UNETHICAL BUSINESS PRACTICES

Case Study of Wal –Mart Stores Inc.,U.S.

PRESENTED IN NATIONAL CASE WRITING COMPETITION-BVMIR-09 , BY:

Dr. Namita Rajput

Associate Professor

Sri Aurobindo College

University Of Delhi

Preeti Sahni

Lecturer

Bharati College

University of Delhi

ETHICAL BUSINESS CALL OF TODAY

There is a need do business with an open eye, continuously measuring & evaluating the consequences & impact of actions taken .

This obligation is seen to extend beyond the statutory obligation to comply with legislation and seeing organizations voluntarily taking further steps to improve the quality of life for employees and their families as well as for the local community and society at large.

SURVIVAL IS FOR ONLY ETHICAL ORGANISATIONS

The companies that survive are the ones that can spot ethical issues and correct them before they become problems .

GIANT MONSTER OF US ECONOMY EATING THE DREAMS OF PEOPLE

WAL-MART

The first true Wal-Mart opened in 1962 in Rogers, Arkansas. Wal-Mart eventually became the world's largest retailer

Company profile and history

The Wal-Mart story began in 1962, when Sam Walton opened the company’s first discount store in Rogers, Ark. Five years later, there were 24 Wal-Mart stores in Arkansas ringing up $12.6 million in sales. 1968 saw the hiring of Wal-Mart Aviation’s first full-pilot, who provided help to Sam and Bud Walton, as well as the opening of the first stores outside of Arkansas, in Sikeston, Mo., and Claremore, Okla. The company officially incorporated as Wal-Mart Stores Inc. on October 31, 1969. Today, 7,390 Wal-Mart stores and Sam’s Club locations in 14 markets employ more than 2 million associates, serving more than 200 million customers per year.

Wal-Mart, the big giant, the place where a lot of people usually do their shopping for the low prices and the variety of products was founded by Sam Walton. Walton was an entrepreneur with an innovative vision, started his own company and made it into the leader in discount retailing that it is today. In fact, Wal-Mart is considered to be the biggest company in the U.S. and it has stores worldwide .

The wal-mart culture rests upon 3 basic beliefs which are:

Respect for the Individual

Service to customer

Striving for excellence

According to PBS:

“Wal-Mart employs more people than any other company in the United States outside of the Federal government, yet the majority of its employees with children live below the poverty line.”(www.pbs.org) In addition, Wal-Mart likes to portray itself as a seller of U.S. manufactured goods but in reality the company has products on its shelves made in foreign countries and at questionable workshops. It would seem that Wal-Mart encourages “made in the USA” but it really encourages products made outside the USA. As a result, Wal-Mart has forced many manufacturers out of business. As a matter of fact, this big giant is facing a significant amount of controversy for unethical business practices. In fact, some of these unethical business practices include the following.

GIANT UNETHICAL CORPORATION OF AMERICA

UNETHICAL PRACTICES OF WAL-MART

Open door policy as against labour union Wal-Mart is a non union organization that feels it does not need third

party intervention. So, Instead of unions, Wal-Mart has an open door policy that encourages employees to take their complaints beyond management.

According to this policy the door of the management is always open for the associates to share suggestions, ideas, and voice concerns. Whether it’s help with a problem, guidance or direction, or simply getting an answer to a question. Managers also treat all discussions fairly, with an open mind, and without bias. They maintain complete confidentially, whenever it’s possible. They work with the associates to mutually resolve any issues or problems.

Analysis of open door policy:

1)The open door policy does little to help its employees but gives the business the leverage it needs to terminate unwanted non compliant help.

2) Employees start out at lower wages than unionized corporations and end up quitting by the end of the first year.

3) Its anti-union policy is a central part of its obsession with minimising costs.

4) Wal-Mart provides managers with its infamous ‘Manager’s Toolbox to Remaining Union Free’ that states: “Staying union free is a full time commitment. Unless union prevention is a goal equal to other goals and objectives in the organization, management will not devote the necessary day in, day out attention and effort.” If there is any evidence of moves towards unionisation, managers are ordered to phone the Wal-Mart Union Hotline immediately.

