Unethical Wal-Mart Business Practices: Case Study

Introduction

Wal-Mart, a giant company that keeps many clients, is widely known both at home and abroad for its huge variety of low-price goods and services. It was created by a very creative and innovative businessman, Sam Walton. Wal-Mart has done very well for itself because, in terms of its discounting retailing, it has defeated many other organizations.

It is thought to be the United States of America's largest corporation. According to PBS, 'Wal-Mart employs more people outside the federal government than any other corporation in the United States, and most of its employees with children live below the poverty line.'(pbs)

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Walmart has been opposed by numerous groups and individuals, including labour unions, community groups, grassroots organizations, religious organizations, environmental groups, gun activists, and consumers and employees of the company. Some of the most critical unethical business practices initiated by them are as follows:-

Unethical Wal-Mart Business Practices

1. Labor Union Opposition.
2. Unfair Treatment to Employees.
3. Child Labor Violations.
4. Low Wages.

Thesis Statement – Successful Corporations are only those that protect themselves from unethical business practices because they are unavoidable.

Background

Walmart Inc. is an American multinational retail company with headquarters in Bentonville, Arkansas, running a network of hypermarkets, discount department stores, and grocery stores. Founded in 1962 by Sam Walton, the company was incorporated on October 31, 1969. It also owns and operates discount stores for Sam's Club.3 As of 31 October 2019, Walmart had 11,438 shops and clubs in 27 countries, operating under 55 different names.4

According to the Fortune Global 500 list in 2019, Walmart is the world's largest revenue company with US$ 514.405 billion. With 2.2 million workers, it is also the world's largest private employer. It is a family-owned publicly traded business, as the Walton family controls the company. Sam Walton's descendants own over 50 percent of Walmart through their holding company Walton Companies and their private holdings.5 Walmart was the biggest U.S. food store in 2019 and 65 percent of Walmart's $510.329 billion sales came from U.S. operations.6

The New York Stock Exchange listed Walmart in 1972. By 1988, it was the most profitable retailer in the U.S.7 and by October 19898 it had become the largest in revenue.

Before we delve into Walmart's unethical business practices, let's define ethics first. Ethics is defined as 'The general and abstract concepts of right and wrong behavior which are derived from philosophy, theology and professional societies.'9 Ethics is also defined as' moral principles, irrespective of the situation or circumstances, through ethics, culture and religion.”.10

The definition of ethics in business decisions covers all aspects of a business organization's activities. There is always a propensity for ethical issues to emerge in a global market, and multinational companies are no exception.11 Multinational corporations are facing a dynamic and complicated global market where right and wrong could be viewed as varying widely.12

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Walmart is still performing some of the riskiest unethical business practices, being the biggest company in terms of sales and the number of people working. Below is the analysis done by me on the unethical practices carried out by Walmart. The unethical practices mentioned are analyzed on three basis, namely,

1. Why do these problems/unethical practices exist?
2. How do these problems/unethical practices affect Walmart Inc.?
3. Who is responsible for these problems/unethical practices?

Unethical business practices

Labor Union Opposition: - Walmart is a non-union company. Instead of relying on unions, they operate on an open-door policy. United Food and Commercial Workers Union filed a complaint against Wal-Mart with the National Labor Relations Board. 'The complaint filed with the National Council on Labor Relations claims that Wal-Mart has breached Federal Labor Law by bribing employees to spy on those co-workers that demanded labor unions.”13

Why does Labour Union Opposition exist in Walmart?

1. Unemployment - The economist Milton Friedman, who supports laissez-faire capitalism, argues that unionization always creates higher pay at the cost of less workers, and that wages would decrease in non-unionized industries if some sectors are Unionized while others aren't.14
2. Efficiency - Sherk argues this is more prevalent for businesses with a competitive advantage (the unions have trouble lowering profit in the competitive market), as this ensures that these firms have greater profits than average, so that redistribution is not in danger of alarming investors.15
3. Corruption - Several unions, like the Teamsters, have been blamed for being active in organized time.16
4. Cost-Push Inflation - With wage increases over the market rate, employers increase cost to businesses and cause prices to rise, leading to a general price increase.17

Note: - These were some of the reasons, which led Walmart Inc. to oppose labour unions in their company.

How did the Labour Union Opposition affect Walmart Inc.?

The labour union opposition affected Walmart Inc. negatively mostly. These impacts can be analyzed from the following affects that it had on the company.

