The author of this case study posits that although Wal-Mart is a very successful international company, which generates commendable annual profits, it remains a company with questionable business practices. According to evidence collected by the author, Wal-Mart generates an estimated two percent of the United States’ gross domestic product; however, the company has been in and out of court for a series of allegations that it mistreats its employees (Stanwick & Stanwick, 2009). Based on the evidence collected from a series of court cases, the author implies that Wal-Mart’s financial success is largely due to the fact that the company cuts corners any which way it can, with the intent of saving a dollar or two.
The various court cases that Wal-Mart has been involved in range from ‘off-the-clock’ work, health benefits, sexual discrimination, roles of unions, child labor laws, and undocumented workers. In each case, Wal-Mart ended up paying large settlements to former employees and some critics view this as an admission of guilt. The off-the-clock work cases refer to instances where company employees were ordered to remain in the stores and work, even after their shifts had ended. In other words, all additional work that employees were expected to do after their 8-hour shifts ended, were done without additional compensation. In their defense, store managers argued that employees were not allowed to go home until all their work was successfully completed. By contrast, employees argued that store managers kept them in the stores long after their shifts had ended and their assigned duties were complete, simply to do additional work as assigned by store managers. In 2000, Wal-Mart settled for $50 million in a class action lawsuit after court documents revealed that the company had written policies in its handbooks which prohibited managers from compensating employees for overtime; thereby confirming employee allegations about off-the-clock work (Stanwick & Stanwick, 2009, p. 410).
The company has also been accused of offering health benefits to employees, but at exorbitant costs. For instance, in addition to only being eligible for health benefits after six months of employment, employees had to pay deductibles in excess of $1,000 (almost three times the amount of normal deductibles). Due to the hefty copayments and deductibles that employees were responsible for, Wal-Mart’s cost to cover employee health benefits was nearly 40 percent lower than the average retailer of similar magnitude (Stanwick & Stanwick, 2009, p. 413). In other words, the company saved a tremendous amount of money by making its employees pay large sums of money toward their company-provided health insurance. Although the company publicly announced that it would lower the cost of health insurance to employees, it announced internally that managers should hire more part-time employees, and refrain from hiring unhealthy employees, that could potentially contribute to higher healthcare costs.
The company has also been accused of blatant sexual discrimination. Several employees filed a lawsuit against Wal-Mart in 2001, alleging that the company had discriminatory policies in place with regards to recruiting females for higher paying positions. The lawsuit was based on the fact that women comprised nearly 65 percent of all Wal-Mart workers, but only 33 percent of all women employed by the company held management positions (Stanwick & Stanwick, 2009, pp. 412-413). Furthermore, the female employees who held management positions earned, on average, more than six percent less than their male counterparts. In a defense effort, Wal-Mart claimed that it did not discriminate against women, but that women were less inclined to apply for management positions, and therefore less likely to fill them. The 2001 lawsuit became a class action lawsuit by 2004, and the biggest ever filed within the U.S. before then (Stanwick & Stanwick, 2009, pp. 412-413).
Wal-Mart also obtained a stained public image when it was accused of being against the formation of unions within its stores. Union members are protected by their respective unions from any malpractice that the company may be involved in. it also ensures that members will earn at least $10 more hourly than non-members (Stanwick & Stanwick, 2009, pp. 415-416). When Wal-Mart employees in a Texas store formed a union, Wal-Mart shut down the entire department in an effort to prevent the union from forming. In other words, the company was so determined to not spend any more money, that it closed an entire department and left hundreds of employees jobless. The National Labor Relations Board ruled against these actions and Wal-Mart was ordered to reopen that department until the matter could be settled amicably. Over a four-year period Wal-Mart has faced more than 40 complaints from the National Labor Relations Board with regards to unfair labor practices as it relates to unions. Although some of these cases have been settled, Wal-Mart union workers earn, on average, $5 less than unionized Kroger workers (Stanwick & Stanwick, 2009, pp. 415-416).
In yet another public debacle, Wal-Mart was accused of violating child labor laws by making employees, younger than 18, work past midnight, and by making younger employees work during school hours. Wal-Mart’s only rebuttal was that that the evidence might have been misleading because some schools could very well have been closed during those times when young employees were documented to have worked. Nevertheless, Wal-Mart paid $135,540 in an attempt to settle child labor violations accusations (Stanwick & Stanwick, 2009, p. 419). Lastly, the company has been accused of knowingly employing illegal aliens, simply because it could pay them less than documented or legal workers. Wal-Mart blamed a third-party contractor for the oversight. The company cooperated with the government and paid an estimated $11 million in fines for employing undocumented workers (Stanwick & Stanwick, 2009, p. 417).
Questions for Thought
- It is unclear if other large retailers face similar ethical issues because very few of them have surfaced to the extent that Wal-Mart has. In other words, despite its supposed financial success, Wal-Mart is frequently accused of mistreating its employees. In almost every case, the company ends up settling out of court, or paying court ordered fines; which in most cases could be viewed as an admission of guilt. If the company practiced the correct ethical behaviors that are expected of any employer, then these cases would not surface so frequently. Other large retailers face similar issues with regards to making money and saving money. However, judging by the lack of class action lawsuits against them, they have managed a way to address those issues ethically and responsibly.
- I disagree that female employees are not interested in management positions at Wal-Mart. First, if they were not interested, they would not go through the effort of filing a lawsuit against the company, in an effort to voice their discontent. Secondly, it must be difficult for them to fairly compete for those positions if they are constantly met with discouraging actions. In other words, regardless if they are qualified, or interested in a position, management (which is predominantly male) discourages them from participating by constantly making sexually discriminating comments. Furthermore, it is discouraging to apply for a position, for which one is qualified, knowing that the same benefits afforded to male colleagues are not afforded to female employees. Based on the evidence presented in the case study, female employees are very interested in applying for management positions at Wal-Mart, but they are continuously discouraged to do so by their male counterparts.
- Healthcare is most certainly an ethical issue because the extent to which an employer cares for the health and wellbeing of its employees is a direct reflection of the employer’s ethical standards. It is unethical to expect employees to work and excel at all their duties, without showing any concern for their wellbeing, which inadvertently enables them to do a good job. It is an ethical issue because the extent of healthcare benefits offered by an employer mirrors that employer’s stance on basic human rights. Wal-Mart is one of the largest and most profitable companies in the world; it can therefore afford to offer comprehensive and affordable healthcare to its employees. Failure to do so implies that the company is money greedy and has little regard for the wellbeing of its employees, whom without, the company’s success will falter.
- Yes, Wal-Mart should be concerned with unionization of its other stores because of unionization in China. There are numerous benefits associated with unionization, both for the employee and the employer. Also, Wal-Mart should treat all its employees, at all its stores equally. It cannot allow unionization in china, simply because China manufactures a large majority of its merchandise. It has to allow unionization because it cares for the common good of all employees.
Stanwick, P. A., & Stanwick, S. D. (2009). Understanding business ethics. Upper Saddle River, NJ: Prentice Hall.