KHAADI: A CASE STUDY 1

Inhumane Workplace Allegations on Khaadi

Amil Tamour Daud Khan, Syeda Mudassra Naqvi, Noor Ul Abrar, and Wajeeha Khalid

NUST-S3H, BPA

Submitted on: 29/4/19

Submitted to: Ms. Rehma Rubab Hyder

Course: Professional Ethics-HU-223

KHAADI: A CASE STUDY 2

Abstract (By Wajeeha Khalid)

Khaadi is a well-known Pakistani retail company that also has a significant international

presence. The company presence revolves around restoring the craft of handloom, but in a

contemporary manner. Such businesses are a fundamental part of a culturally rich society as they

preserve ancient forms of art. Where such business is praised we must also look into the picture

more critically in order to ensure that these brands are functioning in an ethical manner.

This study delves into the malpractices of Khaadi that were highlighted by various

workers of the brand through whistleblowing. The mannerisms adopted by the brand to address

the allegations and the ethical misconduct is put under the microscope and studied to develop

and understanding of and a comparison between how the situation should have been addressed

and how it was actually addressed.

The textile industry has been criticized time and again when it comes to the kind of

practices that take place behind doors. Developing countries like Pakistan have time and again

been caterers of unfortunate labor practices like the Iqbal Masih case, yet despite such tragic

incidents unethical practices in most of the country’s industries prevail. There are several reasons

as to why such incidents continue one of them being the lack of accountability that continues to

prevail in the country. Brands in Pakistan often fail to perform their Corporate Social

Responsibilities.

The study starts off with an organization overview, followed by a breakdown of incidents,

ethical analysis and then a general introduction of the labor laws in Pakistan. Lastly, the analysis

talks about the concluding remarks and comments on how the situation should have been

handled.

Keywords: CSR, Malpractice, Corporations, Labor ethics, Accountability.

KHAADI: A CASE STUDY 3

Contents

Abstract (By Wajeeha Khalid).....................................................................................................................2

Organization Overview (By Syeda Mudassra Naqvi)..................................................................................4
Incidents and Allegations (By Wajeeha Khalid)..........................................................................................7
Ethical Analysis (By Amil Tamour and Noor Ul Abrar)...........................................................................10
Business Ethics and CSR in Pakistan (By Amil Tamour Daud Khan).......................................................14
Analysis.....................................................................................................................................................17
References.................................................................................................................................................18
KHAADI: A CASE STUDY 4

Organization Overview (By Syeda Mudassra Naqvi)

Khaadi is one of the famous Pakistani design and clothing brand founded in December

1998 by Shamoon Sultan. Its first store was established in Zam-Zama Karachi. It is multinational

clothing brand. In the short time since its origin, Khaadi has rapidly turned into a hearty brand

with an international presence. It has an in house dying, stitching and design studio. Khaadi’s

ideology is hand woven fabric having both eastern and western touch. Today it operates 46 stores

across Pakistan.

OBJECTIVES:

Customer expectations should be fulfilled, experimenting new ideas, making a sound

profit, striving to reduce cost and a responsibility to local and international community.

LOGO:

Khaadi, one of Pakistan’s top fashion and lifestyle powerhouses has recently dropped its

name from the logo and became first brand of the country to do so.

OLD LOGO:

NEW LOGO:

The stylized logo with ten oblong shapes, symbolizing fingers on a

handloom now stands alone.

REPLACEMENT OF LOGO

The rebranding and removal of the name coincide with the brand’s celebration of 20

years in Pakistan.
KHAADI: A CASE STUDY 5

Khaadi which began as a 400 square foot store in Zam-Zama, has now expanded to over

500000 square feet of retail space with 45 nationwide and 20 overseas outlets. It continued to

grow from one store in Karachi to three in Lahore and Islamabad.

Achieving a high level of brand equity, Khaadi’s journey and success is an example of

Pakistan’s resilience and success.

Logos without name can evoke more personal and immediate reactions which are

considered important in media environments. Researchers have researched that visual imagery as

compared to verbal imagery is more effective in advertisement. It attracts huge audience and

makes them understand the advertisement message in more effective manner.

A Pakistani brand like Khaadi which has established itself at a level to implement a

nameless logo, is a remarkable feat for Khaadi.

AWARDS:

Khaadi has been nominated several times in national industry awards including the LUX

STYLE AWARDS. Khaadi has won the 1st, 10th and 12th LUX STYLE AWARD.

