Money Over Morals

Contents

TOC o “1-3” h z u HYPERLINK l “_Toc377061184” Introduction PAGEREF _Toc377061184 h 1

HYPERLINK l “_Toc377061185” Ethical Dilemma PAGEREF _Toc377061185 h 1

HYPERLINK l “_Toc377061186” The Question of Ethics PAGEREF _Toc377061186 h 2

HYPERLINK l “_Toc377061187” Short and Long-Term Implications for Stakeholders PAGEREF _Toc377061187 h 4

HYPERLINK l “_Toc377061188” Solution to the Dilemma PAGEREF _Toc377061188 h 5

HYPERLINK l “_Toc377061189” Conclusion PAGEREF _Toc377061189 h 6

Introduction

Businesses do not carry out their operations in a vacuum. The corporations and firms therefore, carry out their operations in the natural and social environment. Due to this precept, the businesses are hence duty bound to adhere to the accountability issues linked to their natural and social environment. Business ethics conversely encompasses the norms to be followed by the businesses in preserving their social and natural environment (Shaw, 2010). This is because whatever action the business embarks on, the stakeholders are affected and the business is justified through the ethical or unethical alternatives it chooses. Major brands in the global business environment do not adhere to good business ethics which culminate into fines that affect them adversely. To counter such a situation, major brands should focus on their ethical dilemmas which are imperative in establishing solutions that can steer them to success.

Ethical DilemmaWal-Mart is a one-stop superstore that is acclaimed for its low prices on a variety of products, which can be translated into being consumer friendly and affordable according to consumer preferences. Although the company has grown to be one of the major brands in the global market, it has been subject to all forms of criticism by various individuals as well as groups (Bianco, 2007). The reason behind this criticism is the allegation that it does not adhere to business ethics. The criticism is based on protests against the company’s business practices and policies, its treatment of employees, customers, as well as suppliers. The company has formulated its own code of ethics according to the stipulations of the law but like many other major brands in the market, it has failed to embrace the code of ethics so as to minimize the cost of business in order to offer low prices to consumers.

One of the main problems plaguing Wal-Mart is based on the internal structure of Employees and suppliers. Wal–Mart is said to be utilizing monophony and monopolistic practices to ensure that its suppliers supply it with items at a lower price as compared to the prices that they supply to other competitors and stores (Collins, 2009). It does this to ensure that it provides consumers with low prices, thus attracting and retaining them while at the same time driving its competitors out of business. There are a number of lawsuits that the company has faced in regards to poor working conditions, anti-union policies, low wages and inadequate health care. It is alleged that the company engages in these unethical practices to minimize its costs to maintain low prices for its consumers.

The ethical dilemma facing the company is whether to increase the prices of the products offered to consumers in order to cater for the cost of employees and suppliers or to maintain their alleged unethical practices such as poor working conditions, anti-union policies, low wages and inadequate health care. The ethical dilemma has resulted in the company involving in practices that raise the question on whether it was adequately adhering to business codes of ethics.

The Question of Ethics Terms and conditions that Wal–Mart has based the employment structure on raises several questions in terms of ethics. The organizational climate created by ‘low prices always’ slogan initiated in 1962 promoted the situations where employees work for longer hours at a low wage that amounts to less than the amount stipulated for the federal poverty line in America. In 2006, the company went as far as to claim that it would raise the pay of the newly recruited employees while at the same time implementing pay caps on the veteran company workers (De, 2010). This is unethical because it did not uphold the doctrine of fairness. If the company wanted to increase the pay of the workers, all the workers should have benefited from the pay increase with none being on the losing end. The working conditions are deplorable according to the laws of the United States.

Workers are not paid overtime, even after exceeding their working hours while others are not allowed to take any lunch breaks or rests. In 2000, the company paid a fine of $50 million in the settlement of a class action in Colorado where former and current workers were accusing it of forcing them to work off the clock. This is unethical because as per the law, workers are entitled to overtime for working longer hours and they are entitled to rest occasionally. In 2005, the Company’s health insurance covered 44% of its work force with the other46% lacking any insurance cover (Henn, 2009).

Wal-Mart’s alleged unethical practices was aimed at cutting its costs so that it could maintain its low prices, which to its competitors was predatory pricing as the low prices it offered gave it unfair competition in the market.

For example, Wal-Mart’s demand on Kraft Foods to lower it prices forced the company to close its 39 plants that rendered more than 13,500 workers jobless. This is unethical because though Wal-Mart is bent on providing the consumers with affordable prices, it should not undermine the rights of the same consumers by rendering some of them jobless.

The values upheld by Wal-Mart reflect on its lack of consideration where the well-being of those working towards its success are concerned. The ethical considerations that it bases its claims are on the fact that its brand name translates to “everyday low prices.”

In this case, Wal-Mart has to adhere to all standards that can lower its costs to ensure that it meets the stipulations of its brand name (Murphy, 2008). The other justification that Wal-Mart capitalizes on is that its prices provide saving incentives for its consumers. This is because the consumers get to pay less for their wants and needs thus making it possible to save a percentage of their disposable income.

The other justification provided by Wal-Mart is that the pricing structure that advocates for costs cuts implemented in marketing, competition and distribution of products as well as the maintenance of the low employee wages enhances low consumer prices which in turn rakes in profits for the company (Weiss, 2009).

