Impact of Business Environment on Ethical Decision Making - Essay Example

Wal-Mart: A Case Analysis Table of Contents I. OBJECTIVE 3 II. INTRODUCTION 4 III. SOURCE OF THE ETHICAL CONFLICT, IFICATION OF THE ETHICAL ISSUE 5 IV. IMPACT OF BUSINESS ENVIRONMENT ON ETHICAL DECISION MAKING 7 V. ETHICAL DECISION MAKING FRAMEWORK 9 VI. WAL-MART AND THE ECONOMY 11 VII. ANALYSIS OF CORE PROBLEMS AND CONCERNS 13 VIII. RECOMMENDATION / CONCLUSION 14 IX. REFERENCES 15 Objective Wal-Mart Stores Inc. has been in the forefront of complaints and suits from various sectors, human rights activists, environmentalists, labor unionists, feminists, and others. But Wal-Mart management counters that they are being singled out because of their size. Rightly so, because today, Wal-Mart is the world’s largest retailer as well as the world’s largest employer with more than 2 million associates (employees) and “serving more than 200 million customers per year”. It has 7, 390 stores and their Sam’s Club locations in 14 markets. (Wal-Mart About Us, 2008) This essay will discuss Wal-Mart’s success as an organization and its ethical problems and conflict with the rest of the consuming public. We will also discuss other complaints and so-called human rights violations committed by the company, and how this huge-sized company is able to proceed working and operating for its consumers with its everyday low price strategy. Introduction Success comes in many forms, and not without sacrifices and a price. For Wal-Mart, this happens in the course of suits, public hatred at times, and more and more complaints coming from the very core of its business, the public. How Wal-Mart overcame and reached to where it is now is the subject for this paper. Wal-Mart Stores Inc. is a success story as we all know. Its accelerated rate of growth is phenomenal that after it opened its first variety store in 1945 and successive opening of other variety stores, discount store, supercenters, and supermarkets, the family of Wal-Mart founder Sam Walton has now a combined fortune of about $90 billion. (Ferrell, Fraedrich, & Ferrell, 2008, p. 394) In its website, the story is told that Wal-Mart began when it opened its first discount store in Rogers, Ark. in 1962. Five years later, there were 24 Wal-Mart stores ringing up $12.6 million in sales. In 1972, when it opened its stocks to the public in the New York Stock Exchange, it had 276 stores in 11 states. (Wal-Mart History Timeline, 2008) Wal-Mart Stores comes in three sizes: discount stores, which are about 100,000 square feet; supercenters, which are about 187,000 square feet; and the neighborhood markets, which are about 43,000 square feet in size. (Ferrell et al., 2008, p. 293) What makes Wal-Mart unique that can be attributed to its business success at an accelerated rate? Its business strategy is unique than many businesses. Wal-Mart’s business strategy is: 1.) “To deliver a broad assortment of quality merchandise and services at everyday low prices (EDLP); 2.) “To foster a culture that claims to reward and embrace mutual respect, integrity, and diversity.” (Ferrell, Fraedrich & Ferrell, 2008, p. 292) It fosters belief for the individual, service to their customers, and striving for excellence. (Ferrell et al., p. 292) Source of the ethical conflict and classification of the ethical issue: Wal-Mart’s critics include feminists, human rights activists, anti-sprawl, activists, and labor unions. The controversies are its alleged “not-so good” treatment of its employees, suppliers, the environment, and the overall economic impact on communities. One major issue: Wal-Mart has engaged in misconduct to provide low prices to consumers. Some other complaints that resulted to suits, sometimes class suits, are the following: 1. Where Wal-Mart enters the market, small competitors close shop and so employees lose jobs. 2. Payroll wages per person declined by almost 5 percent where Wal-Mart stores are located due to its driving down wages. 3. Wal-Mart Watch released a document that showed 46 percent of Wal-Mart employees’ children were on Medicaid or uninsured. (Ferrell et al. 2008, p. 293) Wal-Mart Watch, in its website, says that it conducted a nationwide education campaign “to challenge the world’s largest retailer, Wal-Mart, to become a better employer, neighbor, and corporate citizen.” (Wal-Mart Watch, 2005) Wal-Mart employs technology which is the driving force for its operational efficiency. Radio Frequency Identification or RFID is a merchandise-tracking sys tem which tracks a product from the time it leaves the supplier’s warehouse to the time it enters and leaves a Wal-Mart store. This technology costs one supplier about $9 million to