Ethics- Walmart

In the past 10- years, Walmart has grown to become the largest retailer in the world. As one of the most successful company that run, helps, feeds, and employees on a global scale, has had a negative impact in the role of business ethics. One of the on going battles that Walmart faces till this day is violating labor laws all over the world. As a result of these practices, Wal-Mart has been the subject of criticism by various groups and individuals. Labor unions, community groups, grassroots organizations, religious organizations, and environmental groups have all protested the company's policies and business practices at various times (Corporate Watch: Walmart).

The Wal-Mart Corporation is a multi-billion dollar low-cost retail organization, consisting of 6400 stores and 1.8 million sales associates worldwide. Wal-Mart’s influence on the retail world and the enormity of their corporate size is unparalleled. Wal-Mart can easily report sales of $312.4 billion dollars per fiscal quarter and net profits of $3.8 billion dollars. Wal-Mart promises their customers "Always low prices. Always!" and upholds this motto by providing low prices to customers and high return on investment to stockholders.

One way that Wal-Mart has managed to maintain a competitive edge over other low cost retail giants and provide low prices is by cutting wages and by not offering too many company benefits to their employees. Full-time employee working at Wal-Mart only make $8 an hour, while only 45% of the workers can afford to be covered by health insurance. Wal-Mart also increases part time employees from 20 percent to 40 percent, so that they do not have to cover all of their employees for health insurance.

Although Wal-Mart may not provide excellent benefits to employees, it successfully performs as a legitimate business operating in a capitalistic society. “Nationally, 64% of workers in companies of 5,000 employees or more receive their health benefits from their employer.

However, Wal-Mart typically covers only around 50% of its employees. In addition, the average wait for full-time Wal-Mart workers to qualify for benefits is six months, compared to the retail average of 2.6 months. Wal-Mart avoids providing benefits by relying more heavily on part-time workers, who must wait a year before receiving any benefits. In addition, with Wal-Mart's high employee turnover rate, many workers never get health care.

The affordability of Wal-Mart's health plan options is another problem. Getting Wal-Mart's choice network family plan with a $322.60 bi-weekly premium, $700 annual deductible, $500 health care credit, and $4000 out-of-pocket medical expenses could potentially cost over $12,000 a year. However, the average Wal-Mart employee makes approximately $20,000 a year” (Corporate Watch: Walmart).

Wal-Mart upholds the primary fiduciary duty to satisfy their stockholders and follows the market libertarianism model, which states that a business should not interfere with the free market. In a free market Wal-Mart has a direct responsibility to their primary stockholders rather than the employees of a company. According to philosopher Milton Friedman the only Corporate Social Responsibility a corporation has is to increase profits for its stockholders.

Through a utilitarian perspective, we can see that Wal-Mart acts in a way to produce the greatest possible balance of good over dissatisfaction for their stockholders. Wal-Mart also upholds the fiduciary duties to their stockholders by not increasing wages of their employees, instead they take the sum of money and return it back to their stockholders and shareholders such as customers and suppliers.

“Wal-Mart typically pays its sales associates, cashiers, team leaders, and overnight stockers 26-37% less than the national average for the same jobs in the retail industry. A study conducted by Dr. Richard Drogin in 2003 revealed then women earn less than men and hold fewer managerial positions at Wal-Mart. Using Wal-Mart's figures, a full-time employee at 34 hours per week, making the Wal-Mart average wage of $10.86 per hour, will earn $19,200.48 per year.

This falls below the federal governments definition of poverty for a family of four in the contiguous United States, which is $21,200” (Corporate Watch: Walmart). Wal-Mart creates the happiness for the amount of people who invest in the company. Ethics is about the consequences of an action and the consequence of Wal-Mart’s actions creates the greatest amount of good for the people who are the primary stockholders of the corporation.

We can argue that Wal-Mart’s pursuit of profits does not lead to the greatest collective good for society because many small business owners and Wal-Mart employees have to declare bankruptcy. This occurs because customers prefer the lower prices offered at Wal-Mart to smaller convenience stores. According to utilitarian theory and Corporate Social Responsibility Wal-Mart should create the greatest possible good for the entire society. Requiring Wal-Mart to satisfy the stockholders and the stakeholders- suppliers, shareholders, employees, customers, and managers.

Through the help of multiple partners Wal-Mart can grow as a corporation and return the profits earned to the stakeholders. In support of a company’s fiduciary responsibility to its stockholders Friedman’s argues three major points, starting with, a corporation does not have an obligation to its employees because the only social responsibility a corporation has is to increase profits for it’s shareholders. So the manager of a company would only have a direct responsibility to the owners of the firm, and the owners of the firm are its stockholders. If stockholders desire that the company make as much profit as possible, the company needs to honor that decision and find ways to decrease costs and increase profits.

Thus, a manager has the direct responsibility to maximize profits for the firm, even if it means to reduce the pay and benefits the company’s employees. Friedman also argues against the unjust taxation of stockholders because if a manager spends money on Corporate Social Responsibility activities, he or she is essentially imposing unjust taxes on the stockholder. It is only the government’s role to impose taxes on the stockholders, and not the corporate manager’s.

