs 900 people. The company has two headquarter locations in New York City and Irvington, a distribution center in Secaucus New Jersey, and 58 stores located throughout the United States, Canada, and the UK. (Lewin, 2003) Ms. Fisher states, “At Eileen Fisher, we consider ourselves fortunate to be a company where high productivity exists within a comfortable work environment. Such a situation is not coincidental but the result of workplace ethic that values respect, honesty, awareness, and the ability to communicate with others.” (“Meet Eileen Fisher “ 2011) The prioritization of employees has proven effective. Although women’s apparel sales dipped by more than 6% last year, revenue at Eileen Fisher increased 12%, and employee turnover at retail stores is an underwhelming 19% in comparison to 50.7% for the entirety of the retail industry. (Pofeldt 2003) (See Appendix A) However, Eileen Fisher believes that profitability has been consequential to their ethical prioritization stating, “Our mission is driven by our business and our profitability fosters our mission.” (“Mission Statement” 2012) In addition, Eileen rejected the idea of taking the company public, with strong feelings that the company should be kept intact with the people who have developed it and eliminate the disingenuous focus on shareholder returns. Following this decision, Eileen developed an employee stock ownership plan (ESOP), where company shares are gradually deposited into employee accounts over time, making them literal controlling players in the company. When employees leave the company or retire, they sell their shares back for cash. (Francis 2007) In addition to the ESOP program, Eileen has developed dozens of employee benefits and wellness initiatives, community outreach programs, leadership seminars, and entrepreneurial grants, just to name a few, to reflect Eileen’s official mission to encourage individual growth, collaboration, and social responsibility in the workplace. (Employee Handbook 2007) (See Appendix B)

Evolution of Garment Industry

In the early 1990’s, the United States garment industry experienced a fundamental shift. Brand name clothing companies began outsourcing a majority of their garment production, entering contracts with factories outside of the United States, mostly in China and other Asian nations. China became the largest source of imported apparel in the United States market. As production moved to nations with lower labor costs, non-governmental organizations were raising awareness about working conditions occurring in the garment industry. Revelations of the use of child labor and reports of sweatshop produced goods for major brand names were becoming public. Most foreign nations had laws regulating working conditions and child labor, however enforcement was sometimes negligible. It became clear to the industry and to individual firms that codes of conduct would help the industry move beyond the sweatshop scandals experienced during the 90’s. (Lewin, 2004) Eileen Fisher was one of the inaugural companies of this practice. Their focus on empirical thinking, as opposed to normative thinking, emphasized values, always making the most ethically and socially responsible business choices. Currently Eileen Fisher outsources 65% of their manufacturing to China, with 35% of production manufactured domestically. (Pofeldt 2003) Their seven supply factories in China have been recognized as a model for ethical employee treatment and emphasizing the importance of human rights in the workplace. In addition, the level of transparency regarding the Eileen Fisher Chinese factory is exceptional. On the Eileen Fisher website, they detail the corporate governance of their factory as well as the steps taken by EF headquarters in mediation between factory managers and employees. (Eileenfisher.com 1989) (Figure 1)

Figure 1 – Chinese Factory Subsection on Eileenfisher.com

Eileen Fisher initially decided to open a factory in China for a complex number of reasons. One of these implications did involve the undisputed cost advantages but more so, the quality and detail, the reliability of the suppliers, as well as the proximity of their Chinese factory to demanded silks and textiles. As a player in such a competitive industry, acclaimed for sweatshops and abusive expectations, Eileen Fisher has been acknowledged as a socially responsible stakeholder managed firm, defying industry expectations and rising as a communicative, collaborative, and ethical corporation.

