Sonja Arnoult
Charles Heldridge
Ali Moosa
Marcelo Palomo
David Faglie
Amen Hamed
Wal-Mart: Responding to International Outrage
Background and History:
Wal-Mart was founded in 1962 and has become the staple super-market and all around
retailer in America. Today Wal-Mart operates more than 11,000 retail units under 69 banners in 27
countries (Our Story, 2014). It is the nation’s largest retailer, second-largest corporation, and largest
private employer. Wal-Mart employs around 2.2 million workers. Wal-Mart is doing extremely well
with a reported fiscal year sales of over $466 billion in 2013 (Our Story, 2014). However, they
receive much criticism about inadequate health care, bribery, and the retailer’s anti-union stance.
Around 5,000 lawsuits are filed against Wal-Mart each year. This is roughly seventeen suits per
working day (Riper, 2005). Internationally, Wal-Mart is heavily involved with ethical malpractice.
Some of the most prominent examples of ethical malfeasance include the Wal-Mart bribery scandal
in Mexico and the tragedies in Savar and Dhaka, Bangladesh. So, the question is, how can Walmart
repair its international image after so much controversy?
Problem Identification:
Wal-Mart is such a large corporation that it seems almost unstoppable, but with all of the
recent scandals many people openly protest against Wal-Mart and hope to have it removed from their
communities. Coincidentally, the scandals in Mexico are based in Wal-Mart’s want to expand its
territory. “A New York Times investigation revealed that Walmart's Mexico subsidiary paid $24
million in bribes to local officials to sidestep regulations and obtain construction permits for new
stores. The worst part: the story alleges that then CEO H. Lee Scott and other top executives knew
exactly what was going on and tried to hush it up” (Foroohar, 2012). The problem with Wal-Mart is
that the company seems to believe it is too large to fail. In a company that makes billions and
employs millions it is easy to see where the idea spawns from. As a company that makes so much
money, however, Wal-Mart refuses to help Bangladesh, clearly in a state of crisis. "The fire, which
was the worst industrial accident to date in the South Asian country” killed and injured many
innocent, hardworking people (Lo, 2013). The recent scandal has also “drawn international attention
to lack of oversight over unsafe working conditions in a country that is rapidly climbing up the ladder
of the global supply chain of contractors and sub-contractors that produce goods for multinational
retailers" (Lo, 2013).
Bangladesh Tragedies:
In 2011, an inspection of a factory in Dhaka, Bangladesh discovered serious concerns about
fire-safety (Mattioli, 2012). The exits were inaccessible, the workers did not know of evacuation
routes, and the plant only had some basic firefighting equipment. "The main exit of the building was
locked, and there were no emergency exits. The fire extinguishers that hung on the walls were empty,
surviving workers said, merely props used to pass safety inspections" (Lo, 2013). 112 workers were
killed due to the plants vulnerabilities (Mattioli, 2012). “A lack of fire-safety precautions has been
cited by Bangladeshi officials as a reason that so many people died when the Tazreen factory caught
fire on Nov. 24. Some people jumped to their deaths from upper floors of the factory because
stairwells were engulfed in flame and smoke. The fire escape was inside the building and, like the
main staircase, led to the ground floor, where burning balls of yarn blocked the way” (Mattioli,
2012). This is just another example of how Wal-Mart’s international operations focus on profits, and
lack any sort of ethical awareness. The factory was known to be unsafe at least a year before the
actual fire claimed 112 workers, yet the factory was producing merchandise for Wal-Mart weeks
before the fatal fire. Wal-Mart claims it discontinued contracting with the supplier, but it’s uncertain
whether or not the supplier was aware of this discontinuation of production. After all, Wal-Mart
clothing items were found in the debris (Mattioli, 2012).
