Introduction 3Wal-Mart and Wages 4 – 7-Basic Facts-Ethical Issues-Alternatives-Recommendations
Wal-Mart and Gender Discrimination 7 – 10-Basic Facts-Ethical Issues-Alternatives-Recommendations
Wal-Mart and Sweatshops11 – 14-Basic Facts-Ethical Issues
Wal-Mart and Community Impact14 – 18-Basic Facts-Ethical Issues-Alternatives-Recommendations
Lawsuits18 – 21
Impact on Stakeholders22
The first Wal-Mart store was opened in Rogers Arkansas in the Year 1962. From Wal-Mart’s company website a common misconception people have in regards to discount retailing is put to rest. That being this was the year it all started, When Kmart, Target, and Wal-Mart first opened. In actuality however, the chain of variety stores Sam Walton owned during the 1950’s faced stiff competition for many regional discount stores. In 1972, Wal-Mart stock was offered for the first time on the New York Stock Exchange.
With this infusion of capital, the company grew to 276 stores in 11 states by the end of the decade. Also from the company’s official website, it is important to note that in 1983 the first Sam’s Club members-warehouse store opened. The first Supercenter opened in 1988, featuring a complete grocery, and 36 departments of general merchandise. By 1989, there were 1,402 Wal-Mart stores and 123 Sam’s Club locations. Employment had increased tenfold.
Sales had grown from $1 billion in 1980, to $26 billion. Wal-Mart’s company website states that Today, 7,262 stores and club locations in 14 markets employ more than 1.9 million associates, serving more than 176 million customers a year. With all the success that Wal-Mart has endured throughout its history, a significant aspect of the business that is not represented on its company website is all the daily ethical dilemma’s faced by the organization. The following report hopes to bring light many of these ethical issues, proving that there is a shadow of darkness creeping deep within this financially successful monster known as Wal-Mart.
Some of the issues which will be discussed in great depth in this paper is the unethical practices of wages as it pertains to Wal-Mart. The report will also shed light on gender discrimination and perhaps the most controversial and taboo of most unethical practices, sweatshops and child labour. The report will also discuss how all these unethical practices lead to lawsuits and litigations and its impact on stakeholders.
WAL-MART & EMPLOYEE WAGES
Throughout the years that Wal-Mart has been in business for has been increasing exponentially in figures and profits. The fact that they make billions and almost approximately $100 000 per hour is substantial but do not care about others and how their profitable are being distributed. According to the United Food and Commercial Workers International Union, they stated that “in 2001, sales associates, the most common job in Wal-Mart, earned on average $8.23 an hour for annual wages of $13,861. The 2001 poverty line for a family of three was $14,630” (United Food Commercial, 2005).
This is huge and with the amount of hours employees are working to earn a living for their family is not enough. According to Dr. Richard Drogin a statistical analysis of Gender Patterns in Wal-Mart stated that “in 2003 wage analysis reported that cashiers, the second most common job, earn approximately $7.92 per hour and work 29 hours a week.
This brings in annual wages of only $11,948” (United Food Commercial, 2005). It came to my thought that although Wal-Mart is making a substantial amount of money, they do not care for their employees and do not remotely bother insisting or providing them with benefits or incentives to help them out. Based on the Basic Family Budget Calculator “the average two-person family (one person and one child) needed $27,948 to meet basic needs in 2005, well above what Wal-Mart reports that its average full-time associate earns. Wal-Mart claimed that its average associate earned $9.68 an hour in 2005. That would make the average associate’s annual wages $17,114” (United FoodCommercial, 2005). An alternative and recommendation that Wal-Mart could provide is the face that they can increase the wages of the employees a little by “covering the cost of a dollar an hour wage increase by raising prices a half penny per dollar. For instance, a $2.00 pair of socks would then cost $2.01. This minimal increase would annually add up to $1,800 for each employee” (United Food Commercial, 2005).
It has come to my attention that a lot of employees at Wal-Mart have been working off the clock and without pay. The unethical behavior and practices Wal-Mart has is just horrific. In the annual report of 2006 “Wal-Mart’s 2006 Annual Report reported that the company faced 57 wage and hour lawsuits.
