business ethics case in walmart
DESCRIPTION
Analyzing how Walmart create and behavior depend on its code of conduct, also the solution for all parties: the suppliers, Walmart, labor and consumer.TRANSCRIPT
List of tables
Table 1: The 13-code of ethics in Walmart (Source: Walmart Global Ethics, 2014)...................................8Table 2: Global audit result (%) (Source: http://corporate.walmart.com, 2013)........................................11
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Contents1. INTRODUCTION...................................................................................................................1
1.1. General information about Walmart.............................................................................1
1.2. Reasons of choosing Walmart case study......................................................................3
2. LITERATURE REVIEW.......................................................................................................5
2.1. Framework.......................................................................................................................5
2.2. Codes of ethics in practice...............................................................................................6
3. CASE STUDY ANALYSIS....................................................................................................8
3.1. The Walmart effect..........................................................................................................8
3.1.1. Community satisfaction.............................................................................................9
3.1.2. A helping hand...........................................................................................................9
3.1.3. Wal-Mart contracts with Chinese workers and treats them only as a means......10
3.1.4. Walmart caught using child labor in Bangladesh.................................................12
3.2. Assessment......................................................................................................................12
3.2.1. Squeezing prices......................................................................................................12
3.2.2. Consequences...........................................................................................................13
a. Offshoring and unemployment in home country..........................................................13
b. Violating employment practices...................................................................................14
c. Sweeps and takeovers...................................................................................................16
d. Low cost and irreparable damages..............................................................................17
4. RECOMMENDATIONS......................................................................................................18
4.1. Wal-Mart should change their business strategy........................................................18
4.2. Wal-Mart as a multinational enterprise (MNEs)........................................................19
4.3. The role of law and regulatory agencies......................................................................20
4.4. Victims and communities: what should they do?.......................................................21
4.5. Ethnic leadership, Work goals, and Performance appraisals...................................23
4.6. Empower ethical employees..........................................................................................23
Reference.......................................................................................................................................25
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1. INTRODUCTION
1.1. General information about Walmart
Wal-Mart Stores, Inc. (Walmart) is an American multinational retail corporation that
operates chains of large discount department stores and warehouse stores. Headquartered in
Bentonville, Arkansas, the company was founded by Sam Walton in 1962 and incorporated on
October 31, 1969. Bigger than Europe's Carrefour, Metro AG, and Tesco combined, it's the
world's #1 retailer with some 2.2 million employees1. Walmart operates over 11,000 retail units
under 71 banners in 27 countries and e-commerce websites in 10 countries. They employ 1.3
million in the U.S. alone2.
There are 2 particular milestones that we take into account which are in 1962 and 1991. In
1962, Sam Walton founded the company and established the motto: “The Lowest Prices
Anytime, Anywhere”. The emphasis on low prices has continued throughout Walmart’s growth.
In 1991, through a joint venture with Cifra, a Mexican retail company, Walmart went global,
opening a Sam’s Club in Mexico City3. “Low price” strategy and Walmart’s international scale
are directly relating to ethical issues of this company that we will dig deep in this report.
The Company operates in three segments: the Walmart U.S., the Walmart International
and the Sam’s Club:
Walmart U.S. Segment
Walmart U.S. does business in six merchandise units across several store formats,
including supercenters, discount stores, Neighborhood Markets and other small store formats, as
well as walmart.com.
1 Vault.com, (2014). WAL-MART STORES, INC.|Company Profile|Vault.com. [online] Available at: http://www.vault.com/company-profiles/retail/wal-mart-stores,-inc/company-overview.aspx [Accessed 23 Nov. 2014].2 Corporate.walmart.com, (2014). Walmart Corporate: Our Business. [online] Available at: http://corporate.walmart.com/our-story/our-business/ [Accessed 23 Nov. 2014].3 Corporate.walmart.com, (2014). Experience Walmart's History. [online] Available at: http://corporate.walmart.com/our-story/history/history-timeline [Accessed 23 Nov. 2014].
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Walmart began building Supercenters in 1988;
each store is about 182,000 square feet and
employs about 300 associates. Most
Supercenters are open 24 hours, and may also
include specialty shops such as pharmacies,
banks, hair and nail salons, name-brand
restaurants, vision centers or health clinics.
Image 2: Image 2: Walmart Discount Store(Source: Internet, 2014)
Smaller than a Supercenter, discount stores
employ about 200 associates and offer
electronics, apparel, toys, home furnishings,
health and beauty aids, hardware and more in
about 106,000 square feet of open, brightly lit
space.
Image 3: Walmart Neighborhood Market (Source: Corporate.walmart.com, 2014)
Walmart Neighborhood Markets were designed
in 1998 as a smaller-footprint option for
communities in need of a pharmacy, affordable
groceries and merchandise. Each one is
approximately 38,000 square feet and employs
up to 95 associates. Walmart Neighborhood
Markets offer fresh produce, meat and dairy
products, bakery and deli items, household
supplies, health and beauty aids and a
pharmacy.4
4 Corporate.walmart.com, (2014). Our Business: Walmart U.S.. [online] Available at: http://corporate.walmart.com/our-story/our-business/walmart-us [Accessed 23 Nov. 2014].
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Image 1: Walmart Supercenter (Source: Corporate. walmart.com, 2014)
Walmart International Segment
Walmart became an international company in 1991, and they operate in 26 countries
outside the United States with more than 6,100 stores internationally5. Walmart International is
currently the fastest growing part of their business. Walmart International operates units in three
categories: retail, wholesale and other. These categories consist of numerous formats, including
discount stores, supermarkets, supercenters, hypermarkets, retail websites, warehouse clubs,
restaurants and apparel stores. Generally, retail centers range in size from 5,000 square feet to
250,000 square feet. Its wholesale stores generally range in size from 35,000 square feet to
70,000 square feet. Other, which includes restaurants in Chile, Japan and Mexico, range in size
up to 4,200 square feet. Also, on a limited basis, Walmart International segment operates banks
that provide consumer financing programs.6
Sam’s Club Segment
Sam Walton opened the first Sam's Club in 1983 to meet a growing need among
customers who wanted to buy merchandise in bulk. Since then, Sam's Club has grown rapidly,
opening more than 600 clubs in the U.S. and 100 clubs internationally. By offering affordable,
wholesale merchandise to members, Sam's Club helps make saving simple for families and small
business owners. Sam's Club employs about 110,000 associates in the U.S. The average club is
134,000 square feet and offers bulk groceries and general merchandise7.
