full version Ethical Issues: Wal-Mart Essay

Ethical Issues: Wal-Mart

Category: Business

Autor: auto66 27 February 2010

Words: 2790 | Pages: 12

“WAL-MART SUCKS …. Life out of our communities.” This bumper sticker became the start of a long thought process. As I researched and pondered this small and simple line, I decided that another should be added to this sticker. It should say, “Wal-Mart sucks… life out of our communities, our people, and smaller underdeveloped countries.” In this essay I will focus on one of the many ethical issues surrounding Wal-Mart, labor rights and the continuous circle of problems it can cause.
I chose this industry because as a new business owner, I am frustrated by the amount of business Wal-Mart takes away from my community. I live in a smaller town where Wal-Mart is the largest building within 30 miles. We have a historical downtown area where there are plenty of businesses that offer the same products Wal-Mart does, at reasonable prices too. If Wal-Mart were not in our community, I can only imagine what it would do for those businesses, and the people who run them. Since the start of my studies on this ethical issues paper, I realized that I am willing to pay $.10 more for a product I know is made and handled ethically on all sides. My business will now go elsewhere thanks to the realization brought about by this opportunity.
THE ETHICAL ISSUE
Labor Rights
The ethical issue is as follows. The Wal-Mart corporation forces workers in other countries to work for small incomes, sometimes as much as 30% below their countries own minimal wage (“End Wal-Mart”, 2007). Wal-Mart pays low wages and does not provide adequate health care options for its employees. Also, Wal-Mart expects high production which causes managers to encourage employees to work during breaks, therefore engaging themselves and the employees in unfair and unethical practices. The scope of Wal-Mart’s unethical practices extends all across the world. I would like to discuss just a few issues Wal-Mart has faces in the last 10 years dealing with executives who push employees to work overtime for free, and for hardly any money at all.
Wal-Mart defines sweatshop labor. In Bangladesh, workers at a factory that make shirts and pants sold in Wal-Mart stores, are required to work 12 hours a day, 7 days a week for pay ranging from 9 to 20 cents an hour ( Wal-Mart, 2006). In China, workers in Donguan Hongyuan shoe factory that produce products for New Balance and Wal-Mart are subject to horrible conditions (China Labor, 2006). They are paid $.41 an hour and are required to work 14-16 hour days. They are also forced to work 36 hours of overtime without the legally required overtime pay.
In Central America, James W. Lynn, a whistle-blower of the Wal-Mart company was fired after he made reports of violations in a factory over which he was an inspector. Lynn reported that workers were subject to mandatory 24-hour work shifts, padlocked exits, extreme heat, and no available drinking water or toilet paper ( Greenhouse, 2005). Wal-Mart fired him for a different reason. He sued the company. Workers at a similar factory in Honduras also complained about unsatisfactory conditions. Employees reported that managers were administering pregnancy tests, screamed at them and did not pay overtime (Greenhouse, 2005).
In Pennsylvania, in October of 2006, a lawsuit was settled in which over 187,000 employees were awarded approximately $ 78.5 million dollars in unpaid wages for work done while on breaks (Wal-Mart Employees, 2006). Managers required employees to work extra time in order to meet high demands for production. This is a great example of competitive pressures on profits which force managers to encourage employees to behave in ways that are unethical and illegal. In the above example a whistle-blower, Delores Hummel, came forward and was the lead plaintiff on the suit against Wal-Mart. Apparently she was fired because she complained about work conditions.
In 2002, executives at Wal-Mart were also in ethical violation of fair labor standards. They knew for years about these problems of fair labor at Wal-Mart. An internal Wal-Mart audit of one week of time records in 2000 from 25,000 employees had alerted Wal-Mart officials to potential violations. The audit found 60,767 missed breaks and 15,705 lost meal times. It also alerted Wal-Mart executives to 1,371 instances of minors working too late, during school hours, or for too many hours in a day (Greenhouse, 2002). Not only are workers required to work during breaks, but they are often paid way less than others in a comparative workplace. According to BusinessWeek ( 2007), associates for Wal-Mart earn 20% less than the average retail worker and $10,000 less than the basic needs income for a 2 person family. Executives are aware of these issues yet do nothing about them.
In an Oregon wage-and-hour case, a former personnel manager named Carolyn Thiebes testified that supervisors, pressured by company headquarters to keep payroll low, deleted hours from time records (on a regular basis) and reprimanded employees who claimed overtime ( Olsson, 2004). In 2000, Wal-Mart settled similar lawsuits involving 67,000 workers in New Mexico and Colorado, apparently paying more than $50 million in damages. At that time there were also 38 other similar lawsuits filed due to the same issues. Wal-Mart wanted its workers to work for free, until they started to get caught.

