Business Ethics Pattern of Ethical Challenges

One company that consistently makes the news because of ethical issues is Walmart. This essay examines business ethics as practiced at Walmart.

Founded in 1962, Walmart has grown to sales of $405 billion and more than 2.1 million associates worldwide. The company is now ranked as the world's largest retail chain. But that explosive growth has also made Walmart an exceptional target. How many companies can boast of their own dedicated watchdog organizations, whose sole purpose is monitoring the company's performance on a wide range of issues related to business ethics? Walmart is such a company, although it would probably prefer otherwise. According to the website of Walmart Watch, it exists solely to "hold Walmart fully accountable for its impact on communities, the American workforce, the retail sector, the environment and the nation's economy" (Walmart Watch, 2011). Launched in 2005, Walmart Watch's stated purpose is challenging Walmart to "more fully embrace its corporate responsibilities."

Walmart business ethics have drawn fire in a number of areas. For Walmart employees, the company's approach to benefits, health care, wage and workplace conditions have all received heavy criticism. From class action lawsuits alleging gender bias to charges that taxpayers subsidize Walmart health care coverage, concerns abound over Walmart business ethics. In particular, Walmart's business practices have been challenged with respect to community impact, corporate responsibility and environmental efforts. A growing number of communities have blocked Walmart store openings, citing concerns over predatory pricing, traffic congestion, and environmental problems. Critics argue that Walmart's success allows it to export low wages, pollution, substandard benefits and various abuses to other countries around the globe.

Fortune Magazine quoted a study that found Walmart's average spending on health benefits for its employees was 30% less than the average spending of its retail peers. Walmart had also paid millions of dollars to state and federal regulators for violating air -- and water-pollution laws. The same article reported that the nation's largest employer pays so little that a family of four could not live on the then $9.68-per-hour wage of an average Walmart associate, which annual earnings of $17,600 was below the poverty line. A class-action suit filed in 2001 on behalf of 1.6 million former and current female employees alleged that Walmart systematically favored men over women in pay and promotion. Following charges that Walmart steamrolled local businesses and drove down wages at other stores, communities from Inglewood, CA to Queens, NY blocked new stores (Gunther 2006).

Other organizations continued to make similar charges in 2010. Wake-Up Walmart, a project run by the United Food and Commercial Workers International Union, claimed that Walmart's average wage was six percent below the Federal poverty level for a family of four. They also charge that Walmart's move into urban areas, in addition to destroying small businesses, often depressed other nearby wages where similar jobs would otherwise pay as much as 18% more than Walmart. Wake-Up Walmart further claimed that the company pays $5,000 less yearly to full-time female employees than male ones. They also repeated the claim that the company's health plan is so poor that it forces many employees to rely on publicly assisted healthcare, at taxpayer expense. Walmart Watch accuses the company of being fiercely anti-union, alleging labor law violations ranging from illegally firing workers who attempt to organize to unlawful surveillance, threats, and intimidation of associates who dare to speak out.

Recognition of Ethical Issues

It may be that Walmart's "everyday low prices" strategy is to blame for its being on the wrong side of ethical challenges. Walmart as a company is known for living

In the words of Sam Walton, "If we work together, we'll lower the cost of living for everyone . . .we'll give the world an opportunity to see what it's like to save and have a better life" (What we do, 2011). Walmart supporters point to the company's global record in sales growth and job creation as proof of the company's being a good corporate citizen. Still, the questions about Walmart's commitment to ethical business practices remain.
Several of the business ethics challenges that Walmart faces show up on its financial statements. The retailer's 2010 Annual Reports (Walmart 2010 Financial Report, p. 34) lists ethical issues that bring the possibility of legal and financial consequences: wage-and-hour class actions, exempt status cases, gender discrimination cases, an EEOC lawsuit, and hazardous materials investigations.

While there is no admission of guilt, Walmart is legally obligated to disclose the possibility of being found guilty of any or all of these allegations and charges. Walmart provided some details in its financial report: the company is charged with wage-and-hour violations that include failure to provide rest breaks, meal periods or other benefits, or otherwise failing to pay employees correctly. Walmart was in the process of appealing a judgment for $188 million that was awarded in Braun/Hummel v. Wal-Mart Stores, Inc.

In 2006 Fortune Magazine reported on Walmart's efforts to address ethical concerns. When Walmart announced an ambitious green initiative, many greeted the announcement with skepticism. A study by McKinsey & Co, leaked to the press by walmartwatch.com, revealed that up to 8% of shoppers had stopped shopping at Walmart because of its reputation. Then CEO Lee Scott discussed Walmart's handling of ethical challenges: "If we had known ten years ago what we know now, what would we have done differently that might have kept us out of some of these issues or would have enhanced our reputation? It seemed to me that ultimately many of the issues that had to do with the environment were going to wind up with people feeling like we had a greater responsibility than we were at the time accepting" (Gunther, 2006).

Even amid all the publicity surrounding Walmart's missteps, the company recognizes its responsibility to promote their philosophy of giving back. Walmart's website lists the following programs and initiatives:

Military support: One of the nation's largest private employers of veterans and those on active duty

Hunger relief: Walmart committed $2 billion cash and in-kind to help end hunger in America

Japan earthquake and tsunami relief

Chile earthquake and tsunami relief

Diversity and inclusion initiatives

Sustainability best practices

Awards and recognition from minority organizations, including the National Association for Female Executives (NAFE) and the United States Hispanic Chamber of Commerce

Global Responsibility Reports and Global Sustainability Reports

Supplier diversity and sustainability programs (Walmart Web site, 2011).

Identification of Stakeholders

Walmart acknowledged its "vast number of stakeholders" in a 2004 announcement about its stakeholder engagement initiative. Walmart defined a stakeholder "as anyone who is directly impacted by any part of Wal-Mart's business, including customers, associates, suppliers, communities, governments, media, and non-government organizations." The program was intended to acknowledge the importance of developing a relationship with stakeholders, and by using that dialogue, gain new perspectives, ideas, and approaches on social compliance and global environmental issues. As part of the stakeholder engagement program, Walmart hired new associates for the team and partnered with Business for Social responsibility (BSR) to work with them in developing a rigorous engagement plan of action (2004 Program Enhancements, 2004).

Alternative Courses of Action

One of the more significant challenges for Walmart in managing its ethical challenges is having a vast array of options to choose between to reinvent itself as a "nicer, more decent, friendlier" retailer. Some of the alternatives available to them are obvious. They include:

Doing a better job of hiring and managing their associates and management team such that their values align with Walmart's; the goal is to have less disconnect between Walmart's vision of corporate responsibility and the reality of its day-to-day operations

Understanding the ramifications of focusing on cost containment to the exclusion of equally desirable goals (bad PR costs money too, in the form of lost sales and decreased customer satisfaction, as shown by surveys and studies)

Following not just the…