Thus, it is not ethical for the manager to spend money on CSR. A corporate manager should ideally have no knowledge of CSR if contributing to the society independently (Friedman). Kant supports this argument by stating the example that it would be unethical to violate an innocent person’s right of life in order to save five, thus it is unethical to tax the stockholders for the benefits of the shareholders. Lastly, Friedman mentions that if a manager’s actions reduce returns to stockholders, then the manager is spending the stockholder’s money.

It is unethical to spending the stockholder’s money in a way that does not benefit the stockholder or is different than the way stockholder would have spent the money. Essentially managers are stealing from the stockholders. Stealing is ethically wrong, therefore any action such as Corporate Social Responsibility that reduces returns to would be considered ethically wrong.

The philosopher Freeman argues against the stockholder theory and presents us with the stakeholder theory. Which states that a corporation should partake in Corporate Social Responsibility because the government alone cannot maintain the well being of the society by using tax revenues alone. Wal-Mart should extend their fiduciary duty to include their employees’ in order build trust, unity and company spirit in order to succeed.

A successful business needs to have a good fiduciary relationship with its stakeholders in order for both parties to grow, a company should “keep employees satisfied with their morale high because employees are innovation and idea driven”(Freeman). Freeman argues that a corporation has a responsibility to remain true to its mission statement and corporate values. Wal-Mart’s mission statement is: “to give ordinary folk the chance to buy the same thing as rich people” (Wal-Mart).

Most of Wal-Mart’s employees are ordinary people, who shop at Wal-Mart after receiving their paychecks (High Cost). But if Wal-Mart doesn’t manage to pay their employees enough to shop at Wal-Mart, then they are not staying true to their mission statement. Freeman continues that “a mission statement and corporate values does not state profit maximization as a fundamental purpose”, thus a corporation’s main goal should not be profit maximization rather it should be to provide service to their customers.

The Wal-Mart Corporation is an attractive employer for many Americans because it a provider of numerous jobs throughout the country. Wal-Mart work policies are also not in direct violation of U.S. Labor Laws. Unfortunately Wal-Mart uses abusive labor practices at home and abroad by paying their employees low wages and aggressively seeking to keep wages down. This in turns reduces the standard of life for many people and pushes them towards poverty.

On average “Wal-Mart workers earn an estimated $8.00/hour with a 32 hour work week. This equals $256 a week or $13,312 a year. The Federal poverty level for a family of three is $14,630” (Markkula). Therefore we see many single-parent families who can’t afford to afford health insurance for their families and have to work multiple shifts to make ends meet. Wal-Mart also has been charged because they “lay off older workers to bring in younger and cheaper employees.

Some 40 lawsuits accuse Wal-Mart of a failure to pay overtime”(Markkula). Kant would point out the lack of ethics in Wal-Mart’s relationships with its employees by arguing that a corporation should “act so that we treat humanity as an end and never as a means only”. According to Kant Wal-Mart should not take advantage of its employees as a means to increase revenues for their stockholders, because all of mankind has value in society. It is unfair to treat some groups of people better than others.

There are many cases involving employees that have taken advantage of and it is shown by a story that is probably the most apt at describing the unethical treatment of its workers, because of the sheer senselessness of it. “In 2000, a collision with a semi-trailer left 52-year-old Deborah Shank with permanent brain damage and in a wheelchair. Her husband and three sons were fortunate for a $700,000 accident settlement from the trucking company. After legal costs and other expenses, the remaining $417,000 was put in a special trust to care for Mrs. Shank.

However, six years later the providers of Mrs. Shank’s health plan, Wal-Mart, sued the Shanks for the $470,000 it had spent on her medical care. Wal-Mart was fully entitled to the money; in the fine print of Mrs. Shank’s employment contract it said that money won in damages after an accident belonged to Wal-Mart. A federal judge had to rule in favor of Wal-Mart, and the family of Mrs. Shank had to rely on Medicaid and social security payments for her round-the-clock care. Wal-Mart may be reversing the decision after public outcry.

However this case pinpoints Wal-Mart’s often criticized treatment of employees as a commodity and its sometimes inhuman business ethics” (Hynes). Even when employees try to do the right thing, Wal-Mart takes an advantage of their employees to raise their stocks at any cost. Chalace Epley Lowry worked at Wal-Mart as an administrative assistant in the communications department, on January 2, 2007 and went through a daylong orientation with a heavy emphasis on ethics. Lowry says, "We were told that even if we see something that has the appearance of something unethical we should report it” (Gogoi).

After two weeks after filing a complaint against a more senior executive, the 50-year-old mother of two finds herself looking for another job. “Lowry is the first to admit that she didn't know whether the Wal-Mart executive had done anything wrong. Mona Williams, the vice-president for corporate communications, had asked Lowry to copy some papers she thought were related to stocks.