Major lawsuits have either been won or are working their way through the legal process in states such as California, Indiana, Minnesota, Oregon, Pennsylvania, and Washington” (United Food Commercial, 2005). There has been 3 cases that Wal-Mart has been charged with due to the unethical practices and the misbehaving factors that they do not meet when assuring the employees with what they earned during overtime and pay by the hour.
The first case was held in December 2005, “a California court ordered Wal-Mart to pay $172 million in damages for failing to provide meal breaks to nearly 116,000 hourly workers as required under state law” (United Food Commercial, 2005). The hours that the employees work with no break are remorseful! They try to earn a living for their family or a little money to get themselves through college and school to get an education and provide. Wal-Mart clearly does not care about what they do or how they treat their employees clearly because of the amount of money they rake in per hour.
The second and third case was held in Pennsylvania court, “in December 2005, approved a class-action lawsuit against Wal-Mart Stores Inc. by employees in Pennsylvania who say the company pressured them to work off the clock. The class could grow to include nearly 150,000 current or former employees” (United Food Commercial, 2005). Lastly, “the lead plaintiff alleges she worked through breaks and after quitting time 8 to 12 unpaid hours a month, on average to meet Wal-Mart’s work demands. “one of Wal-Mart’s undisclosed secrets for its profitability is its creation and implementation of a system that encourages off the clock work for its hourly employees” (United Food Commercial, 2005).
During the time of Wal-Mart’s unethical business practice fall, the FLSA “Wal-Mart has known for years of a massive companywide problem of fair labor standards violations but did not take sufficient steps to address the problem. AN internal Wal-Mart audit of one week of time records in 2000 from 25,000 employees had alerted Wal-Mart officials to potential violations. The audit found 60,767 missed breaks and 15,705 lost meal times.
The FLSA alerted Wal-Mart executives to 1,371 instances of minors working too late, during school hours, or for too many hours in a day” stated by Steven Greenhouse (United Food Commercial, 2005). With the substantial amount of internal and external violations and warnings Wal-Mart faces can almost add up to a billion if they keep providing their unethical business practices with the FLSA. Another enactment in January 2005, “violations that took place from 1998 to 2002, Wal-Mart agreed to pay $135,540 to settle US Dept of Labor charges that the company had violated provisions against minors operating hazardous machinery” (United Food Commercial, 2005).
Soon after in March 2005, “Wal-Mart agreed to pay $11 million to settle allegations that it had failed to pay overtime to janitors, many of whom worked seven nights a week” (United Food Commercial, 2005).
This bothers a huge sum of the employees and for Wal-Mart who does not care about them, is quit deceiving for a company that claims they do well for the people by providing them with a job and money for the labor and time they put into working. “The State of Connecticut, investigating Wal-Mart’s child labor practices after the federal investigation ended, found 11 more violations. In June 2005, Connecticut fined Wal-Mart stores Inc. $3,300 over child labor violations after a state investigation found that some minors lacked proper paperwork and were operating hazardous equipment at the stores” (United Food Commercial, 2005).
To end off, Wal-Mart needs to fix a lot of major and minor problems free loafing around its company and big boxes throughout North America. The fact that Wal-Mart is a great company that provides jobs for the poor and for people who are looking for a job is a plus, but the fact that they provide them with whatsoever a lump sum that is not suitable for them to take care of a family of
2. Even full time workers do not get incentives or benefits which allow them to support their family with life insurance, dental care, etc. If the executives pull a million dollars from their pocket and invest it into their employees it would help them at least live a life that is supportive enough to get them to places, eat, and live at. These are some of the recommendations and analytical points that we would like to provide Wal-Mart with by providing a decent amount of salary and benefits that would help the employees out.
WALMART & GENDER DISCRIMINATION
Gender discrimination is an issue that has plagued the world for centuries. It is present in households, work places and society in general. Gender discrimination is defined as “when men or women are discriminated against as a result of their gender”. It is more often then not, the women who find themselves on the negative side of discrimination. For the purposes of this paper, we will focus on gender discrimination in the workplace. Wal-Mart has been involved in many controversial if not unethical employment practices over the past few years.
