Ethical Issues of Wal-Mart

The ethical issues of Wal-mart Introduction: A stakeholder is a person or a group that has an investment, share or interest in a business or an industry[1], it can also be classified as anyone that has an influence on the business. There are two types of stakeholders, primary and secondary. Primary stakeholders are necessary for the company’s survival, meaning people from the workers, supervisors, managers, to the customers, shareholders and board of directors; and secondary stakeholders do not typically engage in transactions with the company and therefore not essential to its survival, meaning the media, special interest group, etc.

Since they have an influence in the company when there are any changes, they become a very important asset to a business and industry. They can influence in the financial status of the business, the work load and so on. Wal-Mart has many different types of stakeholders that are involved in the company, within these stakeholders, it can be seen that there are similar treatments to the different groups of stakeholders.

The largest groups of stakeholders are the workers/employees. Wal-Mart employs 1. million men and women worldwide[2]. From the 1. 5 million, it can be seen that in this stakeholders, Wal-Mart treat male and female differently. They discriminate women. Within all the employees in Wal-Mart, only 10 percent of women are top manager and not to mention that having a lower pay in the same position of a man. Wal-Mart discriminate women in promotion, pay, training and job assignment[3], which they systematically denies. Wal-Mart also treats disabled employees differently.

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They had first agreed an amount of $132,500 for two deaf applicants, hiring them to make corporate-wide changes in the hiring and training of new employees who are deaf or hearing impaired. But in June 2001, Wal-Mart failed to carry on with their words of the original court order and therefore was fined $750,200 because of it. The employees at Wal-Mart work a minimum of just 28 hours to become a full-time. Having a wages amount of just a little higher than minimum wages, Wal-Mart reduces the employees their benefits such as housing assistance, additional child tax credit, insurance health programs, etc.

The employees’ wages can barely cover their living expenses, by cutting off the benefits, they hardly have money for anything else. Wal-Mart even cut them off with meal breaks and over time work pay, by deleting their record and even deliberately taking away their time cards. Employees, unlike the one mention above, illegal immigrants working as cleaning crews, have even worse pays. They have to work seven days a week and earning less than the minimum wages. Since they are illegal immigrants to the country, they will not have the benefit provided for employees even if it is available.

Wal-Mart employed these people because they knew that it will save money instead of legal workers, and therefore decided not to give them the correct amount in which the employees have worked for. Wal-Mart uses a EDLP selling method, and they insist that their supplier does the same in selling in a low price. They even force the suppliers into lower the price 5 percent from year to year, or else they would find another supplier. This force the suppliers into a corner and this in turn may lead to a closing of the company or even bankruptcy since there are not many incomes that can be earned.

The ex-vice president of Wal-Mart, Thomas Couhlin, after his resign, he still remains on the broad of directors. He uses Wal-Marts’ money for his personal use with an amount that is worth more than $10 million. Jared Bowen, a Wal-Mart vice president, discovered his doings and whistle-blowed him. Thomas Couhlin was then sued and was sent to jail, and Bowen was fired for being a whistle-blower. Wal-Mart does not have abilities to train and manage their staff and therefore causing the bad publicity and name to themselves.

From the information above, we can see that Wal-Mart rank their stakeholders similarly. The have the similar treatment of unfairness. Wal-Mart ignores the rights of the employees, and they have little control on the higher post staffs. Wal-Mart did not maximize the stakeholders’ wealth and value, they do not respect their business culture as much and uses forceful methods to get to an agreement. Why do you think Wal-Mart has had a recent number of ethical issues that have been in the news almost constantly?

Wal-mart is the largest retailer in the world, which is possibly the most controversial business in America. Its sales are over $312,000 billion in 2006 and approximately 1. 7 million employees around the world. Wal-mart has saves the average family an estimated $2329 per year[4]. Although Wal-mart is producing lower cost product to customer, but it also producing lots of ethical issues when it provides this benefit to their customers. Relatively low payment of Wal-mart employees:

Why Wal-mart can provide such a low price product, from my opinion, there are two main reasons. A company usually minimize its cost by lowest its labor cost and lower its cost when import product. The reason of why Wal-mart can minimize its labor cost is because in most Wal-mart store, Wal-mart is the monopsony, as a monopsony Wal-mart will be the single buyer of the labor force. As long as Wal-mart is the single buyer, they have a monopoly power to become a “wage maker” because the wage rate it must pay varies directly with the number of workers it employs.

