Diversity Case Study Analysis

Diversity Case Study Analysis

Each organization and corporation must abide by legal practices. However, it is not required for those same organizations and corporations to uphold an ethical responsibility to their employees, patrons, or other stakeholders. It would behoove an organization to align its policies with ethical practices. However, ethical responsibility is a voluntary decision business must take.

Abercrombie & Fitch faced several claims of unethical treatment but has been skirting the line of “legal but unethical.” They have been in court frequently disputing their treatment of their employees. This paper will investigate the behavior of Abercrombie & Fitch to determine a pattern in their treatment of minorities. Additionally, it will analyze the ethical principles and theories that were the foundation of the lawsuits against the company and assess Abercrombie & Fitch’s response to the lawsuit. Lastly, this paper will determine how and what diversity training methods prevent future ethical issues.

History of Abercrombie & Fitch

In 1867, David Abercrombie was born in Baltimore, Maryland. He spent most of his life in New York. He was trained as a civil engineer and surveyor. As a surveyor, he was constantly outdoors to map routes through mountains and forests. After experiencing living in nature, he decided to establish an apparel store. He founded the Abercrombie Company in 1892, catering to a high-end outdoor specialty. He sold camping, fishing, and hunting gear (Abercrombie & Fitch, 2021).

The 25-year-old David Abercrombie started his store in downtown Manhattan near banks and brokerage houses (Hernandez, 2021). A loyal customer and wealthy lawyer, Ezra Fitch, took an interest in the company and decided to invest in it. In 1900, Ezra Fitch bought shares in Abercrombie Company. However, by 1904 he purchased a larger share in the company; therefore, they renamed the company Abercrombie & Fitch. However, they disagreed constantly on how the company should be run. Abercrombie wanted to keep selling goods for exploration, while Fitch was more visionary and thought they should expand the company to include the general public. Frustrated with the direction the company was going, Abercrombie resigned in 1907.

Fitch’s direction for the company proved to be justified after revamping the company and distributing a 456-page catalog—which nearly bankrupted the company (Abercrombie & Fitch Co., 2001). After mailing out 50,000 copies, a rush of orders came in, allowing the company to expand. Proving themselves an elite sporting brand, they have many notable clients.

The company has seen success and failure through countless presidents at the helm. The Great Depression affected the store’s profits; however, they were able to recover by 1938. They built their brand with more sporting goods, including golf and shooting—while still catering to the elite. In 1970, in an attempt to try a different marketing approach, Abercrombie & Fitch held a warehouse sale. However, then-president, William Humphrey, was not pleased with the types of customers showing up for sale. He prompted ended the marketing tactic and enacted another win, a broader range of more upscale clientele (Abercrombie & Fitch Co., 2001). This marketing scheme catalyzed the declining profits, sending the company into bankruptcy by 1976.

In 1992, Sally Frame-Kasaks was succeeded by Michael Jeffries. Jeffries came from Paul Harris Stores, where he was an executive. He was previously married to Susan Hansen, with whom they have a son. However, he has been separated from her for years and is currently with his life partner, Matt Smith. Matt Smith oversees the private family office, The Jeffries Family Office, which handles Jeffries’s homes, investments, and compensation (Maheshwari, 2013).

Jeffries came into his CEO role at Abercrombie with a vision to transform the brand into the chosen retailer for young Americans. He rebranded the store to appeal to young, cool kids. This rebranding concentrated on idealizing the “all-American kid with a great attitude and lot of friends,” as illustrated by Michael Jeffries (Denizet-Lewis, 2006). Combining sex and teenagers, Jeffries successfully revitalized the Abercrombie & Fitch brand. Stores were filled with “model” teenagers, loud music, and cologne, all to entice the “cool kids.”

Unethical Behavior Pattern

Michael Jeffries, known for his standards, initiated the “look policy,” which is a more intense version of a company dress code. The policy encouraged visible store sales employees to look more conventionally attractive. The policy included specifics about fingernail length and hair color. It also banned facial hair and caps (Kaplan, 2015; The Guardian, 2018). This obsession with the “Abercrombie look” has gotten the company into several lawsuits and controversial situations.