5 Corporate.walmart.com, (2014). Walmart International. [online] Available at: http://corporate.walmart.com/our-story/our-business/international [Accessed 23 Nov. 2014].6 Reuters.com, (2014). Wal-Mart Stores Inc (WMT.N) Company Profile | Reuters.com. [online] Available at: http://www.reuters.com/finance/stocks/companyProfile?symbol=WMT.N [Accessed 23 Nov. 2014].7 Corporate.walmart.com, (2014). Walmart Corporate: Sam's Club. [online] Available at: http://corporate.walmart.com/our-story/our-business/sams-club [Accessed 23 Nov. 2014].
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Image 4: Sam’s Club (Source: Corporate.walmart.com, 2014)
1.2. Reasons of choosing Walmart case study
Business ethics is the study and evaluation of decision-making by businesses according to
moral concepts and judgments. Ethical questions range from practical, narrowly defined issues,
such as a company's obligation to be honest with its customers, to broader social and
philosophical questions, such as a company's responsibility to preserve the environment and
protect employee rights. Many ethical conflicts develop from conflicts between the differing
interests of company owners and their workers, customers, and surrounding community. Ethical
issues in business have become more complicated because of the global and diversified nature of
many large corporations. Ethical issues in international business involve employment practices,
human rights, environment regulations, corruption, and the moral obligation of multinational
corporations…We choose Walmart as the case study of those ethical issues because of the
following reasons:
Walmart is an multinational company and the world biggest retailer in the world.
The motto: “The Lowest Prices Anytime, Anywhere” has continued throughout
Walmart’s growth. However, Walmart has been criticized by many groups and
individuals that low prices are not the result of efficiency but other factors such as wage
law violations, inadequate health care, exploitation of workers, and the retailer’s anti-
union stance. Altogether, some 5,000 lawsuits are filed against Wal-Mart each year, or
roughly 17 suits per working day8.
The biggest ethical issue of Walmart is squeezing prices. Because of squeezing prices,
Wal-Mart was accused for violating workers’ rights in foreign countries, alleging that
Wal-Mart denied minimum wage, required overtime, and punished union activity.
Walmart also involved in failing to provide adequate safety equipment child labor
violations, hirings of illegal immigrants. In some cases, workers alleged they were beaten
by supervisors. Regarding treatment of product suppliers, Walmart has a clear policy for
suppliers: On basic products that don't change, the price Wal-Mart will pay, and will
charge shoppers, must drop year after year. The retailer pressured suppliers to sell goods
below cost or at prices significantly less than those available to other stores. Even when a
supplier meets Wal-Mart's prices, the prices are so low, and the supplier loses so much
8 Workplacefairness.org, (2014). The Good, the Bad, and Wal-Mart - Wal-Mart. [online] Available at: http://www.workplacefairness.org/reports/good-bad-wal-mart/wal-mart.php [Accessed 23 Nov. 2014].
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money, then go bankrupt. Also, suppliers have to resort to ethical wrongdoings such as
pay and overtimes violations to reduce cost.
2. LITERATURE REVIEW
2.1. Framework
The term of “ethics” refer to accepted principles of right or worng that govern the conduct
of person, the members of as profession, or the actions of an organisation. Business ethics are the
accepted principles of right or wrong, governing the conduct of businesspeople, and an ethical
strategy is one that does not violate these accepted principles. Among political systems, laws,
econmic development, and culture from nation to nation, ethical issues and dilemmas in
international bussiness are rooted in the variations. The most common ethical issues in
international business involve employment practices, human rights, enviromental regulations,
corruption, and the moral obligation of multinational corporations.
In a worldwide with limited resources, the economic development faces many social and
enviromental issues. That requires businesses to concern themselves about every aspect in the
business enviroment such as worker treatment, product safety, and enviromental protection. The
theoretical framework can be considered as the important foundation for case study’s analysis
and resolutions for the issues. There are two theories that will be mentioned in this paper. The
first theory is legitimacy theory, the second one is stakeholder theory. According to the
legitimacy theory, the companies are required to take responsibility for not only economic but
also social, ecological problems by the authorities. However, ethics in business is a concept
which is not easy to define as a term in law. Because, a large number in defining the ethical
criteria may lead to a complex code to cover every aspect. In diferent countries, we found the the
differences among many cultures of each country. If there is a question that is it legally to require
ethics by law of business? We can not refuse the answer that “yes”. However, in the international
business enviroment nowadays the business entities are expected to fulfil their mission with
efforts from themselves first. That is the reason for the presence of stakeholder theory. The
stakeholder theory says that the companies afford to make market premium and contribute to the
positive social and enviromental perspectives. There are two groups of stakeholders in the
business enviroment. The first group are the internal stakeholders consist of employee, owner and
manager of the coporation, the other group contains external factors of business enviroment that
are economic, political entities, demographic, and social association... Therefore, if the company
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just only focus on the profit economic target and neglect to preserve other commitment to the
benefit of these group they can not carry out sucessfully the content of ethics as well as
sustainable development in three dimensions of economic, social and enviromental element.
