Introduction
The purpose of this report is to analyze the different social responsibilities and ethical responsibilities of businesses to the society. Apart from the main objective of maximization of profits, businesses should have other objectives that ensure that their practices promote the welfare of the society. In this report, Walmart is analyzed.
Walmart is an American multinational company considered to be the largest employer with 2.2 million employees (Walmart.com). Apart from the United States, it has branches in United Kingdom, Canada, Japan, Mexico, and India. It usually operates general chains hypermarkets, grocery stores, and discount department stores. The company’s social responsibility is analyzed looking at how some of its activities and practices affect its stakeholders and shareholders.
In the first part of the report, the different theories that will be essential when analyzing the social responsibility of the company are analyzed. In the second part, an analysis is done to determine where the earlier discussed theories are linked to the findings. In the last part, conclusions and recommendations are given.
Theoretical approach
Shareholders vs. Stakeholders Theories
In the shareholder value theory, the purpose of the firm is set to maximize the financial returns for the shareholders (Carroll, n.d). The theory supports the capitalistic perspective of the firm being founded and operated to singly benefit the shareholders.
The stakeholder value theory argues that the purpose of a firm or a company is to serve broader societal interests that are beyond the economic value creation for shareholders alone. The stakeholders include the shareholders, employees, consumers, and suppliers. It continues to argue that business organizations are dependent upon stakeholders for success. Stakeholders are considered to have a common stake in the organization (Heslin & Ochoa, 2008). There are many questions on who the stakeholder is; those that are affected by the population or those that contribute to wealth creating of the company (Barnett, 2014). The latter, however, points back to the shareholders. Stakeholder value theory addresses the responsibility of a business to those that are affected directly or indirectly by the practices of the company.
Corporate Social Responsibility
According to Carroll (1991), “Corporate social responsibility involves the conduct of a business so that it is economically profitable, law abiding, ethical and socially supportive.” Carroll’s pyramid helps managers analyze the different types of obligations that are expected of business by the society. The theory argues that a business has economic, legal, ethical and philanthropic responsibilities. For this report, the legal and ethical responsibilities of Walmart are analyzed.
Ethical responsibilities entail what the society expects of the business that is above the legal and economical responsibilities (Kampf, 2007). It is the company’s obligation to do what is just and fair for the consumers, employees, shareholders, and the society in general (Crane et al., 2014). It needs not to be necessarily imposed by law, but it should embrace the newly emerging values and norms in the society. Analyzing ethical responsibilities helps to establish whether Walmart’s practices meet the expectations of the society; thus, promoting the well-being of the society.
Legal responsibilities entail what is expected of the company according to the set laws. A business should comply with the laws or regulations set as the operating ground rules by the government or the state. According to Carroll (1991), firms are expected to pursue their economic missions within the set framework of the law.
Business Ethics: Utilitarianism and Virtue Ethics
Utilitarianism is an ethical theory that holds that for an action to be considered as being morally right, it should maximize utility (Driver, 2009). It focuses on the consequences of a decision or an act and not the act itself. The practices of the company must benefit all the parties involved at it should bring them happiness. Utilitarianism in businesses might range from their pricing policies (first class, economy class in flights) to their labor policy (minimum wages).
Virtue ethics emphasizes the character or the person that makes a decision rather than the consequences of the action (Das Gupta, 2010). In a business setting, virtue ethics focuses on the general development of rules that would possibly constrain the management actions.
Analysis
3.1 Shareholders vs. Stakeholders
For the longest time, Walmart has been in the pursuit of profits. Walmart seems to be prioritizing the investors in its strategies. It maximizes its profits to increase the profit attributable to shareholders. It does this by minimizing its operational costs mostly through minimizing the wages. Most business theories support the idea of maximization of profits failure to which the business would not exist. However, this is not good for the society since its pursuit is done at the expense of the collective good of society (De George, 2010). Walmart seems to be putting the interests of the shareholders alone at the forefront disregarding the greater interests of the secondary stakeholders.
Walmart is quite effective when it comes to addressing some stakeholders, such as the investors and the customers (Kampf, 2007). The prices of the goods are low to attract the customers. The other parts of the stakeholders that is the employees and the suppliers have been neglected. For instance, Walmart has been accused of underpaying its employees (De George, 2010). However, it has not put efforts in correcting the situation. Instead, it strives to keep the wages as low possible both in the American stores and those in other countries. Despite it being the largest employer, most employees have been reported to leave their jobs after an average of six months due to their questionable labor policy. Most Walmart employees are believed to be living in poverty. With this, it is quite evident that the company has neglected its social responsibility to the workers.