WHY?
When it comes to employees being tempted to “do the wrong thing”, the answer is simple. There is often times no other choice. Wal-Mart employees are often on welfare because they are not able to get a job otherwise. Wal-Mart can also get another employee to take the place of one that leaves, rather quickly. So many are left in the situation of either choosing to stick with the company, hoping to get a raise in position or salary, or to leave the company and deal with the hassle of finding another job. In these scenarios, Wal-Mart employees are forced to behave unethically simply because they have no other choice. They also face the possibility of being fired as Delores Hummel was, or losing their management position. Often time’s employees cannot afford this chance and stick with it because they have a family or other people to support. In the case of Judy Danneman, a widow with three children, the solution was just that. She knew if she wanted to survive she would have to climb the “management ladder” (Olsson, 2004). She said that working unpaid overtime equaled saving her job. When she was finally hired as an assistant manager she knew she had to expect the same thing from her employees. She said it was an unwritten rule. Overall, both employees and managers at Wal-Mart are forced into these situations by people even higher up than they are, to produce, produce, produce. There is not a lot of room to negotiate as cited by the examples above. It seems at Wal-Mart, behaving unethically is a vicious cycle that has not been forced to stop. Yet.
What about Wal-Mart? I would like to present the possibilities of why Wal-Mart has chosen and still chooses to do what it has done. Wal-Mart is ranked number 1 in the 10 largest corporations for 2002-2003 (Lawrence, Weber, & Post 2005). It is easy to see from this perspective why Wal-Mart has not done more to solve the many issues it faces. Wal-Mart serves over 176 million customers a week and is a leader in the stock market. With that much financial influence, Wal-Mart can remain in control even with all of the issue facing them.

SO WHAT NOW?
In 1992, Wal-Mart established an Ethical Standards Program and “…has worked to strengthen and make it an effective tool for improving conditions for workers in supplier factories that manufacture products sold in our store” (Ethical Standards, n.d.). In 2004, according to that report, the company cut off 1,200 factories for at least 90 days because serious violations were found on two separate visits. Another 108 factories were permanently banned because of child-labor violations (Greenhouse, 2005). In 2004, they also added “Guiding Ethical Principals” which are supposed to assist employees and suppliers in making the right decision and doing the right thing. Some of the principals include reporting ethical violations, never acting unethically-even if prompted to do so, and never asking someone else to behave unethically. Interesting enough, this Ethical Standards and Principals section coming from the Wal-Mart homepage were all I could find in support of ethical principals by Wal-Mart. Several sources supported Wal-Mart’s capacity to provide jobs, but many did not have anything positive to say about the ethical labor practices (or lack thereof) involved in these jobs.
However, this year Wal-Mart announced plans to open over 400 in-store health clinics and to alter employee insurance plans in an effort to increase access to health care for its workers. Changes will include a reduced waiting period for part-time employees, designating children of part-time employees as eligible for health coverage, and expanding the lowest cost health care option (Wal-Mart Planning, 2007). Some people think this is just a way for Wal-Mart to cover up its bad image. It will be a great benefit to Wal-Mart employees if this works out because not only will increase better labor practices, but workers will be entitled to something they should have received when Sam Walton opened the doors for business.

