1. shopping
2. retail

Wal-Mart: Rolling Back on Ethics
By Alexander Crofoot
Introduction
Born on March 29, 1918 in Kingfisher, Oklahoma, who could have
guessed that Samuel Moore Walton would one day grow up to build the
retail dynasty that is Wal-Mart. After leaving the military in 1945,
Walton took over management at his first variety store at age twenty-six.
By 1962 Walton and his brother owned sixteen stores and decided to
take it one step further by opening the first Wal-Mart in Rogers,
Arkansas. The store was originally known as Wal-Mart Discount City
store and it was located on 719 West Walnut Street. In 1972 K-Mart had
already expanded nationwide; meanwhile Walton only had enough
money to produce fifteen Wal-Mart stores. Soon Wal-Mart stock was
offered for the first time on the New York Stock Exchange, and that
infusion of capital gave Walton the ability to expand to 276 stores in
eleven states by the end of the decade.
In 1983 the first Sam’s Club opened, and by 1989 Wal-Mart had
expanded to 1,402 stores nation-wide. This decade was a prime example
of how popular Wal-Mart had grown from $1 billion in profit in 1980, to
a $26 billion profit in 1989. Today, 8,416 Wal-Mart stores are located in
fifteen countries that serve over 176 million people per year (Corporate
Wal-Mart- Suppliers, 2010). The success of the Wal-Mart franchise is
unparalleled in the retail industry. The secret to Wal-Mart’s success can
be summed up in a quote from Walton himself. “You love it when a store
exceeds your expectations, and you hate it when a store inconveniences
you, gives you a hard time, or pretends you’re invisible” (Corporate
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Wal-Mart- Suppliers, 2010). And that is exactly how Wal-Mart has
operated, by exceeding customer expectations and raising the bar for
retail stores everywhere.
In business, however, success is not just measured by profit;
relations are essential to the operations of a successful company as well.
As an organization that is in the top of the Fortune 500 list of companies
each and every year, Wal-Mart is constantly under public scrutiny. Many
hold the view that Wal-Mart has been an unethical company for several
reasons, related to its supplier, community, and employee relationships.
It is important to remember that there are two sides to every story, and
it is no different when it comes to the ethical evaluation of Wal-Mart. Is
Wal-Mart being completely honest? Are its critics stretching the truth? In
order to decipher the truth behind these stakeholder relationships both
sides must be taken into consideration.
Doe v. Wal-Mart Stores, Inc.
In each of the 8,416 Wal-Mart stores that are located across the globe,
there are over one million products featured. With that being said, it is
no surprise that Wal-Mart has approximately 57,000 United States
suppliers under contract (Schmitt, 2009). In 1994, Wal-Mart created a
supplier diversity program with the intention of increasing the amount
of women and minority owned suppliers of Wal-Mart (Corporate WalMart- Suppliers, 2010). This program has allowed Wal-Mart to conduct
business with more than 2,500 Minority and Women-Owned businesses
with which it spends approximately $9.2 billion annually (Corporate
Wal-Mart- Suppliers, 2010).
There are eleven standards that a company must comply with
in order to be chosen as a supplier of Wal-Mart.
1.
2.
3.
4.
5.
6.
7.
2
Compliance with Laws
Voluntary Labor
Hiring and Employment Practices
Compensation
Freedom of Association and Collective Bargaining
Health and Safety
Environment
8. No Gifts or Entertainment
9. Conflicts of Interest
10. Anti-Corruption
When it comes to suppliers and Wal-Mart, much of the
controversy that enters the conversation is associated with overseas
suppliers. Today, 85 percent of the products that are on the shelves of
Wal-Mart stores are from China (PBS, 2010). From 2001-2006, Wal-Mart
cut 196,000 United States employees as it shifted the majority of its
business operations towards importing products from China (Making
Change at Walmart, 2011). Conversely, Wal-Mart’s imported products
make up an estimated 11 percent of the United States trade deficit with
China (Making Change at Walmart, 2011). Table 1 illustrates data from
the U.S. Census Bureau that explains the trade deficit with China
through July 2011.