Although, not all the allegations have been proven in court, the basic facts however speak for themselves. In this section of the paper, we will focus on four main basic facts that we have researched online. We have discovered the following basic facts: 1.For the same job classification, women were paid nearly $0.40 less per hour for hourly workers or nearly $5,000 less per year for managers (Drogin, 2003) 2.In 2001, while more than two-thirds of Wal-Mart’s hourly workers were female, women held only one-third of managerial positions and constituted less than 15 percent of store managers.
This is all despite women having had on average longer seniority and higher merit ratings than their male counterparts (Buckley7 Daniel) 3.In 2001, for the same job classification, women earned from 5 percent to 15 percent less than men, even after taking into account factors such as seniority and performance (Drogin, 2003) 4.Instead of taking action on warnings that Wal-Mart was not promoting women enough, Wal-Mart disbanded the diversity task force which made the recommendations (Bloomberg, 2005)
A few notable instances with individuals that have stood out in these situations are: •Cleo Page: Hired to work in the returns department in the Livermore, California, store in fall 1998. Cleo Page, who had already worked in two other Wal-Mart stores, was quickly promoted to a customer service manager position. Interviewing a little over a year later for a promotion, she charges, she was told that it was a man’s world, and that men controlled management positions at Wal-Mart. She was repeatedly passed over for promotions, which were given to male employees. At one point, her store manager discouraged her from applying for the sporting-goods department manager position, she says, because “customers would feel comfortable” buying sporting goods from a man.
•Betty Dukes: She was hired by Wal-Mart in 1998 as a part time cashier. A year later, with excellent performance reviews, she was given a merit pay raise and a full-time job. Two years later, after being promoted to the position of customer service manager, she began encountering harsh discrimination from her superiors; she says she was denied the training she needed in order to advance further, while that same training was given to male employees. She was also denied the opportunity to work in “male” departments like hardware, and was made to sell baby clothes instead.
Gender discrimination or any other form of discrimination is ethically incorrect. Wal-Mart has certainly been involved in unethical behavior as assumed by looking at the facts mentioned above. The two main issues that we believe have arisen out of these facts are: 1.Discrimination: Wal-Mart has discriminated against its female managers and employees for years. It is shocking that a company which depends so deeply on women as customers treats its female employees so poorly. Wal-Mart as an industry leader should set an example for the corporate world and help eliminate discrimination in the workplace. 2.Unethical employment practices:
Wal-Mart as an employer has a duty to treat all its employees fairly and give them all an equal opportunity when it comes to wage raises, promotions and recognition. However, they have often failed to do this. What makes the situation even worse is the fact that often times, Wal-Mart is the largest employer in an area. Therefore, individuals don’t have the flexibility or freedom to look for other jobs and have to work for Wal-Mart to earn an income. There are many alternatives available that Wal-Mart can pursue as opposed to these unethical practices. The first such alternative would be to pay women the same amount as men within the same job classification. There is no reason as to why women who do the same job as men should receive a lower pay.
If people of the different gender are performing identical duties, it is only fair in this day and age that they be paid the same amount. The second alternative that Wal-Mart pursues is to offer women the same opportunities as men. In our society, women are competing with men on a daily basis in the corporate world. Many women have been successful enough to even exceed the performance level of men. Therefore, Wal-Mart should take these factors into consideration and allow equal opportunities to women. The third alternative that should be pursued is possibly the most important one.
This would be in the form of implementing a plan to promote awareness of gender inequality within the organization and the corporate world. Wal-Mart is an industry leader and often looked upon when developing polices and procedures. However, by implementing this plan, it would be Wal-Mart that benefits the most. In order to eliminate the issue of gender discrimination, the internal culture of the company must have a zero tolerance policy embedded in it. Employees of all levels along with management must know that gender discrimination will simply not be tolerated within the organization. We realize that eliminating gender discrimination from within an organization is not an easy task.