Eileen Fisher and SAI

Proactive involvement overseas is a key component to Eileen Fisher’s corporate governance. The overarching mission of overseas production is to, “practice business responsibility with absolute regard for human rights, the vision for our human rights program is to provide people with dignified work that will enhance their lives. We want to ensure they have a voice and are treated fairly in the workplace. To accomplish this, we engage in our employees, suppliers, nonprofit, and industry partners, taking action to improve and safeguard the welfare of the people in our supply chain.” (“Eileenfisher.com” 1989) They achieve these commitments through a strong partnership with Social Accountability International (SAI). SAI is “a non-governmental, multi-stakeholder organization whose mission is to advance the human rights of workers around the world. It partners to advance the human rights of workers and to eliminate sweatshops by promoting ethical working conditions, labor rights, corporate social responsibility and social dialogue.” (SAI Home 1996) They have developed training and technical assistance programs to work on the broader context surrounding global labor law compliance. One of these compliance methods is the preeminent social standard termed the SA8000 – standard for decent work, a tool for implementing international labor standards. (SAI Home 1996) Eileen Fisher is one of only three U.S. companies that comply with these strict standards. (Pofeldt 2004) These standards require a large allocation of resources (primarily monetary), however they have no objection to this compliance. With this strong commitment to employee rights, how do they hold managers accountable for fully comprehending and utilizing the elements of these standards? In addition, how can they expect workers to speak up about anything when they are raised with such a deep-seated respect for their elders and freedom of speech is limited? Eileen Fisher has taken the additional step of training managers and employees within their Chinese factories on various corporate social responsibility and personal enrichment topics. Eileen Fisher engaged services of SAI and Verit, a nonprofit U.S. based research and monitoring organization, to help workers develop the understanding and skills needed to participate in improving workplace conditions. (“Training Initiatives in China” 2012) Amy Hall, director of the social responsibility team comments, “what is needed is change, not a westernization of the cultural norms of the factory people, but rather to foster greater understanding of their universally recognized rights, how to talk about those rights when they are being violated, and how managers can respond to those comments in a compassionate, non-discriminatory, effective manner. We don’t believe that you can just hang up rules on a wall and walk away.” (Hall 2003) The company received initial backlash to the program for lack of attention to employee wages, but since then have developed improvements to alleviate these concerns. Overtime pay was seen as a burden by employers, so oftentimes managers would not apply overtime to the hours worked by employees. Basic wages for production were also low across the industry, which was the primary competitive advantage of overseas manufacturing. The problem stemmed from the unpredictable nature of factory orders and factory management’s economic need to maintain operations at full capacity. To alleviate this concern, Hall herself has made regular visits to the facilities, setting new goals for how to mend the communication between manager and employees. (Lewin 2003)

Social Fingerprint

SAI’s Social Fingerprint movement allowed Eileen Fisher to accurately assess the conditions of the factory and develop relations between supervisors and employees. Eileen Fisher became the first company to utilize this program in 2010. This program of ratings, trainings, and toolkits was designed to help companies understand and measure their social impact now and then learn how to improve it. (“Announcing a New Way” 2012) Eileen Fisher carried out a collaborative workshop titled, “Improving Your Company’s Business and Social Fingerprint”, which assessed and evaluated their operations, using this feedback to improve existing systems and support through direct action. Hall comments on the success of the program, “What I like about Social Fingerprints is that it takes a holistic approach. In the past, we would have gone in for a workshop and returned in six months for the second visit, this program lays the foundation, where we can use more tools and information to think about what everyone’s place is when visualizing corporate social responsibility.” (“What’s Your Social Fingerprint?” 2011) The current Social Fingerprints program includes the Company Rating System, the Social Fingerprint Supply Chain Management Rating System with new online courses being developed. “Our social fingerprints program allows companies to see where they are now. But more excitingly, it defines a clear path to improvement and breaks the journey into small steps,” states Craig Moss, SAI’s Director of Corporate Programs and Training. The partnership between SAI has created a model of assistance to factories in China. (“What’s Your Social Fingerprint?” 2011) The two companies understand that substantial change will take time but recognizing the important role that companies and organizations can play in fostering change is a substantial realization. Eileen Fisher presents a choice to other companies in the garment district unconcerned with the ethics of their supply chain, “we can walk away from this challenge, jeopardizing the jobs and livelihoods of millions of workers, or we can be a catalyst for something better if we believe in the possibilities.” (Hall 2003)