The main reason that Wal-Mart conducts the majority of its
business with overseas suppliers is cost. China is willing to sell
Wal-Mart products at a much cheaper price than United States
suppliers. This helps Wal-Mart maintain a large profit margin while
remaining consistent with its mission statement of “Saving people
money so they can live better” (Wal-Mart Stores Inc., 2011).
Table 1. US Trade with China
NOTE: All figures are in millions of U.S. dollars on a nominal basis, not seasonally
adjusted unless otherwise specified. Details may not equal totals due to rounding.
Month
Exports
Imports
Balance
January 2011
8,078.1
31,349.6
-23,271.5
February 2011
8,437.2
27,278.7
-18,841.5
March 2011
9,518.8
27,601.4
-18,082.6
April 2011
7,971.0
29,567.1
-21,596.0
May 2011
7,817.8
32,781.3
-24,963.5
June 2011
7,729.9
34,387.4
-26,657.5
July 2011
8,170.9
35,125.5
-26,954.7
TOTAL 2011
57,723.6
218,090.9
-160,367.3
Source: U.S. Census Bureau, 2011
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As a result of this import relationship, Wal-Mart has also
developed a large presence in China, and as of 2006 had 68 stores with
36,000 employees in China (Associated Press, 2006). But how does China
provide Wal-Mart with the products it needs at such low prices? Several
Chinese suppliers of Wal-Mart failed to pay required pay or provide
mandatory benefits to their employees (Associated Press, 2006). This
controversial practice brought Wal-Mart to the courts in 2006 in the case
Doe v. Wal-Mart Stores Inc.
The plaintiffs of this case included former employees from
several foreign countries that are suppliers to Wal-Mart – China,
Bangladesh, Indonesia, Swaziland, and Nigeria (Washington Legal
Foundation, 2009). These plaintiffs proposed that Wal-Mart knew full
well of the failure of these foreign suppliers to comply with the
minimum standards of labor and human rights, but continued to
conduct business transactions with them anyway (Washington Legal
Foundation, 2009). After three years of hearings and debate, the United
States Court of Appeals mandated a ruling that offered workers of U.S.
companies, protection from lawsuits over working conditions. However,
they came to the conclusion that companies overseas that supply U.S.
companies do not qualify for this protection. The argument that WalMart presented to the courts was that it should not be labeled as a joint
employer simply because it has no control over the condition of the
facilities in which the overseas employees worked or the wages
and benefits that they did or did not receive (Washington Legal
Foundation, 2009).
Today Wal-Mart has more than 281 stores and 10,000 suppliers
in China (Mufson, 2010). These statistics indicate that not only has WalMart continued to conduct business with China and other foreign
countries since the Doe v. Wal-Mart Stores Inc. trial, but in fact Wal-Mart
has quadrupled its presence in China. Rather than lobby for improved
working conditions, benefits or wages, Wal-Mart has been focusing on
the environmental safety and conservation in its overseas facilities
(Mufson, 2010). This decision will certainly provide Wal-Mart with
positive publicity, but diverts public attention away from Wal-Mart’s
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seeming indifference to workers’ employment conditions in their
overseas suppliers.
Dukes v. Wal-Mart Stores Inc.
Wal-Mart currently has 2.1 million employees that are located across the
globe. In an effort to diversify the make-up of the company, Wal-Mart
has successfully made fifty seven percent of their workforce women and
thirty five percent minorities including African Americans, Hispanics,
Asian Americans, Pacific Islanders and Native Americans. Wal-Mart also
believes that they provide their employees with the equal opportunity of
a promotion and quality benefits. “Our world-class employment
practices ensure nondiscriminatory treatment of all associates.” (WalMart Corporate- Associates, 2011). This is how Wal-Mart believes they
treat their employees, as evident by the information on their corporate
website. But much like their supplier relationships, Wal-Mart’s
relationship with their employees is rocky to say the least.
In 2001, six women from California decided to sue Wal-Mart,
claiming that the company discriminated against women by
systematically denying them promotions and paying them less than men.
