Wal-Mart de Mexico Issues - Case Study Example

Wal-Mart de Mexico Student name Subject Lecturer University Date Wal-Mart de Mexico case The locals in Mexico and the US are one of the biggest stakeholders in the company. One of their biggest attributes is legitimacy. The reports about corruption in the country are legitimate and affect them directly. Losses due to corruption in the country are one of the highest anywhere in the world. The business culture of corruption in the country results in losses of billions, which would otherwise have profited the country in other ways. Wal-Mart paid bribes in order to avoid the consequences of not following zoning laws, which help in planning of cities and towns. They also paid to avoid environmental impact fees. These allowed them to conduct business with disregard for the environment, without fear of consequences. These actions affected Mexican citizens the most. This is especially true considering the fact that Wal-Mart is the largest private employer in the country. In the US, there were reports of the company driving small local businesses out of business. Shareholders and investors are another group of stakeholders in the case. They invest their money into the company, and expect to get returns on their investment when the company makes profits. They have the power to control the company’s business direction, and react to such allegations in order to protect their positions and investments in the company. Evidence of this is seen by the reaction of Wall Street analysts to the publicity that Wal-Mart was receiving at the time. The law allows shareholders to submit proposals to the company, and vote on governance issues[Los04]. Top executives, both in Mexico and the company headquarters in the United States are another group of stakeholders in the case. After the revelations by the former executive in charge of real estate, the company, through its executives, decided to act with urgency and conduct an internal investigation into the matter. After internal investigators wrote to the company giving detailed reports and evidence, the top executives had to act, calling in procurement officers for a dressing down after the corruption scandal reached alarming heights. Company employees are the fourth group of stakeholders in the case. According to reports, the employees suffered such injustices as being forced to work overtime without pay and the company fighting efforts to unionize. The jobs offered to employees did not come with benefits, and the employees had to rely on Medicaid for their healthcare. Employees had the attribute of legitimacy, especially after the compelling evidence revealed by the documentary movie the high price of low cost. Protests against the expansion of Wal-Mart into the urban market from the rural and suburban regions only indicate the legitimacy of these injustices on employees. Another stakeholder in the case is the US government and financial authorities. The authorities, through the justice department and the Securities and Exchange Commission, have the power and responsibility of enforcing the Foreign Corrupt Practices Act. The legislation allows the government to charge a US company if they find evidence of bribery overseas[Bro121]. The power of the government is seen when the company’s top executives summon its procurement officers in part due to the pressure of government investigations. Company responsibilities to stakeholders in the case The company has ethical and philanthropic responsibilities to the locals in Mexico and the United States. Wal-Mart has the responsibility of enforcing fair business practices and following the rules of fair competition. The company gained an unfair advantage in the market through corruption, and this calls for an anti-corruption program. The company should design an anti-corruption program that focuses on the training and awareness of the risks and consequences of corruption among all the company agents. The company also has the ethical responsibility for environmental compliance in both its internal practices and the activities of company associates. The company has the responsibility of making sure all the licenses and permits across the retail network are above board. The traditional view of shareholders is that they are the owners of the firm. While their ownership is not as straightforward as owning tangible property, like a house, the ultimate responsibility of the company should be the maximization of profits for the shareholders benefits[Mar02]. The company therefore has the economic responsibility to the shareholders to make sure it runs a profitable operation. The company has an ethical and economic responsibility to the employees. Employees have the right to pay, especially when they work overtime. Employees have the right to a healthy and conducive working environment, and the right to unionization. Wal-Mart has a responsibility to protect all these employee rights. The company must also provide equal opportunity to all employees, and avoid discrimination on the basis of gender or otherwise. Wal-Mart has the legal responsibility to comply with the Foreign Corrupt Practices Act. This act allows the government to charge and prosecute a US company found guilty of bribing officials in their overseas markets. Wal-Mart has the responsibility of complying with these rules. Possible actions Collaborating and involving the government The report of bribery in Mexico by the Wal-Mart subsidiary seems like a straightforward open and closed case. In order to absolve itself of any wrongdoing and the negative publicity that comes with the failure to take responsibility for their actions, the company must collaborate fully with government