In 2002, Abercrombie & Fitch released several shirts that depicted outdated stereotypes of Asian Americans. Executives from Abercrombie & Fitch admitted that they were designed to add to their line of humorous apparel. They also claimed that they have other shirts that poke fun at other groups. They did not intend for the shirt about Asian Americans to single out an individual group (Strasburg, 2012). This outcry led to Abercrombie pulling the t-shirt from shelves—the first time in the company’s history.

Another time they had an issue with stereotypical slogans happened in 2005 when a group of high school girls protested offensive t-shirts that read “Who Needs a Brain When You Have These?” “Gentlemen Prefer Tig Ol’ Bitties” and “Do I Make You Look Fat?” All but the last slogan was pulled (Denizet-Lewis, 2006).

Abercrombie & Fitch has been accused of not hiring or firing Muslim women several times. In 2008, Halla Banafa was interviewed at Abercrombie Kids and was asked about her hijab and religion during her interview (U.S. Equal Employment Opportunity Commission, 2013). Abercrombie’s claimed that her hijab would place undue hardship on the company. Three of the U.S. District Courts disagreed. She was awarded $23,000.

In 2011, Umme-Hani Khan was fired for refusing to take off her hijab at work. While the battle was brewing with Elauf, Abercrombie removed their ban on caps and included a clause that allowed them if it “matched company colors (Smith, 2013).” The courts agreed that Khan was suspended and fired based on her refusal to remove her religious attire. She was awarded $48,000.

            In 2013, BuzzFeed News ran an exclusive on Michael Jeffries’ partner involvement with the company (Maheshwari, 2013). Although he did not have an official role at the company, he was one of the most influential individuals there. Michael Jeffries shares everything with Matthew Smith—from financials to operational strategies (Maheshwari, 2013). Since Jeffries was still married to his wife and had not officially reported Matthew’s role to the shareholders, Smith’s role proved dangerous since he was not organizationally accountable for any decision he would make.

Ethical Violations

The literature reveals two primary things: the company was largely impacted by CEO Michael Jeffries, and Michael Jeffries was obsessed with image. The company’s image obsession is demonstrated in two landmark cases, the 2003 class action settlement and the 2013 discrimination lawsuit.

Class Action Settlement

In 2003, Abercrombie & Fitch was the target of a class-action lawsuit. The lawsuit claim that Abercrombie & Fitch favors white male employees for manager and brand representative positions (Kaplan, 2015; NAACP Legal Defense and Educational Fund, 2006). The sales force is disproportionately white and discourages minorities from applying for jobs (Leung, 2004). Non-white employees were often asked to work in areas where they were visible such as stock rooms. By frequently using the euphuism “all-American,” Abercrombie & Fitch reframed their definition of “all-American” to allude to “all-white (Leung, 2004).”  

The court ruled that it violated Title VII of the Civil Rights Act of 1964 since Abercrombie & Fitch’s recruiting and hiring practices excluded minorities and women (U.S. Equal Employment Opportunity Commission, 2004). Selden and Selden (2001) referred to this as the discrimination-and-fairness paradigm. This paradigm is a form of deontology. The goal is to provide equal opportunity in recruiting and hiring (Selden & Selden, 2001). The compliance moderator can determine if the implementation was successful when they are audited and there is an increase in the number of minorities and women (Selden & Selden, 2001).

It can also align with utilitarianism since the outcome maximizes the opportunities for the greatest number of people. Following this ideology is an ends-based concept, where the ends justify the means (Kidder, 1996). After conducting a cost-benefit analysis, the assessment forecasted the outcome produces the greatest range of positive outcomes (Kidder, 1996).

Abercrombie failed to implement the following ethical practices: integrity, fairness, respect, and accountability. When employees and leadership use the turn “all-American” and “hip,” they were using it to reframe their intentions of hiring white youth. Their integrity was compromised each time they undermined themselves. They were showing biases towards non-white employees and potential employees. Non-white employees were not given the same opportunities as white males. When management assigned non-white and “model” employees to non-visible positions, they disrespected their ability to contribute to the organization in another way. Lastly, the leadership refused to hold themselves accountable for the treatment imbalance.

Abercrombie & Fitch settled for $50 million, where $40 million was for the rejected applicants and employees discriminated against and $10 million for attorney fees and compliance monitoring. In addition to their fiduciary responsibility, they also were required to institute policies and programs that promoted diversity to prevent discrimination based on race or gender. This included hiring a vice president for diversity who provides diversity training for employees with hiring authority. They were also required to terminate their current recruitment practices, which target predominantly white fraternities and sororities. Additionally, they were required to hire new recruiters to seek minority employees.