However, we also realize that gender discrimination often becomes a form of systematic discrimination when left unresolved. In today’s society, discrimination of any sort has no room for tolerance. There are many lawsuits, public issues, and scandals that involve gender discrimination. These situations often have a large negative impact on the company’s image. To improve employee morale and the company’s image, Wal-Mart must implement all of the alternatives mentioned above to rid itself of the image that it has developed which is of a company which discriminates on the basis of gender.
WAL-MART & SWEATSHOPSSweat shops generally have poverty wages, force workers to work long hours, employ child labor, deny workers the right to form a union and subject workers to dangerous conditions. Wal-Mart conducts a lot of business outside United states, mainly in third world countries which are in poor economical conditions. I believe Wal-Mart takes advantage of the situations these countries are in by squeezing everything out of them and giving them very little for it. This is very unethical behavior on Wal-Mart’s part.
-The following are some basic facts about how much Wal-Mart deals with international countries. Wal-Mart is the largest importer of Chinese good, 10% of all Chinese exports go to Wal-Mart, Wal-Mart imports 50-85% of its products, 80% of the six thousand Wal-Mart’s factories worldwide are in China.
They used to have a campaigning that was to buy American, they have totally abandon that now to cut cost. Wal-Mart reported that it purchased over $18 billion of goods from China. Its well known to everyone that 80-90% of the garment factories in China are considered to operate under sweatshop like conditions. They push for lower wages harder work and longer hours. Basically they tried to get all that they can for every dollar they spend, even if it meant sacrificing the well being of the employees who work in the factories. Wal-Mart even established its own global procurement division.
This organization was created to find the cheapest material and manufacturing. They squeeze countries to get lower wages and cheaper goods. Wal-Mart is driving the industry standards in the ground, a lot organizations have followed Wal-Mart behavior because the only way they can stay competitive in market is by make these cost cutting moves. Wal-Mart should be more socially responsible, they have the power to set better standards in these factories all across the globe. There are many ethical issues with Wal-Mart when it comes to their sweat shops. They have committed numerous human rights violations. The following is a list of some of the violations Wal-Mart committed: Forced Labor
workers are routinely forced to work overtime, often 16-18 hours a day. They usually have to work 7 days a week. And not are giving any vacations. Minimum Wage Violations Many workers are paid up to 30% below their country’s legal minimum wage. Maternity Leave Violations Most female workers are denied their legal maternity leave and their benefits. In most they are jus terminated.
Overtime Pay Violations Workers are rarely, if ever, paid overtime. Although they often work more than twice the legal number of hours in a week, they are not paid more than their regular wages. Washroom Breaks Violations
In many of the factories, workers need a ticket and permission to use the bathroom. Their breaks are timed and the washrooms are kept locked up. Child labor Companies hire children because they are less likely to complain about poor working conditions. Child labor is often a symptom of poverty and lack of education.
Some children are working under bonded and slave-like conditions, harmful to physical and emotional growth. If Wal-Mart wants to put a stop to sweet shops across the world they have make some major changes in their organization. I have come with a few alternatives that they could possible use to get started. Alter business practice:
In order for Wal-Mart to improve conditions in these factories it must first alter its business practice of demanding a continuously lower price from supplier factories – a price which renders those factories unable to pay workers a living wage. Purchase only from supplier that offer employees appropriate working conditions They should have system in place where they only buy from suppliers who offer their employees adequate working condition. Implement a monitoring system
Wal-Mart needs to create independent monitoring systems, where they should do factory assessments and make sure that certain standards are met when it come to working conditions and wages. They have to demand more form the factories when it comes these issues. Charge customers more
Wal-Mart would pay 20 cents more per product this would be enough to improve the conditions and increase the wages in these factory. This would enough for the workers to support there families. If they could implement some of these alternatives I believe that they would be headed in the right direction to ending sweat shops in third world countries. The reason these CEO’s make so much money is because of the large profits there organizations make. And there able to make these profits because of the measure they take to cut cost. Like sweat shops.