The charges against Wal-Mart were associated with discriminating
against women in promotions, pay, and job assignments in violation of
Title VII of the Civil Rights Act of 1964. The case started in 2000, when a
54-year-old Wal-Mart worker in California named Betty Dukes filed a sex
discrimination claim against her employer. She claims that, despite six
years of hard work and excellent performance reviews, she was denied
the training she needed to advance to a higher paying position. The case,
Dukes v. Wal-Mart Stores Inc., expanded to include 1.6 million current
and former female associates and in 2004 the lawsuit was certified as the
largest class action lawsuit in history. Data collected in 2001 indicates
that Betty Dukes and the other 1.6 million current and former employees
of Wal-Mart had a strong case against Wal-Mart. For instance, in 2001
women held only one-third of salaried positions and made up only
fifteen percent of store managers (Wake up Wal-Mart, 2010).
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Finally in 2011, Dukes v. Wal-Mart Stores Inc. was presented to
the United States Supreme Court. The 1.6 million female plaintiffs
accused Wal-Mart of alleged discrimination against women and claimed
the company was in direct violation of Title VII of the Civil Rights Act of
1964 (Lennard, 2011). Furthermore, many of these current and former
female Wal-Mart employees claimed that Wal-Mart managers exercised
sexism by over paying or promoting disproportionately in the favor of
male employees (Lennard, 2011). However, on June 20th, 2011, the
Supreme Court ruled in favor of Wal-Mart stating that the 1.6 million
plaintiffs did not have enough in common to institute a class action
lawsuit. As a result, the court decided that the variability of the plaintiff’s
circumstances were sufficient enough to stop the case from proceeding
as a class action lawsuit (Lennard, 2011).
Employee Treatment
Although this lawsuit was primarily concerned with the treatment of
Wal-Mart’s female employee’s, Wal-Mart is also known for its poor
treatment of all employees. In fact, the average Wal-Mart hourly sales
employee earns under $250 per week. Most full-time employees are
working for $7.50 per hour for 28-40 hours a week. As a result of this
pay scale, the majority of Wal-Mart employees are living well below the
poverty line (PBS, 2010). Part of the reason that that Wal-Mart’s
employees receive such low pay is that Wal-Mart is a notoriously antiunion company. The unionized retail workers in the United States that
do not work at Wal-Mart on average make 25 percent more annually
than those employees that work the same job at Wal-Mart (PBS, 2010).
The benefits of the employees at Wal-Mart have also been
criticized. After several years of trying to silence the critics of its
employee benefits program by improving the plan offered to employees,
Wal-Mart instituted a huge cut back on employee health-care in October
2011. The new employee health-care program states that any employee
that works less than 24 hours per week will lose all health insurance
plans that the company may be providing them. In addition any future
employees that work an average of 24 to 33 hours a week will no longer
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be allowed to include a spouse as a part of their health care plan
(Abelson and Greenhouse, 2011). Wal-Mart will continue to do its best
to put a positive spin on the way that it treats their employees, but these
facts cannot be denied. As a result of Wal-Mart’s tendency to overlook
the importance of taking care of its employees, the company’s image has
been permanently damaged.
The Community Effect
Despite these controversies, Wal-Mart still finds itself in favor with many
of the communities in which it is located. As one of the largest
corporations in the United States, Wal-Mart claims to understand the
importance of giving back in each of the local communities in which it
is established (Wal-Mart Corporate- Community & giving, 2011). In fact,
Wal-Mart’s community relations have extended to over 100,000
charitable organizations and over $2 billion in fighting hunger in the
United States (Wal-Mart Corporate- Community & giving, 2011). For a
majority of consumers, the primary focus is the fact that Wal-Mart
provides them with lower prices than that of any other retail store
At a first glance, it may seem that Wal-Mart provides a plethora
of jobs for citizens of a community. On deeper analysis, however, it
becomes clear that Wal-Mart can run smaller, family run retail stores in
the area out of business. Even if someone is lucky enough to get a job
with Wal-Mart, on average the individual will be are paid 18 percent
less than he or she would be at the family run retail store. Furthermore,
a 2007 study that found that the presence of Wal-Mart in a community
reduced the retail employment rate by 2.7 percent (Neumark, 2007).
As a result, many communities cannot make up for this lost income.