2.2. Codes of ethics in practice
Nowadays, the safety and well being of workers across the supply chain is the
Responsible Sourcing group’s top priority in market. which is why Walmart suppliers or P&G,
uniliver are contractually required to sign our Standards for Suppliers before they’re approved to
produce merchandise for sale . These Standards for Suppliers make clear our fundamental
expectations for suppliers and factories regarding the treatment of workers and impact on the
environment. Suppliers are also required to display our Standards for Suppliers in the local
language in all factories where products are made for us, so workers know our expectations of
suppliers and factory management.
The Standards for Suppliers (“Standards”) are Walmart Stores, Inc.’s fundamental
expectations of its suppliers related to social and environmental conditions in all our markets. The
Standards are utilized to evaluate employment practices and environmental compliance in
facilities producing merchandise for sale by Walmart. Suppliers must also comply with
Walmart’s Gift and Gratuity and Conflicts of Interest policies and conduct their business in an
ethical manner that is consistent with accepted auditing principles. The Standards must be visibly
posted in English and in the local language(s) in a common area at all facilities that manufacture
products for Walmart and its affiliates.
All Suppliers and their manufacturing facilities, including all subcontracting and
packaging facilities, will be held to these standards. As a guide to help suppliers understand the
expectations and obligations of the Standards for Suppliers, Walmart has prepared the Standards
for Suppliers Manual (“Manual”)
Complian with laws Suppliers and their designated manufacturing facilities must fully
comply with all applicable national and/or local laws and regulations,
including, but not limited to, those related to labor, immigration,
health and safety, and the environment.
Voluntary Labor All labor must be voluntary. Slave, child, underage, forced, bonded, 6
or indentured labor will not be tolerated. Suppliers shall not engage in
or support trafficking in human beings
Suppliers shall certify that they have implemented procedures to
manage the materials, including all labor-related processes,
incorporated into their products to ensure they comply with laws on
slavery and human trafficking. Workers must be allowed to maintain
control over their identity documents.
Labor Hours Suppliers must provide workers with rest days and must ensure that
working hours are consistent with the law and not excessive.
Hiring and
Employment Practices
Suppliers must implement hiring practices that accurately verify
workers’ age and legal right to work in the country prior to
employment. All terms and conditions of employment including, but
not limited to, hiring, pay, training, promotion, termination, and
retirement must be based on an individual’s ability and willingness to
do the job.
Compensation Suppliers must compensate all workers with wages, overtime
premiums, and benefits that meet or exceed legal standards or
collective agreements, whichever are higher.
Suppliers are encouraged to provide wages that meet local industry
standards. Suppliers are encouraged to provide wages and benefits
that are sufficient to meet workers’ basic needs and provide some
discretionary income for workers and their families
Freedom of
Association and
Collective Bargaining
Suppliers must respect the right of workers to choose whether to
lawfully and peacefully form or join trade unions of their choosing
and to bargain collectively.
Health and Safety Suppliers must provide workers with a safe and healthy work
environment. Suppliers must take proactive measures to prevent
workplace hazards.
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Dormitories and C Suppliers who provide residential and dining facilities for their
workers must provide safe, healthy and sanitary facilities.
Environment Suppliers should ensure that every manufacturing facility complies
with environmental laws, including all laws related to waste disposal,
air emissions, discharges, toxic substances and hazardous waste
disposal. Suppliers must validate that all input materials and
components were obtained from permissible harvests consistent with
international treaties and protocols in addition to local laws and
regulations.
Gifts and
Entertainment
Suppliers must not offer gifts or entertainment to Walmart associates
or those working on behalf of Walmart.
Conflicts of Interest Suppliers must not enter into transactions with Walmart associates
that create a conflict of interest.
Anti-Corruption Suppliers must not tolerate, permit, or engage in bribery, corruption,
or unethical practices whether in dealings with public officials or
individuals in the private sector.
Financial Integrity Suppliers must keep accurate records of all matters related to their
business with Walmart in accordance with standard accounting
practices such as Generally Accepted Accounting Principles (GAAP)
or International Financial Reporting Standards (IFRS).
Table 1: The 13-code of ethics in Walmart
(Source: Walmart Global Ethics, 2014)
3. CASE STUDY ANALYSIS
3.1. The Walmart effect
One of the challenges the huge retailer has faced is to have a positive impact upon
the communities it enters. Whether Walmart has acted ethically may be a matter of perspective.
Certainly, Walmart does much for the communities in which it operates, but it has also faced
criticism that its economic impact limits the ability of local businesses.
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3.1.1. Community satisfaction
It is hard pressed to find some- one who has not purchased from a Walmart store. The
other side of the argument is that Walmart does indeed help communities and give them
exactly what they desire – low price and convenience. It saves the customer time because he or
she can consolidate shopping needs. Why go to four or five different stores when you can get
everything you need at Walmart? Often, you will be able to purchase the same brand for less
money as well.
3.1.2. A helping hand
Walmart claims to contribute to the well-being of communities. Between January
1996, the year Walmart began posting pictures of missing children in the lobbies of Walmart
facilities, and January 2010, nearly 7,000 children have been featured on Wal-Mart bulletin
boards – 5,300 of whom have been recovered. It is clear that Walmart does much in the way of
scholarships and philanthropy in addition to offering convenience and low prices. Walmart’s
rhetoric centers on the three basic beliefs that Sam Walton established in 1962:
Respect for the Individual
Service to Our Customers
Strive for Excellence9
If you are in a Walmart store at the right time, you can hear raucous sounds from
the back of the store as the “associates” perform the Walmart cheer:
“Give me a W! Give
me an A! Give me an
L!
Give me a Squiggly! Give
me an M!
Give me an A! Give me
an R! Give me a T!
What’s that spell?
Walmart!
9 News.walmart.com, (2014). Wal-Mart Increasing Resources to Help Find Missing Children. [online] Available at: http://news.walmart.com/news-archive/2005/08/17/wal-mart-increasing-resources-to-help-find-missing-children [Accessed 30 Nov. 2014].
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Whose Walmart is it? My
Walmart!
Who’s number one?
The Customer! Always!”