If an ability to compensate the employees did not exist, this justification would not be problematic. However, the amount of revenue that Wal–Mart brings in does not justify the low wages paid to employees. Marketing, production and distribution costs have been cut by 50%. The strong brand cuts the marketing cost while outsourcing production cuts cost by 50% (Collins, 2009). Distribution uses a cycled formula that distributes inventory continuously hence eliminating the costs for holding areas to store inventory. Wal–Mart has made high profits as compared to other superstores such as K-Mart from the above justifications that are unethical. Unethical conduct by Wal-Mart has resulted in several short and long term implications to its stakeholders.

Short and Long-Term Implications for StakeholdersSince 2005, company has embarked on many public relations strategies to cover up the problems that it has been facing due to the criticism directed towards it. Such strategies include

the Working Families for Wal-Mart formulated in the end of 2005 that worked to some extent in countering criticism that it was insensitive to family needs of its employees. The continued involvement of labor unions in the search for better employee terms will sway the decisions of stakeholders into assessing the employment conditions for other superstores such as K-Mart or Target, which are superior to those of Wal-Mart. The stakeholders especially the investors will start to withdraw their investment slowly which might leave the company with few investors (Henn, 2009). Investors make up part of the stakeholders of the company and if other stakeholders are not happy, especially the employees, the investors might question the morality of investing in that company.

Employees being stakeholders may opt to leave the company for other stores in which they are treated with more dignity. The stakeholders may end up at the losing end because of the lowering of the profits of the company after the consumers understand the disadvantages linked to the company (De, 2010). Suppliers are likely leave the company due to low prices that would lead to low productivity, consequently reducing the consumer satisfaction. Company executives and top management may end up losing their jobs when the other stakeholders feel that the problem lies on their hands.

The long-term impact on the stakeholders includes the payment of fines resulting in the loss of revenue to Wal-Mart due to many lawsuits filed against the company. If structural changes within the organization are not implemented through leadership and the internal organization, the stakeholders may find the investment detrimental, consequently pulling out their investments (Paine, 2007).

Wal-Mart may end up closing down due to lack of stakeholders in the form of workers accordingly leading to the loss of shares for the other stakeholders. The social environment of a company is important and so, with the above conditions, it will tamper with its social environment, forcing the stakeholders to look for other companies that are more serious. Customers may leave the company in large numbers due to the controversies facing it, thus leaving it with no competitive advantage and making the stakeholders abandon it.

Solution to the DilemmaDefinite structural changes should be effected by the company to deal with the ethical dilemma presented at their feet. Wal-Mart has to take a defined turn within the structure to begin changing its practices. Employees should be involved in the decision making process to assist in coming up with decisions that are helpful to the organization as a whole (Bianco, 2007). The stand held by Managers, CEOS, stakeholders and executives within the corporation has to change in line with policies that promote the well being of each stakeholder of the company such as employees and the suppliers. The employee wages needs to be increased while cost cuts should be implemented by using other methods such as cutting the marketing, production and distribution cost to enhance satisfaction of the employees. Another step that has to be taken within Wal-Mart is to raise awareness among stakeholders over the ethical issues and the considerations that are within it. The more the stakeholders can look at the basic structure and the investments made, the more likely that they can respond in a responsible and conducive manner for the company (Shaw, 2010).

Wal-Mart should also raise the consumer prices to some extent to cater for any cost deficits while informing the consumer on the reasons for their increase. In this way, the consumers will support them as long as they are willing to improve their social environment. Wal-Mart’s Top executives should be replaced with other competent employees who will bring about complete awareness of business ethics while at the same time advising the business on how to maintain the adherence to business ethics. Executive pay should be regulated with the pay of the other workers to reduce disparities. Independent auditors should be sourced by the company to provide the correct audits for the company as well as providing it with the right type of advice.

ConclusionThe implications of not considering the needs of employees hold Wal-Mart liable for lack of consideration, respect and responsibility. More importantly, it can alter the way that stakeholders and others look at the company as well as their investment in Wal-Mart. To change this, there is a dire need for the altering of the structure of the company, which will specifically be based on corporate responsibility and ethical Considerations for employees and suppliers.

References

Bianco, A. (2009). Wal-Mart: The bully of Bentonville: How the High Cost of Everyday Low Prices isHurting America. New York, NY: Currency Doubleday.

Collins, D. (2009). Essentials of Business Ethics: Creating an Organization of High Integrity andSuperior Performance. Hoboken, NJ: Wiley.

De, G. R. T. (2010). Business Ethics. Upper Saddle River, NJ: Prentice Hall.

Henn, S. K. (2009). Business Ethics: A case Study Approach. Hoboken, N.J: Wiley.

Murphy, A., F. (2010). Wal-Mart Exposed. Morrisville, NC: Lulu.com

Paine, Lynn. (2009). “Ethics: A Basic Framework.” Harvard Business School (9).

Weiss, J. (2009). Business Ethics: a Stakeholder and Issues Management Approach. Ohio. NJ:Cengage.

Shaw, W., H. (2010). Business Ethics: A Textbook with Cases. New York, NY: Wadsworth PubCo.