PLACES:

Khaadi has international outlets in UAE, Canada and USA. Furthermore, its retail shops

are opened at Lahore, Gujranwala, Peshawar, Gujrat, Islamabad, Faisalabad, Rawalpindi,

Sialkot, Hyderabad, Rahim Yar Khan, Karachi and Multan.

PROMOTIONS:
KHAADI: A CASE STUDY 6

For promoting its brand it relies on advertisements, season sales and the power of social

networks. Furthermore, it builds business partnerships with other brands and good relationship

with customers. Customer Feedbacks are also another parameter

ONLINE SHOPPING FACILITY:

Now Khaadi also provides online shopping facility for the people who want to shop by

sitting at home rather than visiting stores.

TYPES OF PRODUCT:

Accessories that include handbags, clutches, scarves, footwear and perfumes.

Clothing:

Includes tights, trousers, Shawls, Dupattas, western and eastern Shirts (stitched,

unstitched).

Home accessories:

Includes bedsheets, cushion covers, duvet covers, furniture, crockery and table covers.

PRICES:

Based on quality of product, offer freebies and the seasons.[ CITATION Kha \l 1033 ]

.
KHAADI: A CASE STUDY 7

Incidents and Allegations (By Wajeeha Khalid)

In May, 2017, employees of a well-known clothing company Khaadi came out on the

streets protesting against the brand. Workers at Khaadi had initially filed three different

complaints against the company, and in all the complaints the workers’ grievances circled around

the unfair treatment of the factory workers. The workers stated that they were not provided with

letters of appointment by the company, the company had promised the workers that at the time of

employment that after having worked for 3 months they would be given the status and benefits of

a permanent employee. Not only did the company fail to fulfil their promise but they continued

to pay the labor force less than the minimum wage while making them work for over 12 hours a

day. On top of extended hours of work Khaadi forces their workforce to work even on public

holidays. The company has also been alleged to have been taking deductions from employees’

salaries for Employees Old-Age Benefit Institution (EOBI) all the while not issuing EOBI card

for the employees, the company also does not make any contribution to providing its workers

with social security like the Sindh Employees’ Social Security Institution card. [ CITATION

Asa17 \l 1033 ]

As the issue emanated more information on the workplace rules and regulation came

forward like the lack of clean water at the workplace, a restriction on bathroom breaks for the

workers and the fact that there were only three bathrooms at the workplace with over 1500

workers. The company was also said to have bribed an active union member with 500,000 on the

promise that she would withdraw from the case. [ CITATION Awa17 \l 1033 ] A statement was

presented by the company where they insisted on all allegations regarding the company’s

behavior being nothing but mere “conspiracy theories,” upon the allegation that the company

drove a female employee to suicide after being penalized so harshly for taking a longer lunch
KHAADI: A CASE STUDY 8

break than that permitted, the company dubbed it as an “outright lie.” In this very statement they

also put down rumors of having terminated 32 of their employees for presenting their grievances

in public. Soon after the statement was published employees reported that they were no longer

allowed inside the manufacturing factory. [ CITATION Asa17 \l 1033 ]

These events lead to the rise of the hashtag ‘Boycott Khaadi’ on social media and so it

wasn’t long until another statement was published by the company. They now stated that they

employed workers via TexMark, a third-party vendor. Nasir Mansoor, a well-known activist and

the General Secretary of NTUF rejected the statement presented by the company on the grounds

that if a company does not employ its own workers they should not have spoken regarding the

termination the workers to begin with.

Later a spokesperson for TexMark, Imran Shiwani gave a statement saying that the

workers rumored to have been terminated in fact willingly left. [ CITATION Faw17 \l 1033 ]

At a press conference in Karachi, Muhammad Usman, a spokesperson for Khaadi,

refused to answer the questions regarding whether Khaadi owned any manufacturing units in

Karachi. In an article published in June 2017 on Tribune the author writes about the factory

where TexMark supposedly employs workers that then manufacture products for Khaadi. The

factory stands tall with red gates in the SITE area, Karachi. Everyone in the locality knows the

factory to be of Khaadi, from the worker leaving the factory to the local police patrol. Outside

the gates of the factories one of the worker said “It’s very confusing? Who do we go to for our

rights? Khaadi or this new face ‘TexMark’? ” Inside the factory the sowing machines and table

have stickers of Khaadi’s logo on them, the products are packed in Khaadi’s signature packing

and the timetable for the worker is also printed on a paper with a same logo. In addition to this,

students of Karachi’s well-known Institute of Business Administration on their website have

KHAADI: A CASE STUDY 9

claimed to have visited Khaadi’s factory where they witnessed their items being produced.