install and implement but Wal-Mart insists that its suppliers install annually install it, while what Wal-Mart only needs is a system to read the tags. (Ferrell et al., 2008, p. 294) Moreover, RFID tags can determine if there are enough stocks or a store needs replenishment. This also results in time and labor savings because associates or Wal-Mart employees don’t have to look physically if there are enough stocks in the shelves. “The scanners tag incoming pallets and translate that data into supply chain-management database.” (Ferrell et al., p. 295) A lot of suppliers depend on Wal-Mart for sales, so that Wal-Mart can dictate terms to its vendors. But there is something positive in this strategy of Wal-Mart: Suppliers become more efficient and streamlined. However, some suppliers say that Wal-Mart is hurting their business. One example is Snapper, a manufacturer of high quality residential and commercial lawn equipment. Wal-Mart insists that Snapper manufacture low-cost lawn mowers specifically for Wal-Mart market, just like Levi’s when it did with its Signature brand specifically for Wal-Mart consumers. But CEO Jim Weir of Snapper would not concede to Wal-Mart. He said he wanted to concentrate with the other independent dealers of Snapper. Other suppliers closed shop because of Wal-Mart. One of these is Rubbermaid, once Fortune’s most admired company, which closed shop due to Wal-Mart’s insistence of low prices and its reluctance to allow it to increase prices when the cost of raw materials increased. Other companies like Master Lock, Fruit of the Loom, and Levi’s have moved productions overseas of the expense of U.S. jobs due to Wal-Mart’s low price market. (Ferrell et al., 2008, p. 296) Impact of the business environment on ethical decision making Sixty-seven percent of Wal-Mart employees are women, but only 10 percent of top-store managers are women. A sex-discrimination class action was filed involving 1.6 million current and former female employees of Wal-Mart. They charged that Wal-Mart discriminated against women in promotions, pay, training, and job assignments. (Ferrell et al., 2008, p. 298) However, in its website, Wal-Mart claims that this is not so. Wal-Mart, according to the site, fosters diversity, and that its close to 2 million associates, with more than 40 percent women, can attest, “working for Wal-Mart is the chance to be a part of a company unlike any other in the world.” (Wal-Mart careers, 2008) Wal-Mart discriminated against disabled employees when two deaf applicants were denied employment because of their disabilities. Wal-Mart settled the case for $132,500 and agreed to hire the two men. It also agreed to make corporate changes in its policies of hiring disabled employees. But Wal-Mart failed to comply some of the stipulations in the court order and was again fined $750,200, and was ordered to produce and air a TV ad for violating the Americans with Disabilities Act, and reinstate disabled worker William Darnell. Some other violations of Wal-Mart include violation of ADA provisions, and Wal-Mart made out-of-court settlements. Others pertain to its international branches; that Wal-Mart operates stores abroad with sweatshop conditions. Branches with complaints are those from Bangladesh, Swaziland, Indonesia, China, and Nicaragua, for minimum wage violation and even beatings by supervisors. Some California workers complained that because of Wal-Mart, their employers pay them less. A class suit could be built up here. Some stores across the United States also were caught hiring illegal immigrants; 250 of them had been arrested. Scores of illegal immigrants have been caught working in stores and construction sites owned by Wal-Mart. Wal-Mart only allows a minimum of 28 hours for a full time employee. The taxpayer has to pay the difference to cover living expenses, costing taxpayers’ money of about $2,103 per employee. Wal-Mart does not provide health insurance to 60 percent of its employees. Part-time employees are not eligible for the health-care program. When Wal-Mart enters a town or area, a downward trend of low wages and benefits ensues. Wal-Mart has received more than $1 billion in public subsidies for building its stores. This is because when it enters town, chances are many stores and business establishments close shop causing many local residents to lose job. Wal-Mart does not allow unions to flourish in its stores. Founder Sam Walton believes unions are a “divisive force and would make a company uncompetitive.” (Ferrell et al., 2008, p. 299) Environmental issues against Wal-Mart: Alleged violations of Environmental Protection Agency (EPA) stormwater regulations. “Wal-Mart settled the dispute