A REPORT

ON
“UNETHICAL PRACTICES IN AN ORGANISATION”
(Wal-mart Stores Inc.)

“In today's modern business world, the road to success requires more than merely
technical skills, practical knowledge and a good product. Business ethics, above all,
are the guiding forces to achieve and sustain success. Greater accountability and
transparency, up-to-the-minute market information, reliable financial and market
data, etc. are essential gauges for investment decisions. Business ethics become the
fundamental building blocks that link up all these expectations.”

INTRODUCTION:
Business ethics is the branch of ethics that examines ethical rules and principles
within a commercial context; the various moral or ethical problems that can arise in a
business setting; and any special duties or obligations that apply to persons who are
engaged in commerce. Those who are interested in business ethics examine various
kinds of business activities and ask, "Is the conduct ethically right or wrong?"

Business ethics are more than moral values and principles that determine our
conduct in the business world. It refers to the commercial activities, either with other
business houses or with a single customer. They can be applied to all aspects of
business; from generation of an idea to its sale. Business uses the society for its
resources and functioning, thereby obligating it to the welfare of the society. While
the objective of all business is to make profits, it should contribute to the interest of
the society by ensuring fair practices. However, greed has led the present business
scenario towards unethical business practices, legal complications and general
mistrust. Unethical practice on a grand scale is evidenced by the many serious
infractions, both financial and environmental, that have occurred over time.
Strategies such as code of conduct, code of ethics and policies and procedures
developed by various international entities can guide corporate in an effort.

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Code of Ethics

Lot of organizations implement the code of ethics in their company polices, which
they implement during induction and regular training. A Code of Ethics is generally a
more blanket statement of values and beliefs that defines the organization.

It is for?

 Company's assets, funds and records

 Conflict of interest
 Management and employee practices
 Information on competition

Ethical Business Practices

Here are a few ethical business practices that should be followed to build an honest
reputation and ensure smooth running of any organization.

 Investors: Ensuring safety of their money and timely payment of interest.

 Employees: Provision of fair opportunities in promotions and training, good
working environment and timely payment of salaries.
 Customer: Complete information of the service and product should be made
available. Personal information of the customers should not be used for personal
gain.
 Competition: Unscrupulous tactics, competitor bashing and wrong methods
should be avoided while handling competitors.
 Government: Rules and regulations regarding taxes, duties, restrictive and
monopolistic trade practices and unlawful activities like corruption and bribing should
be adhered to.
 Environment: Polluting industries should ensure compliance with the
government norms regarding air, water and noise pollution.

Unethical Business Practices

One might find many companies who blatantly thrive on unethical behavior and
practices. A free environment is present or promoted where acts of violation of
norms to amass wealth in an unethical manner is followed.

Following are some of the activities that come under the ambit of unethical practice.

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 Resorting to dishonesty, trickery or deception.
 Distortion of facts to mislead or confuse.
 Manipulating people emotionally by exploiting their vulnerabilities.
 Greed to amass excessive profit.
 Creation of false documents to show increased profits.
 Avoiding penalty or compensation for unlawful act.
 Lack of transparency and resistance to investigation.
 Harming the environment by exceeding the government prescribed norms for
pollution.
 Invasion of privacy used as leverage, for obtaining personal or professional gains.
 Discrimination on the basis of age, gender, race, religion, disabilities.
 Union busting, strikes.
 Workplace surveillance, drug testing.
 Misleading financial analysis.
 In price fixation, price discrimination, price skimming.
 Attack ads.
 Children and marketing.
 Product testing: use of animals as test objects.
 Genetic disturbances or distortions with use of new technologies like harm
related to mobile radiations etc.

Wal-Mart Unethical Business Practices

Wal-Mart, the big giant, the place where a lot of people usually do their shopping for
the low prices and the variety of products was founded by Sam Walton. Walton was
an entrepreneur with an innovative vision, started his own company and made it into
the leader in discount retailing that it is today. In fact, Wal-Mart is considered to be
the biggest company in the U.S. and it has stores worldwide. According to PBS, “Wal-
Mart employs more people than any other company in the United States outside of
the Federal government, yet the majority of its employees with children live below
the poverty line.” In addition, Wal-Mart likes to portray itself as a seller of U.S.
manufactured goods but in reality the company has products on its shelves made in
foreign countries and at questionable workshops. It would seem that Wal-Mart
encourages “made in the USA” but it really encourages products made outside the
USA. As a result, Wal-Mart has forced many manufacturers out of business.

