Tyco

Case Study 22: “Wal-Mart: But we do give them a 10 percent employee discount”

In this case study, Stanwick & Stanwick (2009) give the reader a synopsis into the allegations and ethical issues which the giant retailer Wal-Mart has been facing since the end of the twentieth century. Wal-Mart is being accused of asking their employees to work off-the-clock and not paying them for this work, for not paying its employees overtime when it was the case, for discriminating against women, for not offering affordable health insurance to its employees, for being anti-union, for using illegal immigrants, and violating child labor laws or partnering with foreign companies which did not follow fair labor practices. Many of these issues have resulted in severe criticism, class-action lawsuits, and millions of dollars in settlements that Wal-Mart had to pay to current or former employees. I would like to start by addressing the Questions for Thought posed by the authors: 1. Are the ethical issues Wal-Mart faces really any different from other large retailers? The issues described by Stanwick & Stanwick (2009) are not unique to Wal-Mart. Many other retailers and business organizations have been alleged and sometimes proven guilty of the same unethical or illegal practices. For example, in January 2006, MSNBC, published an Associated Press article about a lawsuit filled against IBM for not paying overtime to their employees (nbcnews.com, 2006). In the same article, it is revealed that previously, Computer Sciences Corp. and Electronic Art Inc. agreed to settle lawsuits who brought the same overtime allegations against them, and that this practice is common in the technology industry. In May 2012, Huffington Post found that a former Taco Bell manager was alleging the fast food chain was making employees to work overtime without pay (huffingtonpost.com, 2012). Wal-Mart is also not the only business who has been accused of discrimination against women. According to The Wall Street Journal, in February 2011, the U.S. division of Toshiba was sued for discrimination against women over pay and promotion (wsj.com, 2012). General Electrics, Abercrombie & Fitch, Denny’s restaurants, and Wal-Mart have also had lawsuits filled against them for racial discrimination (about.com, n.d.). In 2012, the Department of Labor filled a lawsuit, and won, against an Ohio Subway restaurant owner for violating labor laws: paying less than the minimal wage, failing to pay overtime to employees, and having minors work in hazardous conditions (tribtoday.com, 2012). Many other companies have been accused of using child labor or contracting with companies who use child labor and violate labor laws: Samsung, Dell, HP, IKEA (chinalaborwatch.org, n.d.). 2. Wal-Mart officials have stated that they don’t feel women are interested in management positions at the company. Do you agree or disagree? I have a hard time believing that the leadership of Wal-Mart, who was capable of turning this retail business in one of the largest private employers in the world, would genuinely believe that in the twenty-first century women are not interested in management positions with the company and this is the reason behind Wal-Mart’s low number of women in managerial positions. Additionally, the facts presented by Stanwick & Stanwick demonstrate that Wal-Mart did not have a policy about making management positions available to everyone in the organization, and that woman were indeed being paid less than men for doing the same job. The description of how Wal-Mart’s male employees looked and thought about their female counterparts are inevitably a reflection on the company’s philosophy, because even if it is expected that some individuals would have this type of discriminatory ideas, it is not acceptable for the company who employs them to not address this issue. 3. Wal-Mart is continually criticized for its healthcare policy. Is this really an ethical issue? Why or why not? Along with the many other ethical allegations against Wal-Mart, I can see how some would add the company’s healthcare policy to the long list of practices that makes Wal-Mart a controversial employer who does not always promote fairness and responsiveness to its employees. However, I do not believe weather a company offers or not healthcare benefits is an ethical issue. According to an article posted by the Yale Journal of Medicine and Law, the healthcare benefits started being offered by employers after World War II as a way to draw employees to their companies and compensate for the cap that President Roosevelt put on wages (yalemedlaw.com, 206). I consider that to this day, health benefits are just this: a benefit which comes in the same package with annual leave, sick leave, retirement benefits, option to telecommute, etc. It is true that as a developed nation, U.S. should have a healthcare policy that gives Americans access to not only quality healthcare but also makes it affordable. And yet, I consider this national problem should not be imposed on companies. This is not to say that Wal-Mart and other multibillion dollars companies cannot afford to offer more affordable health insurance or pay their employees’ overtime, but this is not an arguable reason to make the option of offering health benefits an ethical issue, or even create legislation that will make private corporations offer health care benefits. 4. Should Wal-Mart be concerned about unionization of stores since allowing unionization of workers in China? I consider Wal-Mart’s agreement to allow Chinese workers to unionize was a political and strategic decision; one that Wal-Mart was forced to agree to. For Wal-Mart, China represents a large and growing market, with significant increase in household income, plus a low cost supplier of products which Wal-Mart sells to its outlets from around the world. In this situation, Wal-Mart had no other choice but to give in to the pressure the Chinese government, which supports the All-China Federation of Trade Unions, placed on the world’s largest retailer. The possibility of employees wanting or attempting to unionize to achieve greater gain will continue to exist, in the same way as Wal-Mart’s position of being anti-unions is set and firm. The company will continue to look for ways to discourage employees from organizing or joining a labor union because it will come at a great price. Wal-Mart’s success will depend in a large part on the political and economical forces that will be played out at a given time, and its willingness to compromise will come only if it will not come with a loss of profit. This case study makes me think about the idea Milton Friedman put out in 1970 that “The social responsibility of business is to increase its profits” (as cited in Stanwick & Stanwick, 2009, p. 34). Wal-Mart’s practices, as described by Stanwick & Stanwick, reveal the company’s philosophy of maximizing profits while minimizing operational costs. Friedman argued that while managers have the responsibility of increasing the profitability of the company, they are also responsible for helping employees accomplish their personal goals “within the legal rules and ethical customs of society” (as cited in Stanwick & Stanwick, 2009, p. 34). This last part of Friedman’s argument appears to be a ‘gray area’, one that Wal-Mart and its managers appear to have interpreted in their favor. After all, the company offers minimal wage salaries, health benefits, and an employee discount. And yet, Wal-Mart’s focus, as exemplified in this case study, appears to be on lowering operational costs. More than this, the company encourages its store managers to engage in these type of unethical practices (such as one-minute clock-outs, lock-in procedures, off-the-clock work, and unpaid overtime) by compensating them with annual bonuses based on the profitability of the stores, which is directly related to lowering operational costs and not paying overtime to its employees. These practices are clear examples of Wal-Mart’s failure to act and promote fairness and responsiveness to its employees, and fulfill their fiduciary duty. Wal-Mart’s official position to these allegations also reveals that the company, as well as its managers, acted in an immoral manner: the employees were seen just as a way to achieve high profitability for the stores and for the managers to receive their monetary compensations even if this entailed violating laws and leaving aside ethic and moral principals by locking employees down to finish their work, but not paying them for it. In other instances, Wal-Mart and its store managers appeared to follow legal requirements at a minimum, as evidenced by their defensive statement which said the company broadcasted a video to inform managers that one-minute clock-out is against the corporate policy. A corporation is responsible for more than just creating a policy. A company is responsible for ensuring policies and laws, ethical principals and regulations are being understood and put in practice by all members. Wal-Mart’s official response about not promoting more women in management positions is just an excuse and an encouragement for those male managers who reportedly believed that men have to support their families while women are working just to make some spending money. In my opinion, Wal-Mart is guilty of discriminating against women though its failure to align its corporate policies with societal developments and address this issue in a deliberate and consistent manner. As far as the argument against Wal-Mart that it does not offer affordable health benefits to its employees, I do not find it to be an ethical issue for the reasons stated above. More than this, it is not against the law for a small or large company to not offer health insurance. And the reality is that many companies do not offer it because it comes with a very high cost for the organization, or over the past few years, if they do offer it, it comes at a very high cost. For example my employer offers healthcare benefits but the monthly deductible for my family totals 40% of my monthly gross income. However, the measures suggested in the memo sent to the Wal-Mart board of directors designed to cut costs to cover for the cheaper healthcare benefits announced in 2005, are indicative of illegal and unethical practices. And yet, I find this to be representative of the situation that companies across the country are facing and the unorthodox measures they are deciding to take in order to continue to offer these benefits. I believe Wal-Mart’s position of being against its employees joining unions and the actions its management has engaged in to discourage employees from exercising their right to organize, is a violation of the National Labor Relations Act (Warner Act). Unionization is a huge threat for Wal-Mart, which in 2010 had 2.1 million employees worldwide (cnnmoney.com, 2011). A union would translate for Wal-Mart in a huge raise in labor costs, which the corporation is already keeping under the industry average (Stanwick & Stanwick, 2009). As evidenced by its decision to accept Chinese workers to join unions, Wal-Mart will compromise only if it will ultimately have a financial gain. The allegations brought against Wal-Mart for violating child labor laws, fair labor laws, and using undocumented workers as janitors in their stores are just solidifying the idea that overall, Wal-Mart will not hesitate to engage in unethical and illegal practices, even if this comes with a price. My assumption is that due to its size and revenue, Wal-Mart finds acceptable to “cut corners” and continue its expansion around the world, and will take only absolute necessary and minimal action to address issues of corporate social responsibility. And yet again, this Wal-Mart case study is offering a glimpse at some corporate practices which are not always promoting integrity, fairness, and ethical actions; which are not always responsive to all their stakeholders’ needs; which are breaking laws or just doing the minimum required by law; and which exploit others for personal or corporate gain and profitability.