without admitting any wrongdoing or violations of the regulations by paying a $3.1 million civil penalty and agreeing to implement a Supplemental Environmental Project valued at $250,000.” (300) The state of Connecticut filed suit for “violation of state environmental laws and for failing to maintain the required records relating to stormwater management practices at twelve stores.” Again Wal-Mart “settled the suits without admitting any wrongdoing or violations … by paying $1.5 million.” (Ferrell et al., 2008, p. 300) Other violations involved air-quality restrictions at various locations, restrictions on the amount of time that truck engines are allowed to idle, California statutes regulating hazardous waste- and hazardous materials-handling practices, etc. Other issues involved transportation, handling identification, recycling, treatment, storage and disposal of certain merchandise that constitutes hazardous materials or hazardous waste. “There are concerns about the number of acres of green space in a city that can be devoured by Wal-Mart constructing a new store.” (Ferrell et al., 2008, p. 301) Abandoned Wal-Mart stores are left just as they are. Ethical decision-making framework Wal-Mart made its move, don’t want to be just caught off-guard with all the suits and complaints coming in left and right. Wal-Mart issued the Guiding Ethical Principles to assist its associates and suppliers with making the right decision and doing the right thing: 1. Follow the law at all times. 2. Be honest and fair. 3. Never manipulate, misrepresent, abuse, or conceal information. 4. Avoid conflicts of interest between work and personal affairs. 5. Never discriminate against anyone. 6. Never act unethically – even if someone else instructs you to do so. 7. Never ask someone to act unethically. 8. Seek assistance if you have questions about the “Statement of Ethics” or if you face an ethical dilemma. 9. Cooperate with any investigation of a possible ethics violation. 10. Report ethics violations or suspected violations. In addition to these, Wal-Mart experimented on two environmentally friendly stores which provide space for environmental stakeholders (engineers, architects, designers, contractors, etc.) to work together to find ways for an environmentally-friendly atmosphere. The new stores feature experimental urban forest, water conservation, wind turbines, etc. Wal-Mart also partnered in 2005 with the National Fish and Wildlife Foundation for the preservation of wildlife habitats and committed $35 million for the next ten years “to conserve one acre of priority wildlife habitat for every acre developed for company use.” (302) Wal-Mart also enforced measures to conserve electricity through reducing demand during peak hours and controlling heating and cooling, efficient lighting systems; partnered with Rocky Mountain Recycling in 2005 and introduced an innovation the solid waste and recycling industry. “In 2001 to 2006, Wal Mart facilities in the United States have recycled 36,378 tons of plastic.” (Ferrell et al., 2008, p. 303) It implemented pilot programs to other stores across states, introduced the Wal-Mart recycling challenge for kids, paying $5 for every sixty gallon bag of plastic bags, and also paid over $28,000 to schools for the program. In 2005, Wal-Mart won the Waste News Environmental Award. Wal-Mart and the Economy Wal-Mart’s success helps the U.S. economy. Its success in implementing low prices is due to “higher levels of capital investment in distribution and inventory control assets, operational excellence, advanced information technology, low import prices from China, and greater efficiency in its whole supply chain.” (Ferrell et al., 2008, p. 304) During the period 1985-2004, Consumer Price Index measured a 3.1 decline in overall consumer price. Although there was a 2.2 percent decline in nominal wages, during the period, there was still a real disposable income of 0.9 percent. This was associated with Wal-Mart’s lower prices for consumers and for creating 210,000 jobs nationwide. The independent economic analysis firm Global Insight, can attest to this: that Wal-Mart’s entry in the retail sector has led to lower prices for the U.S. consumer. (Ferrell et al., 2008, p. 304) Wal-Mart also made contributions in cash and relief efforts to disasters, like in the Hurricane Katrina, it responded quickly and efficiently, contributing $17 million in cash to the hurricane relief effort, $3 million in merchandise, aside from the $15 million to the Bush-Clinton Katrina Fund, $1 million to the Salvation Army, and $1 million to the American Red Cross. It also gave $8.5 cash assistance to its associates affected, and aside from