Statement From “Human Right Watch 2007”

A report entitled Discounting Rights released by Human Rights Watch in May, 2007 outlines the systematic denial of Wal-Mart workers’ right to organize. It confirms what Wal-Mart workers have been saying for years. Workers seeking a voice on the job with the United Food and Commercial Workers Union have faced:

Un Ethical And Aggressive policies of Wal-Mart

Wal-Mart works aggressively to create a climate of fear and intimidations where workers fear they’ll be fired, disciplined, or lose benefits if they try to form a union.

Wal-Mart routinely monitors and spies on union organizers and pro-union employees and selectively enforces company policies against pro-union workers.

Wal-Mart engages in “unit packing” and other tactics to prevent organizing efforts. When workers have successfully organized, Wal-Mart has refused to bargain, or has shut down stores and units where workers have organized.

Wal-Mart also prohibits employees from talking to union representatives. It is unethical for Wal-Mart to prohibit employees to talk to union representatives since according to the National Labour Relations Act; employers are not allowed to discourage employees from forming a union for they have that right.

Violated Federal Labour Law By "Bribing" Employees To Report On Co-workers Who Favoured A Union.

. Therefore, the United Food and Commercial Workers Union filed a complaint with the National Labour Relations Board against Wal-Mart. “The complaint, filed with the National Labour Relations Board, alleges that Wal-Mart violated federal labour law by "bribing“. employees to report on co-workers who favoured a union.

In 2005, labor unions also created new organizations and websites to influence public opinion against Wal-Mart, including Wake up Wal-Mart (United Food and Commercial Workers) and Wal-Mart Watch (Service Employees International Union). But Wal-Mart denied the charges that were brought against the company.

Wal-mart Is Wrong By Bribing Employees For It Encourages Dishonest Behaviour.

Thus, Wal-Mart is wrong by bribing employees for it encourages dishonest behaviour. If Wal-Mart wants to avoid a hearing or a lawsuit in this situation, they need to post notices saying the retailer will not oppose employees talking to union representatives.

In addition, if Wal-Mart takes more seriously the employees’ complaints, it might encourage them not to unionize.

Unfair Treatment of Employees:

Wage And Hour Violations : Not only does the company have a history of methodically violating

workers’ right to join a union, the Wal-Mart record on worker rights is a laundry list of abuse. Wal-Mart has racked up a striking number of wage and hour violations.

Decreased health care coverage: Wal-Mart has decreased health care coverage to employees while

touting its commitment to offering affordable care. Evidence suggests that Wal-Mart may have even adopted a strategy of eliminating long time workers and discouraging overweight or otherwise unhealthy workers from applying—both as measures to reduce payroll and health care costs.

Violations Of Child Labour Laws

One internal audit of 25,000 employees in 128 Wal-Mart stores in the USA found 1,371 violations of child labour laws, including minors working too late, too many hours a day and during school hours.

“Wal-Mart is proving to be a nation and future breaker” by violating the child labour laws and spoiling the future of the children to enrich themselves, ignoring seniority.

According to Newsweek magazine

Denial to pay wages and salaries: The Bentonville-based multinational employs thousands of

young people to pack its customers' bags. But the 4,300 young teenagers don't receive any pay from Wal-Mart. Wal-Mart’s model is fast becoming the industry standard, as other firms slash employee wages and benefits in an attempt to compete with the retail giant .

Reasoning given by Wal-Mart: So, Wal-Mart succeeds to defend its position as the

undisputed leader of the pack when it comes to violating fundamental workers' rights

UNETHICAL PRACTICES OF WAL-MART

Payment of low wages: Wal-Mart pays low wages and appears to aggressively seeks to keep wages down. Gender Discrimination The company faces the largest gender discrimination case in the history of this

country. Discriminatory policies are as follows:1. Denied Training: Women had been denied training and promotion

opportunities that are offered to men.2. Under payment: women are underpaid in relation to men. According to Hoover’s handbook of American business, “in June 2001 a

group of six current and former female Wal-Mart employees filed a sex discrimination lawsuit (seeking to represent up to 500,000 current and former Wal-Mart workers) against the company . The suit was filed because Wal- Mart failed to provide equal employment for women.

