WAL-MART CASE STUDY
1
Wal-Mart Group Case Study
Team A
Westley Bisson, Leah Bond, Ken Chrapkowski, Lisa Cochran, Christopher Cooper
MGMT560PA – Ethics in a Global Marketplace
June 17, 2012
Dr. Roger Fuller
Southwestern College Professional Studies
WAL-MART CASE STUDY
2
Wal-Mart Group Case Study
Team A’s paper will provide an in-depth review of Wal-Mart’s ethical challenges at
home and abroad along with how Wal-Mart continues to make corporate social responsibility a
priority in its business across the globe. The teams review begins with the history of Wal-Mart,
which can be traced back to the 1940s when Sam Walton began his career in retailing. In May of
1950, Walton purchased a store in Bentonville, Arkansas and opened Walton's 5 & 10 (Tribble,
1990). The company steadily grew throughout the 60’s and 70’s through a combination of
underselling the competition at the expense of a smaller profit and by acquiring ownership of
small regional chains to expand their brand. To the present, where Wal-Mart has annual revenue
near $387.69 billion and employs over 2.1 million people and maintains more than 6,200
facilities around the world, including over 3,800 stores in the United States and 3,800
international units. In fact, their U.S. presence has grown so rapidly that there are only small
pockets of the country that remain further than 60 miles away from the nearest Wal-Mart (Zook
& Graham, 2006).
Despite Wal-Mart’s huge successes, there also have been many detractors who point to
disadvantages that have come along with their rise to prominence. Over the last decade or so,
Wal-Mart has become involved in thousands of lawsuits for a variety of reasons. The majority of
these suits are class action lawsuits in which Wal-marts employees claimed ethical violations and
sued for unpaid wages, race, age and gender discrimination among many other issues which have
been brought to light.
U.S. Ethical Challenges
Wal-Mart has faced numerous ethical lawsuits and issues over the years that have caused
much controversy for this world-renown company. There are several cases that will be
WAL-MART CASE STUDY
3
examined because of how they are controversial topics in general, not just for Wal-Mart, but for
other businesses as well. There was a series of cases over the past several years, to include
possibly one of the most shocking cases in 2000, but the attention on Wal-Mart really started to
ramp up in 2005 when two advocacy groups came after the company for poor employee
practices because the employees and communities in which they operated had had enough. It
only escalated after a documentary by Robert Greenwald was released just a few months later.
This documentary was titled “Wal-Mart: The High Cost of Low Price” (Hagloch, 2006, p. 152).
Some of the main ethical issues scrutinized were what impact occurs when a Wal-Mart
store opens causing small town small business owners to close, establishment of unequal
employment opportunities, and poor health insurance plans for Wal-Mart employees. There
were thousands of lawsuits against the company because of these issues. The advocacy groups
were trying to get Wal-Mart to not only improve its business practices for its employees, but also
for the consumers and their local communities.
The shocking case referenced above when discussing Wal-Mart and their controversial
unethical practices occurred in 2000 when a Wal-Mart employee, Barbara Shank was hit by a
semi-trailer, which caused her permanent brain damage and bound her to a wheelchair for life.
Even after the settlement from the trucking company, Barbara still incurred hundreds of
thousands of dollars in medical bills and legal fees. Adding insult, six years after the accident,
her family received a bill from her health insurance, through Wal-Mart for almost $500,000 in
uncovered medical insurance bills, according to an article titled Did Wal-Mart Wake Up?
(Unknown). This is a perfect example of the poor healthcare coverage Wal-Mart provided for
their employees and goes to show the unethical, cruel and insensitive reaction by Wal-Mart to
Barbara’s case.
WAL-MART CASE STUDY
4
Another example of unethical behavior that tends to be very disturbing, not only to the
employees that are only making on average $17,000 annually, but also to its investors and
stakeholders, is how Wal-Mart’s CEO’s are compensated (Frederichs, 2009, p. 49). It came out
that the top management of the company wages were costing its shareholders over $1 billion in
2006 (Frederichs, 2009, p. 50). If a company can pay their CEO and chief executives this much
money, they could easily increase the pay of the average employee, not to mention increase their
healthcare benefits. It is sad to think that people are so greedy and unethical to not see the
obvious injustice going on within this company in reference to wages and healthcare coverage.