Architecture firm Arshad Shahid Abdullah on their website has claimed to have designed

Khaadi’s factory and their office in Karachi. [CITATION Faw171 \l 1033 ]

In another article on Tribune a tailor namely Usman Ali was interviewed regarding his

experience at the company. Ali was interviewed on the website because he was terminated for

asking the manager at the factory to give him time off to give his intermittent examination.

According to Ali when he approached his superiors he was given an option to either leave work

and study for his examinations or to continue working for the company. He had been working at

the company for approximately two years. At the time of his joining the company he was told

that after three months he will be given the status and perks of a permanent employee – an empty

promise. The work load on Ali had increased significantly from making 80 kurtas per day he was

pushed to make 400 per day with no benefits what-so-ever. Even at termination along with Ali a

number of other workers were offered money to keep quiet about the issue or else they would be

“picked up by law-enforcement agencies”.

As of June, 2017, Khaadi has signed an agreement regarding implementation of just labor

laws at their workplace[ CITATION Imt17 \l 1033 ]

KHAADI: A CASE STUDY 10

Ethical Analysis (By Amil Tamour and Noor Ul Abrar)

In this section we will be analyzing the incidents and accusations against Khaadi. I will

also be looking at the way Khaadi has responded to the situation and what course of action

should have been taken.

Firstly, this is a case of external whistleblowing1. The workers at Khaadi registered 3

formal complaints. The first two were with the Karachi bench of the National Industrial

Relations Commission and the third was with the Directorate Labor of Sindh. The first complaint

was filed by 33 workers, second by 125 and third by the General Secretary of the union that the

workers had formed. After registering the first two complaints, Khaadi responded that no due

action would be taken against the 33 workers. However, immediately after this they were fired.

The threat to the remaining 125 workers remained. This is when the protests started. [CITATION

Rah17 \l 1033 ] [ CITATION Asa17 \l 1033 ]

When the protests gained speed and media space, Khaadi gave out a statement calling the

situation a conspiracy theory and mere hearsay. First, they denied any and all of these allegations

but afterwards on June 6th 2017, signed an agreement with the National Trade Union Federation

agreeing to improve its labor environment at production units. They also agreed to provide their

employees with employment letters, issuance of EOBI and SESSI and to increase their pay to the

minimum wage set by the government. In accordance to this, they emphasized that the 125

whistleblowers would resume duty and not be harassed.

As can be seen, all of the settlements that Khaadi made with the NTUF completely

contradict their initial statement. This conduct brings into light a very important moral principle:

A term used to describe the activities of individuals who leak confidential information on
organizational misconduct.
KHAADI: A CASE STUDY 11

fidelity. Fidelity not only affects customers and the public which form Khaadi’s market but also

the existing employees in the organization. When employees lose trust in the company and its

mission, they feel no loyalty to their position. They might leave their posts altogether or engage

in malpractice, corruption or fraud. Employees lacking motivation and goals hinder the

company’s growth. If employees choose to exit the organization because of this lack of trust, the

company can either use this to improve its ethical climate or proceed unaffected. The employee

can also voice their concerns on the ethical climate which is deemed more effective because it

gives the organizational higher-ups a constructive model to improve upon. Moreover, vendors,

distributors and clients affected by infidelity might also find substitutes. Valued business players

will leave the organization contributing to more loss and lack of cohesiveness.

Speaking of mission and goals, Khaadi’s mission was already lacking in providing the

employees with something to work towards. We found that the company did not have a solid

mission statement for its workers. Whether one is given to them internally on joining is hard to

say but a lack of a mission statement is a serious concern. Mission statements govern

organizational culture and ethos. Employees use the mission statements to check their ethical

behavior in the workplace and it also provides a drive to them to move forward in their

occupation. Because Khaadi does not have a clear mission statement, it is safe to assume that its

organizational culture is then determined by the behavior of higher-ups and management. But so

far this behavior has only consisted of neglect and infidelity. The Company has also been alleged

to bribing a female worker with a whopping sum of 500,000 PKR. Therefore if this, coupled

with the allegations mentioned before, is the type of behavior affecting Khaadi’s organizational

culture, how are the consumers and employees expected to extend loyalty and trust toward the

organization? [ CITATION Ste15 \l 1033 ]

KHAADI: A CASE STUDY 12

When a retail force which has established a global footprint exploits the trust of its

public, a major ethical breach is seen not only by its national branches but international ones as

well. Khaadi has established its company in UAE and the UK, therefore, its ethical misconduct

affects its customers not only in Pakistan but also in these other branches. On its website, Khaadi

claims that they want to use ancient hand-weaving techniques and reenter them into high-street

fashion. While this is a fair enough ethos to have, an organization which is so confident in its

expansion should know better than to not only have cultural protection as a mission on its

website. Khaadi needs a strict revision of its mission statement.

