Wal-Mart Mexico Bribery Scandal 2012 - Case Study Example

Wal-Mart Mexico Bribery Scandal Name Institution Professor Course Date Introduction One of the global most respected and successful firm, Wal-Mart, was caught in an immense bribery scandal. In April, 2012, the New York Times wrote a story claiming that Wal-Mart had hushed up corruption scandal entailing 24 million dollars of suspect imbursement from Wal-Mart in Mexico. The bribes were paid to the Mexican officials to win permits in weeks or days as opposed to years or months. The Company paid bribes to allow the establishment of as many stores as possible and prevent the reaction of competitors. In response to the bribery scandal, Wal-Mart opened an inquiry into the matter. However, in spite of the much proof of suspicious conduct and apparent contravention of US and Mexican laws, the company shut down the inquiry. In reaction to the New York Times Story, the company started new inquiry into the bribery scandal. The company also established a novel role for a worldwide FCPA (Foreign Corrupt Practices Act) compliance officer. This essay argues that Wal-Mart was ineffective in its crisis response because the firm focused more on damage control instead of rooting the wrongdoing. In addition, the Company was not aggressive enough to safeguard and prevent risks and threats to its reputation and did not communicate the crisis to the stakeholders to ensure credibility of the investigation. Wal-Mart focused more on the harm control instead of addressing the wrongdoing. With respect to the New York Times story, Wal-Mart knew about the violations of US laws and had robust discussions on the way forward. However, the Company failed to report the incidence to the Justice Department (Cullen & Parboteeah, 2013). The company also failed to come clean with the media or public regarding its dirty deals until when the media investigations compelled it. A crisis poses significant threats to the image and survival of a firm (Ulmer, Sellnow & Seeger, 2013). The power of media implies that news spread swiftly but with effective crisis management skills, a firm can reduced the damage. Wal-Mart focused on the damage than addressing the wrong-doing even after proof of corruption surfaced. The Company’s leadership swept the misdeeds of the Company under the rug notwithstanding strict advice from internal investigator and general counsel. Even with the considerable damage that had already been done to the company, Wal-Mart could have surrendered itself to the Mexican and U.S authorities. The complicity and cover-ups for the wrongdoing resulted in high penalties because the company failed to set up an ethical tone once the scandal was disclosed. The firm lacked a crisis management plan. According to Heat and O’ Hair (2010), effective crisis response entails management and not resolution. The company leadership failed to accept wrong-doing which later incurred increased penalties that further damaged the reputation of the firm. According to Blyth (2009), crisis leaders should have experience and knowledge to manage a crisis incidence effectively. They need balance between decisive and swift actions. Concealing wrong-doing by the firm’s executives further damaged the reputation of the firm. Through hiding wrongdoing, Wal-Mart failed to intercept the adverse outcomes. Cooperation and self-disclosure instigate lenient treatment. However, because the company chose to ignore the benefits of self-disclosure, it subjected itself to more reputational damage. Wal-Mart was not aggressive enough to safeguard and prevent risks and threats to its reputation. Safeguarding the reputation of the company could have been achieved through effective crisis management strategies. The company did not have feasible strategies to keep the crisis under control. Wal-Mart created a watchdog almost seven years after the discovery of its corruption scandal to ensure compliance with FCPA rules (Cullen & Parboteeah, 2013). . The company should have prevented the scandal had it integrated the proactive compliance with its long-term business plan. Powerful compliance programs should have been established earlier to prevent bribery before it took place. According to Kuneuther and Useem (2009), response to a crisis is much more effective when it has been organized, readied and planned in advance. Two forms of intervention in crisis management entails taking actions or implementing strategies to prepare the capability of response and when the crisis takes place, respond reliably and efficiently. The internal investigations that were initially conducted by the company were not credible because even after finding enough proof of corruption, the company swept it away. More so, the general counsel of the company who given the responsibility for the investigation cleared the Wal-Mart executive in Mexico making the process to lack credibility (Cullen & Parboteeah, 2013). Initially, the company performed everything in the right way through hiring an outside law organization to propose a wide-ranging inquiry. However, rather than letting the outside law firm continue with the inquiry, Wal-Mart sent the inquiry back. The firm placed one of its leaders who were supposedly involved in the scandal in charge of the investigation (Cullen & Parboteeah, 2013). Making a person alleged to have been participating in the corruption scandal to take charge of the inquiry jeopardized the credibility of the investigation thereby further tarnishing the image of the firm. In addition, the company even after finding proof of wrongdoing did not implement effective remedial strategies through dismissing and terminating the involved employees. The company did not communicate to its stakeholders and shareholders about the crisis. After the discovery of the bribery allegations, Wal-Mart failed to reveal the issue to its shareholders and stakeholders. Failure to disclose the information led to the loss of confidence in the firm. The company should have reported the misdeed up to the command chain. The company risked facing expensive and harmful derivatives actions from its shareholders. According to Ulmer, Sellnow and Seeger (2013), managing crisis entails communicating with stakeholders to maintain and construct perceptions of reality. Creating renewal entails leaders inspiring stakeholders to stay with the firm throughout the crisis besides rebuilding the firm better than it was before. Communicating the crisis to the media and public as honestly and quickly as possible is paramount. Effective and honest communication facilitates control of the message an aspect that helps in controlling the crisis and preventing it from becoming a major issue. The stakeholders should not be allowed to learn of a crisis via media as this creates an inconsistency and increased damage to the image of the firm. Conclusion An effective crisis response is designed to repair a firm’s damage image. Crisis management plans teach appropriate response actions that uphold or restore the image of a firm. Crisis leaders should hold the experience and knowledge to respond productively to a crisis situation. As a result, a response to the crisis can be said to be effective if it uphold or helps to repair the image of a firm. The bribery scandal that faced Wal-Mart in 2012 was not addressed adequately. Apparently, several years back, Wal-Mart discovered the corruption scandal but failed to report it to the department of justice. More so, the company did not employ aggressive strategies to prevent the threat and risks to its reputation through conducting credible investigation and punishing the culprits. In addition, that the company failed to communicate the crisis to its stakeholders and shareholders an action that led to the loss of confidence in the firm and its leadership. In this regard, Wal-Mart was ineffective in its crisis response. References Blyth, M.(2009). Business continuity management: Building effective incident management plan. UK: Wiley. Cullen , J., & Parboteeah, P.( 2013). Multinational management. UK: Cengage Learning. Heath, R., O’ Hair, D.(2010). Handbook of risk and crisis communication. UK: Routledge. Kunreuther, H., & Useem, M.(2009). Learning from catastrophes: Strategies for reaction and response. India: Pearson Prentice Hall. Ulmer, R., Sellnow, T., & Seeger, M.(2013). Effective crisis communication: Moving from crisis to opportunity. UK: SAGE Read More