As a monopsony, Wal-mart has such monopsony power at its maximum, it is because Wal-mart is the single employer in the labor market. [pic][5] From the figure above, we can see that when a monopsony like Wal-mart, they will employed labor at Qm and giving a wage of Wm, but from a normal demand and supply model, labor should be employed at point a which quantity at Qc and wage at Wc. As Wal-mart is the single buyer in the market, they will only employed Qm number of labor, which means Wal-mart is using its onopsony power to control the number of labor to lower the wage of their employee. From the figure above, wage should be related to the demand and supply curve, but the figure shows that the wage is lower than the wage of a labor should get, therefore Wal-mart is actuality using its monopsony power to producing an ethical issues of lowing the wage of its labors. The other problem shows at the figure is when Wal-mart is controlling the wage of its labors by controlling the amount of labor it employed.

But the figure shows that, the market could provide more labor force then Wal-mart employed, therefore, it means that the market do have labor force to produce more product but at the wage that Wal-mart decided, labor force is not fully used and provided an excess labor force. Therefore the ethical problem that Wal-mart produce is not just constrict labor to except a lower wage but also producing a waste in the labor market. As Wal-mart is a monopsony, an exclusive or craft union model would not be a good ideal to protect Wal-mart’s employees.

Therefore it is suggested that an inclusive or an industrial could be form to ensure the benefit of Wal-mart’s labors. A minimum wage which is higher then the equilibrium point should be set for Wal-mart and the all other oversea company that own by Wal-mart, this will make a perfectly elastic labor supply over the range of ac, therefore if Wal-mart wants to hires any labors, it would have to pay a wage of Wu. If Wal-mart does not meet the minimum wage, the labor market will supply no labor at all, this could product the wage of all labors that work for Wal-mart.

There is another case that Wal-mart is meeting the minimum wage but there is not enough working hours for its full time workers. Therefore apart from the minimum wage, a minimum and a maximum working hour should be set up too. This could be done by the union force too. [pic] Others ethical issues about employees The other ethical issues about employees of Wal-mart are about its female employees. Wal-mart has more than 67% of employs are female, but it only make up less the 10% of the top-store managers. It clearly shows the unfair working condition between male and female employees.

This issue had accreted the attention of the federal judge in San Francisco and made them granted class-action to a sex discrimination lawsuit against Wal-mart. Another issue that Wal-mart can provide such a low price product for customers is Wal-mart do run sweatshops overseas. These workshops are paying below minimum wage in that country, unpaid for overtime, relatively long working hours, and a extremely disgusting working environment. Apart from the problem above, there supervisors will even beat their labors in these sweatshops.

We can simply know that these are illegal but Wal-mart do have method to refuge with it. The common method is to form a shell company, the reason of Wal-mart doing this is they clearly know that it is an illegal immigrant. Therefore they are trying to make sure that no people working for Wal-mart were illegal immigrants. Other issues that Wal-mart can provide cheap product As I have mansion before, Wal-mart is economic of scale so that it can become a monopsony in the labor market, but also Wal-mart is also a monopsony in the product market too.

By using its monopsony power, Wal-mart has a larger power when they negotiate with their supplier. One of the example is Wal-mart is running a EFLP strategy, and it force their supplier to do so, therefore the cost of running this strategy will be shift from Wal-mart to their supplier. The reason of this is a non-ethical issues is because the strategy of Wal-mart took all the profit from their supplier and shift all the loss to them. Wal-mart also build the new branch for expansion on those small town to monopoly the business of the town, make those the small stores which doing business in the town is reduce the turnover.

Those issues are all because of Wal-mart who use the immoral and dirty tricks to get in hand of money, under the table of stakeholder issues and associated measures of corporate impacts, for employees, Wal-mart have not compensation and benefits, occupational hearth and safely and communications with management; for suppliers, they have not encouraging minority suppliers; for community, they have not conservation of energy and materials, donations and support of local organizations; and for environmental groups, they have not minimizing the use of energy, minimizing adverse environmental effects of goods and services.