3.2 Corporate social responsibility
Legal Responsibilities
Walmart has been facing legal issues both in the domestic and international markets. It has been engaged in several scandals related to bribery. According to New York Times, Walmart was involved in hundreds of suspect payments given to Mexican officials. The bribery totaled to more than $24 million (Barstow, 2016). A lawsuit was filed against Wal-Mart by suppliers of Wal-Mart in China, Bangladesh, and Indonesia. Walmart working conditions was claimed to be causing harm to the workers and ‘unjust enrichment’ to Wal-Mart.
In other lawsuits, Walmart has been accused of discrimination against women. The alleged discrimination was regarding their wages and pregnancy policy. Although Walmart has been finding a way out of the lawsuits, it is evident that it is not fulfilling its legal responsibility. They are trying to expand the stores illegally through handing out of bribes (Barstow, 2016). They also do not put into perspective the labor policies that would improve the working conditions of the workers.
Ethical Responsibilities
When analyzing the sustainability reports of Walmart for the past few years, it had done well in some elements, such as corporate citizenship, environment and sustainability, philanthropy, and community relations (Walmart.com. 2014). The company has initiated programs that aim at conserving the environment. Although Walmart has been reported to promoting work safety and basic work values, nothing much has been done. Workers are still working for long hours, under questionable conditions, and the pay is not so good.
3.3 Business ethics
Ethics addresses a decision being right or wrong. Concerns have been raised especially by tare unions, concerning the labor conditions of the Walmart employees. Although there have been concerns about the working conditions, the most focused on the issue is that of minimum wages paid to the Walmart employees. The incidence of bribery in Mexico is also against the business ethics.
Utilitarianism
Under utilitarianism, an action is only right if it maximizes the utility of both parties (Driver 2009). One of these issues discussed under utilitarianism is low employee pay. Employees of Walmart receive an average of 6-7 dollars an hour for 28-40 hour work weeks (Kampf, 2007). The low wages have an impact on the employee's families especially those with kids. The total annual earnings are around 13,000 dollars a year (Kampf, 2007). With the current economy, the budget of many families will be constrained. It might be hard for the employees to even meet the basic needs of the families due to the rising cost of gas, meeting the children school suppliers and paying the mortgage in time. Many Walmart employees are thus subjected to poverty. Many of the Walmart employees and their families receive government assistance. The assistance was in the form of form of Section 8 housing, health care for the children of the employees, reduced cost of lunches and tax credits.
Utilitarianism should yield maximum usefulness and happiness to both sides (employers and employees) (Das Gupta, 2010). This is not the case with Walmart since they tend to maximize their profits at the expense of their employees. While maximizing profits are good for the company, many of the companies employees are left unhappy and in poverty. With Walmart being a multi-billion profitable company it is quite odd that there employees would need public assistance, yet the company can be able to adequately pay their workers. Under the Mexico issue, the decision of Walmart to bribe the officials for their expansion gains was wrong. People of Mexico were not happy with that since people who initially lived at and around the building sites had to be displaced. Some of the ancient pyramids had to be ruined thus destroying the pride and culture of the people (Iacovone et al. 2009). Walmart also hurt themselves with their action since they build some hatred for the local people thus reducing the number of customers.
Virtue Ethics
According to Das Gupta (2010), virtue ethics emphasize on a person and virtue in the morality. It does not dwell on the consequence of an action. The person that made the decision about the wages to be paid is considered to be wrong under virtue ethics. In this case, Walmart did not consider the wellbeing of its employees.
What Walmart did in Mexico was also wrong under the virtue ethics that stands for courage, honesty, temperance, and justice (Iacovone et al., 2009). It did not stand up for what is right by accepting to give out the bribes. It seems to use the people of Mexico for its own good since it was not honest to them and yet it expects them to be its customers. It uses them in its attempt to gain maximum profits. The name of Walmart is also put at stake with Walmart acting so greedy and still trying to cover up for their actions.
4.0 Conclusion and Recommendations
I recommend that businesses put the interest of the stakeholders at heart the same way they do with the shareholders. Secondly, any company, in this case, Walmart, should review the labor policy to ensure that the workers have a good working environment. Thirdly, businesses should uphold their legal and ethical responsibilities so that they can be able to meet the overall social responsibility.
Reference List
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Carroll, B. A. (1991). The pyramid of corporate social responsibility: Toward the moral management of organizational stakeholders. Business Horizons
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Walmart.com. (2016). Walmart CEO Outlines Growth Strategy at Annual Meeting for the Investment Community. Corporate.walmart.com. Retrieved 10 May 2016, from http://corporate.walmart.com/_news_/news-archive/2014/10/15/walmart-ceo-outlines-growth-strategy-at-annual-meeting-for-the-investment-community