IMPACT ON BUSINESS WORLD
“Low Prices. Always” A familiar phrase seen every day by most people. The low prices come from not only from the horrible labor practices by executives and managers but from the conditions of factories all over the world. What does this mean for the business world? These “Low Prices. Always” mean no prices for smaller businesses and other retailers. It also means suffering and welfare for those who work for the company.
The backlash of these unethical labor practices by executives and managers is seen not only in the physical workplace, but in the global workplace as well. Because employees all over the world are required to work for such low wages for so much time, Wal-Mart is able to infiltrate communities everywhere. People always need jobs, and places to shop. Wal-Mart’s are springing up everywhere, even in communities where they are not needed or wanted.
As I was getting ready to research a little further into this subject, an article appeared on MSN which fit quite nicely into this discussion. The headline read, “The ‘Wal-Mart Effect’ Strikes Again.” Last Black Friday, popular items on sale were plasma screen TV’s selling at below $1,000. No other company was able to compete with that price. Since, fallout from this measure is obvious. According to Business Week (2007), companies such as Circuit City, Rex, CompUSA, Tweeter Home Entertainment Group, etc… are all being forced to close stores and lay off employees because there is no obvious hope for the future. These, among other retailers are all blaming what they call ‘The Wal-Mart Effect’ that is, the Superpower of retail chains.
The emergence of Wal-Mart supermarkets into smaller communities with hometown stores, has forced them to go bankrupt. Even huge toy companies like FAO Schwartz and KB Toys have been forced into bankruptcy because of the steep discounts Wal-Mart offered on popular toys (Gogoi, 2007).
It is important to note that communities are starting to do something about it. For example, voters in Inglewood, California did not pass a bill which would allow Wal-Mart to invalidate city codes in order to build a supercenter. It is also interesting that in 2004 Wal-Mart planned to open 40 stores in California but since has only opened 1 unopposed (Wood, 2004).
Wal-Mart’s underpaid employees and gross violations of ethical labor standards means more people relying on the government for support. Interestingly enough, Wal-Mart won an award in 2004. Wal-Mart was named as one of the “10 Worst Corporations of 2004” (Wal-Mart Named, 2005). Reasons they “won” this award came from paying employees $8.23 per hours as opposed to the $10 an hour average for a supermarket worker, removing off-the-clock work from employees, and providing unaffordable and inadequate healthcare. It was also mentioned that a Wal-Mart store consisting of 200 employees ends up costing the federal tax-payer $420,750 per year because so many of the employees are on housing assistance and receive deductions and tax credits for their low income. If Wal-Mart does open the in-store clinics they say they plan to, these numbers should drop heavily.
It is easy to see how the “roll-off” from bad labor habits and unethical behaviors from managers and executives in stores and factories impact not only the business world, but the individuals’ world as well.

RECOMMENDATIONS
There is a fundamental and inevitable conflict between the interests of corporations, to whom wages are a cost, and most human beings, to whom wages are a means of survival. Nowhere in this society is that conflict better illustrated than at Wal-Mart. Most of its employees and most of its customers depend on their paychecks to pay the bills. But to keep its shareholders in the money, the company depends on hyper-consumption. It is a complete circle with no end.
Wal-Mart has the ability to impact business as usual because of their large numbers of direct suppliers (No Boundaries Wal-Mart clothing brand) as well as indirect suppliers (Mattel Toys) (Cox, 2003). Wal-Mart is leading the global race to the bottom in wages and working conditions. It has taken advantage of global trade rules that allow full access to the U.S. market (globalization), even if products are made under conditions of extreme oppression as mentioned above.
In order for Wal-Mart to improve conditions for its workers, and factories, it must first essentially alter its business practice of demanding a continuously lower price from supplier factories. These prices that Wal-Mart demands are prices which render those factories unable to pay workers a reasonable living wage. Further, Wal-Mart should commit to supplying from factories in which workers have a representation and the right to bargain with their employer. Also, Wal-Mart should open its supply chain to independent monitoring so that factory and store assessments may take place randomly in order to assess the quality and safety of each factory and store. These random assessments may force managers and executives to keep on their toes when it comes to several aspects of the business routine. It is key for managers to ensure the well being of all employees. This involves allowing workers to leave when needed, to get paid correctly, and ensure the safety of each individual both in the physical stores and in the factories it buys from.
All in all, Wal-Mart has the ability to change its practices but does not seem willing enough to do so. I feel Wal-Mart knows they are so “large and in charge”, so the corporation has no need to do better. I picture the board sitting at their annual meetings to go over the complaints and abuses smiling because those complaints are mere ants in the world of Wal-Mart. It is not fair to employees being paid $.41 an hour to not have representation or adequate compensation for the unethical practices done by their managers. If Wal-Mart wants my business and the business I take with me from friends in family that support me in my findings, they better do something more because Wal-Mart’s unethical labor practices are the high cost for low prices.















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