Now, I would like to contrast Khaadi’s response in this incident to Khaadi’s response in

the 2016 price tag incident.[ CITATION Alv16 \l 1033 ]

Here, Khaadi was accused of cheating its customer base by placing a higher price tag on

discounted items. While the allegation was sound and managed to gain media attention, Khaadi

didn’t outright deny the allegation. Their marketing manager spoke to Express Tribune to clarify

the mistake. This approach to the problem involved the company looking into the matter and

reaching out to the public on the clarification. On the other hand, in the 2017 incident the

company refused to even accept the allegations.

One can argue that the intensity of both incidents varies dramatically but the course of

action should have been more or less the same. As mentioned before, when employees exit or

voice their concerns the organization can either ignore or use them as tools for improvement.

Here, when the complaints were launched, the least the company could do was to immediately

jump into rectifying the mistakes pointed out. A statement should have been given out addressing

the concerns and then if the contract with NTUF was to be drawn, fidelity would be maintained.
KHAADI: A CASE STUDY 13

Another problem with Khaadi’s statement was that they diverted the blame from their

own company, to other third party suppliers. They also argued that the company is not

responsible for employees hired by independent contractors. All of these claims further adds to

Khaadi’s exploitative culture. Shifting responsibility has allowed them to get away without

ensuring proper working conditions. [ CITATION Has17 \l 1033 ]

In regards to the workers who launched the complaints, it is also important to see whether

they went through an internal hierarchal process to alert the higher ups within the organization

before going to the media. This is also a good opportunity to assess how written complaints work

and whether there is a proper complaint process at the company. As mentioned before, three

formal complaints were launched. However, none of these were placed within Khaadi’s internal

administration. This may be because a process as such does not even exist, or employee

grievances are not taken seriously.

KHAADI: A CASE STUDY 14

Business Ethics and CSR in Pakistan (By Amil Tamour Daud Khan)

Security and exchange commission of Pakistan issues the CSR (corporate social

responsibility), which a general order for public companies. This way the companies take

responsibilities of the impacts of their respective business operations on the society, people and

environment. It can be said that it creates a filter for the actions of a company and generates the

energy in a positive way that could lead to social regulation. There are four basic aspects of

practicing CSR namely; Philanthropy, Ethical Labour Practices, Environmental Efforts and

Volunteering.

In this case ‘Ethical Labour Practices’ is the CSR component that needs to be

highlighted. It demands the company to treat their employees fairly and ethically, follow the

governments’ orders with respect to Employee rights and minimum wage requirement. It is

widely discussed in the business community how the CSR program is a win-win situation for a

large scale operating company. Firstly it appeals socially responsible citizens and in the longer

run actually plays a part in bringing about a change in the real world.

Pakistan being a developing country is making its way to come to the CSR maps however

incidents like these show how far it still lacks behind, this cannot be taken as one odd or

noteworthy example because other cases like the ‘Iqbal Massih’ case show the country has weak

CSR practices. Generally companies do not follow this obligation which is why we frequently

come across struggles of unpaid or underpaid labourers and pathetic inhumane working

conditions.

In Khaadi’s particular case, their representative was called by the National Trade Union

Federation (NTUF) due to unfair labor practices carried out by the organization that included not

issuing an appointment letter at the time of hiring, not issuing SESSI (Sindh Employees' Social
KHAADI: A CASE STUDY 15

Security Institution) cards to workers in industrial units and therefore, their social protection is

denied. Furthermore, they conducted monthly deductions for Employees Old-Age Benefits

Institution (EOBI) contributions from salaries but did not issue them EOBI cards. Workers were

made to work over 12 hours a day including on public holidays and Sundays. Clean drinking

water and restrictions on toilet facilities were faced. Units with 1500+ employees had merely

three bathrooms.

According to the law in any worker gets injured while on duty, is to be compensated with

a leave however that too wasn’t done. Minimum wage for unskilled worker is set by the

government is Rs14,000 and the skilled workers at Khaadi get paid Rs13,000. Sindh Terms of

Employment state that workers are allowed a 32 days annual leave.