Wal-Mart has been subject to criticism by various groups and individuals. Labor
unions, community groups, grassroots organizations, religious organizations, and
environmental groups protest against Wal-Mart, the company's policies and business
practices, and Wal-Mart customers. Other areas of criticism include the corporation's

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foreign product sourcing, treatment of product suppliers, environmental practices,
the use of public subsidies, and the company's security policies

As a matter of fact, this big giant is facing a significant amount of controversy for
unethical business practices. In fact, some of these unethical business practices
include the following.

Labor Union Opposition:

Wal-Mart is a non union organization that feels it does not need third party
intervention. So, instead of unions, Wal-Mart has an open door policy that
encourages employees to take their complaints beyond management. But, according
to PBS, the open door policy does little to help its employees but gives the business
the leverage it needs to terminate unwanted non compliant help. In addition,
Employees start out at lower wages than unionized corporations and end up quitting
by the end of the first year. Wal-Mart also prohibits employees from talking to union
representatives. It is unethical for Wal-Mart to prohibit employees to talk to union
representatives since according to the National Labor Relations Act, employers are
not allowed to discourage employees from forming a union for they have that right.
Therefore, the United Food and Commercial Workers Union filed a complaint with
the National Labor Relations Board against Wal-Mart. “The complaint, filed with the
National Labor Relations Board, alleges that Wal-Mart violated federal labor law by
"bribing" employees to report on co-workers who favored a union.” But Wal-Mart
denied the charges that were brought against the company. Thus, Wal-Mart is wrong
by bribing employees for it encourages dishonest behavior. If Wal-Mart wants to
avoid a hearing or a lawsuit in this situation, they need to post notices saying the
retailer will not oppose employees talking to union representatives. In addition, if
Wal-Mart takes more seriously the employees’ complaints, it might encourage them
not to unionize

Unfair Treatment of Employees:

Wal-Mart has been accused of discriminating against women. Women had been
denied training and promotion opportunities that are offered to men. In addition
women are underpaid. That is, men are paid more than women. According to
Hoover’s handbook of American business, “in June 2001 a group of six current and
former female Wal-Mart employees filed a sex discrimination lawsuit (seeking to
represent up to 500,000 current and former Wal-Mart workers) against the
company.” The suit was filed because Wal- Mart failed to provide equal employment
for women. In fact, there are over 70 percent of women working at Wal-Mart, but
only a small amount of those women are managers. So, men are holding more
management positions than women. In addition, “Wal-Mart is the nation's largest

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employer of women, but unfortunately they are being treated without dignity and
respect." So it seems then that discrimination is a big problem at Wal- Mart. If Wal-
Mart wants to avoid lawsuits they need to give more job opportunities to women and
they should get paid as much as male employees. Even though Wal-Mart is such a
successful company, they can do better if they put a stop to discrimination for it will
save them money on lawsuits. In fact, “Wal-Mart recently introduced workplace
diversity initiatives, intended to prevent further gender bias.”

Another issue that Wal-Mart is facing right now is the fact that employees’ wages are
very low. An average worker makes between $12,000 and 17,000 a year which is not
much. As a result employees have to apply for public assistance and this public
assistance comes from our tax dollars. Basically, one of the reasons for Wal-Mart low
wages is because they want to cut operating costs and they want to continue offering
low prices. So, “Wal-Mart's ultimate defense is that it offers lower prices and
somehow that justifies all sins." It seems that Wal-Mart cares more about keeping its
prices low than to increase employee’s wages. Besides low wages, Wal-Mart’s health
insurance is so expensive that some of the employees can not even afford to pay for
it. So, those employees who couldn’t afford the health plan will probably have to get
their health care benefits through their spouses or the state from our tax dollars.
Wal-Mart responded to this problem by offering discounts on health care coverage.
“Members can save as much as 50% on services not normally covered by medical
insurance.” Discounts are not enough. Wal-Mart still has a moral responsibility to
provide affordable health care to its employees not shift the cost onto the American
taxpayers. Wal-Mart can also raise employees’ wages so they can afford to pay for
their health plan.

