Ethical Business Practice- Walmart

Question: Discuss about the Report for Ethical Business Practice for Walmart. Answer: Introduction The assignment will focus on addressing ethical issues of Walmart. The purpose of this paper is to evaluate the sustainable practices of the company. It also discusses the ethical issues faced by the company. Carrolls four-part Corporate Social Responsibility has been used to assess Walmarts commitment to entire society. The paper has identified key stakeholders of the company according to their power; legitimacy and urgency. It is also important of Walmart to be ethical in communication and business practice. In this paper, some questions will be answered based on the case study of ethical business practice of Walmart. Analysis Walmart is one of the most powerful companies in the international market. The business practice of this company is often inspected carefully. By evaluating the sustainability activities regarding employees; society and environment, it can be said that whether Walmart is doing enough to become more sustainable is future. Walmart has been criticized over the years for the way it treats its employees. The company failed to offer health insurance to the most of its employees and to avoid health coverage it encouraged part-time workers. This has significant ripple effect on the economy, as a company like Walmart engages significant number of work-force. After the bad publicity of the company, Walmart improved the health benefits package and offered low deductibles. It also implemented generic prescription plan to save millions of dollars of the employees (Ferrell and Fraedrich 2015). Moreover, its low price strategy has reduced the wage of the workers and this has been highly criticised. This has led to high dissatisfaction of the workers. Hence, it can be said that Walmart is not practising enough to attain sustainability. Existence of Walmart has put other companies out of business. This is a social issue. The reduction is wage of Walmart has reduced the wage at other retail firms as well. However, Walmart works together with suppliers to reduce the cost of packaging and shipping to maintain low costs of products to the customers (Ji, Gunasekaran and Yang 2014). It has developed Sustainability Index in order to maintain the quality of the product and to have a sustainable supply chain. However, the critics argue that the sustainability goal of Walmart is actually shifting burden on the suppliers. Walmart is one the major violators of environment activities. In 2005, US Attorneys office of California has announced violation of safe environment practice by the company, in terms of recycling; treatment and hazardous material storage and transportation. In 2013, the company pled guilty due to dumping hazardous waste materials. Opening up of Walmart has caused urban extension, which means the acres of green space in the city consumed by Walmart store construction. Apart from these negative impacts on environment, this company has aims to offer renewable energy. It has installed 115 rooftops solar electricity in several countries. It also taken up many projects for its own renewable projects. By reducing the energy consumption and purchasing green power have facilitated the country to conserve energy. Walmart has replaced their old freezers and reduces emission of greenhouse gas by 20 million metric ton by 2015. It has also attempted to reduce the use of fossils fuel (Slattery 2015 ). By transporting many products in each time has resulted into fall in carbon emission. Walmart has been successful in converting million pounds of used cooking oil into biodiesel; soap etc. The recycling method of this company has reduced global plastic waste since 2007 and it has been able to keep waste out of landfills by a significant amount. Hence, it can be said that, Walmart is becoming environmentally sustainable over the years by practicing environment friendly business. 2. The worlds leading retail company Walmart has been criticized for low benefits and wages to its workers. Even if they promote hiring healthy and productive employees, it actually encourages part time workers in order to avoid health benefit package. When employees earn very little, the Federal government offers health benefits to those people. Therefore, burden of health care coverage has been shifted to federal government. Moreover, even if the company is expanding its stores a but has decreased workforce it used to engage. As a result of this, unemployment in the society has been taken place. Due to lack of workers, it is also hard to handle huge customers at the stores. This has led to customer dissatisfaction. Later the company has offered low deductibles to improve the health benefits. Moreover, it has always opposed formation of labour union (Boudway 2012). Whenever, any situation arises to form union, Walmart manages to by-pass it diplomatically. For example, when butchers of the company voted to join union, Walmart announced they would sell pre-cut meat to get rid of workers of the meat-cutting department. Moreover, the company prevented the workers to join union technically in China, where the working condition was very poor along with a very low wage. This is one of the unethical behaviours of the company. However, mounting pressure the company allowed union in its store (Li and Liu 2016). Some major unethical practices of the company have been alleged by the workers themselves. It has been complained by the employees that Walmart denied meal breaks or rest breaks. In fact, the managers of the company deliberately changed time cards to prevent the overtime. The company denied the allegation but pay $640 million for settle down 63 lawsuits. Walmart has been accused on ethical grounds for discriminating its employees. The company paid less to the female store managers than the males in the same job position. It is claimed that Walmart not only practices sex-discrimination in terms of wage, but also in terms of promotion; training and job assignment. Walmart claimed that promotion is made on individual basis and it took the case to the Supreme Court firms right is violated by local suit. Walmart has also faced various scandals. During 2005, the Vice Chairman Thomas Coughlin resigned as he was caught stealing $500000 from the company for irrelevant expenses and reimbursement. He also used gift cards that were unauthorised. In spite of getting millions of dollars of compensation from the company, he has misused Walmarts fund for paying his personal expenses. Again in 2012, bribery