Sunday, April 15, 2012

Research Paper on Corporate Ethics

Corporate Ethics at Wal-Mart

At the begging, the corporations on the United States were blamed for lack of business ethics and failing to exercise appropriate control over their executives. After the bursting of the “dot-com bubble” an ethical crisis spread not only nationwide but globally as well. Nowadays most of the companies have significantly improved in fighting their shortcomings, ethical and compliance officers are assigned, new procedures for controlling improper conduct are implemented, managerial personnel takes part in ongoing ethical training programs in order to make them aware of the corporate social responsibility. The big business adjusts to the legal environment very quick due to the heavy monetary penalties, criminal prosecutions and long time jail sentences, whereas on the past the corporations were very reluctant to cooperate with the authorities, resisting regulatory and judicial investigation and providing legal protections for their top managers.


As the world’s largest retailer and N1 in Fortune 500, Wal-Mart has always been in the spot light. Along with its foundation in 1962, Sam Walton established the three basic believes which are the driver of his successful business:

Respect for the individual
Service to our customer
Strive for excellence

In addition to that Sam Walton stipulated in the Statement of Ethics as essential the following guiding ethical principles:

Follow the law at all times;
Be honest and fair;
Never manipulate, misrepresent, abuse or conceal information;
Avoid conflicts of interest between work and personal affairs;
Never discriminate against anyone;
Never act unethically - even if someone else instructs you to do so;
Never ask someone to act unethically;
Seek assistance if you have questions about this Statement of Ethics or if you face an
ethical dilemma;
Cooperate with any investigation of a possible ethics violation; and
Report ethics violations or suspected violations.

Wal-Mart is very often listed by Fortune magazine as one of US most admired companies but at the same time the corporation faces criticism about its employment practices and it is frequently subject to litigation. The Markkula Center for Applied Ethics poses the question: “Is it Ethical to Shop at Wal-Mart?” Bob Brownstein sees a big mismatch between the company Statement of Ethics and the reality. He takes four basic points to illustrate the environment at Wal-Mart:

1. Basic standard of living – the average annual income of the employees is around $13,312 which is below the Federal poverty level for a family of three (which is $14,630). 2/3 of the employees can’t afford to take part in Wal-Mart’s health insurance plan. It amounts to 20% of their paycheck
2. Inequality – huge amount or worker trapped in a low pay dead-end service job without benefits
3. Increased material and technological innovation and productivity – Wal-Mart sells cheaper taking away business of already existing firms
4. Non-Market institutions – Wal-Mart is an economic force which transform people into anomic creatures driven by the search of bargains.

Opinions like that are not few but the largest retailer faces not only criticism but many lawsuits the biggest one of which is 11-billion dollar class-action discrimination lawsuit, employee pay and health benefits. Legislators changed regulations for big companies regarding healthcare plan of the workers. In 2006 Wal-Mart launched a huge PR-campaign to oppose the critics and the show the positive impact the company has on the working families. But hiring a global ethics officer was not only a defensive act, moreover it was an attempt to present itself in front of the critics as a reputable employer with spotless image at home and abroad. But is it like this in fact? Couple of yeas ago, in 2006, former Wal-Mart executive Tom Coughlin, got convicted for not complying with the Foreign Corrupt Practices Act. It requires full accounting transparency under the Security and Exchange Act. The former vice-chairman of the board of directors pled guilty for defrauding the company and tax evasion. The verdict of the judge was 27-month home confinement.

The common practices of Wal-Mart attract the attention of not only the labor unions and authorities but also the nature activists. There are many case of environmental abuse. The states of Pennsylvania, Connecticut and Washington are very upset with the retailer for violating the state water quality regulations. Wal-Mart was accused for not complying with standards for construction site cleaning. After heavy rains the water was bringing tons of silt in the nearby rivers, endangering the fish and the drinking water for thousands of people. In 1998 Pennsylvania's Department of Environmental Protection ordered the construction to be halted. At that time the store construction was almost over. Wal-Mart was also accused for another destructive business policy. This time the problem comes from the placement of the stores. Most of the retail shops are built on a farmland. The environmental activists are posing the question: “why do the counties and municipality allow construction of stores on huge farmland, when there is a global shortage of food supply?” Apparently they believe these farmlands could provide sustenance for more people. But this is not the only negative side of the Wal-Mart stores locations. This problem is referred to as the “urban-sprawl” issue and it continues to grow. It increases the car-dependency for the communities, raising the amount of greenhouse gases emitted and therefore the usage of more gas. Wal-Mart faced many other claims from different State environment agencies (Connecticut, Texas, Illinois) and even the Federal Environment Protection Agency. Even though they undertook a huge campaign to show to the people and authorities how environmentally friendly they are, a simple calculation made it clear that Wal-Mart cause more harm to the nature that it preserve it. A donation amounting to $190 million was given away for charity, with $1.3 million was made for nature friendly causes. It looks a huge number but this 0.021% from the profit that goes to help the environment.

As the biggest retailer and second largest employer (after the Federal government) Wal-Mart is huge economic force and the labor, legal and environmental problems associated with it, are huge.
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