1. In 2000, in Jacksonville, Texas, meat cutters voted to unionize. Subsequently, Walmart abolished in-house meat-cutting workers for pre-packaged products, arguing that the move will cut costs and avoid legal proceedings.18 Walmart argued that the national elimination of in-house meat processing was planned for many years and was not connected with unionization.
2. A successful unionization for a Walmart store in Jonquière, Quebec (Canada) in 2004 was completed, but Walmart closed the shop five months later, because the company did not approve the union's new business plan.19 In September 2005, the Quebec Employment Board held that the closure of a Walmart store would be a reprisal against unionized workers..20
3. In August 2006, Walmart announced that it would allow employees of all Chinese trade unions to enter trade unions and would work for 28,000 workers with the state-sanctioned All-China Trade Union Federation (ACFTU).21 The All-China Federation of Trade unions was criticized because it is the only trade union in China and a method to use of the government. ACFTU was viewed as not acting in the best interest of its members (workers), bowing the pressure of public authorities on industrial growth and not upholding workers ' rights.
4. In November of 2012, the United Food and Commercial Workers and several Walmart workers initiated a campaign to go to strike on Black Friday in several stores across the country in protest of low pay, a rise in health insurance premiums, and not the option of taking a day off or Thanksgiving off.22

Who is responsible for the Labour Union Opposition?

The top management is primarily responsible for the opposition labor union, and the managers followed the lead afterward. This could be highlighted through the following incidents:-

1. In 1970, late Founder Sam Walton of Walmart resisted an anti-union campaign by pushing retailers International Union to push for unionization in two small towns in Missouri. Walmart retained an Alpha Associates firm to develop a Union prevention programme.23
2. Walmart CEO Tom Coughlin was pressured in March 2005 to resign its board of directors, under embezzlement charges.24 Coughlin alleged that the money was being used to carry out an anti-Union project involving cash bonuses paid to employees of the United Food and Trade Union, in exchange for a list of names of workers of Walmart who had signed the cards.25
3. A lawyer from the United States said that Coughlin's initial claims were not supported by evidence and, while Coughlin himself reportedly reaffirmed those statements to journalists after his arrest, Walmart continues to deny that there was an anti-union campaign.

Unfair Treatment to Employees: -

Walmart, the largest private employer in America with 1.5 million staff, has been criticized for its strategy of putting profit first, and in particular above its employees. The company's policy of sick leave was described in a new report on the ' absence control system ' by Walmart as 'brutally unjust' and 'often against the Law.' Further, Wal-Mart was strongly alleged to discriminate against women within the organization. Females were also apparently underpaid than men.

Why does Unfair Treatment to Employees exist in Walmart?

Employee inequality is a form of discrimination based on workers ' ethnicity, gender, religion, national origin, physical and mental incapacity, age, sexual orientation and sexual identity. Discrimination can be intended and involve inconsistent or unintended treatment of a group, yet create disparate effects for a group. The discrepancy is one type of illicit discrimination in US labor law. In the United States, it implies unfair behavior towards an individual because of a protected characteristic (e.g. race or gender).26

From the above definitions, we can conclude that Walmart is treating its employees unfairly due to one of two reasons or both, namely, it can unintended or it can be intended where they treat a particular group favorably or unfavorably due to the reasons mentioned above.

How did the Unfair Treatment to Employees affect Walmart Inc.?

Their unfair treatment towards different groups has been affected adversely by disparaging their own image and paying huge fines in courts settlements, as can be viewed from the following instances.

1. 'In June of 2001 a group of six current and former female employees of Wal-Mart filed a lawsuit against the company against sex discrimination (who seeks to represent up to 500 000 Wal-Mart workers).'27
2. Wal-Mart struggled to provide women with equal opportunities in terms of employment, even though Walmart hires more than 70% of women, only a few of them are executives, which means that there are men at the top management of the business.
3. Walmart, the largest private employer in the country, regularly refuses to accept reports from physicians, penalizes staff who need to look after the sick family and punishes workers for legitimate absences.28
4. The above report is based on an inquiry by more than 1,000 employees, accusing Walmart, inter alia, of breaking the American Disability Act and the Family and Medical Leave Act. This month, in a lawsuit, the organization alleged that Walmart discriminated against pregnant workers in an earlier petition to the Equal Employment Opportunity Commission. Walmart said it did not review the report, but disputed the group's findings.29

Who is responsible for the Unfair Treatment to Employees?

Mainly, the top management is responsible for the unfair treatment of its employees. These would comprise executives because they're the ones who hire managers and we know that 65% of Walmart's hourly paid workers are female workers, but only 33% of them are in Wal-Mart's top management.30 Only 35% of its retail managers are women, compared with 57% in equivalent shops. On the other hand, keeping comparing Walmart with other retailers is unfair since it characterizes workers differently; if the total number of managers in departments were included, women would account for 60 percent of management levels.31

Child Labor Violations: -

The New York Times reported in January 2004 on its internal Wal-Mart audit carried out in July 2000, which examined the record for approximately 25 000 employees in a time clock of one week. The Times stated that 'the audit identified large breaches of child labor laws and government regulations, including 1,371 cases of juveniles who work too late, leaving or not attending school and working too many hours a day. There were 60,767 missed breaks and 15,705 missing meals.

Why does child labor exist in Walmart?