The factory in Bandgladesh failed inspection months before the fire and should have been
shut down, not making clothes. The clothing industry accounts for 80% of the GDP in Bangladesh,
therefore, it has a lot of power over the country (Berfield, 2013). They failed to do anything about the
poor working conditions because they wanted to keep the extra production in continuation rather than
do what was ethically right. Walmart officials in the United States knew about the conditions of
factories in Bangledesh, but they did nothing about it. Although Wal-Mart accounted for such a high
percentage of production at that location they had an extremely strong opposing view to helping
those in need. "Walmart took the lead in blocking a proposal that global retailers help pay for safety
improvements at the factories that produce their products" (Lo, 2013). This is strong opposing view
shows how unconcerned Wal-Mart is about the health and lives of those that produce for them. They
do not care about what is ethically or morally right. They only choose what is most profitable to them
with no regard to the well-being of others.
Walmart was even told by the International Labor Rights forum located in Washington to
help with funding to compensate for the disaster that occurred in Bangladesh, yet Wal-Mart still
refused (Greenhouse, 2013). The nine-story Rana Plaza collapsed and killed more than 1,129 people
(Greenhouse, 2013). In order to help the families in need the people of Bangladesh extended their
hand out to Wal-Mart for help, as “55 percent of the factories production was for Wal-Mart”, it was
assumed that it would be no problem for them to contribute to the fund for the broken families. Six
million dollars was requested, a remarkably small sum considering the lives lost, and remarkably
smaller when considering Wal-Mart’s annual income (Greenhouse, 2013). Wal-Mart refuses to help,
however, and is in denial that it is at fault for this decision. They claim no responsibility for the
losses and continue to refute the fact that their help is needed even as other large corporations join
the cause. If Wal-Mart continues down this road of malpractice and poor ethical standards public
appeal for the store will continue to fall and the public image of Wal-Mart will continue to suffer the
consequences of their actions.
A man by the name Rajan Kamalanathan represented Wal-Mart in ethical resourcing as the
vice president. He responded to the International Labor Rights forum by saying that they did not plan
on helping out. Mr. Kamalanathan backed up his answer by saying that Walmart had no affiliation
with Rana Plaza in the production aspect at the time the unfortunate event occurred. Furthermore, he
said that anything related to the production aspect was unauthorized if it happened (Greenhouse,
2013). Industry analysts say that Wal-Mart keeps refusing to participate because they already said,
“No” to the International Labor Rights forum and want to stick by their word. Wal-Mart thinks they
will look hypocritical if they contribute after already saying that they have no authorized related
production in the factories involved in the tragedy. However, this has predictably done nothing but
harm their reputation.
Mexico Bribery Scandal:
“Wal-Mart de Mexico was an aggressive and creative corrupter, offering large payoffs to get
what the law otherwise prohibited. It used bribes to subvert democratic governance — public votes,
open debates, transparent procedures. It used bribes to circumvent regulatory safeguards that protect
Mexican citizens from unsafe construction. It used bribes to outflank rivals” (Barstow, Bertrab,
2012). Wal-Mart de Mexico was constantly taking in bribes for clearly a variety of different reasons
and at some point it was noted that executives approved at least four different bribe payments that
totaled more than $200,000 in all just to build a medium-size supermarket (Barstow, Bertrab, 2012).
Through confidential Wal-Mart documents, The Times identified nineteen store sites across
Mexico that were the target of Wal-Mart de Mexico’s bribes (Barstow, Bertrab, 2012). A pattern
arose as the dates of bribe payments coincided with dates when critical permits were issued
(Barstow, Bertrab, 2012). Wal-Mart was tearing through Mexico placing locations in highly
unethical areas that were overpopulated, under-resourced and truly unable to compensate for the loss
of land and power. Wal-Mart did not care about the needs of the areas it was taking over. It only
cared about expanding its properties to places that it saw as desirable. There were eight bribe
payments totaling $341,000 where Wal-Mart built a Sam’s Club in one of Mexico City’s most
densely populated neighborhoods, near the Basílica de Guadalupe, without a construction license, or
an environmental permit, or an urban impact assessment, or even a traffic permit (Barstow, Bertrab
2012). Also, in nine bribe payments totaling $765,000, Wal-Mart built a vast refrigerated distribution
center in an environmentally fragile flood basin north of Mexico City, in an area where electricity
was so scarce that many smaller developers were turned away (Barstow, Bertrab, 2012).
