CASE 73
Walmart Manages Ethics and Compliance
ChallengesJuggles Risks and Rewards
CASE NOTES FOR INSTRUCTORS
This case examines Walmart and its approach to ethics from its origins to the present time period.
Students will see the difficulties Walmart faced as it became the largest retailer in the world. The case
serves as a thought-provoking exercise on the importance of establishing a strong ethics program in a
company.
Some ethical criticisms of the company include the following: the presence of Walmart drives other small
and local businesses out of the market; Walmart’s presence leads to the lowering of wages in the towns it
locates in; and Walmart exerts too much power over suppliers. Another major controversy discussed is its
treatment of employees. Low wages and benefits, denial of meal breaks, cutting of employee work hours,
and a reduction in staff during periods of expansion are some criticisms levied against the company. There
are also cases when Walmart’s statements seem to contradict its actions (i.e., it says it is not against
unions but appears to fight them).
On the other hand, Walmart has recently announced changes to improve employee well-being. Low
employee loyalty and high turnover have led to low-quality customer experiences, and Walmart’s sales
and image have suffered as a result. The company therefore announced a pay hike for employees who
complete its training program. New hires who successfully pass Walmart’s training program will earn $10
an hour. Walmart also offers more advanced training for those who want to go into management. The
company has started to recognize the importance of employee loyalty and retaining employees over the
long term. It hopes that employees’ perceptions of Walmart will change, and they will begin to see the
company more as a career opportunity than simply as a job of last resort.
The company has also encountered leadership issues, including the 2005 incident of board vice chair
Thomas Coughlin’s forced resignation for stealing as much as $500,000 from Walmart, and the more
recent bribery scandal in Mexico possibly implicating former CEOs Mike Duke’s and Lee Scott’s
knowledge of the misconduct. Walmart paid $300 million to settle with government authorities, which
accused the firm of paying bribes in Mexico to speed up zoning licenses for stores. In addition, safety has
also become an issue for Walmart after a fire in an unsafe Bangladesh factory killed many workers.
Walmart is devising a new safety plan for factories in Bangladesh and is revising its auditing policies.
Despite these criticisms, there are several activities the company is involved in that have a positive
impact. For example, it has become a leader in installing renewable energy sources in many of its stores
all over the world including solar, wind, biodiesel, and fuel cell installations; it works with The
Sustainability Consortium to develop a sustainability index to measure the sustainability of its products
and processes; and it has been successful in converting used cooking oil into biodiesel, soap, and
supplements for cattle feed and composting over 1,900 metric tons of organic wastekeeping 81 percent of
operational waste out of U.S. landfills. The Environmental Protection Agency’s Green Power Partnership
Program has ranked Walmart the third largest purchaser of green power among its U.S. retail competitors
and ninth largest purchaser in the Fortune 500. Walmart is also encouraging energy conservation in all of
its stores through policies such as installing LED lights and using daylight when possible, turning off
lights and other power sources when not in use, and replacing its open freezers with secondary loop
refrigeration systems.
The case closes with a discussion of the actions Walmart is taking to improve its relations with
stakeholders, such as tighter corporate governance policies and philanthropy. A look into the company’s
present and possible future creates the opportunity for students to engage in a fruitful discussion of the
role of ethics and compliance in a large company.
QUESTIONS AND DISCUSSION
1. Assess how Walmart is managing ethics and social responsibility as one of the largest corporations in
the world.
Students’’s answers will vary and should be supported by reasoning. Some might viewwill likely
view Walmart as a socially irresponsible company that is only pretending to engage in socially
responsible activities—such as paying its workers higher wages— to improve its image. Other
students will likely acknowledge that Walmart has made many mistakes, but that it has also made
2. Evaluate various ethical issues Walmart has faced and how the company responded to stakeholders.
The company’s size is a major factor in its ethical issues because the consequences of its actions
affect more people (e.g. putting smaller, local businesses out of commission; lowering of wages;
Walmart has responded to these issues in various ways. It confirmed that it would purchase an
additional $250 billion in products sourced, grown, or assembled in the United States launched a
“Made in America” initiative to combat criticisms of offshoring, in which it pledged to increase
U.S.-made goods by $50 billion over a ten-year period. It announced a minimum wage hike of $10 an
hour. To increase the safety of its factories, it requires that an independent agency assess the electrical
While many of Walmart’s approaches appear to be reactive—reacting to crises as they occur—its
3. What are Walmart’s contributions to improving the well-being of consumers and the economic
sustainability of society?
Walmart employs millions of people worldwide, and its EDLP pricing strategy allows consumers to
purchase products at lower costs than they might have at other stores—resulting in significant cost
savings. For many global suppliers, Walmart represents the bulk of their business. The “Made in
America” initiative could increase business for smaller U.S. suppliersIts investment in locally
ADDITIONAL RESOURCES
Walmart annual reportTo download Walmart’s annual report:
http://news.walmart.com/2017/04/20/walmart-releases-2017-annual-report-proxy-statement-globa
l-responsibility-report-and-global-ethics-and-compliance-program-updatehttp://s2.q4cdn.com/056
532643/files/doc_financials/2015/annual/2015-annual-report.pdf.
Walmart’s global responsibility reportethics and compliance program:
http://corporate.walmart.com/global-responsibility/global-compliance-program-report-on-fiscal-y
ear-2017http://cdn.corporate.walmart.com/f2/b0/5b8e63024998a74b5514e078a4fe/2015-global-r
esponsibility-report.pdf.
The results of the Walmart bribery probe in Mexico:
http://www.reuters.com/article/us-usa-corruption-walmart-idUSKBN1852IShttp://www.wsj.com/
articles/wal-mart-bribery-probe-finds-little-misconduct-in-mexico-1445215737.
Walmart’s decision to pay current employees $10 an hourBenefits of Walmart’s greater employee
investment:
https://www.forbes.com/sites/bryanpearson/2016/11/01/5-priceless-ways-walmarts-investment-in
-workers-is-paying-off/#299dacdc45d5.
http://www.nbc-2.com/story/28148190/walmart-to-pay-current-employees-at-least-10-an-hour#.V
pbmi3l3BVI.
Walmart and the gender discrimination lawsuit:
http://www.businessweek.com/magazine/content/10_48/b4205039091060.htm.