In 2008, Wal-Mart was tied up in over 80 different labor rights’ lawsuits. These lawsuits
varied from managers forcing employees to work off the clock, not allowing employees’ lunch
breaks, and manager altering employees’ time cards, as was highlighted in a research article
titled Top 10 Unethical Business Actions (2011). This was not something that had just started
recently for the company. This evidenced can be traced back to as early 2000, when an audit
was performed on the company, which gave light to over 75,000 violations, which were found in
just a week long period. (Did Wal-Mart Wake Up?, p. 9-10). The report gave way to the
declaration that “Wal-Mart may face several adverse consequences as a result of staffing and
scheduling not being prepared appropriately” (Friedman, 2008, p. 5). That number is shocking,
but what is more shocking is those 75,000 violations are only from 128 of their stores (Did WalMart Wake Up?, p. 10).
Wal-Mart not only has been labeled as unfair and scandalous towards labor acts as well
as infamously poor healthcare plans and unfair wages, but they also have had noted problems
with gender discrimination among women employees. In 2007, a court of appeals found that
Wal-Mart “must face a class-action lawsuit of 1.6 million female workers who claim that they
WAL-MART CASE STUDY
5
were not treated fairly in terms of pay and promotions” (Did Wal-Mart Wake Up?, p. 10). WalMart was dealing with the largest class action lawsuit in U.S. history of damages near $10 billion
(Did Wal-Mart Wake Up?, p. 10). This is a very broad overview of a disturbing gender
discrimination case, where, if the facts are true, Wal-Mart could lose the case.
When Wal-Mart stores are planted in small, rural towns, the small business owners are
greatly impacted in a very negative way because they cannot compete with the deals Wal-Mart
can offer. A study on the impact of Wal-Mart stores in rural communities found that small towns
can lose up to 47 percent of their retail trade within 10 years after a Wal-Mart had opened
(Stone, 1995). The small business owners have gone through different advocacy groups to seek
protection from taking away all of their business, but there is only so much protection they can
provide, while the business owners are still losing a lot of business, if not completely going out
of business all together.
These mentioned are just a few of the many different ethical issues Wal-Mart has faced in
the past due to controversial unethical business practices. There are several labor unions and
advocacy groups that continually try to bring justice for Wal-Mart employees, customers, and
small business owners. One of the groups’ main objectives is to increase negative attention on
the company to where consumers will stop funding them by shopping there until they change
their ways and implement a way forward to prevent unethical practices in the future from taking
place again. This just highlights a few of the unethical claims that this company is facing
stateside. Wal-Mart’s problems do not stop at our borders as they have become an international
and global company their ethical issues have become global as well.
Overseas Ethical Challenges
Wal-Mart faces many ethical challenges in the overseas marketplace as well, ranging
WAL-MART CASE STUDY
6
from poor labor standards to low quality assurance as they strive to keep competitive and cut
prices. These corner cutting tactics has led to increased dissatisfaction of the corporation among
the eyes of the communities they serve, often leading them to boycott the store and in some cases
even forbid them from setting up shop at all (Smith, 2011; Clifford, 2012).
Wal-Mart has been involved with sweatshop abuses overseas (Global Ethics, 2005)
involving overworking employees, not paying employees required wages, physically abusing
them and locking them in the workshop. Although they have made strides in the United States
(Birchall, 2011) and overseas (Martin, 2012), the key difference will be the follow-up. It is far
easier to report information in the United States compared to eastern countries, which can have
an effect on interested parties following up on their promises. A follow-up 2006 Ethical
Sourcing report, Wal-Mart states that only 30% of its audits were unannounced compared with
Reebok which announced a 46% rate (Webteam, 2007). There were no independent audits for
Wal-Mart and it was unclear if there were for Reebok. Wal-Mart stores in every country outside
of the United States are unionized, according to one Washington Post (2011) report. In countries
such as China, labor unions must be recognized by law and Wal-Mart reports a 70%
membership. Upon further research, it was found that the All-China Federation of Trade Unions
sets 70% as the goal for foreign companies. Though the wages are considered low by our
standards, the cost of living is also comparably low. Wal-Mart insists that they are paying above
the average wage for many areas in China. This leads to skepticism regarding labor laws in
China and the effectiveness of unions. Further supporting their stance against labor unions, a
Canadian store was closed just as the union was near winning a contract citing that “it would
make it impossible for the store to sustain itself” (Common Dreams, 2005).