The corruption does not stop at Mexico. There are reportedly thirty-one similar reports of
what can be noted as “significant” allegations of corporate violations, which includes potential
crimes from senior executives within various markets for 2006 alone (Foroohar, 2012). The company
has hired hundreds of lawyers, investigators and forensic accountants who are examining all 27 of its
foreign markets. It has already found potentially serious incident, including indications of bribery in
China, Brazil and India. Several top executives in Mexico and India have been suspended or forced
to resign in recent months (Barstow, Bertrab, 2012). The company spent more than $100 million on
investigation in 2012 alone (Barstow, Bertrab, 2012). The suspension of major executives implies
that Wal-Mart’s bribery problems extend to the highest level, or that their executives simply cannot
contain the problem.
A $52,000 bribe was placed in order to get around new zoning charts and place a Wal-Mart
near the pyramids in San Juan Teotihuacan (Barstow, Bertrab, 2012). There have been numerous
stand-offs with protestors against Wal-Mart and the destruction of their land. Archaeologists began to
find evidence that Walmart "was building on ancient ruins” (Barstow, Bertrab, 2012). They found the
“remains of a wall dating to approximately 1300 and enough clay pottery to fill several sacks, an
altar, a plaza and nine graves” (Bhasin, Lutz, 2012). This created an uproar and locals began
protesting heavily against Wal-Mart building on these precious landmarks.
In Mexico, bribery is commonplace with Mexican firms “third most likely to have to pay
bribes right after [Russia and China], according to Transparency International, an anticorruption
NGO” (Foroohar, 2012). Although most of the hottest markets score low on the TI corruption index,
popularity doesn’t excuse wrongdoing. Bribery is still illegal and marketers clearly agree that
malpractice is not something they will support. The U.S. Securities and Exchange Commission said
that it was looking into potential violations related to the Foreign Corrupt Practices Act in Brazil,
China and India in November of 2010.
Recommendations:
The level of disrespect at Wal-Mart is endless. They clearly did not care about the landmarks
of Mexico and appear to lack any remorse over the many lives that were lost in Bangladesh. They, in
fact, seem to be almost in a state of denial about these events and their cooperation in them. WalMart desperately needs to accept credibility and increase accountability within the corporation. It
important for them to increase ethical standards of all employees within the company to ensure
proper implementation and consideration for ethical standards.
Wal-Mart needs to consider adopting a more proactive ethical strategy. If Wal-Mart
continues bribing foreign officials, it could end up in a position such as the Siemens bribery scandal
which cost Siemens a combined total of $1.6 billion in fines As if the massive fines weren’t enough,
Siemens still battles the critics and skepticism arising around the name of the company, which causes
distrust in brand and loss of customers. In Wal-Mart’s case, the reputation of the company is at stake
and may already be critically injured in the eyes of many. Wal-Mart clearly does not want to take on
blame for things that have already passed and since they deny all responsibility they feel no need to
compensate those they have hurt in any way. Wal-Mart must put the past behind it and make a new
name for itself, and that can only come from a proactive ethical strategy. The damage has already
been done. It is important that Wal-Mart adopt some ethical changes while the company is still
thriving.
Wal-Mart needs to instill an enforceable code of conduct that emphasizes ethical behavior.
There needs to be an emphasis on management within this code of conduct. This will provide some
sort of way to apply accountability to the enforcement of rules at each location. To avoid situations
of neglect, poor treatment of workers, and overstepping boundaries it is very important that WalMart puts in place a stringent set of rules that will allow managers to maintain optimal standards. We
recommend a system that sets a clear standard that is based in ethics and concerned about the wellbeing of others internationally. This code of conduct should include measures in the areas of legal
compliance, anti-bribery, basic human rights, and employee health and safety. The need for legal
compliance is great, because Wal-Mart must comply with the law no matter where they operate. This
includes adhering to the FCPA. If Wal-Mart officials adhere to legal standards, particularly the
FCPA, there won’t be scandals involving bribery. Avoiding bribery could help solve the issues in
Mexico and other nations where they haven’t been caught yet. A measure forcing managers to
observe basic human rights, and placing an emphasis on their health and safety could prevent
misfortunes such as the Bangladesh tragedies. These tragedies are avoidable, and considering the
safety of their workers and their contractors’ workers could help Wal-Mart prevent being caught up
in future tragedies.