The following charts show us the extremely low wages the employees in these sweat shops are paid. Followed by a chart that shows how the CEO’s of these organizations are rewarded with millions of dollars because of these sweat shops.
WAL-MART & IT’S IMPACT ON COMMUNITIESCharles Fishman (2006) articulated in his article, The Wal-Mart effect and a Decent Society: Who knew Shopping was so Important, Wal-Mart shaped consumers’ spending habits, the prices of products and every aspect of business, including handling and negotiating with suppliers in business operation. Specifically he points out, “It has reshaped the economic life of the towns and cities where it open stores; it has also reshaped the economic life of the United States- a single company that steadily, silently, purposefully moves the largest economy in history.”
(Fishman, 2006) Despite their success, there are many critics who oppose the expansion of Wal-Mart in their neighborhoods due to the negative social and economic impact that it leaves on counties. Economic, environmental and cultural influences of Wal-Mart’s existence in the local communities will be explored in more detailed. Wal-Mart is a leader in the retail industry providing the lowest prices on general merchandise as well as groceries, which make it difficult for any other retailer to compete. It has become a challenge to find opportunities in which other retailers can capitalize on that does not overlap into the Wal-Mart market.
The local mom and pop grocery stores cannot compete with Wal-Mart in terms of volume and prices. The aggressive expansion of Wal-Mart stores force locally owned stores to lower their prices or reposition their strategy to stay competitive. According to the article by Jim Simmons, “The Economic Impact of Wal-Mart Store,” studies have shown that existing retailers within a 10 –kilometer radius have suffered a reduction of growth. Smaller communities within a 10-20-kilometre radius of a Wal-Mart have also suffered a decrease of 15% to 20 % reduction in retail sales.
The study also indicated that retailers in larger communities will suffer a bigger loss with the introduction of Wal-Mart into the community. Wal-Mart has created a supply chain that is vertically integrated and therefore only associates itself with large dependable suppliers. Since Wal-Mart has such a big influence on its suppliers, the suppliers are forced to cut their prices and outsource work so that they can keep up with Wal-Mart’s demand for their product. As a result there are hundreds of jobs going overseas where there is cheaper labor. As results, Wal-Mart’s entrance impacts labor market with decline of jobs in other sectors that are related to manufacturing and supplying.
In fact, the research on Wal-Mart’s effect on employment (Emek, 2005) proved that Wal-Mart creates around 100 jobs in the first year based on analysis of information on total employment from Census Bureau’s County Business Patterns and tracking of the newly opened Wal-Mart locations.
As time progresses, the employability decreases by half as jobs. Wholesale employment declined by 20 jobs due to the company’s vertically integrated supply chain. Moreover, Bianco (2006) argues that the company leads to a double digit employee turnover with least expensive medical benefits that they offer to only 44 percent of their employees. While one single location of the store attracts customers from a distance, the existence of Wal-Mart store leads to increase in vehicle traffic and pollution. William Beaver (2005) examines data from 25 news accounts.
He observed that in 23 out of 25 cases, traffic congestion was the major issues that Wal-Mart created. 48 percent of local population detested the pollution of noise, air, water and light. 28 percent of local population expressed disliked how Wal-Mart took away the essence away from a ‘traditional community.’ Wal-Mart changes the local customers’ shopping behavior and implants Wal-Mart culture that rejects unionization of workers.
Moreover, Wal-Mart destroyed the cultural heritages. In 2003 and 1997, Wal-Mart constructed on the site contained human remains or graves in the City of Honolulu and in Tennessee. In 2004, Wal-Mart built a super centre in Teotihuacán in Mexico that was remained as religiously sacred ground (www.wakeupwalmart.com). Wal-Mart often relocates as one of their business strategies.
Wal-Mart’s rapid expansion of Super centers and Sam’s Clubs has contributed to hundreds of vacant stores across the country. When Wal-Mart decides to convert a discount store into a larger Super center, it is claimed to be cheaper or easier to relocate entirely. David Brennanm associate professor of marketing at the University of St. Thomas, in St. Paul, Minn. mentioned that Wal-Mart stores relocate regularly and they even relocate right across the street (www.wakeupwalmart.com). The environmental effect of Wal-Mart is also critical.