Gender Discrimination

Less Managerial positions to women:

In fact, there are over 70 percent of women working at Wal-Mart, but only a small amount of those women are managers. So, men are holding more management positions than women.

Less dignity and respect to women: “Wal-Mart is the nation's largest employer of women, but unfortunately they are being treated without dignity and respect." (www.arkansasnews.com)

Meeting the Challenge of gender discrimination

So it seems then that discrimination is a big problem at Wal- Mart. If Wal-Mart wants to avoid lawsuits they need to give more job opportunities to women and they should get paid as much as male employees. Even though Wal-Mart is such a successful company, they can do better if they put a stop to discrimination for it will save them money on lawsuits. In fact, Wal-Mart recently introduced workplace diversity initiatives, intended to prevent further gender bias.

Expensive Health Insurance

Wal-Mart’s health insurance is so expensive that some of the employees can not even afford to pay for it. So, those employees who couldn’t afford the health plan will probably have to get their health care benefits through their spouses or the state from our tax dollars. Wal-Mart responded to this problem by offering discounts on health care coverage. “Members can save as much as 50% on services not normally covered by medical insurance.” Discounts are not enough. Wal-Mart still has a moral responsibility to provide affordable health care to its employees not shift the cost onto the American taxpayers. Wal-Mart can also raise employees’ wages so they can afford to pay for their health plan.

No Over Time /Wages not in proportion to Work

While wages are low at Wal-Mart, too often employees didn’t get paid at all for overtime. In fact, according to Wal-Mart’s policy, they are supposed to pay employees for every minute they work. But, since Wal-Mart is such a big company, there will be cases in which managers might do unethical things. For instance, employees were forced to work unpaid overtime. As a result, they filed a suit against Wal-Mart for not getting paid for overtime. So “in February 2004, a federal judge ruled that Wal-Mart should pay workers for overtime hours” .But, the case is still pending. In fact Wal-Mart claimed their policy is against such work. So Wal-Mart’s managers who required overtime were disciplined and fired. In fact, it is Wal-Mart’s responsibility to make sure that people get paid. They should settle the suit by paying their employees for unpaid overtime. It seems that Wal-Mart needs to periodically examine its pay practices to make sure that all employees are getting paid for all the hours worked.

Sufferings below the low Cost Offerings to the public

Wal-Mart is leading the race to the bottom by relentlessly squeezing cost efficiencies out of the supply chain. Wal-Mart frequently requires its suppliers to open their books for Wal-Mart inspection and tells them exactly where to cut costs. When national labour or environmental standards create a barrier to cost cutting, suppliers are encouraged to relocate to a labour market that will enable them to produce at the low price Wal-Mart requires. Even where wages are rock-bottom, Wal-Mart insists that its suppliers drive prices ever lower. To do this lot of unethical activities crop in to come on to the lowest cost ,lot of people in the supply chain suffer because of this cost cutting drive

Use Of Illegal Migrants As Workers

Finally, Wal-Mart was under investigation for the use of illegal immigrants as workers. In fact, “in October 2003 federal agents uncovered 300 illegal immigrants employed by outside contractors cleaning its stores.” As a result, the company became the target of a class action suit. So, Wal-Mart was accused of breaking immigration laws. In addition, Wal-Mart cheated immigrant on account of

low wages social security payments, federal payroll taxes. Contractual employments No security of tenure No payments for over time. Immigration experts said the arrests of so many illegal immigrants at Wal-

Marts across the country demonstrated that these workers have come to play a significant role in the American economy. They often take the low-end, low-paying jobs shunned by not just American workers, but also legal immigrants. But, Wal-Mart claimed they hired those particular

REPORTINGS BY EMPLOYEES

I hate wall-mart I worked there 3 years and saw many bad practices. The final straw that made me quit was the fact that I was a full time department manager, yet only was getting 16-22 hours a week!!!

When I asked why my hours where being cut they told me it was due to a lack of busness.HELLO you are WAL-MART a short drop in sales should not lead to me and my family being broke.

get things together wall-mart if you would actually pay your workers enough to live maybe you would save money in the 'loss prevention' department because your workers wont have to steal from you to make ends meat!!!