Starting up a system of community service would definitely help to improve the image of
Wal-Mart to those that it has hurt. We recommend taking on a service for low income working
families in Bangladesh. Rather than forfeiting the stance already in place it can provide a new
window of opportunity through its own causation to help out in Bangladesh. This would help to
redeem credibility that Wal-Mart does, in fact, care about those people that it hurt. In Mexico, they
could provide some services to preserving history and landmarks. One suggestion is that they help to
protect and restore the same type of historical landmarks their expansion efforts have marred and
destroyed. They could accomplish this by donating to the World Monuments Fund, which works
closely with the Mexico City Historic Center. These organizations aim to preserve and protect
historic architecture in Mexico. This would help to show that they were regretful of past instances
and wanted to move forward with a helping hand and generous attitude. By taking steps to repair
these bonds Wal-Mart can recast its public image and move forward in a different light. It can
continue to provide helpful services and donations to foundations that support international needs. By
doing this Wal-Mart can prove that it is interested in the well-being of others and is a brand to be
trusted.
Conclusion:
Wal-Mart could continue to ignore these recommendations and avoid proactive ethical
measures, but it will only hurt them in the long run. In the short run, Wal-Mart may not see a
significant financial impact, because they’re paying no reparations and incurring no fines, but that
could change. More importantly though, they are ruining the reputation of the brand. A negative
company image can hurt sales, and if they continue to employ a poor ethical strategy Wal-Mart’s
woes will only continue to worsen.
By taking incremental steps forward to change the attitude of employees from the outside in
Wal-Mart can save itself from situations like Siemens, paying out billions in fines, and tragic
disasters like Bangladesh, which has caused the deaths of over 1,200 people. It is not too late to
reassess standards and enforce rules. It is the time to provide a helping hand to others and reduce
reputational fall out. By providing an enforceable code of conduct and lending community service,
Wal-Mart can move forward with a different image. No longer will it be viewed as a selfish,
disrespectful brand, but a brand that people can trust and will continue to use. In addition, they can
avoid future financial hindrances that could result from continued unethical actions. Wal-Mart can
repair its international image by breaking itself of its poor ethical habits and listening to public
opinion, which has increasingly demanded ethical responsibility and corporate accountability.
Works Cited:
Barstow, D., & Bertrab, A. X. (2012, December 18). The Bribery Aisle: How Wal-Mart
Used Payoffs To Get Its Way in Mexico. The New York Times, p. A1.
Berfield, S. (2013, November 19). Four Things We Learn From Wal-Mart's Bangladesh
Factory Audit. Bloomberg Businessweek.
Bhasin, K., & Lutz, A. (2012, December 18). 7 Stunning New Details About Walmart's
Mexican Bribery Scandal Read more: http://www.businessinsider.com/new-details-in-walmartbribery-scandal-2012-12#ixzz2yvSgJnOa. Business Insider. Retrieved April 10, 2014, from
http://www.businessinsider.com/new-details-in-walmart-bribery-scandal-201212#ixzz2xZFAqDP2
D'Innocenzio, A. (2012, November 15). Walmart Earnings Q3 2012: Retailer Probing
Violations Of Anti-Bribery Act In Brazil, China, India. Huff Post Business. Retrieved April 10,
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Foroohar, R. (2012, May 7). Walmart's Discounted Ethics. Time.
Greenhouse, S. (2013, November 23). U.S. Retailers Decline to Aid Factory Victims in
Bangladesh. The New York Times, p. B1.
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Fire. Corp Watch. Retrieved April 11, 2014, from
http://www.corpwatch.org/article.php?id=15804
Mattioli, D. (2012, December 10). Bangladesh Fire: What Wal-Mart's Supplier Network
Missed. The Wall Street Journal.
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http://corporate.walmart.com/our-story/
Riper, T. V. (2005, November 10). Wal-Mart Stands Up To Wave Of Lawsuits. Forbes.