Resources
About.com. (n.d.). Top companies hit with racial discrimination suits. Retrieved from http://racerelations.about.com/od/theworkplace/tp/Top-Companies-Hit-With-Racial-Discrimination-Suits.htm
China Labor Watch. (n.d.). Tragedies o globalization: the truth behind electronics sweatshops. Retrieved from http://www.chinalaborwatch.org/pro/proshow-164.html
CNNMoney.com. (2011). Fortune 500. Top Companies. Retrieved from http://money.cnn.com/magazines/fortune/fortune500/2011/performers/companies/biggest/employees.html
Huffington Post. (2012). Ex-Taco Bell manager alleges chain forced employees to work unpaid overtime. Retrieved from http://www.huffingtonpost.com/2012/05/03/taco-bell-sued-overtime_n_1474482.html
NBC NEWS. (2006). IBM accused of not paying overtime to workers. Retrieved from http://www.msnbc.msn.com/id/11009274/ns/business-us_business/t/ibm-accused-not-paying-overtime-workers/
Stanwick, P. A., & Stanwick, S.D. (2009). Understanding business ethics (1st ed.). Upper Saddle River, NJ: Prentice Hall.
The Wall Street Journal. (2012). Toshiba accused of gender discrimination in U.S. Retrieved from http://blogs.wsj.com/digits/2011/02/01/toshiba-accused-of-gender-discrimination-in-us/
TribToday.com. (2012). Local Subway franchisee accused of violating labor law. Retrieved from http://www.tribtoday.com/page/content.detail/id/567601/Local-Subway-franchisee-accused-of-violating-labor-law.html?nav=5003
Yale Journal of Medicine & Law. (2006). Learning from Wal-Mart: Is employee-based health insurance the optimal solution? Retrieved from http://www.yalemedlaw.com/2006/04/learning-from-wal-mart-is-employee-based-health-insurance-the-optimal-solution/