Clearly Walmart has participated in helping to make communities better, but there
is another side to the story as well. Walmart has faced many obstacles over the years. It seems
that legal and social challenges have acted as important reasons for the development of its code
of conduct and annual reporting. This statement can be illustrated in two relevant cases:
3.1.3. Wal-Mart contracts with Chinese workers and treats them only as a means
That is, these workers are like slaves, or literally tools to get the work done; they are not
valued and respected as human beings with their own lives to live. They are basically being that
is, these workers are like slaves, or literally tools to get the work done; they are not valued forced
(with rewards and punishments)
to work 7 days a week and possibly to work overtime
WalMart classifies as “full-time” any employee who works a minimum of twenty-eight
hours per week. Moreover, WalMart makes no commitment to provide associates with a
guaranteed minimum hourly workweek. If a store’s profits decline, management may simply cut
associates’ hours, possibly resulting in the loss of benefits held by “full-time” employees. A
shorter workweek may partially explain why half of Walmart associates, including some full-
time, qualify for food stamps and even cash income assistance in states with higher social
insurance benefit levels
to lie to inspectors and auditors in order to keep their jobs, while the whole point of the
inspections and audits are to ensure that they have good working conditions, etc.
If we buy goods from Walmart, we’re taking part or essentially being an accessory to
slavery. Moreover, Walmart pays 18 cents for a product that they charge $14.96 for in America.
In addition, a Walmart supplier factory was reported by the National Labor Committee as
having employed minor employees as young as 12, worked them for excessive overtime hours at
less than the legal minimum wage there of 55 cents/hour Also, they worked 7 days/week and
worked with paint and chemicals without protective gear.
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Lastly, Walmart’s factories abroad have also abused children: In Bangladesh (2006), it
was estimated that 200-300 were discovered sewing pants for Walmart. They were routinely
beaten, forced to work overtime, cheated out of their wages, given phony time cards, and told to
lie about their age.10
Of course, if we do not buy these goods or boycott them, these Chinese workers might
lose their job, and where does that leave them? One can still, however, argue that they should be
treated with respect, and that Walmart should improve working conditions immediately.
Color
Year
Green Yellow Orange Red denled Red
disapproved
Red
unauthorize
d
Low risk Medium-
risk
Higher-risk Higher-risk Egregious Egregious
Reaudited
after two
years
Reaudited
after one
years
Reaudited
after 180
days
Reaudited
as soon as
possible
Barried
from
business
with
Walmart for
one year
Indefinitely
barred from
business
with
Walmart
2011 12.9 51.7 22.1 0.8 0.9 1.0
2012 7.3 56.17 24.01 1.25 1.12 0.37
2013 7.1 29.2 57 0.8 0.5 0.4
Table 2: Global audit result (%)(Source: http://corporate.walmart.com, 2013)
Wal-Mart uses a “traffic light” system to rate factories as Green, Yellow, Orange, Red,
or Disapproved, based on the number and type of violations. Clear information on
10 Makingchangeatwalmart.org, (2014). Making Change at Walmart » Walmart Watch Fact Sheets. [online] Available at: http://makingchangeatwalmart.org/factsheet/walmart-watch-fact-sheets/ [Accessed 30 Nov. 2014].
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qualifications for each system is not publicly disclosed, and this lack of transparency to
stakeholders is itself a serious issue. (see Table 1)
While Wal-Mart’s rating system provides auditors a starting point for monitoring
factories, it is a vague and subjective list and open to interpretation. There is no definition of
low, medium, and high risk. For example, auditors are able to decide the severity of work
hours violations and rate the factory accordingly (as Red for severe, and Orange or Yellow for
minor). Such vague descriptions of the rating system, as well as the changes in the system over
the past three years, make it difficult not only for stakeholders who want to be involved in this
process, but also for the factory owners and suppliers themselves to keep track of violations
classification
3.1.4. Walmart caught using child labor in Bangladesh
At the end of 2005, the Radio Canada program Zone Libre made public the news that
Walmart was using child labor at two factories in Bangladesh.89 Children aged 10-14 years old
were found to be working in the factories for less than $50 a month making products of the
Walmart brand for export to Canada.
Referring to Walmart’s policy at that time consisting of cutting ties with suppliers when
violations occurred, the NGO Maquila Solidarity Network11 said that ‘cutting and running is the
worst possible response to reports of child labor or other sweatshop abuses’. Critiques said that it
only discourages workers from telling the truth to factory auditors for fear of losing their jobs and
encourages suppliers to hide abuses or to subcontract work to other factories that will escape
inspection.12
Nevertheless, Walmart ceased business with the two factories immediately. Walmart
alleges that despite its effort to inspect all factories, it is difficult to enforce its own corporate
code of conduct with thousands of subcontractors around the world.
3.2. Assessment
11 Wikipedia, (2014). Maquila Solidarity Network. [online] Available at: http://en.wikipedia.org/wiki/Maquila_Solidarity_Network [Accessed 30 Nov. 2014].
12 Marketwire, (2014). Caught Using Child Labour, Wal-Mart Cannot Run Away From its Responsibilities, Say Anti-Sweatshop Groups. [online] Available at: http://www.marketwired.com/press-release/caught-using-child-labour-wal-mart-cannot-run-away-from-its-responsibilities-say-anti-570656.htm [Accessed 30 Nov. 2014].
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3.2.1. Squeezing prices
Low price has become the key point of Wal-Mart to compete with other retail
corporations. Evidence is in Wal-Mart’s supermarkets, prices are always about 15% lower than
the price of the same type or the same item sold in elsewhere. Thus in order to maintain this
strategy, squeezing prices is used drastically. With the position as a retail giant, Wal-Mart has
enough power to force suppliers to deliver their products with the cheapest prices. Firms who are
suppliers for Wal-Mart have only two choices: either accepts Wal-Mart's prices even though they
are only making a few cents profit on each product, or Wal-Mart will not order any more. If the
vendors intend to reinforce this criterion of Wal-Mart, these companies will be threatened to
cancel contracts and encounter for the very high possibility of bankrupt.