1. Poverty is widely regarded as the primary reason why children work in insufficient jobs for their ages. Children work because their parents are poor; their family incomes must be supplemental or unpaid.
2. Note that children in England were considered acceptable to work in cotton mills at aged 5 years or older.
3. The relatively low salaries paid to children are often why employers like Walmart executives prefer them to adults for the jobs. Some children are unpaid, especially as domestic workers, if adults are involved in those conditions then it would be called 'slavery.' Employers find children more obedient and easier to control. With young workers, strikes or trade unions are unlikely to be launched.
4. The failure to attend school is a cause and effect of child labour. Education is not free in many countries, so parents often pay a fee for their children to attend primary school, buy books and provide school uniforms.

How did the child labor violations affect Walmart Inc.?

The child labor violations has affected Walmart negatively by disparaging their own image and paying huge fines in courts settlements, as can be viewed from the following examples:-

1. Wal-Mart Stores, the biggest company in retail, it has agreed to pay $135,540 in federal charges that in Connecticut, New Hampshire and Arkansas as it violated child labor laws. In the settlement, Wal-Mart promised to exclude any staff under 14 years of age from working on balers and agreed to ban workers under 18 years of age.
2. Wal-Mart promised to train new store managers to comply with child labor laws and to provide current managers with more education in the subject.
3. On January 6, the Labor Department and Wal-Mart signed the agreement but made no public announcement. The agreement states, 'Compliance with child labor laws and regulations will be an important factor for the assessment of management's performance.'
4. A clause of the settlement further agrees to notify Wal-Mart 15 days in advance before the agency investigates any other 'salary and hour' fees, such as a failure to pay minimum wages or overtime.

Who is responsible for the child labour violations in Walmart Inc.?

Walmart and primarily executives in the business are responsible for the infringements of child labour. There may be cases where top management i.e. executives, may not be aware about child labour in their company. Labour officials said that most of the 24 settlement violations involved employees under 18 years of age operating in hazardous equipment, such as cardboard balers and chain saw. Wal-Mart denied any wrongdoing in the Agreement, but at the same time promised to train new shop managers in compliance with child labour laws and to provide the existing managers with more education on this subject.

Low Wages:

Wal-Mart is accused of paying very low wages to its workers, with an average annual income of between $12,000 to $17,000 per annum. 'The main justification of Wal-Mart is that it delivers lower prices for its and somehow excuses that sinfulness.' In addition, Wal-Mart has an expensive insurance system and Wal-Mart workers can't manage to pay for their health insurance again. Employees serving the company over time haven't enjoyed the benefits of their labor since they haven't been paid for overtime services rendered.35

Why does low wages to employees exist in Walmart?

1. Walmart Inc. provides its employees with low wages so they can make more profit by cutting costs as wages and pay which make a large part of their expenses.
2. Because of the current legislation, businesses such as Walmart must pay a mandatory minimum wage but are expected to save labor costs everywhere, they can.
3. A minimum wage increases the cost of items and thereby decreasing the demand for its products. In order to avoid this situation, the low wages are given by Walmart to its employees.
4. The reason for the existence of low wages could be due to unfair treatment of employees as discussed above.

How has the Low Wages affected Walmart Inc.?

Similarly, like other criticism mentioned above Walmart was affected unfavourably because of providing low wages to its employees and this harmed their public image as well as costing them hundreds of millions of dollars as settlements in court dispute cases. This could be highlighted below:-

1. By 2008, Walmart promised to pay at least $352 million for trying to pressure workers to work off a clock. “Several lawyers described the proceedings on wage violations as the largest settlement ever.'37
2. On September 4, 2008, the Mexican Supreme Court ruled that Walmart de Mexico, Walmart's Mexican affiliate, would stop partly paying employees by redeemable coupons at Walmart outlets only.38
3. In July 2016 several employees in China went on informal strike against the new system of work hours at Walmart outlets in Nanchang, Jiangxi Province, the Chengdu Province of Sichuan and Harbin City in Heilongjiang Province.39 Since Walmart employs part-time and relatively low-paid workers, some workers may be partially eligible in the welfare program.40 This has led to criticism that Walmart has increased the burden on taxpayer-funded services
4. Berkeley claims that the low wages and benefits of Walmart are insufficient for a 2004 study at the University of California and that the social security burden is decreasing, although California taxpayers still pay $86 million a year to Walmart employees.42

Who is responsible for Low Wages in Walmart Inc.?

Previously, Walmart owner Sam Walton said 'I pay low wages. I will benefit from this. We're going to succeed, but the foundation is a very low-wage, low-earnings job template.'43 Walmart estimates that the employees were paid $10.11 an hour on average in 2006.

Human Rights Watch estimate that this is less than the mean of 10.24 dollars earned by discount department stores, 10.55 dollars for warehouse clubs and supercentres, and 11.12 dollars for grocery stores.44 Walmart managers are judged in part on the basis of their ability in controlling the cost of wages.45

Walmart insists its wages are generally in line with the current local market in retail labour.

From the above information we can conclude that the one responsible for the low wages in Walmart is entirely the top management, which can be seen from Sam Walton’s statement.