Todd Corley was appointed the Chief Diversity Officer in 2004. His goal was to fulfill some of the court-ordered mandates. This posed a challenging ordeal since Corley described the internal culture as a “friendly fraternity (Corley, 2015).” Nevertheless, in the decade Corley headed the Office of Diversity, he increased the minority-majority ratio to 2:1 (Bhasin, 2017). Additionally, he increased women’s representation in leadership.

CEO Michael Jeffries frequently inhibited Corley’s progression. As noted previously, Jeffries’s leadership direction was laced with unethical practices. His unethical behavior created and maintained an unethical workforce (Chughtai et al., 2014). He failed to construct, empower, and demonstrate to his employees what an ethical leader looks like (Alshammari et al., 2015). The organization’s ethical values became stale, which were reflected by executives failing to push back on Jeffries’ behaviors that did not align with the company’s ethics (Maheshwari, 2013).

Samantha Elauf vs. Abercrombie

Abercrombie & Fitch found themselves under siege with discriminatory allegations; even with the multi-part agreement issued with the settlement in 2004, Abercrombie & Fitch still found themselves under siege with discriminatory allegations. In 2008, Samantha Elauf received positive feedback in all the competency areas during her A&F interview (Demby, 2015). Unclear about the policy on hijabs, the hiring manager called the district manager for clarification. The hiring manager was told that the headscarf violated their Look Policy and had to rescind her job offer.

Elauf took her claim to the Equal Employment Opportunity Commission (EEOC). They filed a lawsuit on her behalf, alleging that Abercrombie had violated the Title VII of the Civil Rights Act of 1964, which does not allow employers to discriminate for religious reasons. Employers must make reasonable accommodations for employees’ religious practices.

The District Court initially awarded Samantha Elauf $20,000 in damages. However, that was reversed in Appeals Court. The argument was that the employer could not be liable for failing to accommodate unless the employer knew the required accommodation. Since employers cannot ask about religion during an interview, there was no way they could acquire the knowledge (EEOC v. Abercrombie & Fitch, 2014). Yet, the EEOC argued that Elauf did not know the “look policy” and did not know that conversation needed to occur.

Their ruling aligns with deontology—defining right and wrong based on rules. This is a common ethical practice in authoritative business models. Even though the consequences are ethically flawed, the predetermined rules determine whether the action is right or wrong. In this case, they could not ask about the employee’s religion and had a policy prohibiting the headscarf. If the interviewee needed accommodation, she needed to inform the interviewer.

Abercrombie amended their “look policy” and interviewing procedure in response to this case. The “look policy” has been updated to allow headscarves (Levine, 2015). They updated their hiring process to let candidates know there is a look policy.

Diversity Training

In the decade Corley was Chief Diversity Officer, he implemented several court-ordered programs and policies that helped address diversity issues within the company. He stated his goal was to create a consistent shopping experience with their customer regardless of where the store was located (Babcock, 2021). Implementing diversity programs are essential to customers and the current underrepresented employees who may be experiencing isolation and demoralization from unfulfilled expectations (Pendry et al., 2007). Suppose Abercrombie & Fitch continues to build their diversity training with assessment in mind. In that case, they can improve organization efficacy, highlight areas of improvement, build support, and create allies for the initiative (Pendry et al., 2007).

Today, Abercrombie & Fitch has a three-area diversity and inclusion approach: team, customer experience, and global community (Abercrombie & Fitch, n.d.). They stated they are committed to developing inclusive leaders, culturally sensitive business practices, safe spaces, and diverse recruiting practices (Abercrombie & Fitch, n.d.).

Conclusion

            Abercrombie & Fitch started as an organization where diversity was a fleeting thought. From racist t-shirts to religious discrimination, they have found themselves in several predicaments that could have been prevented if they had a more diverse and inclusive leadership. Abercrombie & Fitch has been forced to acknowledge that diversity and inclusion are important parts of an organizational structure, and the notion of exclusion is outdated. Today, Abercrombie & Fitch has been named the best place to work for LGBTQ equality for the last 15 years (Human Rights Campaign, 2021).

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