In 2004 Wal-Mart stores and associates cost the state of California
approximately $86 million (Dube and Jacobs, 2004).
Another argument often made against Wal-Mart establishing
itself in a community is the opinion that they do not actually support
issues that are important to the community. Some would go as far as to
say Wal-Mart is not interested in what is best for the community at all.
Jeff Doss is the real estate manager of Wal-Mart, and in 2005 he was
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asked about a quote by Sam Walton that stated Wal-Mart would never
build stores in towns where residents did not want them. He responded
with the statement, “if that was the case, we would never build a store
anywhere” (Meekel, 2005). The implication is that Wal-Mart
management is well aware that many communities do not want WalMart stores locally, but Wal-Mart will build a store in those
communities, regardless.
Wal-Mart has an effect primarily on rural communities of the
United States, but also on some major cities, specifically New York City.
In 2011, the Alliance for a Greater New York (ALIGN) and the Murphy
Institute at the City University of New York projected that if Wal-Mart
were to achieve its goal to open 159 stores in the area, 14,000 retail jobs
and $353 million in total wages would be lost due to the Wal-Mart
openings (Norman, 2011).
Community: The Effect on Taxpayers
This raises another important issue that has been brought about due to
the nation-wide spread of Wal-Mart stores – the effect Wal-Mart has on
local taxpayers. Studies have shown that a large number of number of
Wal-Mart associates qualify for Medicaid and other types of subsidized
public care, at the expense of taxpayers. An example of this is the state
of Ohio where, in 2009, in excess of $44.8 million in taxes was paid out
specifically due to this phenomenon. Not only does Wal-Mart pass these
bills onto the communities in which it locates, but in 2008 and 2009
Wal-Mart managed to fail to make payment on an estimated $3.4 billion
in taxes (Office of the New York City Public Advocate, 2011).
This community versus Wal-Mart fight has actually risen to a
moderately intense level. So much so that one of the well-known
websites against Wal-Mart, www.wakeupwalmart.com, has actually
developed a five-step plan that is meant to keep a community Wal-Mart
free. It consists of a strategy for success, planning tactics, using
legislative tools, location resources and allies, and finding others in the
community. The site also serves as a place for infuriated community
members to blog about their opinions on Wal-Mart. This is just one
8
example of how passionate the combat has gotten between Wal-Mart
and the community. Superficially, Wal-Mart can appear to be the ideal
store for a community, but in reality many communities do not want the
stores because of the detrimental effects associated with having a WalMart store within its borders.
The Reality of the Situation
The injustices that Wal-Mart has been associated with are no secret and
as a result, many people have developed a negative view of Wal-Mart.
Unfortunately, consumer behavior directly contradicts this negative
view. In fact, Wal-Mart has continued to prosper in light of the hundreds
of trials and studies that have given the company negative publicity.
Wal-Mart currently has market capitalization of $191.5 billion and holds
the majority of the retail market share at 13.5 percent (Yahoo Finance,
2011). Wal-Mart’s closest competitor, Target, cannot hold a candle to
these statistics, as their market capitalization is barely one fifth of that of
Wal-Mart’s, at $35.7 billion (Yahoo Finance, 2011).
How has Wal-Mart been able to maintain its success? It is
argued that the company is far from ethical, hurts the United States
economy, and negatively affects communities in which the stores are
located. The truth is that the United States recession of 2008 created the
perfect environment in which Wal-Mart thrives; consumers with tight
budgets look to the retailer with the lowest prices. Ironically, this same
recession has exacerbated two of the most detrimental impacts of WalMart’s business practices: these practices impact on unemployment and
household income.
The United States Unemployment Rate
Between January 2001 and January 2008 the unemployment rate ranged
between 4.2 percent and 6.3 percent. Since that time, the rate has reached
a high of 10.1 percent in October of 2009, leveling off at around 9percent
since (Bureau of Labor Statistics, 2011). Table 2 illustrates this impact of
the 2008 economic recession on the American unemployment rate.