The suppliers are required to give their lowest prices if they want to sign in contract with
Wal-Mart. In this sense, Wal-Mart forces providers to compete against each other and choose the
one donating the lowest price. The "squeezing prices" of Wal-Mart is particularly effective with
foreign manufacturers, especially in developing countries producing cheap goods such as China,
India. Each year, Wal-Mart buys about $ 1.5 billion of goods from China - half of commodities
purchased directly and the rest purchased from intermediate manufacturers. That is why, Wal-
Mart always been criticized for "monopsony", squeezing suppliers until they went bankrupt.
3.2.2. Consequences
a. Offshoring and unemployment in home country
To survive with the cost reduction requires from Wal-Mart, many suppliers were forced to
lay off their employees and closed their firms in US to outsource products in outside. Of course
many American companies have offshored their production for decades before and Wal-Mart is
not the only firm making cost pressures on providers. But the chain of supply and demand from
Wal-Mart was in some degree accelerating the transfer of jobs from US to low-wage countries
like China.
LR Nelson - an irrigation equipment manufacture located in Peoria, Illinois State, US
since 1911 is one of Wal-Mart’s longtime suppliers. The company produces annually more than
1,000 types of different plants devices. On 5th May 2005, Nelson declared fired 80 full-time
workers and cut down the number of permanent employees to 120 people. Currently, although
Nelson has a large modern factory of 30,000 square meters near Peoria, the company no longer
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makes form of irrigation equipment devices anymore, except the high-technology production of
commercial irrigation.
Mr. Dave Eglinton –the president of LR Nelson explained for the last round of layoffs to
Peoria press: "Wal-Mart said they prefer to buy from us because many products are made in
America but as the disparity of price is too large, they said that if we cannot supply the goods
from China, they deny doing cooperating with us. "According to Mr. Eglinton, Wal-Mart and
Home Depot are "the two largest customers of us. Both began buying directly from other
factories located in China. If we do not fulfill their requirement, we will lose all of our business.”
b. Violating employment practices
Pursuing “low cost” strategy lead Wal-Mart to unethical behaviors with not only
employees of Wal-Mart’s suppliers but their own workers. “Wal-Mart expects its suppliers,
consultants, law firms, public relations firms, contractors and other service providers to act
ethically and in a manner consistent with this Statement of Ethics. If you hire a service provider,
you should take reasonable steps to make sure the service provider is aware of our Statement of
Ethics, has a reputation for integrity, and acts in a responsible manner consistent with our
standards.”13
Besides forcing LR Nelson into dismissing their workers to cut down cost in
manufacturing, Wal-Mart found itself at the center of a storm of protest when reports in July
2013 on Business insider website revealed Wal-Mart cooperates with factories in Bangladesh
who violate seriously employment practices. The report says that Wal-Mart in June 2013
“released a list of more than 200 factories it said it had barred from producing its merchandise
because of serious or repeated safety problems, labor violations or unauthorized subcontracting.”
13 Google Books, (2014). Wal-Mart World. [online] Available at: http://books.google.com.vn/books?id=Lt6Zr_C6FooC&pg=PA228&lpg=PA228&dq=walmart+forces+suppliers+to+lower+prices+consequent&source=bl&ots=3_8o1NhAwe&sig=Gy9k1KfTNqU-EUnvpcVFA6nXiJw&hl=en&sa=X&ei=3mNvVJrGBoWW8QW8xoHICg&ved=0CCEQ6AEwAQ#v=onepage&q&f=false [Accessed 30 Nov. 2014]. p/6.
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Image 5: Women work at a garment factory in Savar(Source: BusinessInsider, 2012)
Women work at a garment factory in Savar July 27, 2012 (see Image 5). Women work for
ten hours a day and earn about 3,000 taka ($37.5) per month. Bangladesh's $19 billion garments
industry attracts some of the world's biggest clothing brands because of low costs, but many
retailers say unrest over pay and delayed shipping schedules are eroding that advantage (picture
taken on July 27, 2012).14
But one month later, at least two of the factories on the list have continued to send
massive shipments of sports bras and girls' dresses to Wal-Mart stores in recent months,
according to interviews and U.S. customs records.
In June 2011, Walmart said, it banned the Bangladeshi garment factory Mars Apparels
from producing goods for the retail giant. But over the last year, Mars has repeatedly shipped
tons of sports bras to Walmart, according to U.S. customs records and Mars owners. The most
recent shipment in late May, almost two years after Wal-Mart claims it stopped doing business
with the Bangladesh firm. A second Bangladesh clothing maker, Simco Dresses, was blacklisted
in January but continued shipping Wal-Mart Canada in March.
International labor groups have been pressing retailers to sign an accord to pay for fire
and building safety upgrades to Bangladesh factories. So far, several large retailers including
H&M, Inditex and PVH Corp., which includes Tommy Hilfiger and Calvin Klein, have signed
onto the agreement. But many of the biggest retailers in the United States, including Walmart and
14 Factories, W. (2013). Walmart Accepted Clothing from Banned Bangladesh Factories. [online] Business Insider. Available at: http://www.businessinsider.com/walmart-clothing-from-banned-factories-2013-6 [Accessed 30 Nov. 2014].
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Gap, have not. Instead, they are working on an alternative plan that they say will improve safety
faster — but that is not legally binding.
Moreover, Wal-Mart workers are under strict working conditions with a poor wage.
Workers are paid 14.5% less than workers in the retail sector ", and “several recent studies
showed that Wal-Mart cut down both average wages and overtime wages of employees in
branches, reduced the rate of job insurance premiums and health insurance for workers.”