WAL-MART CASE STUDY
7
Stretching back until around the mid-nineties, Wal-Mart had the practice of purchasing
life insurance policies for low-level employees such as maintenance crew and cake decorators
(Stone, 2009). This practice was commonly used for key employees to cover the high costs of
their absence and came with certain tax breaks. By using it on the low-level workers, they
utilized a loophole to cash in on often high-health risk employees (further perpetuated by the
lack of insurance, long hours, physical strain, mental strain, etc.) until the government closed the
loophole. This practice may, however, continue overseas where corporate tax breaks are
achieved far easier due to the closer government-business relationship. Soon after in 2003, 61
stores were raided in 21 states resulting in the arrests of 250 undocumented nightshift janitors
(CNN, 2003). Although Wal-Mart places blame on the contractor that hired the workers, further
investigation found the very employees of the store were key players in the contracted company.
This lends to the assumption that Wal-Mart was taking advantage of the AmericanMexican immigration issue, seeking to take advantage of the cost savings undocumented
immigrants provided. Further harming their image were stints such as their hesitation in 2010 to
remove a plate dedicated to Augusto Pinochet, an ex-Chilean dictator responsible for several
human rights violations (The Clinic, 2011). These many ethics violations are due mostly in part
to differing standards, laws, cultural beliefs and the flow of information. While America may see
low dollar wages as inhumane, they forget the differing cost of living and may not understand
the additional benefits citizens in other countries may have such as healthcare or other assistance.
In addition, many wages are often competitive despite being still sub-par.
Why would Wal-Mart, a multi-national corporation, decide to pay workers more when
all it would do is push their prices higher and make them less competitive? This could possibly
trigger events that could lead to the downfall of the business and the loss of even more jobs, so
WAL-MART CASE STUDY
8
they just stay at the average. This allows them to keep the standard of living low (along with
other companies) in order to keep costs low.
Wal-Mart’s Response and Changes to Ethical Company Practices
Wal-Mart is such a powerfully large multi-national corporation that it could probably get
away with some immoral practices here and there as long as it continues to save its consumers
money at the register. However, Wal-Mart continues to make corporate social responsibility a
priority in its business across the globe. It keeps its suppliers in check by conducting random
inspections at their facilities to make sure employees are being treated fairly and that there are no
illegal or under-age workers. But because it has so many suppliers in various countries, WalMart mostly relies on its suppliers to honor its codes. "Obviously you can't be in every place at
all times," says Don Shinkle, a vice president. "We have to rely on our vendors to make sure our
standards are met fully" (Ortega, 1995, p. 2).
One example of how Wal-Mart handles code violations is that of one of its women’s
clothing line suppliers, Sam Lucas, designer of the brand White Stag. When Wal-Mart
contracted with Sam Lucas, he was required to sign a code of conduct concerning the treatment
of workers who design and make White Stag clothing (Ortega, 1995). “When told that underaged workers have been found at Sam Lucas, Mr. Shinkle, the vice president, said Wal-Mart will
immediately cancel its order from the factory” (Ortega, 1995, p. 3). Instead of punishing the
supplier that subcontracted with Sam Lucas to make the clothing, Wal-Mart would punish the
main contractor, Sam Lucas, even though the subcontractor, in this case, Next Day Apparel, Inc.,
is legally obligated to abide by Wal-Mart’s code as well.
In this example Wal-Mart did not cancel its orders with Sam Lucas or his subcontractor,
though because Mr. Shinkle, vice president of Wal-Mart said “Wal-Mart is satisfied with Next
WAL-MART CASE STUDY
9
Day's efforts to comply with the code, and that ‘the factory has to take responsibility’” (Ortega,
1995, p. 3). Wal-Mart agreed not to cancel its orders in this instance because Next Day Apparel,
Inc. had moved all of its operations to the Dominican Republic immediately after it discovered
there were under-aged workers at its factory. This was a desperate effort made in order to avoid
losing its contract with Sam Lucas and Wal-Mart. Sam Lucas also required all of the workers to
provide proof-of-age evidence and laid-off those unable to provide proper documentation. Sam
Lucas and Next Day Apparel, Inc. were in a tough position because many people do not have
proof-of-age documentation in the countries where their factories operate at and they are forced
(Ortega, 1995).
Wal-Mart also strives to be a leader in environmental sustainability and donates millions
towards several sustainability causes. CEO Scott stated “We’re keeping our commitment to be a
responsible citizen. Responsible citizenship means that we contribute to the charities and
organizations in our communities” (“Wal-Mart,” 2011, p. 21).
