Wal-Mart and Corporate Social Responsibility
Length: 1340 words (3.8 double-spaced pages)
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
The Wal-Mart Corporation is a multi-billion dollar low-cost retail organization, consisting of 6400 stores and 1.8 million sales associates worldwide. Wal-Mart’s influence on the retail world and the enormity of their corporate size is unparalleled. Wal-Mart can easily report sales of $312.4 billion dollars per fiscal quarter and net profits of $3.8 billion dollars. Wal-Mart promises her customers "Always low prices. Always!" and upholds this motto by providing low prices to her customers and high return on investment to her stockholders. One way that Wal-Mart has managed to maintain a competitive edge over other low cost retail giants and provide low prices is by cutting wages and by not offering too many company benefits to their employees. Full-time employee working at Wal-Mart only make $8 an hour, while only 45% of the workers can afford to be covered by health insurance. Wal-Mart also increase part time employees from 20 percent to 40 percent so that they do not have to cover all of their employees for health insurance . Although Wal-Mart may not provide excellent benefits to her employees, it successfully performs as a legitimate business operating in a capitalistic society. Wal-Mart upholds the primary fiduciary duty to satisfy her stockholder and follows free the market libertarianism model, which states that a business should not interfering with the free market. In a free market Wal-Mart has a direct responsibility to her primary stockholders rather than the employees of a company.
According to philosopher Milton Friedman the only Corporate Social responsibility a
Corporation has is to increase profits for its stockholders. Through a utilitarian perspective, we can see that Wal-Mart is acts in a way to product the greatest possible balance of good over dissatisfaction for their stockholders. Wal-Mart upholds the fiduciary duties to their stockholders by not increasing wages of their employees, instead they take the sum of money and return it back to their stockholders and shareholders such as customers and suppliers. Wal-Mart creates the happiness for the amount of people who invest in the company. Ethics is about the consequences of an action and the consequence of Wal-Mart’s actions creates the greatest amount of good for the people who are the primary stockholders of the corporation.
We can argue that Wal-Mart’s pursuit of profits does not lead to the greatest collective good for society because many small business owners and Wal-Mart employees have to declare bankruptcy.
This occurs because customers prefer the lower prices offered at Wal-Mart to smaller convenience stores. According to utilitarian theory and Corporate Social Responsibility Wal-Mart should create the greatest possible good for the entire society. Requiring Wal-Mart to satisfy the stockholders and the stakeholders- suppliers, shareholders, employees, customers, and managers. Through the help of multiple partners Wal-Mart can grow as a corporation and return the profits earned to the stakeholders.
In support of a company’s fiduciary responsibility to its stockholders Friedman’s argues three major points, starting with, a corporation does not have an obligation to its employees because the only social responsibility a corporation has is to increase profits for it’s shareholders. So the manager of a company would only have a direct responsibility to the owners of the firm, and the owners of the firm are its stockholders. If stockholders desire that the company make as much profit as possible, the company needs to honor that decision and find ways to decrease costs and increase profits. Thus, a manager has the direct responsibility to maximize profits for the firm, even if it means to reduce the pay and benefits the company’s employees. Friedman also argues against the unjust taxation of stockholders because if a manager spends money on Corporate Social Responsibility activities, he or she is essentially imposing unjust taxes on the stockholder. For it is only the government’s role to impose taxes on the stockholders, and not the corporate manager’s. Thus, it is not ethical for the manager to spend money on CSR .A corporate manager should ideally have no knowledge of CSR if contributing to the society independently (Friedman). Kant supports this argument by stating the example that it would be unethical to violate an innocent person’s right of life in order to save five, thus it is unethical to tax the stockholders for the benefits of the shareholders. Lastly, Friedman mentions that if a manager’s actions reduce returns to stockholders, then the manager is spending the stockholder’s money. It is unethical to spending the stockholder’s money in a way that does not benefit the stockholder or is different than the way stockholder would have spent the money. Essentially managers are stealing from the stockholders. Stealing is ethically wrong, therefore any action such as Corporate Social Responsibility that reduces returns to would be considered ethically wrong.
The philosopher Freeman argues against the stockholder theory and presents us with the stakeholder theory. Which states that a Corporation should partake in Corporate Social Responsibility because the government alone cannot maintain the well being of the society by using tax revenues alone. Wal-Mart should extend their fiduciary duty to include their employees’ in order build trust, unity and company spirit in order to succeed. A successful business needs to have a good fiduciary relationship with its stakeholders in order for both parties to grow, a company should “keep employees satisfied with their morale high because employees are innovation and idea driven”(Freeman). Freeman argues that a corporation has a responsibility to remain true to its mission statement and corporate values. Wal-Mart’s mission statement is: “to give ordinary folk the chance to buy the same thing as rich people.” (Wal-Mart). Most of Wal-Mart’s employees are ordinary people, who shop at Wal-Mart after receiving their paychecks (High Cost). But if Wal-Mart doesn’t manage to pay their employees enough to shop at Wal-Mart, then they are not staying true to their mission statement. Freeman continues that “a mission statement and corporate values does not state profit maximization as a fundamental purpose”, thus a corporation’s main goal should not be profit maximization rather it should be to provide service to their customers.
The Wal-Mart Corporation is an attractive employer for many Americans because it a provider of numerous jobs throughout the country. Wal-Mart work policies are also not in direct violation of U.S. Labor Laws. Unfortunately Wal-Mart uses abusive labor practices at home and abroad by paying their employees low wages and aggressively seeking to keep wages down. This in turns reduces the standard of life for many people and pushes them towards poverty. On average “ Wal-Mart workers earn an estimated $8.00/hour with a 32 hour work week. This equals $256 a week or $13,312 a year. The Federal poverty level for a family of three is $14,630(Markkula)” Therefore we see many single-parent families who can’t afford to afford health insurance for their families and have to work multiple shifts to make ends meet. Wal-Mart also has been charged because they “lay off older workers to bring in younger and cheaper employees. Some 40 lawsuits accuse Wal-Mart of a failure to pay overtime”(Markkula).Kant would point out the lack of ethics in Wal-Mart’s relationships with its employees by arguing that a corporation should “act so that we treat humanity as an end and never as a means only”. According to Kant Wal-Mart should not take advantage of its employees as a means to increase revenues for their stockholders, because all of mankind has value in society. It is unfair to treat some groups of people better than others.
Chang, Michael, Phil 116 Lectures 10/307 to 10/29/07. University of California, Riverside.
Freeman Edward, A Stakeholder Theory of the Modern Corporation. Ethical Theory and
Business, (Englewood Cliffs, NJ: Prentice Hall, 1994), 66-74
Friedman Milton, The Social Responsibility of Business Is to Increase Its Profits, New York
Times Magazine, September 12, 1970. The New York Times Company.
Markkula Center for Ethics: Santa Clara University. “Is it Ethical to Shop at Wal-Mart?” 09
Shaw, William and Vincent Barry. “Utilitarianism and Kantian Ethics” in Moral Issues in
Business, 8th Ed, Belmont: Wadsworth, 2001, 59-69.