On 19th October 2014, Protesters who is working in Wal-Mart in New York carried the
slogan "The Walton is destroying America. What we want is respect, the respect today." The
workers marched to the Walton’s house for the purpose requested Wal-Mart pay them a
minimum wage is $ 15 per hour15.
Mrs. Cantare Davunt (see Image 6) earns only $10 per hour after 5 years working at Wal-
Mart stores in Minnesota. "The money is not enough to cover my life." She said. "The staff of
customer service even earns less than I did."16
Image 6: Wal-mart stole my American dream(Source: Vietq.vn, 2014)
c. Sweeps and takeovers
Wal-Mart has been accused of using monopoly power to force its suppliers into self-
defeating practices. For example, Barry C. Lynn, a senior fellow at the New America Foundation
says that Wal-Mart's constant demand for lower prices caused Kraft Foods to "shut down thirty-
nine plants, fire 13,500 workers and eliminate a quarter of its products”. Kraft was unable to
15 Google Books, (2014). Wal-Mart World. [online] Available at: http://books.google.com.vn/books?id=Lt6Zr_C6FooC&pg=PA228&lpg=PA228&dq=walmart+forces+suppliers+to+lower+prices+consequent&source=bl&ots=3_8o1NhAwe&sig=Gy9k1KfTNqU-EUnvpcVFA6nXiJw&hl=en&sa=X&ei=3mNvVJrGBoWW8QW8xoHICg&ved=0CCEQ6AEwAQ#v=onepage&q&f=false [Accessed 30 Nov. 2014].16 Vietq.vn, (2014). Nhân viên Walmart biểu tình yêu cầu tăng lương. [online] Available at: http://vietq.vn/nhan-vien-walmart-bieu-tinh-yeu-cau-tang-luong-d43580.html [Accessed 30 Nov. 2014].
16
compete with other suppliers as the cost of production had gone up due to higher energy and raw
material costs. Lynn says that in a free market, Kraft could have passed those costs on to its
distributors and ultimately consumers.17
That lowering cost to maximum level to eliminate other competitors of Wal-Mart
contributes to unfair competition market. Sears and Kmart –a multinational corporation and a
chain of discount department stores headquartered in Hoffman Estates, Illinois, US perished
because of Wal-Mart’s competition. The merger of the two corporations is only a desperate
connection to survive in front of the devastating power of Wal-Mart. However, Sears and Kmart
now only equal to the size of Wal-Mart in 1993 - one fifth the size of the current Wal-Mart. Toys
"R" Us - the company invented the style shop "exclusive control" (category killer) in 1950 and
completely transformed the way of trading toys in the US - also in the race with Wal-Mart. Since
1998, Wal-Mart in the US has sold more toys than Toys "R" Us did. Winn-Dixie - grocery store
chain worth $ 11 billion was forced to bankruptcy in 2005 because they were incapable to
compete with Wal-Mart. The company had to close one-third of its 920 stores and fired 22,000
employees. In the same decade, Wal-Mart gradually prevailed in the food business in the US that
leads to the bankruptcies of 21 supermarket chains.18
d. Low cost and irreparable damages
The Wal mart consumption has leaded to the huge increase in salmon farming industry in
Chile which is the main contribution to the environmental pollution here. Tens of thousands of
farmed salmon confined to net pens produce a huge amount of waste: chemical, biological,
organic, and inorganic. For more than 25 years, researchers around the world have recognized the
harm from salmon farm waste and its long-term impacts on water quality, fisheries resources, and
sea-bed ecology.
Salmon net pens discharge untreated sewage, including contaminated feed laced with
chemicals, toxic residues, nitrogen, phosphorus, and copper and zinc—not to mention diseases
and parasites—directly into coastal waters throughout the world. In addition, tons of
contaminated salmon, together with processing wastes—bones, entrails, and even the carcasses of
17 Lynn, Barry C. (July 2006). "Breaking the Chain: The antitrust case against Walmart". Harper's Magazine. Retrieved on September 5, 2006.18 Anon, (2014). [online] Available at: http://mvopat.people.ysu.edu/courses/business_ethics/business_ethics_readings/Wal-Mart_Effect-Fishman.pdf [Accessed 30 Nov. 2014].
17
seals, sea lions, and other predators—are dumped in landfills or processed for fertilizer or animal
feed.19
Sewer Systems in the Sea
Experts have calculated that factory salmon farms, each extending over several acres of
coastal water, discharge extremely high concentrations of untreated sewage. In 2000 and 2001,
nutrient discharges from aquaculture in the Northeast Atlantic, including Scot-land, Denmark,
Norway, and Ireland, were estimated at almost 40,000 tons of nitrogen and 6,600 tons of
phosphorus.20
Pollution from Nutrients
Sewage and other wastes from salmon farming causes far-reaching environmental harm
by contaminating the sea-bed and its shellfish species, contributing to the antibiotic resistance of
shellfish and wild fish, and causing eutrophication that triggers toxic algal blooms.
The accumulation of sewage on the seafloor under and around salmon farms directly
harms marine biodiversity. Scientists in Scotland, Norway, Ireland, and Canada have all shown
that some of these effects may last several years and extend for several hundred meters away
from salmon farm. Divers have also found biological “dead zones” under salmon farms—areas
on the sea-bed devoid of marine life. This problem is so prevalent that every few years salmon
farmers relocate their net pens to prevent the sea-bed from completely dying. As a result, salmon
farms are gradually moving further offshore and contaminating a larger area of once healthy
water.21
Pollution from Chemicals
Salmon farm sewage often contains chemicals and contaminants that easily enter the food
chain and accumulate as they move up it, ultimately reaching humans. Among these chemicals
are copper, zinc, tributyltin, a fungicide, oxytetracycline and oxolinic acid, both antibiotics,
polychlorinated biphenyls (PCBs).