Under the Factories Act, 1934 no adult worker of 18+ can be permitted to work in any

establishment for nine hours or more and 48 hours a week. Similarly, no one under the age of 18

can work for an excessive seven hours a day and 42 hours a week. The Factories Act, which

enlists conditions for industrial work, applies to factories, employing ten or more workers. The

Provincial Governments also have the jurisdiction to extend the Act, to even five workers. As

provided in the Factories Act, 1934, every worker who has completed a period of twelve months

continuous service in a factory shall be allowed, during the subsequent period of twelve months,

holidays for a period of fourteen consecutive days. In addition to the leave entitlements, workers

are granted festival holidays as declared by the Federal Government. The Provincial Government

under section 49 of the Factories Act, 1934, has also stated 13 official holidays in their Gazette.

Furthermore, every employee is allowed to enjoy all such holidays with pay on all days declared

and notified by the Provincial Government. If however, a worker is required to work on any
KHAADI: A CASE STUDY 16

festival holiday, one day's supplementary compensatory holiday with full pay and an additional

holiday shall be given

Other than the above mentioned reasons, dismissing 32 of its employees and the suicide

of an employee was considered a grave situation and was highlighted in the meetings. NTUF

issued a press release declaring that they would discuss with Khaadi and ensure the

implementation of labor laws which did lead to an agreement.

Khaadi’s representatives and trade union members both agreed to work towards; safety,

security and health of workers and old age benefits.

Khaadi agreed to give appointment letters to those whom weren’t given earlier. They

assured the registration of its employees with the Employees Old-Age Benefits Institution as

well as the Sindh Employees Social Security Institution and guaranteed that they would stand by

labor laws, including minimum wage regulations. However the company denied all the

accusations regarding the dismissal of its 32 employees or its link with the suicide of a female

employee. They claimed that these were fake rumors made to defame them while they worked

for the greater cause which according to them was promoting Pakistani values, tradition, and a

positive image of Pakistan internationally. [ CITATION Rah17 \l 1033 ] [ CITATION Nat04 \l

1033 ]
KHAADI: A CASE STUDY 17

Analysis

Corporate giants, be it international or national, have functioned in developing countries

for years on end and have rarely been held accountable in the host country. This lack of

accountability has resulted in the exploitation of vulnerable workers. Factories in developing

countries have a long history of exploiting their workers and Khaadi’s case is another example.

During our research we have found major loopholes in the system that later become the bases of

exploitation. It is this lack of regard of the government of the country towards its citizens. In a

country where a significant percentage of the population comprises of the labor population it is

essential for the government to understand the need for protecting these vulnerable citizens.

Khaadi did not react to the situation in an ethical manner nor did they not fulfil their

ethical obligations. Ideally when faced with such accusations an organization is required to take

responsibility as one of a company’s greatest assets are their employees and for their concerns to

be heard is their basic right. Furthermore, lying to your clientele and employees shows a very

exploitative nature on the organization’s part.

Khaadi could have been an ideal case for accountability on the company’s part if they had

chosen to act in an ethical manner and if they had not simply dismissed allegations; rather, they

should have looked into the issue and actually listened to their employees’ worries. If action to

provide them with a safer workspace would have been taken immediately, they would have

become a landmark for Corporate Social Responsibility in the country. This would have set a

domino effect where more companies would have started to work towards more effective

business ethics
KHAADI: A CASE STUDY 18

References

Abid, A. (2016, august 1). Sale Deception: Khaadi Accused of Cheating Customers. Retrieved

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accused-cheating-customers/

Ali, I. (2017, June 6). Khaadi, NTUF reach agreement on labour issues. Retrieved from Dawn :

https://www.dawn.com/news/1337805

Farooq, A. (2017, May 29th). Khaadi faces social media rage amidst allegations of inhumane

work conditions. Retrieved from Dawn: https://www.dawn.com/news/1336144

Hasan, F. (2017, June 2). Khaadi tailor skipped intermediate exams for work, now he’s been

'fired'. Retrieved from The Express Tribune:

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now-hes-fired/

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https://tribune.com.pk/story/1430311/labour-abuse-khaadis-third-party-vendor-texmark-

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Jawed, R. S. (2017, May 30). Sindh Labour Federation rubbishes Khaadi statement denying

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denying-inhumane-working-conditions/

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KHAADI: A CASE STUDY 19

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Politics, A. (2017, May 30). What is Reality of Khaadi Scandal? Retrieved from Awami Politics:

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