For the past several years, Wal-Mart has proudly been named by the Chronicle of
Philanthropy as the largest corporate cash contributor in America (“Wal-Mart,” 2011).
Approximately 90 percent of Wal-Mart’s charitable cash donations are made at the local level
(“Wal-Mart,” 2011). Wal-Mart’s response to Hurricane Katrina in 2005 is a good example of
the company’s corporate social responsibility priorities. As local, state and federal officials
prepared for the nation’s worst natural disaster in history, Wal-Mart readied 45 truckloads of
relief supplies to be shipped before Katrina struck the mainland. By the end week one post
Katrina, Wal-Mart had delivered 1,900 trailer loads of emergency supplies to affected areas.
Wal-Mart also pledged more than $2 million towards the relief funds and local Wal-Mart stores
were giving away free merchandise in several evacuation areas (“Wal-Mart,” 2011).
WAL-MART CASE STUDY
10
“Other charitable contributions made in 2007 include $5 million coupled with $35
million in product donations to America’s Second Harvest, the nation’s largest hunger relief
organization; $67 million towards supporting education through literacy and scholarships; $32.5
million in donations to The Salvation Army’s bell-ringers in front of Wal-Mart stores; and $39
million to the Children’s Miracle Network in support of local children’s hospitals and healthcare
initiatives” (“Wal-Mart,” 2011, p. 20).
Conclusion
Team A’s paper provided a critical review of Wal-Mart’s meteoric rise from one nickel
and dime store to company that maintains more than 6,200 facilities around the world, including
over 3,800 stores in the United States and 3,800 international units. Most prominent in their
geographic saturation is their U.S. presence has grown so rapidly that there are only small
pockets of the country that remain further than 60 miles away from the nearest Wal-Mart (Zook
& Graham, 2006).
The paper also provided an in-depth view of ethical challenges at home and abroad. On
the home front this paper reported, a court of appeals found that Wal-Mart “faced a record classaction lawsuit of 1.6 million female workers who claim that they were not treated fairly in terms
of pay and promotions” (Did Wal-Mart Wake Up?, p. 10). Wal-Mart was dealing with the
largest class action lawsuit in U.S. history of with damages near $10 billion (Did Wal-Mart Wake
Up?, p. 10). Our border was not the end of Wal-Mart’s ethical challenges as reported in 2003,
61 stores were raided in 21 states resulting in the arrests of 250 undocumented nightshift janitors
(CNN, 2003). This perpetuated the assumption that Wal-Mart was taking advantage of the
American-Mexican immigration issue, seeking to take advantage of the cost savings
undocumented immigrants provided.
WAL-MART CASE STUDY
11
The review then turned to Wal-Mart’s responses to a myriad of ethical issues. While
Wal-Mart’s critics have been just and Wal-Mart’s ethical actions or lack of them have been
suspect, recent history and where they are at now should be emphasized. Wal-Mart looks to be a
modern model of working to balance employee and customer needs without sacrificing one for
the other. Wal-Mart’s early orientation to the customer is why it has become the world’s largest
retailer. It has built an empire of loyal customers who have grown to rely on the inexpensive
brands that they provide.
Key to Wal-Marts continued growth was a shift, albeit forced, through litigation in their
orientation becoming more equitable among employees, community and their consumer. The
public is now much more conscience of large companies being good stewards in all areas. As
the paper reported, Wal-Mart has proudly been named by the Chronicle of Philanthropy as the
largest corporate cash contributor in America (“Wal-Mart,” 2011). Approximately 90 percent of
Wal-Mart’s charitable cash donations are made at the local level (“Wal-Mart,” 2011). WalMart’s response to Hurricane Katrina in 2005 is a good example of the company’s corporate
social responsibility priorities. “As local, state and federal officials geared up for the nation’s
worst natural disaster in history, Wal-Mart had 45 truckloads of relief supplies ready to be
shipped before Katrina hit the mainland. A week after Katrina hit, Wal-Mart sent 1,900 trailer
loads of emergency supplies to affected areas.
Wal-Mart also pledged more than $2 million in contributions towards the relief fund and
stores, giving away free merchandise in several evacuation areas” (“Wal-Mart,” 2011, p. 20).
The good they are now doing now is amazing and illustrates how vital it is to fully look at issues
and not make assessments based off of an initial view or bias perspective. The flexibility that is
needed in adapting to changing social expectations that had guided Wal-Marts initial approach
WAL-MART CASE STUDY
12
and probably led them to neglect their employees looks to have taken an ethical turn toward the
good.
