Wal-Mart is the world’s largest retailer with more than 4000 stores including 3000-plus Supercenters. In addition to the U.S., the company is also the largest local retailer in several other countries including Canada and Mexico and employs around 2.2 million people worldwide . The company is not only huge but also highly profitable, finishing its last fiscal year with an annual profit of $15.7 billion on total revenues of $447 billion . It is reasonable to expect higher ethical standards from a company as big and profitable as Wal-Mart because the company doesn’t only have the power to shape industry practices but also have significant social and economic impact on the communities it serves.
These high ethical standards include paying fair wages and benefits to employees, making significant charity contributions to community’s educational, economic, and social programs, adopting environmentally-friendly business practices, and engaging in fair business practices at both local and international levels. Wal-Mart’s records indicate that the company’s intense focus on achieving maximum operating efficiency and, thus, earning record profits has led it ignore its ethical obligations on the most part.
The only ethical area in which Wal-Mart earns high points is environmentally-friendly business practices and one of the major reasons is the potential of huge economic pay-off. The company kept 80.9 percent of waste generated by U.S. operations out of landfills in 2011 and the comparable rates for Brazil and China were 52 percent. The company is also the second-largest onsite green power generator in America and currently renewable energy meets 4 percent of Wal-Mart’s global electricity needs. The company’s goal is to achieve 100 percent renewable energy rate in the future . Despite doing well in sustainability, the company’s record in other areas is dismal, even poorer than smaller and less profitable competitors.
The average hourly wage at Wal-Mart’s competitor, Costco is almost twice the average at Wal-Mart at $17 per hour . Similarly, one would expect Wal-Mart to take care of its employees, especially during difficult economic climate since the company’s earns billions of dollars every year yet Wal-Mart did exactly the opposite during recent financial crisis. The company announced in 2011 that it will cut healthcare benefits for full-time workers as well as eliminate insurance for new part-time workers .
As far as corporate giving is concerned, Wal-Mart’s probably closest competitor Target gave 4.7 percent of 2010 pretax profits in 2011 while Wal-Mart gave 4.1 percent during the same period . Similarly, Wal-Mart has also been criticized for its business practices including allegations of bribery in Mexico . In addition, Wal-Mart’s pressures on suppliers to achieve lower costs results in labor violations overseas and the company has failed to properly monitor its suppliers. New York-based China Labor Watch discovered in 2009 that workers at many factories in China operated by Wal-Mart’s suppliers suffer from serious rights’ abuses such as low pay and degrading work conditions .
Wal-Mart’s story is a cautionary tale that companies should put more efforts in balancing commercial interests and ethical obligations because they are part of the communities in which they operate and have obligations towards the society. Wal-Mart’s business model has been highly successful over the decades but the company’s competitors have shown it is possible to be both profitable as well as ethical.