helping other shelters and organizations, dispatching truckloads of water, food and other supplies, and pallets of clothes to help thousands of victims and evacuees. Wal-Mart says it is doing everything to improve its image, and that it is just being singled out because of its size. In its website, it says the Wal-Mart Foundation donated a total of $3.6 million in grants to 12 organizations who are supporting the country’s veterans “get access to education, afford college, adjust to civilian life and successfully graduate.” (Wal-Mart Foundation) In 2008, Wal-Mart announced that it has provided close to $8 million in scholarships. (Wal-Mart Helps Students Pay for College) Some of the controversial points for and against Wal-Mart: “‘Some well-meaning critics believe that Wal-Mart Stores today, because of our size, should, in fact, play the role that is believed that General Motors played after World War II. And that is to establish this post-World War middle class that the country is so proud of … The facts are that retail does not perform that role in the economy.’ Wal-Mart CEO H. Lee Scott “‘This is one of our nation’s great companies … The story of Wal-Mart exemplifies some of the very best qualities in our country – hard work, the spirit of enterprise, fair dealing and integrity.’ – Vice President Dick Cheney “‘It is extremely troubling when the vice president … praises a company that pays low wages and benefits, discriminates on the basis of gender, locks its own workers into stores at night, busts unions and violates child-labor laws.’ – Representative George Miller (D., Calif.) “‘It’s time for Wal-Mart to understand that their company practices run counter to the very values that make this country great – fairness, opportunity and equality.’ – Senator Edward Kennedy (D., Mass.).” (Ferrell et al. 2008, p. 305) Analysis of core problems/concerns There are valid grounds for the suits and complaints against Wal-Mart. This can be explained through its off-the-court settlement on the suits, and by paying the complainants and victims. Some of these suits that involve environmental abuse and neglect on the part of the Stores of Wal-Mart have evolved into class suits, and there is no recourse for Wal-Mart but to settle the case amicably, or pay the corresponding penalty, but with the condition that Wal-Mart would not be judged as guilty of the charge. It is also worth mentioning here that Wal-Mart has instituted reforms, and has shown to the world that it can abide by the rules, and be a partner of development even as it pursues its mission to its consumers for everyday low prices. It has implemented commendable measures to help the environment, by having some of its stores environment friendly. The contents of its website seem to be all for the good of the consuming public, and not just for its employees. Wal-Mart’s mission though is for everyday low prices for the consumers. It explains that Wal-Mart continues to work for low prices for its products and services. It is also worth nothing that Wal-Mart’s operations and management are one of the best and very commendable. It has grown in such an accelerated rate that it will continue to be a driving force in the retail industry, not only locally but also globally. Recommendation / conclusion There has been an overstatement to some of the issues against Wal-Mart, but as what has been said in the Introduction, Wal-Mart has been singled out because of its size. Be that as it may, Wal-Mart has a big responsibility to the American public and to the world in general. It has to be careful with its operations, especially now that it has gone global. Its responsibility to the general public and the environment cannot be just ignored. There is a big problem on environment abuse committed by big companies and businesses, and Wal-Mart should be in the forefront of enforcing measures to prevent this abuse. References Ferrell, O. C., Fraedrich, J., & Ferrell, L. (2008). Business Ethics. Boston: Houghton Mifflin Custom Publishing Wal-Mart About Us (2008). Retrieved November 12, 2008, from http://walmartstores.com/AboutUs/ Wal-Mart Careers (2008). Retrieved November 12, 2008, from http://walmartstores.com/Careers/ Wal-Mart Foundation helps national heroes earn college degrees. Retrieved November 7, 2008, from http://walmartstores.com/CommunityGiving/8768.aspx?p=231. Wal-Mart Helps Students Pay for College. Retrieved November 7, 2008, from http://walmartstores.com/CommunityGiving/8736.aspx Wal-Mart History Timeline (2008). Retrieved November 10, 2008, from http://walmartstores.com/AboutUs/7603.aspx Wal-Mart Watch (2005). Retrieved November 12, 2008, from http://walmartwatch.com/about Read More