The company has the history of major settlements that started 2003. From 2003 to 2005, states and federal environmental agencies in the United States fined $5 million for polluting the local environment. In 2005, Wal-Mart polluted streams with improperly stored pesticide and other pollutants. In 2004, Wal-Mart paid over $3.1 million as penalties for violating the Clean Water Act in 9 states. Last but not least, Wal-Mart improperly instructed and monitored the petroleum storage tank. For its misconduct, they paid $765,000.
The major ethical issues that are identified with Wal-Mart in respect to its impact on local community is lack of social responsibilities. They focus more on maximizing profit rather than cooperating or concerning the local community.
The company is not violating any government regulation or stated law but they directly or indirectly impact on poverty rate. Their economical impact on local retailers and other business sector was influential. For that reason, its activities that results in economic impact can be stated as deontological ethics. Similar to that, there was no illegal proculdure in conducting business but they disrespect the cultural heritages by destroying the meaning site.
On the other hand, environmental impact of Wal-Mart is teleological ethics since the consequence is serious and critical when it influences everyone basically. Additionally, protecting the environment is not an option but responsibility. In a way to resolve the issues, Wal-Mart should take actions voluntarily responding to the problems by contributing to the local communities.
Beaver (2005), showed cases when Wal-Mart implanted more traffic lights, and contributing to costs of traffic studies to resolve local traffic congestion. Other alternative can be limiting the size of the store or assortment to arbitrate the grocery market share. Currently, Wal-Mart introduces numbers of small sized store and such specified and focused retail operation will benefit both local stores and Wal-Mart. Beaver William (2005) suggested that the communities should decided on the entrance of Wal-Mart in their neighborhoods.
This leaves us with a worthy alternative we can look into. Wal-Mart’s can increase business activities since customers are willing to travel extra miles to visit the location. Therefore, all the cases should be examined. WALMART & LAWSUITS
Lawsuits affect everyone from shareholders to management all the way down to the customers and even have societal impact. There are many unresolved issues with Wal-Mart that have made the news, most of which has been discussed today, and in most all instances these cases are brought before the court of law.
Richard Willing of USA Today writes that Wal-Mart is different from most other large retailers in that Wal-Mart, which promotes itself as a down-home friendly business, is helping change the nature of corporate litigation by aggressively fighting many cases even when it would be cheaper for the company to settle.
The policy runs counter to the strategy of “settle quickly and cut your losses” that companies have used for generations. But it is paying dividends for Wal-Mart, which in the past five years has seen the pace of its lawsuits stabilize as potential plaintiffs and their lawyers opt not to sue after weighing the costs of fighting the retailer (USA Today, 2001). Willing writes that, by its own count, Wal-Mart was sued 4,851 times last year — or nearly once every two hours, every day of the year. Juries decide a case in which Wal-Mart is a defendant about six times every business day, usually in favor of the retail giant.
Wal-Mart lawyers list about 9,400 open cases (USA Today, 2001). Richard Willing states in his article that no one keeps a comprehensive list of all the nation’s litigation, but legal analysts believe that Wal-Mart is sued more often than any American entity except the U.S. government (USA Today, 2001). One of the root causes of problems with Wal-Mart and why they face so many lawsuits is because they try to minimize costs to raise their profits. They try to buy goods cheap from suppliers so they can sell the same product for less than the competitors. Management has many responsibilities in this instance.
Many of those responsibilities have to do with keeping the company profitable and its costs low (Wal-Mart Ethics, 2002). Wal-Mart is the same as any other company yet they have the added pressure of making sure that they offer their customers everyday low prices. In order to maintain this promise to their customers, leadership had to find ways to offset expenses. It is here lawsuits concerning wages and gender discrimination begin. Some of the gender discrimination problems may stem from the fact that most of upper management is made up of mostly men (Wal-Mart Ethics, 2002). Some unethical legal practices at Wal-Mart incl