MikeBismarck, ArkansasU.S.A

REPORT BY catskills, New YorkU.S.A. Truth is here

The Catskill NY Super Wal-Mart is still just under 2 years old. management USED to be grade A quality, employee morale used to be high until management started cycling quickly and for some reason lost MOST of its management team that actually CARED about the store, and employees/customers.Now left with a severe management shortage employees are forced to work with a long time *FRIEND* of the store manager who is an asst. manager who is unprofessional, mean spirited, doesn't care about the employees they oversee and speaks down to them. this member of management is bringing down morale and the store manager and other members of management know this and they do not care. they consistently display unprofessionalism that would not be tolerated by a UNION. she has been overheard telling associates to stop their meals and do small work errands (which is illegal) and clock back in EARLY to do things for her. Also we have a grievance that WALMART is open ALL DAY thanksgiving, forcing employees to work long 9 hour shifts, giving them NO CHANCE to spend quality time with their loved ones on this holiday that is supposed to be about FAMILY.employee morale is down more than ever. management could care less about its workers... this isnt what Sam Walton wanted.

WALMART INJURY DEVELOPED CANCER - WAL-MART DOES NOT CARE *Rebuttals

*Consumer Suggestion ex-employee.

In a unfortunate incident an employee was hurt and compensation was asked but was completely denied and the small wound was converted into cancer because she was poor and couldn't afford medical treatment. So in wall mart employees are not treated as a part of the family and business and have no values in the eyes of management and board as was reported by the ex-employee.

Success of Wal-Mart in question

The sentiment behind Wal-Mart founder Sam Walton's promise of a "better life for all" belies questionable business practices - many that have been challenged by employees, unions, environmentalists, recording artists and human rights organizations. All these challenges should be met and it should learn lessons from their mistakes.

Conclusions:

The companies that survive are the ones that can spot ethical issues and correct them before they become problems.

In this case Wal-Mart failed to acknowledge those potential problems and they are probably going to pay for it. Thus, Wal-Mart’s unethical business practices have hurt its company’s reputation.

If Wal-Mart wants to survive they will have to try hard to improve their image. That is, they need to show that they care about ethics by treating employees fairly.

As a result, it will attract good employees and people will have no reason to complain about the company. In addition Wal-Mart needs to be socially responsible in order to avoid economic harm and in order to maintain the legitimacy granted by society.

Conclusions:

As Wal-Mart is not just a threat to the standard of living of its own employees. It damages the standard of living of numerous others in the economy.

In some cases, it forces the closure of better paying firms. Business Week estimates for every WM supercenter that opens, two other supermarkets will close.

We will hail Wal-Mart if it hails the society at large

There should not be any compromise on ethics and socially responsible behaviour,as it is giving back to the society, other wise its survival will be in danger.

Say no to unethical practices

Wal-Mart's immoral, predatory practices and reprehensible behavior has to be mended which is essential for the survival of Wal-Mart

Bibliography

 Walton, Samuel Moore. Encyclopedia Britannica. 2005. Encyclopedia Britannica Online http://www.pbs.org/itvs/storewars/stores3.html The Record (Bergen County, NJ), Joan Verdon April 13, 2005 pB03 COPYRIGHT 2005 North Jersey Media Group Inc. Hoover’s Handbook of American Business 2005, Austin, Texas copyright 2004 http://kansascity.bizjournals.com/kansascity/stories/2001/11/12/story8.html http://home.earthlink.net/~local1613/nlra.html http://www.washingtonpost.com/wp-dyn/articles/A48056-2005Apr12.html http://www.ufcw.org/issues_and_actions/walmart_workers_campaign_info/facts_and_figures/walmartandwomen.cfm 

Bibliography

The Guardian (London, England), April 14, 2005 p23 COPYRIGHT 2005 Guardian Newspapers http://www.ufcw.org/issues_and_actions/walmart_workers_campaign_info/facts_and_figures/walmartandwomen.cfm http://www.flagstaffactivist.org/fan/study.phtml http://www.walmartfacts.com/keytopics/default.aspx http://www.lieffcabraser.com/wal-mart.htm http://threehegemons.tripod.com/threehegemonsblog/id57.html

http://www.ufcw324.org/3walmartstoriespage.html