investigators. Results of the investigation will help the company officials create a legal framework for prevention of such incidences in the future. Heads must roll all across the board, from the high level employee involved in the case like the rising star Mr. Castro-Wright to any low level employee involved in the bribery scandal. Monitoring: compliance program The company must improve its compliance efforts both at home and in overseas markets. Perhaps more damaging in the case more than the actual bribery is the cover up that prevented swift action. This calls for an improvement in the communications system of the company. Enhancing the current communication channels helps in providing regular and effective feedback. An effective strategy could be prioritizing the reporting and action on issues relating to integrity and ethics. The company should also encourage and strengthen the use of the global helpline program, which has been in place for many years[Wal14]. Solving issue of corruption and environmental compliance should start from within the company. The company should conduct training programs and regular refresher courses for its employees on the awareness and understanding of corruption related issues. The company must also change its policy when dealing with outside actors in relation to corruption and environmental practices. The company must enforce strict rules prohibiting the giving or receipt of bribes to influence any decisions. The enforcing of these rules is more important. The company must make sure to assess any potential corruption risks by monitoring such activities as; interactions with third parties, especially those who interact with government officials, monitoring business or legal expenditure and any charitable donations. The head office must also monitor the results of government inspections and any penalties incurred as a result. The company must also track all licenses and permits issued across all the retail chains. The company must eliminate any form of discrimination, gender or otherwise across its supply chain system. It must be able to provide equal opportunities of employment and career advancement to both the men and women who work for it. The company must respect and uphold the labor rights of its employees, and respect their right to lawful protest and joining of unions. Defending it position: strengthening shareholder value The company should embrace corporate social responsibility in order to enhance its image and position in the market, both in the country and internationally after such a damaging scandal. Historically, economic reasoning suggests that it is only humans that feel a sense of moral responsibility for the actions they take. Since corporations are not human but purely legal entities, they should leave social responsibility to the state[Fri702]. This is the argument that many have used to justify the position that the responsibility of any business is maximization of profits for the shareholders. However, there is no reason why profit maximization and corporate social responsibility cannot go hand in hand. There are several reasons why this is the case. Throughout the years, an interesting trend of increasing company interest in corporate social responsibility has emerged[Amb03]. For instance, in the 12 years between 1995 and 2007, ethical investments in the US have improved by about 320 per cent[Ser12]. There has also been an upsurge in the emergence of ethical and sustainability indices like IRIS, GRI, Certified B Corporations and the SROI network. Employees and consumers continue to respond favorably to CSR efforts by companies[Ser12]. Companies must realize that they do not exist solely for themselves, but also for the social good of the current and future generations of their customers[Dur01]. They must, therefore, engage in activities that will paint them in the best light. There is evidence that companies can maximize shareholder wealth by maximizing surpluses to the stakeholders through CSR. Another significant trend is that of shareholder behavior. The assumption is that shareholders are narrow-minded in their quest for profit and personal gain, and constantly ignore calls for social responsibility, instead favoring the push for profits. They have, however, changed to become some of the most ardent supporters of companies taking social responsibility[Gla10]. The company should strengthen efforts to meet with activists and labor officials to iron out integrity issues like employee rights, privileges and perks. They must improve their labor and healthcare record, and must roll out a strong environmental policy. To avoid corporate responsibility being taken as a public relations gimmick, they must join ethical accountability organizations like IRIS and GRI to strengthen their position as an ethically compliant and socially responsible company. Ethical theories The solutions to the problems in this case follow the principles of the utilitarian theory. The basis of this theory is that one should choose their actions based on the maximization of utility, the greatest good for the greatest number of people[Nat15]. While the compliance might not necessarily be favorable to the top level management of Wal-Mart de Mexico and the US, adopting corporate social responsibility strengthens the position of the company, improves surpluses to the stakeholders and improves the image of the company. Works Cited Los04: , (Loss & Seligman, 2004), Bro121: , (Brown, 2012), Mar02: , (Marens, 2002), Wal14: , (Walmart, 2014), Fri702: , (Friedman, 1970), Amb03: , (Amble, 2003), Ser12: , (Seretny & Seretny, 2012), Dur01: , (Durcker, 2001), Gla10: , (Glac, 2010), Nat15: , (Nathanson, 2015), Read More