The Gap walks a tightrope in Sri Lanka…

As The Gap’s (GPS) shareholders reflect on how to cast their votes between now and the May 15 annual meeting, they’ve got a doozy of a proposal to sort out that one of our eagle-eyed researchers, B.B. Murti, spotted in the company’s April 3 proxy. It’s Proposal No. 4, submitted by Stephen M. Jaeger and Yasodha Natkunam, who own 125 shares of stock through their family trust.

Jaeger and Natkunam think that the Gap should not engage in trade with Sri Lanka until it ceases violating human rights. The country, called Ceylon until 1972 and now officially known as the Democratic Socialist Republic of Sri Lanka, is a tiny teardrop-shaped island in the Indian Ocean, slightly bigger than the state of West Virginia, close to the southeast corner of India.

The human rights violations Jaeger and Natkunam refer to are real and brutal, stemming from the war that lasted almost three decades between the government and the separatist group known as the Liberation Tigers of Tamil Eelam (LTTE or the “Tamil Tigers”). Jaeger and Natkunam focus on the crimes committed by the Sri Lankan government; however, this March, 2011 report published by the United Nations (an executive summary is available here, if you prefer) makes it clear that both sides are guilty of unspeakably horrific conduct.

The proponents argue that The Gap should heed the recommendation of the U. S. Senate’s Appropriations Committee, which they say “has proposed that international institutions vote against any loan, agreement or other financial support (except humanitarian aid) for Sri Lanka unless it complies with standards set by international law.” One of The Gap’s major suppliers, Brandix, is located there and may soon expand its operations. (According to the 2011 proxy, unnamed shareholders submitted a similar proposal last year, although they missed the filing deadline and the resolution was not voted on.)

Jaeger and Natkunam submitted the resolution because:

We are concerned that a reputable company such as Gap Inc, which is one of the largest garment manufacturers in Sri Lanka, will appear to endorse the crimes perpetrated by the Government of Sri Lanka, if it continues its trade with that country. We believe that this claim is not merely theoretical since Gap Inc is providing Sri Lanka with the foreign exchange that keeps its massive military viable.”

Needless to say, The Gap’s board doesn’t see things the same way as Jaeger and Natkunam do. The board says that it shares the proponents’ concern for “the protection of human rights and is committed to advancing the rights of garment workers around the world.” Nevertheless, it urges shareholders to vote against the resolution.

The Gap’s directors acknowledge that the allegations of abuse committed by the Sri Lankan government are serious, but it adds that “apparel production in the country benefits its citizens.” Apparel production provides employment and helps to improve the stability and economy in Sri Lanka, the company says, and it “only contract[s] with factories that employ workers regardless of ethnic background”, working to ensure that all workers aren’t discriminated against and have fair working conditions. The proxy adds that The Gap requires contracted garment factories to abide by its “Code of Vendor Conduct” and in 2010 created a “Human Rights Policy.”

The Gap has supported a number of social programs in Sri Lanka; but since 2009 its focus has been to provide “life skills and enhanced technical skills education to [about 550] female garment workers to help them advance in the workplace and in their personal lives.” The program, known as Personal Advancement and Career Enhancement, or “P.A.C.E.”, received recognition by former president Bill Clinton as an effective way to equip poor women with the skills they need to improve their lives and those of their families. The proxy adds that The Gap plans to expand the program to other facilities in Sri Lanka later this year.

There’s no easy answer to this resolution as we see it. If the U.N.’s report is accurate, the Sri Lankan government is still unwilling to account for its past behavior, which included shelling hospitals, murder, torture, causing critics to “disappear,” depriving people of humanitarian aid, and much, much more. On the other hand, punishing the government has huge repercussions on the people, too. There is evidence from many sources that when women have access to education and employment opportunities, the standard of living improves not just for themselves and their families, but also for their communities and nations.

It may be one short line on the proxy card, but this resolution could have a big impact, regardless of which side wins.

Image source: Made in Sri Lanka original stamp, via Shutterstock