9
The rise in the unemployment rate works to Wal-Mart’s
advantage, contributing to the chain’s continued success during the past
few years. As Wal-Mart has expanded nationwide, it has continued to
take away jobs in the retail sector by driving out small retailers
wherever it goes. However, even as Wal-Mart takes away jobs in an area,
given the current economic situation people are less reluctant to take a
job with Wal-Mart in spite of the controversy surrounding the company.
Prior to the recession, a majority of these workers might have compared
available salaries at other employers and opted against working for WalMart; now these same individuals find themselves comparing taking a
job with Wal-Mart to not having a job at all.
Table 2: United States Unemployment Rate 2001 through
September 2011
Year Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov Dec
2001 4.2
4.2
4.3
4.4
4.3
4.5
4.6
4.9
5.0
5.3
5.5
5.7
2002 5.7
5.7
5.7
5.9
5.8
5.8
5.8
5.7
5.7
5.7
5.9
6.0
2003 5.8
5.9
5.9
6.0
6.1
6.3
6.2
6.1
6.1
6.0
5.8
5.7
2004 5.7
5.6
5.8
5.6
5.6
5.6
5.5
5.4
5.4
5.5
5.4
5.4
2005 5.3
5.4
5.2
5.2
5.1
5.0
5.0
4.9
5.0
5.0
5.0
4.9
2006 4.7
4.8
4.7
4.7
4.6
4.6
4.7
4.7
4.5
4.4
4.5
4.4
2007 4.6
4.5
4.4
4.5
4.4
4.6
4.7
4.6
4.7
4.7
4.7
5.0
2008 5.0
4.8
5.1
4.9
5.4
5.6
5.8
6.1
6.2
6.6
6.8
7.3
2009 7.8
8.2
8.6
8.9
9.4
9.5
9.5
9.7
9.8
10.1 9.9
9.9
2010 9.7
9.7
9.7
9.8
9.6
9.5
9.5
9.6
9.6
9.7
9.4
2011 9.0
8.9
8.8
9.0
9.1
9.2
9.1
9.1
9.1
9.8
Source: Bureau of Labor Statistics, 2011
Income and the Recession
Much like the unemployment rate, the income of the average United
States household has been negatively affected by the current economic
environment. In fact, the two can be viewed as inversely related in the
sense that as companies continue to decline in this “survival of the
fittest” economy, they are forced to downsize and impose pay cuts on
10
workers simultaneously in an effort to avoid going under. This means
that unemployment will rise as household income declines. The
relationship between unemployment and household income can be seen
in Figure 1 below.
Starting at the left side of the graph, the lower, finer line
represents the unemployment rate from January 2000. The higher,
heavier line represents a household income index, beginning also in
January of 2000. The two lines appear to directly relate to each other up
until January 2008 (the second shaded region on the graph) when
household income drops off and unemployment rises and the two lines
cross. More recently, household income and unemployment are both
dropping and both are at points on their respective scales that are
significantly different from where they started in 2000. The behavior of
the measures during the 2008 recession indicates that both are affected
by the recession itself. This clearly illustrates what has happened to
household income and unemployment during the recession.
Figure 1: Unemployment and Income in the United States
Source: Sentier Research, 2010
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The research from which this data is drawn was conducted
in 2010 and reviewed income by type of household as well. The
conclusions of this study can be summed up in the following six points.
1. Real median annual household income has fallen significantly more
during the economic recovery period from June 2009 to June 2011
than during the recession lasting from December 2007 to June 2009.
2. During the recession, real median annual household income fell by
3.2 percent, from $55,309 in December 2007 to $53,518 in June 2009.
During the economic recovery, real median annual household
income fell by an additional 6.7 percent, from $53,518 in June 2009
to $49,909 in June 2011.
3. For the entire period from December 2007 to June 2011, real median
annual household income has declined by 9.8 percent. A decline of
this magnitude represents a significant reduction in the American
standard of living.
4. Real median annual household income for family households with a
male or female head and no spouse present (many with children in
the household) declined by 7.3 percent (from $39,321 to $36,465)
compared to a decline for married-couple households of 4.5 percent
(from $76,783 to $73,324).
5. Real median annual household income for households with a head
under 25 years old declined by 9.5 percent (from $32,123 to $29,060)
compared to a decline for households with a head 45 to 54 years old
of 5.5 percent (from $65,911 to $62,315).