As those many examples, the Wal-Mart’s image must be affected. And also in United States even do anything to upgrade their competitive actions as cruel “business Darwinism. ” What do you think Wal-Mart could do to develop an improved ethical culture and respond more positively to its diverse stakeholders? Wal-Mart face a lot of ethical issues, this led to a not so positive image of the company. Therefore Wal-Mart tries to do something in order to increase its positive image. Wal-Mart then focuses on the problem that she is facing, and tries to solve those of the problems.

The society said that Wal-Mart has sexual discrimination, there are 67% of workers are female but there are less than 10% of the female is in the top management group. So the society challenges, that the Wal-Mart has sexual discrimination problems. According to this discrimination problem, starting from 2006, the Wal-Mart website (responding the top management group), there are more than 40% of the top management are female in order to break the problem of the sexual discrimination. Besides sexual discrimination, Wal-Mart also faces the discrimination of the disabled employee problem.

In 2000, Wal-Mart agreed to pay the compensation to two deaf applicants, but in 2001, Wal-Mart fails to complete the compensation for the two applicants. Due to this problem, the society feels negatively towards Wal-Mart. Because of this problem, the Wal-Mart than established a website (www. WalMartFacts. com), the website recorded all the litigation that Wal-Mart faces and what it thinks about the claims and lawsuits as well as information about the action it is taking to help the environment. Another existing problem is the sweatshop workers.

Due to the company failing to monitor labour conditions at overseas factories that allegedly maintained sweatshop conditions, therefore there are 15 of the overseas workers who plaint about the wages of the workers are below the minimum wages of their countries. Due to this problem, Wal-Mart then increases the minimum wages of the workers and also increases the health insurance among employee. In order to satisfy the living conditions of the workers and provide a better payment and benefits to the employee. Besides solving the problem that Wal-Mart is facing, they also want to increase the positive image of the company too.

Therefore the company not only solving the problem and also improving on the environment too, this can also help the company to increase the positive image. What is the Wal-Mart doing to improve the environment? The company work on five part of the improvement that can help the environment as mentioned below: The firstly, Wal-Mart set up 2 environmentally friendly stores. The two environmentally friendly stores recruits a lot of professional people in order to save energy conserve natural resources and reduce pollution. But how does Wal-Mart do to improve the environment?

For examples, they build an experimental urban forest, solar energy, and climate control and water conservation for the two experimental stores. Wal-Mart also use the T-8 low-mercury fluorescent lamps and electronic ballasts, this can reduce 15% of energy. It also recycles plastic bags and corporate with the Rocky Mountain Recycling Company to recycle plastic bags to become the plastic sandwich bale. A part of the plastic bags comes from schools, as the Wal-Mart carry out the Kids Recycling Challenge Program, each sixty-gallon bag of plastic bags, the school received $5 from Wal-Mart.

Over 2000 bags of plastic bags were collected. Wal-Mart decided to do this program every year. Wal-Mart is sincere to the environmental protection, in 2005; it won the Waste News Environmental Award. Wal-Mart also works on the voluntary work. It set up the Wal-Mart’s Associate Disaster Relief Fund. The other voluntary work such as donate money in merchandise, Salvation Army, Hurricane relief effort and so on. These are the voluntary work that Wal-Mart has done. The above points are the Wal-Mart work on the environment, voluntary work and the improvement of the employee benefit.

The purpose of her is to increase the positive image in the society. ———————– [1] Homepage of Dictionary. com, http://dictionary. reference. com/browse/stakeholder, [accessed on 3/10/2009] [2] Richardson, John, Business Ethics – Annual Edition, Mc Graw Hill, 2005/2006, p155. [3] Ferrell, Fraedrich, Business Ethics – Ethical Decision Making and Cases, Houghton Mifflin, 2009, p. 296 [4] Ferrell, Fraedrich, Business Ethics – Ethical Decision Making and Cases, Houghton Mifflin, 2009, p. 296 [5] Stanley l. Brue, Campbell r. Mcconnell, Essentials of Economics McGRAW-Hill International Edution, 2007, P. 228