scandal was discovered in Mexico. In this scandal, the top executives of Walmart paid millions of dollars as bribe to the Mexican officials (Barstow 2012). It was paid in order to get approval of zoning permits and license to open stores in this country. The executives covered their tracks with the help of fraudulent methods of reporting. Around $24 million has been paid as bribes to get the required permits. While investigating, it has been found that when the Walmart was informed about the bribery evidence, the CEO Lee Scott and higher authority were reluctant to report this issue as, revel ation of bribery would create negative impact on the reputation of the company. Hence, Walmart has suffered from ethical leadership issues. Even if the stakeholders voted against reselection of Mike Duke; Lee Scott and Robert Walton, these members were reselected, which signalled lack of confidence in the ability of leadership to prevent misconduct of the stores (Ferrell and Fraedrich 2015). Therefore, it is required to ensure that Walmart is adheres to ethics and compliance. 3. Corporate Social Responsibility (CSR) refers to behaving as a socially responsible apart from just earning high profit. It addresses the social problem of all levels and focuses on ethical behaviour of the company. There must be some motivation within the business apart from making profit. Business does not exist because of making high profit, rather it has to meet some need that the society values for. CSR is both corporate and stakeholder responsibility. According to Carrolls four-part model of CSR, it involves four layers of business. This defines that the business should be profitable; law abiding; ethical and socially supportive (Carroll and Buchholtz 2014). This is also called pyramid of responsibilities. The pyramids must be seen as a whole and the four parts of it should not be separated. Making high profit by minimizing costs or maximizing sales and strategic choice are at the base of the pyramid, i.e. the economic responsibility. Better economic performance is required by t he society. The business or the company must obey the law as law reflects what is socially accepted and what is not. Hence, the second layer is the legal responsibility. Ethical responsibility is not required but it is expected by the society. The firm must avoid questionable business practices. By operating above minimum standard of law indicates ethical responsibilities. At the top of the pyramid, the philanthropic responsibilities stand. When a company improve the quality of life for the society then they aim for this responsibility. The companys contribution to the community and its engagement in volunteerism program is example of philanthropic responsibilities. The stakeholders are affected by the different responsibilities. The economics responsibility affects the employees and owners; legal responsibility affects the owners mainly, but also related to the workers and consumers. The ethical layer of responsibility has impact on all stakeholders but it mostly engages employees and consumers. The philanthropic responsibilities affect the community. It also influences the morale of employees by performing what is socially desirable and expected. The Walmart has put the small merchants out of the business. Due to the ability of charging low price for reasonable quality, it becomes harder for the local stores to compete with this international giant. The small firms are unable to reduce their cost of production, thus unable to earn profit by charging low price. Walmart is socially responsible for downward pressure of the wage in the towns where it opens store. This is because; to compete with low pricing of Walmart, the other firms reduce their cost of labours (Lichtenstein 2014). The predatory pricing of the company left no place for the competitors in the market. However, in the other way around, it can be said that low price of the products has helped to save millions of dollars of the consumers, who are unable to afford high priced goods. Walmart requires huge space for construction of its stores, as the superstores occupy 20 to 30 acres of land. It selects a busy and prime location to attract more customers of the city. This results into stressing the roads parking and the congestion on the road affecting the traffic flow. However, the Walmart started to open its smaller stores of 1500 square feet as in the places like New York city, it is hard to get such huge vacant land for its stores. The expansion of stores has caused stretching of urban area that implies less greenery in the region. Many cities were not eager to welcome Walmart, because of loss of green space and urban sprawl. Hence, the ethical responsibility of Walmart is questionable. In terms of environment, Walmart has fulfilled philanthropic responsibilities by reducing its energy consumption. Daylighting feature dim or switch off the lights when daylight increases and enters through skylights. This reduces the demand for electricity during the peak hours. In addition to this, Walmart controls heating and cooling to manage the energy consumption. Using LED lights; secondary loop refrigeration system in the stores helped the company to meet its goal of reduction in the greenhouse gas emission (Plambeck 2012). This indicated that Walmart is following its philanthropic responsibilities that are socially desirable and expected. Stores in Mexico and Northern Ireland are powered by wind energy. Walmart has also contributed to disaster management program; women empowerment. It has donated over 1.5 million dollars for aiding the victims of Hurricane Sandy. Moreover, it also granted $2 million for the associates damaged home and for creating toll-free number for the associates who needs help. It has also addressed obesity problem in America and lowered its price for fruits and vegetables to encourage healthy buying and reduced fats; sugar and salts in the foods. Therefore, it is reflected from the practice of Walmart that it meets responsibilities of all tyres that are expected and socially desirable. 