Wal-Mart's Recovery from the Bribery Scandal - Case Study Example

Wal-Mart’s Recovery from the Bribery Scandal The first step towards recovery is an apology from the current chief executive officer. For many years, Wal-Mart has held a reputation for integrity and transparency, which was damaged after the scandal. Massive bribery occurred in Mexico in order to acquire different permits from the Mexican authorities. Giving bribes is against both the Mexican and American laws, and it was a breach of customer trust by the retail shop management. The executive management of Wal-Mart de Mexico was aware of the bribes and hid the report from the headquarters in Bentonville (pp.1). They covered evidence from the previous investigation, and the accused were never punished. This was against the moral and ethical standards upheld by the company as it pursued growth in Mexico (pp.2). Giving bribes and promoting the accused employees did not display any morals or business ethics. This was an example of impunity by a leading world retail market. Investors believed the significant growth experienced by Wal-mart de Mexico was a model for future growth and the most successful investment business. Corruption allegations and evidence that was unearthed by investigators was a substantial setback to investors. The top executive was supposed to prevent any misconduct by the company, but they orchestrated the bribes. This was against what investors expected from them, and a break of their trust. According to Cicero (pp.3) he had dispatched lawyers to deliver large amounts of cash to government officials who dealt with issuing of permits. This enabled the company open several branches within a short time. The company had hired gestores to conduct the bribes, who would in turn receive 6 percent of the bribe money. These were additional expenses by the company. This was an enormous misuse of investor money and an apology from the CEO would be one way of regaining their trust. The company has to commit itself to improve its corporate affairs and citizenship through corporate accountability. After the eruption of the bribery scandal, trust in business declined and corporate citizenship is necessary when rebuilding their reputation. The chief executive at that time had claimed internal investigators were overly aggressive. It was discovered a few days later that a top lawyer planned to ship files of internal investigators to Mexico (pp.2). The company executives had failed to cooperate with FCPA, which was against corporate conduct. After the first allegations in 2005, a group of executives began working secretly to conceal those claims and prevent deep investigations (pp.3). Investigators also received resistance from powerful executives implicated in the scandal in order to impede and conceal the evidence (pp. 3). The company had hired an external law firm to conduct investigations, but their approach was rejected by the company leaders. They were replaced by internal investigators who conducted a preliminary inquiry (pp. 8). Investigators found that gestores had received millions of shillings and the top executive was aware of the payment. They had used codes that different from other billing records, which could only be understood by specific workers. These payments were to speed up expansion plans by the company instead of following legal procedures to acquire those permits. The management worked hard to end the investigations and hide any inquiry until it was reported again in 2012. This was a sign of poor leadership and corporate citizenship. The company had acquired market dominance through fraud, and corporate accountability is necessary for rebuilding its reputation. This would open the company to scrutiny by shareholders and the public regarding its business activities. A corporate website would help accountability and the public scrutiny process. With the current development in internet technology, a public website would provide accurate information to the public and other interested parties. The company can make crisis information available on the website as a method of informing worldwide customers and the general public. According to Cicero, the company executives had worked hard to conceal the allegations from the public. The scandal erupted in 2005, and some findings were never made public until 2012. Some of the executives argued that the lead investigator should not hand over corrupt employees to law enforcers (pp. 16). They aimed at covering the findings from the public and other interested parties. A corporate website would be a key information source about such investigations and legal actions taken against the corrupt employees. This would build their confidence on the investigators, executives, and the company as a whole. Public scrutiny would help the general public and business partners reconsider conducting business with Wal-Mart. The top executive was aware of corruption, and some of them were implicated in the allegations. Changing the executives would be another step of rebuilding the company’s reputation. Cicero gave amounts, dates, and names of those involved including top company executives (pp.5). After the investigators recommended expansive investigation, Wal-Mart leaders shut down the process. These leaders continue to serve in several positions within the company. Castro-Wright was identified as the driving force behind the bribes but was promoted in 2008 to become the Vice chairman (pp.1). According to Cicero, bribes soared up when he took office in 2002 due to pressure put on employees to use necessary ways to obtain permits. Lee Scott was the chief executive and continues to serve in the management board. He accused investigators of being overly aggressive in order to transport some of their files to Mexico (pp. 2). The top executives received reports after bribes were made and identified officials to be paid. Changing the top executives would serve as a way of recovering from the scandal and ending future corruption. Thorough investigation on the case is required, and it can only be done by external auditors. When the initial allegations emerged, the company hired Willkie Farr & Gallagher to lead the investigations. The firm proposed scrutinizing all payments and interview all implicated employees. Wal-Mart leaders rejected this proposal and settled on internal investigators to conduct investigations. They conducted limited preliminary inquiries within two weeks (pp. 8). The executives had control over internal investigators and limited the investigation process. Some of the lawyers conducting the investigation had been implicated in the allegations. The internal investigating unit was ill equipped, and only four members were assigned to corporate fraud (pp. 8). External audit firm, Kroll Inc., was hired in 2003 to conduct investigations. They discovered that the company had helped high-volume customers evade taxes. External investigators identified specific individuals who received the largest share of bribes and the main leaders involved. However, these leaders were promoted into different positions, and Cicero’s allegations were discarded. An external auditor and investigator are required to unearth the findings and the leaders that covered up the implicated executives. These recommendations should be applied in both Mexico and USA without any alterations. The bribery activities occurred in Mexico with the help of top executives in the country. Although these practices were concealed from the headquarters, little was done to punish those implicated. The top seat in Bentonville promoted some of the implicated employees such as Castro-Wright. He was promoted in 2005 to serve in USA despite allegations made against him. Other executives such as Lee Scott were absorbed into the executive board in USA. Investigations conducted in Mexico require their response since they served in the country when the bribery took place. This would enable the company acquire back customer trust by American citizens. According to lead investigator Mr. Halter, gestore payments stopped when Castro-Wright moved to the U.S. in 2005 (pp. 10). This shows that they were actively involved, and they should face the law as part of Wal-Mart’s code of ethics. The company is required to respect American and Mexican laws, which guard against corruption. The top executives disregarded American FCPA rules and the Justice department would be involved in this scandal. This would require applying these recommendations in USA as well as Mexico as compliance with the law. Wal-Mart is an international retailer with headquarters in USA, and bribery cases in any region affect its worldwide activities. After the story broke out, Wal-Mart share price dropped by 5 percent in the USA. Investors had to weigh the likelihood of such amount of money being used to fuel international growth. The total sales in American and Mexico dropped after the allegations were made public due to loss of customer trust. Congress representatives Cummings and Waxman announced their interest in conducting an investigation into the scandal. Customer and investor trust can be won back by publicizing information about its business activities. Launching a corporate website would provide the necessary information worldwide. The top executives serving in USA who were implicated in the scandal have to be replaced. The company has a code of ethics that guards against corruption and affects all branches in the world. The company headquarters are situated in USA and applying these recommendations in the country would act as a lead before they are applied in other countries. Works cited Barstow, David. Wal-Mart Hushed Up a Vast Mexican Bribery Case. From http://www.nytimes.com/2012/04/22/business/at-wal-mart-in-mexico-a-bribe-inquiry- silenced.html?_r=1&ref=business. Print. Read More