Child labor violations:

In January 2004, The New York Times reported on an internal Wal-Mart audit
conducted in July 2000, which examined one week's time-clock records for roughly
25,000 employees. According to the Times, the audit, "pointed to extensive violations
of child-labor laws and state regulations requiring time for breaks and meals,"
including 1,371 instances of minors working too late, during school hours, or for too
many hours in a day. There were 60,767 missed breaks and 15,705 lost meal times.
Wal-Mart’s vice president for communications responded that company auditors had
determined that the methodology used was flawed, and the company "did not
respond to it in any way internally."

Use of illegal workers:

Wal-Mart has been accused of allowing illegal immigrants to work in its stores. In one
case, federal investigators say Wal-Mart executives knew that contractors were using

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illegal immigrants as they had been helping the federal government with an
investigation for the previous three years. Some critics said that Wal-Mart directly
hired illegal immigrants, while Wal-Mart claims they were employed by contractors
who won bids to work for Wal-Mart.

On October 23, 2003, federal agents raided 61 Wal-Mart stores in 21 U.S. states in a
crackdown known as "Operation Rollback," resulting in the arrests of 250 nightshift
janitors who were undocumented. Following the arrests, a grand jury convened to
consider charging Wal-Mart executives with labor racketeering crimes for knowingly
allowing illegal immigrants to work at their stores. The workers themselves were
employed by agencies Wal-Mart contracted with for cleaning services. Wal-Mart
blamed the contractors, but federal investigators point to wiretapped conversations
showing that executives knew some workers did not have the right papers. The
October 2003 raid was not the first time Wal-Mart was found using unauthorized
workers. Earlier raids in 1998 and 2001 resulted in the arrests of 100 workers without
documentation located at Wal-Mart stores around the country.

In November 2005, 125 alleged undocumented immigrants were arrested while

working on construction of a new Wal-Mart distribution center in eastern
Pennsylvania. According to Wal-Mart, the workers were employees of Wal-Mart's
construction subcontractor.

Working conditions:

Wal-Mart has also faced accusations involving poor working conditions of its
employees. For example, a 2005 class action lawsuit in Missouri asserted
approximately 160,000 to 200,000 people who were forced to work off-the-clock,
were denied overtime pay, or were not allowed to take rest and lunch breaks. In
2000, Wal-Mart paid $50 million to settle a class-action suit that asserted that 69,000
current and former Wal-Mart employees in Colorado had been forced to work off-
the-clock. The company has also faced similar lawsuits in other states, including
Pennsylvania, Oregon, and Minnesota. Class-action suits were also filed in 1995 on
behalf of full-time Wal-Mart pharmacists whose base salaries and working hours
were reduced as sales declined, resulting in the pharmacists being treated like hourly
employees.

Wal-Mart has also been accused of ethical problems. It is said that the Wal-Mart
employees are gender discriminated when trying to be hired and treated in the work
area. In Duke vs. Wal-Mart Inc., which was a discrimination case on behalf of more
than 1.5 million current and former female employees of Wal-Mart’s 3,400 stores
across the United States. Dr. William Bliebly who evaluated Wal-Mart’s employment
policies "against what social science research shows to be factors that create and
sustain bias and those that minimize bias” (Bliebly) and he finished by saying, the

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men and women not being created equal in the workforce is what Wal-Mart is doing
and what they should essentially not be doing.

Allegations of predatory pricing and supplier issues:

In May 2010, Wal-Mart's US stores pulled its "Miley Cyrus" line of necklaces and
bracelets, three months after the Associated Press informed the chain that the
jewelry contained harmful amounts of the toxic metal cadmium. Long-term exposure
to cadmium can lead to bone softening and kidney failure. It is also a known
carcinogen, and research suggests that it can impact brain development in the very
young. Cadmium in jewelry is not known to be dangerous if the items are simply
worn, but concerns come when youngsters bite or suck on the jewelry, as many
children do. Wal-Mart said that while the jewelry is not intended for children, "it is
possible that a few younger consumers may seek it out in stores." "We are removing
all of the jewelry from sale while we investigate its compliance with our children's
jewelry standard," Wal-Mart said. The tainted jewelry was made at a Chinese
manufacturer.