Ethical Evaluation

It is evident that Eileen Fisher is a stakeholder-managed firm. This conclusion was reached through our discussion of the differentiation between shareholder and stakeholder ethics, a debate famously disputed between Milton Friedman and Edward Freeman. According to Friedman, companies have one responsibility, and that is to their shareholders and prioritizing financial success. Companies that prioritize their shareholders are uninterested in the treatment and condition of their abroad employees as long as they are benefiting financially. (Friedman 1970) Freeman argues just the opposite, that businesses should make their decisions based on the potential benefits for all stakeholders. A stakeholder is defined, as the constituent of a company interested in various facets of corporate success, not just profit. (Freeman 2010) Eileen Fisher does just that. The implementation of SAI’s SA8000 is expensive; currently $217,000 of their budget is allocated to these standardization costs, not including the additional training and seminars that they provide. (Lewin 2003) (See Appendix C) This demonstrates that Eileen Fisher is willing to sacrifice profit for the commitment to social responsibility and employee development.  Lynn Stout, author of The Shareholder Value Myth, voices concern how companies have become so wound up in profiting that they have lost focus on constructive corporate governance, including the ethical treatment of employees abroad. Eileen Fisher has successfully cleared their mind of this focus, and has developed a corporate governance policy that will establish long term success within the company. The overarching Eileen Fisher mission, emphasizing individual growth and wellbeing, collaboration and teamwork, joyful atmosphere and social responsibility, has established their prioritization of their stakeholders, while simultaneously prospering financially.

Eileen Fisher’s facilitation of management within their overseas factories can be reasoned through Donaldson’s Rights in the Global Market. Donaldson discusses three correlative duties fundamental to the rights and responsibilities of employees and others. The three duties are: the duty to avoid depriving people of their rights, the duty to help protect people from such deprivation, and the duty to aid those who are deprived. (Donaldson 1989) Edwin Hartman elaborates on Donaldson’s theory and adds a fourth duty, which states that a corporation has a duty to avoid depriving anyone. (Hartman 1989) The duties are proven obligations if the corporation can fulfill these responsibilities. Through Eileen’s partnership with SAI and their newly implemented Social Fingertips program, they have successfully accomplished prioritizing each of these duties in their overseas factories. The dialogue regarding human rights and managerial/employee collaboration demonstrates that although Chinese government regulation of factory labor has been ignored and law enforcement has been lax, Eileen Fisher has focused on their responsibility to facilitate accountability in these factories. For Chinese factory employees who have been deprived of ethical conditions and wages, Eileen Fisher has implemented policies and training to aid in these deprivations. Eileen Fisher most definitely does not facilitate aiding “the depriver to get the job done,” reasoned by Hartman. If a factory is not complying with the standards set by Eileen Fisher, it shuts it down. In one instance, Amy Hall “heard that there was a factory overworking employees. They interviewed workers who all said there was no problem with overtime expect for one employee who was new and had not been coached. We ended up dropping the factory because they were not committed to change. The best suppliers are factories that will be honest with you.” (Lewin 2003)

Conclusion

Eileen Fisher has become a role model in the garment industry. They have prioritized their employees both domestically and abroad, reinforcing their emphasis on social responsibility. Eileen Fisher is one of only a few companies that are completely transparent to their customers. Most of the information discussed within this paper was outlined and detailed within their online website. Their website acts as a database for every aspect of their social responsibility. Eileen Fisher customers have become loyalists to the brand because of their consistent emphasis on ethical business practices. Company transparency seems to be the overarching concern in regards to competitors within the garment industry. Because Eileen Fisher is so open, honest, and detailed when providing examples and concrete evidence to reinforce their claims, media and consumers have no problem trusting them. On the other hand, competitors such as Nike need to become more transparent with the public regarding their involvement overseas or they will continue to receive backlash and scrutiny. Through their ethical business practices and prioritization of stakeholders, Eileen Fisher undisputedly proves they are a stakeholder-managed firm that also benefits their shareholders due to consequential financial success. Shareholder managed firms need to clear their minds of the Shareholder Value Myth and begin aiding in the deprivation of their employees both domestically and abroad. As years pass and societal concerns shift, they are susceptible to declining customer bases and profits if they do not begin to reform their unethical practices.

Appendix A

Appendix B

Eileen Fisher’s Social Consciousness Program

EILEEN FISHER’s commitment to Social Consciousness encompasses three broad categories:  human rights in the workplace, community involvement and environmental sustainability.

