Solidarity Fund Essay Sample

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This case discusses the ethical decision the Quebec Foundation of Labor’s Solidarity Fund had to make as to how to proceed in its relationship with Gildan Activewear. The Solidarity Fund began investing in Gildan in 1995. Gildan grew, expanding to the US and Honduras to pursue vertical integration. In 2002, the Canadian Broadcasting Corporation aired an exposé depicting the deplorable conditions of operations in Gildan’s El Progreso factory. Outside monitoring agencies performed audits and pressured Gildan at the 2003 shareholder’s meeting to perform an audit to review working conditions and recent firings of workers attempting to unionize. Gildan asked the Solidarity Fund to audit its Honduras operations. Upon completion, auditors were convinced Gildan fired the employees due to unionization attempts. In November 2003, the Solidarity Fund had to decide whether to remain invested, use its voting power to transform the company’s behavior, or sell all equity and call loans. 1.b.)

In this case there are a number of stakeholders. The market stakeholders include the investors in the Solidarity Fund, The Solidarity Fund itself as a stockholder in Gildan, and the employees of both the Solidarity Fund and Gildan. The non-market stakeholders include the economies the companies support, Canada and Honduras primarily, and their governments.

To review the market stakeholders first, we should look at the Solidarity Fund. It is a stockholder in Gilden and therefore, has interest due to its partial ownership. It wants to see its return on investment for its investors and can use its voting power to do so. The dilemma at hand may also affect the stockholders of the Solidarity Fund because if it underperforms the stockholders will lose money or have an opportunity cost on the investment. The investors in the Solidarity Fund have an economic power over the Solidarity Fund because if they stop investing, the Solidarity fund will no longer be a viable investment vehicle. Employees for both the Solidarity Fund and Gildan are stakeholders as well, in different ways. The employees for the Solidarity Fund hold a stake because they will be impacted financially long-term depending on the return on investment the Fund brings in. If the Fund dissipates, the jobs are lost. In regards to Gildan’s employees, the employees want fair wages, safe environments, and tolerable working hours. Employees from both companies have economic power with varying degrees. The employees of Gildan have less economic power than they desire, leading to the attempt to unionize.

The largest non-market stakeholders are the economies supported by the Solidarity Fund’s investments. The Canadian economy is a non-market stakeholder because the Solidarity Fund has had a great positive impact on its economy since its inception helping to stimulate economic growth by investing in local, small-medium businesses. Its power is primarily an economic power. The Honduran economy is very similar in its interest. Because the Solidarity Fund, through its investments, allowed Gildan to expand to Honduras, the economy has grown providing jobs that afford workers higher wages and better benefits. This power was impacted not only by economic power, but also political power when Honduras set up export processing zones (EPZs).


Solidarity Fund
Return on Investment for Investors
Investors in the Solidarity Fund
Loss of Investment or Opportunity Cost
Employees for the Solidarity Fund
Financial Gain and Job Stability
Employees of Gildan
Fair wages, Safe Environments, and Tolerable Working Hours
(Very Little) Economic

Canadian Economy
Economic Growth through Growing Small-Medium Businesses
Honduran Economy
Growth through the textile industry
Economic & Political

2) The Solidarity Fund has an admirable sense of environmental intelligence based on this case. The Fund is keenly aware of the external social environment as it chooses socially responsible companies to invest in. The fund also conducts social audits to ensure the companies are up to the Fund’s standards. The Fund plays a very active part in the companies it invests in, usually placing a member on the board of directors. It also takes into account the interests of its employees and supports many unionized companies. The competitor environment is a limited one due to its primary, indirect competitor being investors pension funds. It’s not in direct competition as most pension funds are usually company funded, and the Solidarity Fund is funded with workers own money to supplement their pensions. The economic environment has an impact on the Solidarity Fund because it was a large driver behind the inception of the Fund. When the Fund was put in place in 1983, Canada was in a deep recession with its unemployment rate at 14%.

The Solidarity Fund was launched and it helped individuals invest retirement funds along with stimulating job growth with 500,000 shareholders twenty years later. While the Solidarity Fund is based out of Quebec, Canada, it’s geophysical environment is global. The Fund invests in many different companies. Most of these companies are trying to grow, and some (like Gildan) are growing internationally. By owning portions of these companies, understanding what is happening in all operations is difficult and necessary. The Solidarity Fund has done an exceptional job with this particular environment utilizing their social audits. For example, during the social audit of Gildan many issues were uncovered like the issue of too much cotton dust in the air in the plant in Honduras.

The Solidarity Fund has also done well with the legal environment, partially due to its goal to invest in socially responsible companies. By choosing to audit its investments it can see ahead where legal issues may arise from being socially irresponsible. The areas that need some extra attention include the customer, political, technological, and legal environments. The customer environment is a driving force because of the individuals that invest in the Solidarity Fund, 60% are union workers. The customers will likely want to invest in companies that closely align with the area’s preferences. In the case, Gildan is certainly not in alignment with this preference seeing they are firing individuals that attempt to unionize. The political environment needs attention because the Solidarity Fund is investing in global companies. Political policies impact business in varying degrees across the world. Knowing the political environment of each of those countries will assist when choosing investments. The technological environment closely mirrors political environment risks in that the Solidarity Fund must know what the technological threats are to each of its investments.

3) In this case, the limits of the market and the limits of the law can be fairly easily determined. The limit of the market is that the Solidarity Fund didn’t know it was being “injured” until it ran its second audit. After the first audit, the Solidarity Fund was placated with the notion that the workers of Gildan could unionize if they so wished to do so. Unionization, however, would drive the cost of the product up, lowering the profits taken in by Gildan. This would have trickled over into their stock pricing, and the returns would increase slower or they would disintegrate all together. The market can’t do this, though, because the entity being injured didn’t know to shift the investments. The limit of the law is that, in this case, the law was not enough. Gildan did follow the laws set forth by Honduras with 44 hour work weeks, each day having less than 13 hours on the clock. Even if the laws were to be changed, Honduras had a history of having limitations on implementing and enforcing laws as evidenced by the “20 poorly trained inspectors” enforcing the labor code.

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