Corporate Governance Issue at Walmart - Case Study Example

Corporate Governance Issue at Walmart Name Institution Course Date Corporate Governance Issue at Walmart Chen M. (2015), Here Are All the Reasons Walmart’s Business Is Not Sustainable, The Nation, retrieved at http://www.thenation.com/article/here-are-all-reasons-walmarts-business-not-sustainable/ Introduction There are many corporate governance issues that have attracted the attention of the media including issue concerning corporate social responsibility, shareholders’ engagement, qualities of directors, transparency in business and audit to name a few (Antal et al., 2002). Corporate Social Responsibility is a notion that has undergone scrutiny for over 50 years and has become prevalent in the recent years. The increasing number of multinational corporations and domestic companies are adapting to a number of Corporate Social Responsibility initiatives that incorporates codes of conducts to improve environmental systems and health and safety and support of community development projects (Dahlsrud, 2006). The increasing prominent of Corporate Social Responsibility can also be reflected in its revival in public debate (Barnett, 2007). This essay will outline and summarize an article covering the issue of Corporate Governance in Walmart Company. It will discuss the context of the article in relation to the issue of CSR and will give the reasons why Corporate Social Responsibility issue in Walmart has attracted the attention of the media. The essay will then conclude by a brief summary of the issue discussed in the article and recommend measures for improvement. Walmart: Company Background Walmart Stores Inc. is a multinational retail company that entails a chain of hypermarkets, departmental stores and grocery stores with its headquarter at Bentonville Arkansas (Lichtenstein, 2009). Walmart Inc. was instituted by Sam Walton in 1962. As from this year, the company has 11,528 stores in more than 27countries. Walmart is considered the largest corporation in the world by revenue and has about 2.2 million employees. It is a family business controlled by the Walton family. Walmart’s business operations are categorized into three major divisions including Walmart United States, Walmart International as well as Sam’s Club (Lichtenstein, 2009). In addition, the company offer a number of retail formats through the divisions such as warehouse clubs, supermarkets, restaurant, drugstores and supercentres. Walmart’s reputation is as a result of offering products at low prices compared to the competitors. Over the years it has recorded high annual income in terms of revenue and profits. The company operates in countries like the United States, China, United Kingdom, India, South Korea and South America among others (Lichtenstein, 2009). Another way the company has been able to maintain high competitive advantage is cutting wages and offering fewer benefits to the employees. Corporate Social Responsibility at Walmart As the largest corporation in America by revenue, Walmart can have substantial effects on the employees, the customers and the environment (Gereffi and Michelle, 2009). Walmart may seem to be the largest company in terms of revenue but has over the years been faced with issues related to Corporate Social Responsibility. It has been accused of discrimination, environmental crimes and human right violations among other issues. Few years ago, labour unions have hammered on Walmart Stores Inc. for its policies and business practices. Walmart is expected to incur a total of $300 million on regulatory and compliance enhancements which entails dealing with complains from National Labour Relations Board (Will, 2006). In addition, the company has attracted the media for its alleged discrimination offences. In the company, it is reported that female workers are discriminated against issues related to promotion and pay. Recently, the company has received a lot of criticism for neglecting the environmental. Walmart pleaded guilty to many environmental crimes including lack of a program to deal with hazardous waste (Stone, 2008). Lack of environmental program and training led the employees to dispose the company waste into sewer systems. In addition, Walmart put the community and the environment at risk by improperly handling hazardous products such as pesticides, aerosols and solvents (Stone, 2007). Overall, Walmart has been ranked as one of the companies that offer the worst Corporate Social Responsibility. Corporate Governance Issue being raised: Corporate Social Responsibility The term Corporate Social Responsibility is in popular use today even though competing and complementary concepts like stakeholder management and business ethics are vying to become the most widespread descriptors in business (Teuteberg and Gomez, 2010). In the article, the fundamental subject is the business case for Corporate Social Responsibility. In addition, over the years, it has been debated that organisations should take part in social activities simply because the society supports it (Antal et al., 2002). Currently, the public at large believe that firms should be responsible for the society, employees and all the shareholders in addition to focussing in maximizing their profits even though improving their well-being requires the company to sacrifice some portion of their profits Corporate Social Responsibility is the primary corporate governance issue being raised in this article. In this case, Walmart showcased a situation of “free market” which can mislead the values of a human’s basic needs (Chen, 2015). For instance, Walmart has violated the issue of corporate governance by financing commodities exchange, hyper-inflating markets and subsidizing agricultural products yet they supply to almost a quarter of the nation’s population. Therefore, the Food Chain Workers Alliance have been able to uncover violations almost at every connection in the retailer’s “ethical sourcing” system. In addition, Walmart human resource department has currently been lagging (Basker, 2002). This is because their stores associates have been reporting case of mistreatment. Other than that, the supply-chain workers have also constantly complained of being exploited in serious ways (Chen, 2015). Since they have fewer resources against the company, Walmart fails to employ them. Moreover, the company has lacked corporate social responsibility in cases where the Food Chain Workers Alliance charged the company with charges linked to being guilty of systematic deprivation of migrant personnel both home and abroad. For instance, Walmart’s giant market has been linked with exploitative fishing boats within the pacific region’s disreputable labour trafficking operations (Chen, 2015). Therefore, the company profits indirectly from abused migrants labours who catch fish for the growing aquaculture industry. Additionally, Walmart fails in corporate social responsibility in cases of discrimination portrayed by bosses to their