Wal-Mart, Article Review Example

Ethics could be defined as “well-founded standards of right and wrong that prescribe what humans ought to do, usually in terms of rights, obligations, benefits to society, fairness, or specific virtues.”(Velasquez, Andre, Shanks, J., & Meyer).The author in the article “Wal-Mart: But We Do Give Them a 10 Percent Employee Discount”argues that the company’s unbelievable growth since its founding by Sam Walton forty-four years ago has been due to its intense focus on cost minimization but the company has failed to live up to its ethical obligations. There is no reason to change the strategy that has served the company well for over four decades and has made it into one of the largest companies in the world but Wal-Mart has shown blatant disregard for corporate social responsibility (CSR) in its pursuit for profits and growth.

One of the reasons behind off-the-clock work is the fact that the store managers are almost entirely evaluated on the profitability of their stores and to meet cost-targets set by the headquarter. One of the corporate objectives at Wal-Mart was to keep labor costs at 8 percent of the sales which is lower than the average of 9 to 10 percent for large retail chains and moreover, each store manager was expected to achieve annual reduction in labor costs of between 0.2 and 0.3 percent. Similarly, the corporate office also instituted a policy of no-overtime pay in order to keep costs down and managers who failed to achieve cost targets could be demoted or even fired while those who met targets were rewarded with attractive compensation package. As a result, managers resorted to illegal activities such as making employees work off-the-clock, skipping breakers, refusing to pay in cases where employees forgot to clock in after break, locking stores so that employees could not leave, and making employees work overtime for free if they could not finish their work in time. The company’s contract with a third party for cleaning services was also motivated by desire to achieve low labor costs because the store managers would often know the contractors were using undocumented workers for cheap labor. Because of the company’s relentless focus on cost-cutting, the managers had no choice but to seek ways to keep costs under control or even reduce it.

Even violation of child-labor laws might also have been driven by store managers’ desire to achieve lower costs by hiring students. Similarly, the company also sought ways to keep labor costs down by requiring higher deductions from employees under the company’s health plans. Where possible, the company also took advantage of the federal healthcare plans such as Medicaid in states like Georgia to keep healthcare plan costs low.  The company’s opposition to labor unions was also due to the fact that the company feared labor unions would result in high labor costs as well as other compensation benefits such as paid vacations and paid leave (Mishel & Walters, 2003). In addition, labor unions also make it difficult to fire employees and store managers might have feared that the presence of unions would make it difficult to engage in illegal labor practices such as unpaid work hours.

Sexual discrimination at Wal-Mart stores also reflect two disturbing trends within the company. First, the company did a poor job of ensuring gender equity within its stores and didn’t take any steps to educate managers and workers on the importance of fair access to promotional opportunities for everyone. As a result, store managers often engaged in sexual discrimination due to both their personal biases regarding women’s role in the society and women’s motives for work as well as their desire to keep labor costs low by paying less to women. The author mentions several examples of explicit gender discrimination such as one store manager telling a female employee that women worked for just additional income and another manager telling a female employee that women were not interested in a career.

The ethical issues faced by Wal-Mart are the same faced by other large retailers and even small businesses. First of all, companies are not only answerable to stockholders or consumers only but also other stakeholders such as employees and the communities in which their operate. The ethical obligations are even greater for large companies because they yield more power and influence in shaping the work practices within the industry. Companies like Wal-Mart that make billions of dollars in profit should not forget the fact that their performance is also due to the hard work and dedication of their employees, thus, they should at least ensure that their employees have reasonable standards of living. Wal-Mart has an ethical obligation to provide reasonable health coverage at an affordable cost because the average compensation within Wal-Mart is under $20,000 which puts most employees at the bottom of economic hierarchy in America.

Similarly, companies also have an ethical obligation to ensure gender equity not only because federal and state laws prohibit gender-based discrimination(U.S. Equal Employment Opportunity Commission) but also because the society benefits when women are treated fairly. Similarly, companies should also not engaged in child labor because societies benefit when it engages its children in education instead of labor and allowing under-18 employees to work overtime only encourages them to skip school. Even if the practices a particular company may engage in is legal, the companies should still do what is ethically right in order to set good examples for others and advance the overall benefits of the society.

Wal-Mart officials claimed that they feel women are not interested in management positions at the company which could not have been farther from the truth. The article states that management opportunities were often announced only to men and, thus, it significantly decreased the probability of women applying for job. In addition, we also see that the store managers were often influenced by their personal biases regarding the career motivations of women and the role of women in society. when one woman asked to work in the hardware department, her boss advised her to go for the toy department. Similarly, one store manager told a female employee that women didn’t pursue career. Such personal beliefs increase the probability that not only store managers might have mostly advertised promotional opportunities to men only but they might also have avoided giving work responsibilities to women that could have prepared women for leadership positions.

Wal-Mart has been criticized for its healthcare policy and it is an ethical issue because all companies, despite their size, have a moral obligation to ensure their employees get fair compensation packages, given the operating performance and resources of the companies. When companies do well, it is the right thing to share some of the rewards with the employees. Despite being one of the largest companies in the world as well as enjoying billions of dollars in annual profits, a significant proportion of the company’s employees do not have health insurance. Moreover, the average compensation of a Wal-Mart employee is under $20,000, thus, any serious health-related event could easily prove to be financially catastrophic for an average employee. Moreover, the company doesn’t seem to have any profit-sharing and performance bonus award for the average employee. Even though employees at Wal-Mart work hard, the benefits are only reaped by the corporate headquarter and the store manager.

Until unionization of its stores in China, the company had mostly been successful in its attempts to contain unionization of stores in the U.S. and Canada etc. But Wal-Mart will increasingly seek growth in international markets as growth opportunities slow down at home. There are already signs that the company’s international operations have been having material impact on overall performance (Wohl, 2012). There are several lessons from Wal-Mart’s failure at containing unionization of its stores in China. First of all, the unions in China had deep government connections. Secondly, China is an attractive market and Chinese Government and the unions must have realized their huge negotiating power against Wal-Mart, which like most large scale companies cannot afford to miss on growth opportunities in China. Unionization of stores in China will send message to other countries that they can also force multi-national companies like Wal-Mart to agree to unionization to ensure reasonable compensation for local employees. Other countries, especially emerging countries realize that they offer the future growth to companies like Wal-Mart as large-scale retail industries in developed countries has already reached the maturity stage.

Wal-Mart has grown to be one of the largest companies in the world due to relentless focus on cost-cutting but it has also failed to live up to its ethical obligations in the process. The store managers have their compensation entirely tied to their ability to achieve cost and profit targets which force them to pursue unethical and even illegal ways to meet corporate expectations. This is also the reason the company has a history of fighting unionization of its stores even though it may change due to international expansion. If China is any indication, the company may be less successful in its anti-union activities outside the U.S. from where most of its future growth may come from.

References

Mishel, L., & Walters, M. (2003, August 26). How unions help all workers. Retrieved December 11, 2012, from http://www.epi.org/publication/briefingpapers_bp143/

U.S. Equal Employment Opportunity Commission. (n.d.). Sex-based Discrimination. Retrieved December 11, 2012, from http://www.eeoc.gov/laws/types/sex.cfm

Velasquez, M., Andre, C., Shanks, T., J., S., & Meyer, M. J. (n.d.). What is Ethics? Retrieved December 11, 2012, from http://www.scu.edu/ethics/practicing/decision/whatisethics.html

Wohl, J. (2012, August 17). Wal-Mart international growth slows, shares fall. Retrieved December 11, 2012, from http://www.reuters.com/article/2012/08/17/us-walmart-results-idUSBRE87F0G820120817