CSR & Governance
In current business environment, it is crucial for the firms to consider the social aspects of their business to hold a competitive position and retain the strong brand image in the market. But, many big organizations do not consider these aspects seriously to make money that shows their irresponsibility towards the society (Valentine, et al., 2011). Concerning, the thesis statement of this essay is whether corporations can act as moral agents or indeed change from egoist enterprises to social agents. In this essay, some issues confronted by the international company will be analyzed and discussed by using theories.
For this, Wal-Mart, which is an American multinational retailer, has been taken for example because it is facing issues related to corruption and labor relations in the international market.
To explain these CSR issues, Kohlberg’s theory of moral development and Utilitarian theory of ethics are used because first theory explains the ways to develop moral behavior within the organization whereas later one can be used to determine the ethical aspects of the actions of the firm.
CSR Issues Confronted by Wal-Mart
The following issues are faced by Wal-Mart at regular basis:
Wal-Mart is alleged with the poor labor relations since the long period. It is estimated that around 500 lawsuits are reported in a year from workers against Wal-Mart due to this unethical labor practices. There are several examples of issues for which it was accused by the labor that affected its relationship with the employees (Osterndorf, 2015).
In 2007, the company admitted that 10% of its employees are not provided with health coverage, and another 43% are provided with coverage from other sources than the firm. Even many times, Wal-Mart agreed to pay a high amount to settle the suits related to low-wage, overtime violations, poor working conditions, underage labor, etc. (Barclay, 2015).
It is also accused for the discriminative practices as many cases are filed for sex discrimination against the company. In 2009, the company settled the suit of discriminating against Africa- Americans in the recruitment.In August 2013, the company had to pay p$190,000 in penalties regarding poor safety practices. In 2015, the company faced the protest by the labor as the company was accused of paying less to the workers.
However, after a significant protest by the workers, it announced for paying a minimum $9 an hour to the employees above then the $7.25 federal minimum wage (Mitchell, 2015). In the year 2011 and 2013, it was accused of firing employees without proper reason and running the understaffed stores to save the costs. It has been criticized for its policies against the labour unions (Dreier, 2013). So, the company has a long history of dealing with workers’ rights that put question on its intention to be the social agent from egoist enterprise.
Wal-Mart has faced allegations of bribery and corruption in its business practices. In 2012, it was reported in The New York Times that Wal-Mart had offered bribery to the gestores who dealt with bureaucracies on behalf of the firm to expedite permits to open the stores and achieve market dominance in Mexico in the late 1990s and early 2000s (Heineman, 2012). It is reported that company paid bribery of $16 million in “donations” to local politicians and their organizations. In concern of this, company violated Mexican law and the US Foreign Corrupt Practices Act (Tandon, 2015). Apart from this, the company is also facing the allegation of paying bribes to local officials in India and China. It paid millions of dollars to officials in India to get support for moving goods through customs and obtaining real estate permits. It caused the violation of the US Foreign Corrupt Practices Act and other anti-corruption laws due to these payments.
So, the above analysis shows that Wal-Mart is facing CSR issues about labor relations and corruption. It is because the company has focused on making money without considering the social aspects regarding human rights and moral business values. Both issues can be evaluated based on the theories in the following section.
Wal-Mart is involved in immoral practices like ineffective HR practices leading to weak labor relation and corruption for getting support from the officials to successfully operate in foreign markets. These practices are unethical from the point of the Utilitarian theory of ethics. Utilitarianism ethical approach holds that the ethical decision causes the best for the most number of people and considers the consequences of the activities of the majority people before making any decision. In the case of Wal-Mart, whether the action of the firm is right or wrong can be determined by the consequences regarding happiness (Griseri and Seppala, 2010). It means the HR practices and business practices to get the permit can be identified as morally right or wrong only with the outcomes related to benefits to a maximum number of people. From this point of this theory, it can be found that company is working unethically as its business practices are causing a big harm to the rights and interests of the employees and their families and country’s legal and economic aspects. In the perspective of weak labor relations and corruption, the greater number of people including employees, families, public of both countries including US and India get affected (Muller and Kolk, 2010). Thus, the actions of the company did not create the best outcomes for the people. However, it could be able to generate higher returns for shareholders through unethical practices but it also caused a big loss for a large number of people.
However, capitalism aspect of the business allows the individuals to use own economic resources and make decisions related to their own self-interest. It also allows the firms like Wal-Mart to make decisions regarding their personal well-being. In capitalistic economy, the firm can find more success by producing several goods or services and keeping business profits for themselves (Valentine, et al., 2011). But, there is no purest form of capitalism in the global market because there are government regulations and controls on the business that ensure ethics in capitalistic market.
According to Kohlberg’s theory of moral development, there are three levels of moral thinking named as pre-conventional, conventional and post-conventional that leads to moral development. At pre-conventional level, sense of morality among children is controlled externally like from teachers and parents (Shaw and Barry, 2015). The child accepts and believes the rules made by parents and teachers. The conventional level reflects the link between the personal and societal relationship with the sense of morality in an individual. In this, individual believes that is required to ensure positive relationship and societal order (McKinney, et al., 2010). At post-conventional level, sense of morality of an individual is bind with the more abstract principles and values. In such situation, people believe that it is unjustified to follow some rules as there is need to make changes.
Based on this theory, it can be stated that the CSR issues like weak labor relations and corruption should be avoided by the company to operate its business ethically. During the pre-conventional level, the company needs to determine and explain the reactions of the employees when they join the organization. It shows their desire to perform their job responsibilities diligently and without much conflict (Yoon, 2011). In this level, it can be effective for Wal-Mart to drive the moral behavior by avoiding punishment and through self-interests and rewards. During the conventional stage of morality, employees become more comfortable and start to do the better good of the firm rather than individual goals. Employees need to accept the rules of authority and to be ensured positive relationship and societal order (Weiss, 2014).
During the post-conventional level, there is the highest level of moral development among the employees who have long experience with the company. These employees are promoted to higher positions and want to develop a sense of morality among their subordinates. Behavior can be driven by the balance of social order and individual rights and internal moral principles. Therefore, employees of the firm are at different stages in moral evolution (McGee, 2010). For this, the company’s ethical policies and standards can be effective to secure the efficient workplace to avoid corruption and adopt better HR practices to make strong relationship with the workforce. Apart from this, it is also crucial for the firm to adopt universal ethical principles like equality, dignity, and respect for the employees to be morally responsible. Kohlberg’s theory holds that people adopt the ethical principles which they are intended to follow and if they violate those principles, it causes guilty among them (Gray, 2010). So, Wal-Mart also needs to involve ethical aspects in its business not only to avoid punishment like penalties, but it should also be in its best interest and internal moral principles to be the social agent rather than egoist enterprise.
On the basis of the above discussion, it can be summarized that several firms face CSR issues due to involving in unethical business practices. Wal-Mart is facing issue related to labour relations and corruption due to paying bribery to the officials in US and foreign countries. Based on Utilitarian theory of ethics, it can be concluded that company is doing unethical business practices as these business practices are not causing the benefits for the greatest number of people by affecting the life of employees and their families along with the public of both countries. At the same time, Kohlberg’s theory of moral development concludes that there are three stages including pre-conventional, conventional and post-conventional stages, which are required to develop morality within the organization. Therefore, it can be summarized that corporations can act as moral agents or indeed change from egoist enterprises to social agents.
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