19 Puresalmon.org, (2014). Pure Salmon Campaign - Raising the Standards for Farm-Raised Fish. [online] Available at: http://www.puresalmon.org/waste.html [Accessed 30 Nov. 2014].20 Puresalmon.org, (2014). Pure Salmon Campaign - Raising the Standards for Farm-Raised Fish. [online] Available at: http://www.puresalmon.org/waste.html [Accessed 30 Nov. 2014].21 Puresalmon.org, (2014). Pure Salmon Campaign - Raising the Standards for Farm-Raised Fish. [online] Available at: http://www.puresalmon.org/waste.html [Accessed 30 Nov. 2014].
18
The abuse of antibiotics by large salmon farming operations has not only led to chemical
resistance in wild fish species but also raised health concerns for humans whose diets already
include milk, eggs, and meat products containing unknown amounts of similar drugs.22
4. RECOMMENDATIONS
4.1. Wal-Mart should change their business strategy
Wal-Mart itself needs to change its orientation of development to suit with business ethics
principles. Wal-Mart should get a business model that will stop harming communities and
employees, because it would be worth the higher prices. Wal-Mart's business model is strictly
about charging less. But when it charges less, someone has to pay. Usually, the local employees
pay, as they have to work for less money and no benefits, while watching local businesses close
because they can't compete. In addition, suppliers suffered, as they have to offshore and save
money in every possible way to meet Wal-Mart's prices. And foreign communities, as their
people work for slave prices in unsafe factories to meet the Wal-Mart demands.
An alternative strategy to Wal-Mart is to adopt friendlier cooperation by changing the
way they treat their employees, suppliers and the communities. By that, they might obtain the
sustainable development and morality.
Firstly, Wal-Mart needs to stop squeezing their suppliers. They should create more
opportunities for their partners to get profits. If Wal-Mart attempt to do that, it might make a huge
influence on the market. That will create more competiveness in the game and help decrease the
rate of unemployment because of offshoring process. Even though, this action could lower the
profits of Wal-Mart, it will definitely improve the value of Wal-Mart in the market as a role of
fair trader. Emphasizing the part of local supplies could be an invaluable move of Wal-Mart,
reduce either offshoring or outsourcing will make more chance for suppliers and labor in
America. It also indirectly improves the serious sweatshop problem in other countries.
4.2. Wal-Mart as a multinational enterprise (MNEs)
Wal-Mart as an employer need to take their responsibilities for their employees. They
need to enforce their Code of conduct, provide a dispute resolution system, provide restitution to
Wal-Mart sweatshop workers, commit to sourcing from Union shops and worker co-ops
22 Puresalmon.org, (2014). Pure Salmon Campaign - Raising the Standards for Farm-Raised Fish. [online] Available at: http://www.puresalmon.org/waste.html [Accessed 30 Nov. 2014].
19
Worldwide, and pay a living wage. To oblige that, Wal-Mart as MNEs must follow international
guidelines and laws in their host countries about:
Employment Practices and Policies: respect the right of employees to join trade unions
and to bargain collectively; develop nondiscriminatory employment policies and promote equal
job opportunities; provide equal pay for equal work, provide favorable work conditions; limited
working hours; respect local host-country job standards and upgrade the local labor force through
training; adequate health and safety standards for employees; pay basic living wages to
employees; balance job opportunities, work conditions, job training, and living conditions among
migrant workers and host-country nationals.
Consumer Protection: respect host-country laws and policies regarding the protection of
consumers; safeguard the health and safety of consumers by various disclosures, safe packaging,
proper labeling, and accurate advertising.
Environmental Protection: respect host-country laws, goals, and priorities concerning
protection of the environment, preserve ecological balance, protect the environment, adopt
preventive measures to avoid environmental harm, and rehabilitate environments damaged by
operations; disclose likely environmental harms and minimize the risks of accidents that could
cause environ- mental damage; promote the development of international environmental
standards; control specific operations that contribute to the pollution of air, water, and soils;
develop and use technology that can monitor, protect, and enhance the environment.
Political Payments and Involvement: not taking, giving, or being involved in any way
with bribes and illegal payments and related politics with host country representatives.
Basic Human Rights and Fundamental Freedoms: respect the rights of all persons to life,
liberty, security of person, and privacy, equal protection of the law, to work, to choice of job, to
just and favorable work conditions, and to protection against unemployment and discrimination;
respect each person’s freedom of thought, conscience, religion, opinion and expression,
communication, peaceful assembly and association, and movement and residence within each
state.23
23 This guidelines is originated from: the 1948 UN Universal Declaration of Human Rights, the 1975 Helsinki Final Act, the 1976
OECD Guidelines for Multinational Enterprises, the 1977 ILO Tripartite Declaration of Principles Concerning Multinational
Enterprises and Social Policy, and the 1972 UN Code of Conduct on Transnational Corporations. (Excerpt From: "Business
Ethics: A Stakeholder and Issues Management Approach" by Joseph W. Weiss)20
4.3. The role of law and regulatory agencies
One thing we have to admit, Wal-Mart may not be that easy to change its business model.
For that situation, government regulations play an important role to balance the interests of
corporation, consumers, suppliers, and other groups.
About situation of Wal-Mart about being monopsony and setting price predation to push
other companies out of competition, there are some laws and regulations of America that
restrict those action.
Sherman Antitrust Act, 1890: Prohibits monopolies.
Clayton Act, 1914: Prohibits price discrimination, exclusivity, activities restricting
competition.
Federal Trade Commission (FTC) Act, 1914: Enforces antitrust laws and activities.
Consumer Good Pricing Act, 1975: Prohibits price agreements in interstate commerce
between manufacturers and resellers.
Antitrust Improvements Act, 1976: Supports existing antitrust laws and empowers
Department of Justice investigative authority.
Trademark Counterfeiting Act, 1980: Gives penalties for persons violating counterfeit
laws and regulations.
Nonetheless, lack of evidence and existent limitation of laws and regulations is a serious
concern that lead to Wal-Mart violation haven’t been punished as it is deserved. Therefore, the
improvement in legislation systems will change the way Wal-Mart run business properly.