When Lowry found out a few days later that Wal-Mart was planning a $15 billion stock buyback, she worried that Williams might have traded on insider information by exercising her stock options. ‘In all honesty, Mona's transactions could all have been aboveboard,’ she says, ‘but I acted in good faith, just pointing out that there might have been some wrongdoing.’ Wal-Mart says Lowry is simply confused.

The company says she mistook a deferred compensation form for an options exercise request and that Williams did nothing wrong. ‘The Ethics Office determined the same day the complaint was filed that the document that created Ms. Lowery's concerns had nothing to do with stock trading and that there was no violation of Wal-Mart's ethics policy,’ said David Tovar, a Wal-Mart spokesman, in a statement. In dispute, however, are the circumstances that led to Lowry's looking for a new job. Soon after Lowry filed the complaint, her identity was disclosed to Williams.

Wal-Mart says Lowry agreed to disclosure, but Lowry says she was never given a choice. Lowry said it was impossible to remain in the department since Williams was effectively her boss, so she asked to be transferred. Wal-Mart has said that Lowry now has 60 to 90 days to look for a job within the company, but she may not get one. If she can't find another Wal-Mart job in 90 days, human resources officials have told her that they would have to discuss ‘next steps’” (Gogoi).

For Wal-Mart's own communications department to be dealing with an issue like this is particularly poignant. “In 2001, the Environmental Protection Agency and Justice Department fined Wal-Mart for violating newly adopted standards for storm water runoff. In 2004, Wal-Mart faced fines for violations of environmental laws in nine states and paid the government $400,000 to settle claims that it had violated air pollution regulations in eleven states.

Wal-Mart was also fined in Georgia for allowing polluted storm water to run into state waters and in Florida for failing to adhere to safety restrictions on petroleum storage at its auto service centers. Currently, Wal-Mart is under investigation for ignoring hazardous waste laws in several states” (Corporate Watch: Walmart). “The states of Pennsylvania, Connecticut and Washington are very upset with the retailer for violating the state water quality regulations.

Wal-Mart was accused for not complying with standards for construction site cleaning. After heavy rains the water was bringing tons of silt in the nearby rivers, endangering the fish and the drinking water for thousands of people. In 1998 Pennsylvania's Department of Environmental Protection ordered the construction to be halted. At that time the store construction was almost over. Wal-Mart was also accused for another destructive business policy. This time the problem comes from the placement of the stores. Most of the retail shops are built on a farmland.

The environmental activists are posing the question: “why do the counties and municipality allow construction of stores on huge farmland, when there is a global shortage of food supply?” Apparently they believe these farmlands could provide sustenance for more people. But this is not the only negative side of the Wal-Mart stores locations. This problem is referred to as the “urban-sprawl” issue and it continues to grow. It increases the car-dependency for the communities, raising the amount of greenhouse gases emitted and therefore the usage of more gas. Wal-Mart faced many other claims from different State environment agencies

(Connecticut, Texas, Illinois) and even the Federal Environment Protection Agency. Even though they undertook a huge campaign to show to the people and authorities how environmentally friendly they are, a simple calculation made it clear that Wal-Mart cause more harm to the nature that it preserve it. A donation amounting to $190 million was given away for charity, with $1.3 million was made for nature friendly causes. It looks a huge number but this 0.021% from the profit that goes to help the environment” (Luthans, Fred, and Jonathan P. Doh).

In conclusion, Wal-Mart proponents simply cannot justify every bad thing they’ve done from FLSA Violations, low-wages for the employees, not providing health care and benefits for employees, the environmental issues, and the lack of Corporate Social Responsibilities towards the communities around Wal-Mart. As the biggest retailer and second largest employer (after the Federal government) Wal-Mart is huge economic force and the labor, legal and environmental problems associated with it, are huge.

REFERENCE

* "Corporate Watch: Walmart." Walmart Corporate Watch. N.p., n.d. Web. 15 Jan. 2013.

* Hynes, Rory. "Top 10 Unethical Business Actions." Listverse. N.p., 13 Sept. 2011. Web. 15 Jan. 2013.

* Freeman, Edward. A Stakeholder Theory of the Modern Corporation, Ethical Theory and Business. Englewood Cliffs, NJ: Prentice Hall, 1994.

* Friedman, Milton. “The Social Responsibility of Business Is to Increase Its Profits.” New York Times Magazine, September 12, 1970. A3. Print.

* Gogoi, Pallavi. "Wal-Mart's Latest Ethics Controversy." Http://www.businessweek.com. N.p., 13 June 2007. Web. 20 Jan. 2013.

* Luthans, Fred, and Jonathan P. Doh. International Management: Culture, Strategy, and Behavior. Boston: McGraw-Hill Irwin, 2009. Print.

* Markkula Center for Ethics: Santa Clara University. “Is it Ethical to Shop at Wal-Mart?” 09 August 2007.

* Shaw William, and Vincent Barry. Utilitarianism and Kantian Ethics in Moral Issues in Business, 8th Ed. Belmont: Wadsworth, 2001. Print. Pages 59-69.

* "Walmart.com: Save Money. Live Better." Walmart.com: Save Money. Live Better. N.p., n.d. Web. 17 Jan. 2013.