Much like the world has viewed the role of the United States in global affairs with higher
expectations. Entities as large as Wal-Mart have an even higher expectation to be just and
correct in their actions. Wal-Mart’s employment and ethical problems along their subsequent
corrective efforts have begun to dispel the negative view of Wal-Mart as a bottom line money
and profit, at all costs to employee and the environment type of company. Team’s A’s belief is
Wal-Mart’s ethical outlook has evolved from possibly a true amoral position, where their only
consideration was profit and expansion to consequentialist view of promotion of common good
and sound corporate citizenship.
WAL-MART CASE STUDY
13
References
Birchall, Johnathan (2011) Obama Boosts Wal-Mart Expansion Plans, FT.com, FT
Clifford, Stephanie (2012) Wal-Mart’s U.S. Expansion Plans Complicated by Bribery Scandal,
NY Times
CNN (2003) 250 Workers Arrested at Wal-Mart, CNN.com, CNN
Did Wal-Mart wake up?: How strategic management handled Wal-Mart’s reputation.
(Unknown).
Freidman, M. (July 28, 2008). Wal-Mart’s own audit documented constant violation of labor
laws. Arkansas Business, pp. 1-5.
Friedrichs, D. O. (2009). Exorbitant CEO compensation: Just reward or grand theft? Crime, Law
and Social Change, 51(1), 45-72. doi:10.1007/s10611-008-9144-2
Geller, Adam (2005) As Union Nears Win, Wal-Mart Closes Store, CommonDreams.org,
CommonDreams
GlobalEthics.org (2005) Lawsuit Claims Wal-Mart Condones Overseas Sweatshops,
GlobalEthics.Org
Hagloch, S. B. (2006). Wal-Mart: The high cost of low price. Library Journal, 131(3), 152-152.
http://ezproxy.sckans.edu/login?url=http://search.proquest.com/docview/196823684?acco
untid=13979
Martin, Andrew (2012) Wal-Mart Vows to Fix It’s Controls, NYTimes.com
Mui, Ylan (2011) Wal-Mart works with unions abroad, but not at home, WashingtonPost.com
WAL-MART CASE STUDY
14
Ortega, Bob. (1995, July 3). Broken rules: Conduct codes garner goodwill for retailers, but
violations go on --- factories in latin america still hire minors illegally and unionists get
killed --- drastic solution at wal-mart. The Wall Street Journal. Retrieved from
http://ezproxy.sckans.edu/login?url=http://search.proquest.com.ezproxy.sckans.edu/docvi
ew/398587234? accountid=13979
Retrieved June 7, 2012 from http://www.awpagesociety.com/wp-content/uploads /2011/09/WalMart_CaseStudy.pdf
Smith, Robert (2011) New York City Officials to Wal-Mart: Keep Out, NPR, NPR
Stone, Ralph (2009) Dead Peasants Insurance Policies, Fogcityjournal.com, FCJ
Stone, K. (1995). Impact of the wal-mart phenomenon on rural communities: Increasing
understanding of public problems and policies. Retrieved June 7, 2012 from
http://www2.econ.iastate.edu/faculty/stone/10yrstudy.pdf
Top 10 unethical business actions. (2011, September 13). Retrieved June 7, 2012 from
http://listverse.com/2011/09/13/top-10-unethical-business-actions/ sept 13, 2011 top 10
unethical business actions.
TheClinic (2011) Indignación por placa de Pinochet en sede de Wal-Mart, TheClinic.cl
Trimble, Vance H. Sam Walton: The Inside Story of America's Richest Man, pp.46-64
(Dutton, 1990)
Unknown. (2011, September). Did wal-mart wake up? how strategic management handled walmart’s reputation. Retrieved from http://www.awpagesociety.com/wpcontent/uploads/2011/09/Wal-Mart_CaseStudy.pdf
Wal-Mart Corporate. (unknown). About us. Retrieved June 7, 2012 from
WAL-MART CASE STUDY
http://www.walmartstores.com/AboutUs/
Webteam (2007) Ethical Problems Remain at Wal-Mart, Makingchangeatwalmart.org,
Zook, Matthew & Graham, Mark (2006). Wal-Mart Nation: Mapping the Reach of a
Retail Colossus. Global Economy. Routledge. pp. 15 - 25.
15