Government needs to set up more policies to subsidize supplier who are the victims of Wal-
Mart’s squeezing prices strategy such as creating favorable treats to help them recover and setting
lower taxes. Authorities should restrict legislation about monopoly and set higher penalties for
violation. For example, government ought to impose higher taxes to Wal-Mart to compensate the
welfare for unemployment.
4.4. Victims and communities: what should they do?
Suppliers or other firms that are bullied could not be against Walmart individually in the
competition. For that being said, founding groups or association will help gathering all the firms
together and make power voice to protest the aggressive violation of Walmart. By being together,
firms will win their rights back and obtain higher profits.
21
The social community should demand large corporation as Walmart to contribute its well-
being. Developing outreach activities that enhance community well-being connects the
organization with its geographical location and the life of its employees outside of work.
Companies can give nonprofit and community organizations money, products or services, and
skills, and provide job opportunities for nontraditional employee populations. A systematic
giving program would integrate all four areas.
Money can be directly donated to community organizations or linked to the sales of
particular products. Products or services can be given to community organizations for use
by its employees and clients, or to leverage as fundraising auction items. Companies can
provide employees with paid time to volunteer their services for community
organizations, or offer employees community service sabbaticals. Companies can serve
the community by offering job opportunities to nontraditional employees, such as people
with disabilities or ex-convicts.
Managers can reactively give to community organizations on a first-come first-serve
basis, outsource giving to the United Way and other mediating organizations, or
proactively given by developing a few key strategic partnerships with nonprofit
organizations aligned with the company’s mission. Cause-related marketing and
organizational sponsorships help build brand loyalty. Businesses should pursue an
integrative approach that involves all three types of recipients.
An ideal strategic partnership is one where both the company and the community
organization benefit from the arrangement. Determine which community organization
benefits the most from the company’s products, services, and employee skill set, and also
has a similar customer, labor, and supplier profile. This provides the foundation for a win-
win opportunity, one that benefits both the community organization and the company.
Strategic partnership objectives must be transparent, fair, and realistic, and
communication between the partners must be two-way.
Employees should be involved in the company’s outreach decision-making process. The
community involvement process should be carefully monitored, and the outcomes
measured, assessed, and shared with the community.
In addition, the media also plays an important role in revealing the truth behind
sweatshops and reclaim the right back to the victims. All the violations of Walmart we know are
22
all from the media. It is a global communications network that can provide information
accurately. Therefore, utilizing the function of newspaper and broadcasting to protest Walmart’s
action is truly effective by making pressure and criticizing to change Walmart’s methods.
The public as consumers is the most powerful party in the situation. Once they leave
Walmart, the company could not be powerful anymore. They can be against Walmart by
boycotting goods that violating business ethics, accepting higher price to promote competitive
market, being aware of some pricing discrimination tricks that Walmart make. Consumer is the
demand side of a company, once Walmart lose that, it will not be in the competition and end up
kicking out of the market.
4.5. Ethnic leadership, Work goals, and Performance appraisals
The most important ethics reference point is an employee’s direct supervisor or manager.
How a manager acts in response to an ethical issue has more influence on employee ethics than
any stated policy or words of encouragement. Managers have already been promoted, so their
daily workplace actions indicate to subordinates what it takes to be promoted.
Employees want their managers to be honest, credible, respectful, and fair. When
managers exhibit these admirable characteristics, employees do likewise. If managers behave
unethically, their subordinates are tempted to do likewise as well. It is difficult for subordinates to
take orders from, and support, someone they consider dishonest, untrustworthy, or unethical.
Managers are also responsible for developing work goals and performance appraisals,
both of which impact ethical performance. Hypocrisy and moral confusion develops when
unethical behaviors are ignored, encouraged, or rewarded.
Work goals should be specific, measurable, aligned, time-bound, and challenging, yet
attainable. The individual work goals are jointly determined by the manager and employee, and
aligned with departmental and organizational goals. Avoid stretch goals that may tempt
employees to stretch the truth.
Performance appraisals should document employee accomplishments and benchmark the
distance an employee still needs to travel to become an ideal employee. Measure whether the
employee lives up to the Code of Ethics, embodies the attitudes and behaviors of an ideal
employee, and constructively contributes to ethics-based initiatives. Use 360-degree performance
appraisals to develop a holistic perspective of the employee, and to let all employees know that
23
their opinions do matter. Moreover, document any allegations of unethical behaviors and provide
the employee an opportunity to clarify the situation. Punishments must reflect the magnitude of
the violations.
4.6. Empower ethical employees
An ethical organization is a community of people where every employee is treated with
dignity and has a sense of organizational ownership and accountability. A complementary set of
management systems reinforces a sense of community within the organization and with external
stakeholders.
Managers should create a fully empowered workforce where employees effectively
participate on decision-making teams, develop plans for superior customer service and
continuous improvement, and share in the financial benefits generated by their efforts.
Develop effective teams based on trust. Trust is the foundation for constructive conflict,
goal commitment, personal accountability, and achieving collective goals. Train teams to
collectively solve problems and give them the authority to, within reason, make changes as
needed. Use Appreciative Inquiry techniques to design and implement systems for achieving
superior customer satisfaction, and Scanlon-type gain sharing plans and Open Book Management
to provide employees the information and decision-making authority necessary to improve
organizational operations. Conclude each day with team-based reflections. Each team member
should praise a major accomplishment, share a work-related problem, and brainstorm problem
solutions to implement the following day.
Team-based participatory management, where employees provide meaningful input in the
organization’s decision-making process, and share the financial gains associated with improved
performance, creates a sense of ownership, communal experience, and accountability among
employees.
Last but not least, employees themselves need to be awareness of their value and the
danger of working environment. They can unite against the unfairness at work under labor
unions. Going on a strike could be the next step. It will draw attention of public and
communications network to appeal the help from outside.
24
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