Human Rights in the Workplace EILEEN FISHER is committed to responsible business practices with absolute regard for human rights.  The company has adopted Social Accountability (SA)8000, a global standard for the continual improvement of workplace conditions.  The SA8000 standard is posted in all EILEEN FISHER locations and may also be found in the EF Public Directory or as specified on the posters.

Core Business The company complies with the SA8000 standard in all of its facilities (headquarter offices, showrooms, stores and distribution center).  As part of its commitment to SA8000, the company has established a Social Consciousness Committee, which facilitates communication between staff and  leadership on issues relating to the SA8000 standard.  Employees may raise concerns related to company performance against SA8000 with any member of these committees, with the Social Consciousness Team, or with leadership.  EILEEN FISHER will address these concerns and communicate the outcomes as appropriate.  Social Consciousness Committee members are listed on the SA8000 posters.

Suppliers EILEEN FISHER believes in working with suppliers that share our business philosophy.  As such, factories that supply EILEEN FISHER with finished product are asked to make a commitment to SA8000 as their workplace standard.  EILEEN FISHER monitors these factories, helps them set goals based on SA8000 and facilitates training in SA8000 to help them tackle challenging labor and human rights issues.

Community Involvement   The company supports programs for women that directly influence health/well-being and empowerment/independence.  We also support community groups near our offices and stores. Charitable support ranges from merchandise and gift certificates to direct contributions and employee volunteerism.  EILEEN FISHER will also match personal charitable gifts to non-profits totaling up to $1000 per EF employee in a calendar year.  The matching gift form may be found in the EF Public Directory.

Environment EILEEN FISHER is committed to guiding our product and practice toward sustaining the environment.  This commitment includes glass/plastic/aluminum recycling in our locations, environmentally-friendly cleaning supplies, organic cotton product and more.  As we continue to deeper our environmental commitment, we welcome participation in this new area of exploration for the company.

Eileen Fisher Benefits Table

Appendix C

Works Cited

“Announcing a New Way to Measure and Improve Social Performance.” Social Accountability International | Home. N.p., 2012. Web. 18 Nov. 2012. <http://www.sa-intl.org/index.cfm?fuseaction=Page.ViewPage&gt;.

Donaldson, Thomas. “Rights in the Global Market.” Multinational Corporate Responsibility. N.p.: n.p., 1989. 139-62. Print.

Eileen Fisher: Wholesale Employee Handbook. March 8, 2007

Eileenfisher.com. N.p., 1989. Web. 18 Nov. 2012. <http://www.eileenfisher.com&gt;.

Francis, Theo. “Inside Eileen Fisher’s Employee Stock Plan.” Eileenfisher.com. The Wall Street Journal, Jan. 2007. Web. 18 Nov. 2012. <http://www.eileenfisher.com/ns/images/ourcompany/inthemedia/pdf/jan07_wsj.pdf&gt;.

Freeman, Edward. “Business Ethics at the Millenium.” Philosophy Documentation Center (2010): 169-80. Print.

Friedman, Milton. “The Social Responsibility Of Business Is to Increase Its Profits.” New York Times 13 Sept. 1970: n. pag. Print.

Hall, Amy. “Statement of Amy Hall.” Statement of Amy Hall. CECC, July 2003. Web. 18 Nov. 2012. <http://www.cecc.gov/pages/roundtables/070703/hall.php?mode=print&gt;.

Hartman, Edwin. “Donaldson on Rights and Corporate Obligations.” Multinational Corporate Responsibility. N.p.: n.p., 1989. 163-72. Print.

Incorporated, Cotton. “Force of Impact: U.S. Companies Seek Transparency in Overseas Production.” WWD. N.p., 23 Aug. 2012. Web. 18 Nov. 2012. <http://www.wwd.com/markets-news/textiles/force-of-impact-us-companies-seek-transparency-in-overseas-production-6187185&gt;.

Lewin, Jennifer. “Eileen Fisher Case – Brand Linked Workplace Standards.” CSR|NYC Strategies. CSRNYC, 2003. Web. 18 Nov. 2012. <http://www.csrnyc.com/humanrightsworkplace/eileenfishercase.html&gt;.

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