Question

Walmart Case Study:

Walmart Stores, Inc., is an icon of American business. With net sales of over $485 billion and more than 2.3 million employees, the world’s largest retailer and one of its largest public corporations must carefully manage many stakeholder relationships. Its stated mission is to help people save money and live better. Despite past controversies, Walmart has attempted to restore its image with an emphasis on diversity, charitable giving, support for nutrition, and sustainability. In fiscal year 2016, the company, along with its Walmart Foundation, donated $1.4 billion in cash and in-kind contributions. Walmart often tops the list of U.S. donors to charities. However, more recent issues such as bribery accusations and employee treatment have created significant ethics and compliance challenges that Walmart is addressing in its quest to become a socially responsible retailer.

7-2 History: The Growth of Walmart The story of Walmart begins in 1962, when founder Sam Walton opened the first Walmart Discount Store in Rogers, Arkansas. Although its growth was initially slow, over the next 45 years the company expanded from a small chain to more than 11,500 facilities in 28 countries. Much of Walmart’s success can be attributed to its founder. A shrewd businessman, Walton believed in customer satisfaction and hard work. He convinced many of his associates to abide by the “10-foot rule,” whereby employees pledged that whenever a customer came within 10 feet of them, they would look the customer in the eye, greet him or her, and ask if he or she needed help with anything. Walton’s famous mantra, known as the “sundown rule,” was: “Why put off until tomorrow what you can do today?” Due to this staunch work ethic and dedication to customer care, Walmart claimed early on that a formal ethics program was unnecessary because the company had Mr. Walton’s ethics to follow.

In 2002 Walmart officially became the largest grocery chain, topping the Fortune 500 list for that year. Fortune magazine named Walmart the “most admired company in America” in 2003 and 2004. Although it has slipped since then, it remains within the top 50. In 2015 Fortune ranked Walmart the 42nd most admired company in the world.

7-2a Effects on Competitive Stakeholders Possibly the greatest complaint against Walmart is it puts other companies out of business. With its low prices, Walmart makes it harder for local stores to compete. Walmart is often accused of being responsible for the downward pressure on wages and benefits in towns where the company locates. Some businesses have filed lawsuits against Walmart, claiming the company uses unfair predatory pricing to put competing stores out of business. Walmart countered by defending its pricing, asserting that it is competing fairly and its purpose is to provide quality, low-cost products to the average consumer. Yet although Walmart has saved consumers millions of dollars and is a popular shopping spot for many, there is no denying that many competing stores go out of business once Walmart comes to town.

Walmart wages, decline by 5 percent after Walmart enters a new market. As a result, some activist groups and citizens have refused to allow Walmart to take up residence in their areas. This in turn brings up another social responsibility issue:

Introduction

With such tremendous success in profits and growth, it has also brought many challenges relating to ethical issues in regards to; off-the-clock-work, sexual discrimination, health benefits, the role of unions, use of illegal aliens, and issues relating to child and labor laws. It is the intent of this case study to identify the ethical issues Wal-Mart has faced, as well as discuss four questions of thought. Off-the-Clock-Work

From 2000 to 2007, Wal-Mart has been in court facing numerous lawsuits, in which they have paid out millions of dollars, for violation of laws surrounding non-payment of overtime compensation to its employees. Several employees claimed that managers required them to work off the clock by requiring them to work after punching out their timecard. If the employee refused to work after their shift and off the clock, then they would be threatened with termination of employment.

One of the many complaints includes the use of “lock-ins”. They stated, “Managers would lock the doors after the store had closed and would force the workers to stay in the store until all the work had been completed”. Employees were also told that if they could not complete their assigned work in their eight-hour shift, that they would have to remain at work, off the clock, until their work was complete.

It was evident that the managers had no respect or appreciation for the employees, who should have been valued as stakeholders that contributed to the success of the store. Sexual Discrimination In 2001, Wal-Mart faced a lawsuit with regards to sexual discrimination for not promoting women to managerial positions and for not paying them a wage equivalent to what the male employees were making. Some of the facts that supported the lawsuit include 65% of the hourly employees and 33% of the managers were women, and on average women received 6. % less in wages than their male counterparts received. One example of discrimination included a female employee being told that a man was promoted over her, who was qualified because the man had to support his family. Another example of discrimination was when a woman was told that a man was paid more because according to the Bible, Adam came before Eve. The managers involved in these and other sexual discrimination cases included in this lawsuit made poor ethical decisions by discriminating against its female employees.

In 2003 Wal-Mart’s policy of lower costs in every part of its operation was highlighted based on the type of health benefits that it offered to its employees”. New employees had to wait six months before being eligible for the health care benefit, and retirees were not allowed to keep their benefits. Wal-Mart’s payout for employee healthcare benefits in 2002, was 40% lower than the average that all companies in the U. S. were paying and 30% less than their competitive retailers (Stanwick & Stanwick, 2009). In an effort to keep health care costs down, Wal-Mart recommended to the board of directors that it should hire more part-time employees and try to discourage unhealthy employees by requiring all employee’s responsibilities to include some type of physical activity. It is evident that Wal-Mart’s board of directors and upper management were more concerned with profit than the welfare of the employees. The Role of the Unions

In an effort to keep low prices for its customers, Wal-Mart kept its labor costs low. There has been a constant battle between Wal-Mart and its employees, who wanted to create a union. The purpose of the union was to ensure that employees, who were members of the union, would receive a wage that was competitive to others in the workforce. In 2002 a comparison of wages for unionized workers and Wal-Mart employees showed that unionized Kroger employees would get four to five dollars an hour more than the Wal-Mart employees. It was discovered that Wal-Mart would discourage employees from forming unions, by firing those that promoted it. On the contrary, the Wal-Marts in China were allowed to have unions, as they received pressure from the All-China Federation of Trade. Unions were believed to be a part of the Chinese Communist Government. Use of Illegal Aliens, in an effort to keep their costs low every day for its customers, Wal-Mart used a campaign slogan of “Roll Back the Prices,” but again it came at the sacrifices of its employees.

Wal-Mart outsourced to third-party contractors to hire janitors to clean its stores after hours. To keep costs down, these third-party contractors, with Wal-Mart’s knowledge, hired illegal aliens to clean the stores after hours. This was discovered after federal agents, from the Immigration Service, raided sixty Wal-Mart stores in an operation called “Operation Rollback,” in 2003.

As a result of the raid, more than 250 illegal aliens were arrested, and Wal-Mart faced thirteen felony indictments and paid $5 million dollars in fines. Some of the illegal aliens also filed lawsuits that claimed they were forced to work every night and did not receive compensation for overtime. This was not only a violation of federal law, but it also showed a lack of the citizenship principle where every employee should respect the law.

Child and other Labor Laws From 2000-2005, Wal-Mart was faced with fines and lawsuits pertaining to violations of child and labor laws. It was identified by audits, that employees under the age of eighteen were working past midnight, working during school hours, and working more than eight hours a day. Discovered were employees under the age of eighteen operating machinery that was dangerous, which included chainsaws and cardboard balers (Stanwick & Also, exposed were employees who were not taking their breaks or given time off for a meal period.

Traditional violations of the reliability principle would include breaching a promise or contract or not fulfilling a promised action. An example of this is when Wal-Mart managers did not pay their employees for working overtime. Wal-Mart officials also stated that they did not feel women were interested in management positions at the company.