Wal-Mart has been accused of selling merchandise at such low costs that competitors
have tried to sue it for predatory pricing (intentionally selling a product at low cost in
order to drive competitors out of the market). In 1995, in the case of Wal-Mart
Stores, Inc. v. American Drugs, Inc., pharmacy retailer American Drugs accused Wal-
Mart of selling items at too low a cost for the purpose of injuring competitors and
destroying competition. The Supreme Court of Arkansas ruled in favor of Wal-Mart
saying that it’s pricing, including the use of loss leaders, was not predatory pricing. In
2000, the Wisconsin Department of Agriculture, Trade, and Consumer Protection
accused Wal-Mart of selling butter, milk, laundry detergent, and other staple goods
at low cost, with the intention of forcing competitors out of business and gaining a
monopoly in local markets. Crest Foods filed a similar lawsuit in Oklahoma, accusing
Wal-Mart of predatory pricing on several of its products, in an effort to drive Crest
Foods's own company-owned store in Edmond, Oklahoma out of business. Both cases
were settled out of court with no fine and no admission of wrongdoing.

Wal-Mart has been accused of using monopsony power to force its suppliers into
self-defeating practices. For example, Barry C. Lynn, a senior fellow at the New
America Foundation (a think tank), argues that Wal-Mart's constant demand for
lower prices caused Kraft Foods to "shut down thirty-nine plants, to let go off 13,500
workers, and to eliminate a quarter of its products." Kraft was unable to compete
with other suppliers and claims the cost of production had gone up due to higher
energy and raw material costs. Lynn argues that in a free market, Kraft could have
passed those costs on to its distributors and ultimately consumers.

For example, most Wal-Mart store pharmacies fill many generic prescriptions for $4
for a month's supply. However, in California and ten other states, complaints from

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other pharmacies have resulted in Wal-Mart being required to charge at least $9 for a
month's supply of certain drugs.

The 2010 remodeling of their smaller stores shifting emphasis away from non-grocery
products towards carrying grocery items carried by their supercenters, has created a
small backlash amongst some loyal customers. The smaller and larger sizes in the
adult clothing were discontinued as well as other available styles, forcing adult
customers to look for clothing in the children's section, or shop with more expensive
specialty "Big and Tall" stores for basic items such as jeans. Their popular Wrangler
and Faded Glory brands are not readily available through their on-line stores in the
larger sizes, causing many of their customers to feel that Wal-mart has abandoned
their needs, and shows more interest in maximizing their profits and pursuing the
affluent demographic than being the one-stop-store filling the needs for the entire
family or the community.

Harm to endangered species:

In 2007, it was revealed that furniture sold at Wal-Mart was made from wood which
had been illegally logged in protected Russian habitats for Siberian tigers and other
wildlife. Wal-Mart promised to stop selling products that used wood from those
areas, but not until the year 2013

2010 Race Incident:

On March 18, 2010 at the store in Washington Township, Gloucester County, New
Jersey an announcement was made allegedly saying: "Attention Wal-Mart customers
- all black people leave the store now". Company spokesperson Ashley Hardie
described the incident as 'unacceptable'. Wal-Mart has said they will change their
policy with regard who can have access to their public address system. The intercom
system at the particular store was modified to prevent such breaches in future.

Conclusion:

Thus, no company is immune to problems. The companies that survive are the ones
that can spot ethical issues and correct them before they become problems. In this
case Wal-Mart failed to acknowledge those potential problems and they are probably
going to pay for it. Thus, Wal-Mart’s unethical business practices have hurt its
company’s reputation. If Wal-Mart wants to survive they will have to try hard to
improve their image. That is, they need to show that they care about ethics by
treating employees fairly. As a result, it will attract good employees and people will
have no reason to complain about the company. In addition Wal-Mart needs to be
socially responsible in order to avoid economic harm and in order to maintain the
legitimacy granted by society.

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References:

 (www.arkansasnews.com)
 (www.usatoday.com)
 (www.ufcw324.org)
 (www.washingtonpost.com).
 (www.pbs.org)
 (http://en.wikipedia.org/wiki/Criticism of -walmart)

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