employees. For example, one of Walmart’s employee faced discrimination when his boss warned him that he would be deported back to Mexico if he challenged him again (Chen, 2015). Another case of poor corporate governance portrayed by Walmart is the act of not fulfilling the promises as well as inappropriate and unfair contracting to the farmers. They have also dominated entirely in the milk market leaving the farmers suffering from severe industry consolidation and fall of milk price. This shows how the company lack corporate social responsibility. Walmart’s sustainability records have been heavily stained by their practices of environmental crimes. They have violated a number of standards for instance, Clean Water Act, federal pesticides safety rules as well as Clean Air Act to name a few (Chen, 2015). In addition, Walmart has been accused for having tendencies of break labour and employment laws. These acts have pushed their suppliers to the contravention point therefore forcing them to incorporate law-skirting into their business models. This clearly indicates the lack of corporate social responsibility within the company (Chen, 2015). Reasons this Corporate Governance Issue was discussed in the Media The media is known to inform the public of the issues happening around the world. Certainly, through the media, the public is able to learn new things and get hold of what is happening around them. The Corporate Social Responsibility issue at Walmart was addressed in the media in order to inform people of the unfair practices happening in the company (Stone, 2007). In addition, the media covered this issue facing Walmart as a way of condemning the bad practices that happens in the business environment. Discrimination of employees, environmental population and endangering the lives of the public people was addressed in order to criticize and condemn these practices and prevent it from happening in other organisations (Barbaro, 2007). Walmart was exposed for what they really are in terms of their commitment to the well-being of the customers and the community at large (Markkula, 2007). It was only through their exposure to the public that Walmart noted their mistake and responded accordingly in order to save their brand and image. For instance, after the exposure made the company take part in diversity efforts in its remuneration and promotion. Walmart also implemented environmental programs that enabled the company manage its waste well with less environmental exposure (Barbaro, 2007). From the exposure of Walmart Corporate Social Responsibility, many companies have learned that maximizing on profit is not the only important thing to focus on when carry out business activities (Marshall, Coleman and Reason, 2011). Issues related to the environment and the society at large should be addressed in order to not only expand a company’s image recognition but also to build a safe and healthy society (Smith, 2003). Personal Perspective on the Issue of Corporate Social Responsibility in Walmart According to philosopher Milton Friedman (1970), the most important Corporate Social Responsibility a company has to focus on is to raise the profits of its participants. Therefore, through my perspective, we can clearly see that Walmart constantly acts in a manner that enables them produce the highest balance of goods over discontent of their stakeholders (Freeman, 2000). By this, they tend to create satisfaction specifically to those that invest in the company. On the other hand, they endorse the legal tasks to their stakeholders by failing to raise wages for their staff members but in turn take back the money to their stakeholders such as customers and suppliers. Therefore, ethics concerns the costs of an action and Walmart‘s activities develops maximum amount of goods for individuals who are considered principal stakeholders of the corporation (Markkula, 2007). Moreover, in my perspective, we can argue that chase of profits demonstrated by Walmart doesn’t necessarily result to collective goods for the community as a whole. This is because a number of small business owners as well as Walmart staff members have to declare bankruptcy (Markkula, 2007). This is so since consumers choose the cheaper options offered by Walmart instead of their own convenience stores. According to utilitarian theory, Walmart ought to develop the largest possible good for the whole community. This necessitates Walmart to satisfy its stakeholders who include suppliers, shareholders, customers, managers as well as their employees. In addition, Friedman argues on the unjust taxation imposed on the stockholders. This is because if a manager utilizes funds in CSR activities, he or she is therefore inflicting taxes to the stockholders. Therefore, in my opinion, it is the role of the government to inflict taxes on the shareholders and not the managers (Shaw and Barry, 2001). In my opinion, I agree that Corporate Social Responsibility not only benefits the society but also brings about business advantages to an organization (Garvey and Newell, 2005). And as a result, Walmart should take part to assist the society suppress or solve their challenges. Today, Corporate Social Responsibility has revolved to just being a set of guidelines used by companies to stay out of trouble (Fassin, 2005). Organisations that are involved in CSR have the potential to build their reputation (Laszlo, 2003). Reputation is based on values as trust, reliability and consistency as thus consistency involvement in CSR may bring about many benefits to business. Society can end up to be a better place to live in when many issues affecting it are resolved. Therefore, I agree with the proponents of CSR as it has the potential to bring change to both the business and the society (Laszlo, 2003). Conclusion In conclusion, from the article, we see that Corporate Social responsibility is liked to long-term organisational success and image recognition. In addition, it has been debated that companies should engage in social activities simply because the society supports it. Companies should be responsible for the society, employees and all the shareholders even though improving their well-being requires the company to sacrifice some portion of their profits. Walmart is considered the largest corporation globally in terms of revenue. Although it is known as a discount and low cost retailer, Walmart has been accused of having a weak Corporate Social responsibility. They have been criticised for causing environmental pollution, employee discrimination and endangering the public at large. Walmart issue on Corporate Social Responsibility represents a case of how the value of human needs can be distorted. The company also has been accused of mistreating its employees in terms of remuneration and wages. The company has also violated the federal pesticide safety laws, Clean Water Act thereby threatening both habitat and people’s health in the local community. 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