6. Real median annual household income for households with a head
looking for work or on layoff (unemployed) declined by 18.4 percent
(from $41,037 to $33,487) compared to a decline for households with
a head working full-time of 5.1 percent (from $72,104 to $68,454)
(Sentier Research, 2010).
The common thread in all six of these conclusions is decline.
But in a time when citizens in virtually all socioeconomic statuses
continue to suffer, Wal-Mart continues to thrive. The conditions that so
negatively affect peoples’ lives appear to work to Wal-Mart’s advantage.
Over this recessionary time period, an accurate revision of Wal-Mart’s
mission statement of “saving people money so they can live better,”
might be saving people money, so they can continue to live the lifestyle
12
they have become accustomed to. (Wal-Mart Stores Inc., 2011). If there
is one thing that Wal-Mart is good at, it is providing millions of products
for consumers to choose from, all at lower prices than other retailers.
The American Consumer and Ethics
Despite its best attempts to cover its tracks, it has become abundantly
clear that Wal-Mart is indeed a questionable business in terms of ethics.
The retail giant continues to hurt its suppliers, communities, employees
and ultimately the United States. However, the unfortunate truth is that
as American citizens have lost an average of three to four thousand
dollars from their annual incomes, they have also become increasingly
indifferent to the effect of Wal-Mart’s unethical practices in an attempt to
maintain their respective living standards.
While individual consumers continue to save money at WalMart, collectively the American consumer does not appear to fully
understand that money saved personally directly stunts the growth of
communities and the United States economy as a whole. The prevailing
attitude of every man and woman for him- or herself has resulted in the
America people learning how to turn and look the other way while WalMart continues to operate unethically. This phenomenon has
contributed to Wal-Mart’s continuing success since the economic
recession of 2008. In fact, since the recession began, Wal-Mart has
increased revenue and profit each year, as indicated by their annual
income statements, seen in Table 3.
There are many industries that win consumers by being aware
of stakeholder theory and becoming highly active in corporate social
responsibility. But because the retail market has ultimately become
something very close to a monopoly, Wal-Mart sits atop the proverbial
food chain and seems to be impervious to business ethics; the
corporation is able to continue to maintain the highest market share
and sales, while remaining unethical. It is true that no business can be
successful without their consumers, and American consumers have a
share of the responsibility in allowing this seemingly unstoppable
conglomerate’s behavior. But while consumers deserve a share of the
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blame for Wal-Mart’s success in spite of poor ethics, other parties have
some responsibility as well, including the United States government.
Table 3: Wal-Mart Income Statements, Years Ending 2009
through 2011
Period Ending
Total Revenue
Cost of Revenue
Jan 31, 2011
421,849,000
315,287,000
Jan 31, 2010
408,085,000
304,444,000
Jan 31, 2009
404,254,000
303,941,000
Gross Profit
Operating Expenses
Research Development
Selling General and Administrative
Non Recurring
Others
106,562,000
103,641,000
100,313,000
—
81,020,000
—
—
—
79,639,000
—
—
—
77,546,000
—
—
—
—
—
25,542,000
24,002,000
22,767,000
201,000
25,743,000
2,205,000
23,538,000
7,579,000
(604,000)
181,000
24,183,000
2,065,000
22,118,000
7,156,000
(513,000)
284,000
23,051,000
2,184,000
20,867,000
7,133,000
(499,000)
15,959,000
14,962,000
13,734,000
Total Operating Expenses
Operating Income or Loss
Income from Continuing Operations
Total Other Income/Expenses Net
Earnings Before Interest And Taxes
Interest Expense
Income Before Tax
Income Tax Expense
Minority Interest
Net Income From Continuing Ops
Non-recurring Events
Discontinued Operations
Extraordinary Items
Effect Of Accounting Changes
Other Items
Net Income
Preferred Stock And Other Adjustments
Net Income Applicable To Common Shares
Source: Yahoo Finance, 2011
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1,034,000
—
—
—
(79,000)
—
—
—
146,000
—
—
—
16,389,000
14,370,000
13,381,000
—
—
—
16,389,000
14,370,000
13,381,000
The American Government’s Role in Business Ethics
Over the past decades, many governments across the globe have
realized that they have a significant role to play in the adoption and
implementation of business ethics. In a study that examined the role
that European governments played in corporate social responsibility
(CSR), several interesting results become evident. The study focused on
two specific areas in which increased CSR has become evident in the
governments examined, globalization and political initiative (Albareda
et al., 2008).