4. According to Mitchell et al. the stakeholders are identified based on three variables; power; legitimacy and urgency. Power is the extent to which the party has the access of physical; material and social esteem to impose the will on the company (Ravi 2015). Legitimacy is the perception that the actions of a party are proper or appropriate within some social norms. Urgency is defined as degree to which a party claims for immediate action. It defines how important the claim of the stakeholders to the company. Based on these typologies the managers give priority to the stakeholders. Greatest priority will be given to the stakeholders with urgency; power and legitimacy. These variables are interrelated with each other and hence represented in the Venn Diagram. Source: Ravi 2015 The stakeholders of Walmart are the top managers; employees; customers and environment stakeholders etc. Customers are the only demanding stakeholders as it does not have any power or legitimacy. In the initial years of Walmart, the companys only focus was on providing high quality service to its customers (Lukic 2013). However, at present, the customer loyalty; interest of the customers has diminished that has affected the brand value. The major reason for this was its increasing bad reputation. Hence, even if they do to have any power, the customers are the major stakeholders of the company. this is because; without fulfilling the demand of these stakeholders the business cannot sustain for long. The lower price of the products is one of the major way to keep these group of stakeholders happy. The employers are considered to be definitive stakeholders. They have the power to influence the decision of the company. Employers also have legal support and their claim is also urgent. Many lawsuits have been filed against Walmart by the employees. Walmart has mistreated its employees of California by giving no proper break for meal and deliberately hide the record of overtime done by the workers. Hence, Walmart had to pay $640 million to settle 63 lawsuits (Hirsh and Cha 2015). In the class -action lawsuits of workers of San Francisco, it has been claimed that Walmart practices sex-discrimination. With many appeal and re-appeal in the court, it has been determined that there is nothing common in the women to classify for class-action status. The grievances against Walmart focused on the condition of working in the company. This has led to protests and picketing. Hence, employees are major stakeholders of Walmart whose interests have to be addressed by the firm. The environmental stakeholders are also dominant stakeholders. Such as government; policy makers or other social activists. The environment related activity of Walmart affects the society as a whole. Due to disposal of hazardous waste component, the had to pay charges in 2013. The company faces problem while expanding their stores as it has been destroying the greenery (Tate, Ellram and Glgeci 2013). Moreover, Walmart has faced many ethical issues, thus the shareholders demand that the leaders of the company should improve the transparency. Moreover, the top managers played vital role as stakeholders. In spite of shareholders vote against re-election of some former members, they were elected that indicates power of the higher authority. This has led to lack of confidence shown by the investors into this company, who are the major stakeholders with urgency to change the firms decision. 5. Ethical communication is one of the socially responsible practise of a company. Employees along with other stakeholders get to understand ethical practice of the firm if the communication is transparent and made clear to them. Walmart has lacked communication process with the employees that has caused loss of money to the company (Collins 2011). Walmart did not trained workers properly about disposing the harmful waste. Hence, incurred million dollars as compensation. Moreover, prior to the scandal in Mexico, research claimed that the CEO was informed about the bribery evidence, however, no report or files lodged against this incident (Barstow 2012). This lack transparency in communication. The bribery scandal and scam of 2005 sends negative signal to the customers as well as the stakeholders. By filing lawsuits against the workers and terminating relationship with the suppliers who are engaged in misconduct, Walmart communicate with the shareholders to get back their support and con fidence on the firm. Moreover, Walmart demanded that suppliers must not subcontract to any other firms, as this would make the supply chain more complex. Walmart auditing and approval mechanism is done by the third party. Suppliers pay for inspection process and this caused limitation in reaching information to the parent company, i.e. Walmart. The company hired staffs of warehouses by employing agencies or contractors. Many complaints raised against the company but it argued that the third party agencies are responsible for poor working condition. Walmart must ensure that the third party obeys proper labour law. Hence, it required proper communication. The factory audit has to be made public to be accountable truly. Walmart has released promotional campaign to control its damage. This way of communication would lead to improve the brand image of the company. the company emphasizes on providing healthier food alternatives and uses different advertisement to communicate with the people and shareholders. By developing relationships with influential people the company has practised ethical communication. Its sustainable environmental business practices conveyed the message of social responsibilities. It is recommended that company should develop good relationship with its stakeholders. By initiating goodwill with the customers and looking after the well-being of the workers would help the company to improve its ethical business practices. The internal control mechanism of Walmart must be improved in order to overcome the bad reputation from bribery scandals. It is important that the company should become more responsible to the community as a whole (Barnett 2016). Conclusion The main purpose of the assignment is to evaluate the ethical business practice of Walmart that also takes into account the corporate social responsibility. The research has used data and information from the given case study and assess the impact of Walmart on society. It has been found that the major issue of Walmart is being unethical to the employees. In addition to this, some unlawful practices like bribery and scam of top executives led to bad reputation. However, the company is achieving environmental sustainability over the years. The major limitation of this study is that, Walmart has its stores over many countries. Business practice is different in different region. This aspect is not addressed in this assignment. References Barnett, M.L., 2016. The Business Case for CSR: A Critique and an Indirect Path Forward. Business Society (forthcoming). Barstow, D. 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