There has been a change in the center of economic power
where increasingly the state has a dependent role and business a
dominant one (Albareda et al., 2008). The increased globalization that
the power of technology has inspired, has indirectly presented
governments with new political challenges that force big business and
government to cooperate with one another. Several nations have used
the concepts of CSR as a framework for the collaborative efforts of
governments and businesses to follow (Albareda et al., 2008).
For instance, Italy has been able integrate the social and
environmental concerns of their country into the everyday operations of
businesses nation-wide. The government has been able to build the
perception that CSR is a competitive opportunity for companies in Italy
to earn success. On the other hand, the United Kingdom government
found the adaptation of CSR policies justifiable during a time where
Britain was faced with a high unemployment rate, social poverty and
lack of economic development, a situation that the United States
government faces now (Albareda et al., 2008).
The controversy that arises when governments become
involved with CSR is whether or not officials of that government should
take it upon themselves to regulate and enact laws to make CSR actions
mandatory within businesses (Albareda et al., 2008). In Europe, CSR
public policies have taken hold in fifteen of the twenty seven nations of
the European Union. These nations have found that there is indeed a
clear role for government in the development of CSR in business, in
their efforts to address the socioeconomic issues that their countries
15
may face (Albareda et al., 2008). In the conclusion of this study, the
relationship between government, civil society, and business was
summed up in the following diagram, seen as Figure 2.
It is important to note that in this diagram, although the process
begins with government instituting CSR within public administration, if
and when CSR is correctly implemented into the three interrelated
realms of government, business and civil society, it becomes a
renewable and beneficial process for the given economy as a whole.
This particular study is interesting because it was conducted by
observing three Europeans countries implementing CSR successfully in
different ways – those countries being Italy, Norway, and the United
Kingdom. Although the governments in these countries mandated CSR
in different ways, there was a common result indicating that CSR is a
strong force for sustainable economic development.
Figure 2: The Relationship between Government, Civil Society,
and Business
Government
1
2
Business
1.
2.
3.
4.
Civil society
CSR in public administration
CSR in administration-business sector relationships
CSR in administration-society relationships
Relational CSR
Source: Albareda et al., 2008
16
3
4
Conclusion: Together We Stand, Divided We Fall
One of the downfalls of a capitalist society is the frequency with which
businesses become virtual monopolies, and consequently, make the
given industry ultimately inefficient and dangerous to the country’s
economy. Perhaps there is no better example of this situation than
Wal-Mart’s domination of the retail industry for the past several decades.
Although Wal-Mart may claim that they believe in, and
participate in, a stakeholder welfare view of management, a closer
examination of the statistics has revealed an approach that has achieved
the opposite result. The reality is that Wal-Mart has developed a
proverbial stranglehold over its employees, suppliers and the
communities in which it operates. Furthermore, the lingering effects
of the economic recession of 2008 have left American citizens with
significantly lower household income and in many cases, jobless. The
combined effect of the current economic conditions of the United States,
and the unethical operations of Wal-Mart, has been to present the retail
giant as a hazard to its stakeholders and also to the United States
economy as a whole.
Trapped in a struggle for survival, the American consumer has
been forced to hold the savings they incur at Wal-Mart, more valuable
than the economic condition of their respective communities and
nation. This circumstance makes it seem that a boycott or decline in
Wal-Mart’s sales is far from a realistic expectation to hold for consumers
nationwide. Government intervention, however, could force Wal-Mart to
behave in a more ethical manner. In most cases government
interference in realm of business is unnecessary and a hindrance, but in
this specific case governmental implementation of CSR (corporate social
responsibility) in the form of legislation is necessary. The experiences of
several European nations bear out the conclusion that forcing a
corporation to behave in a responsible manner can benefit all parties.
17
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