Save Money, Live Worse: When You Save, Who Suffers? The Truth About Walmart
To: Walmart CEO Mike Duke, Walmart China President and CEO: Greg Foran, and Walmart’s Ethical Standards Team
From: Carly Krieger
Table Of Contents
The Cold Hard Truth……………………………………….4
Mistreatment of Employees: Low Wages……5
Mistreatment of Employees: Unsafe Working Conditions ……………………………7
Mistreatment of Employees: Oppression of Rights …………………………………………….7
Company Dishonesty and Overseas Exploitation………………………………………..8
Walmart’s Environmental Damage………12
To the public eye, the 2013 year brought yet another fiscal victory for Walmart as it continued to dominate the retail industry. As 2013 comes to a close, Walmart’s national and international success in the past year has kept it on top, ranking in as the 5th largest company globally by measures of market capitalization with a value of 238.85 billion dollars (See Chart 1)(theonlineinvestor.com). In the last year, Walmart U.S net sales surpassed 274 billion dollars, experiencing a 3.9% increase since 2012, Walmart International net sales surpassed 135 billion dollars national sales, experiencing a 7.4% increase since 2012 and Sam’s Club net sales surpassed 56 billion dollars, experiencing a 4.9% increase from the 2012 fiscal year (Walmart 2013 Annual Report).
The Cold Hard Truth
All in all, it seems that right now Walmart has established itself as one of the most lucrative companies in the world. On its 2013 annual financial report, Walmart claims that their financial mission is to provide strong returns to shareholders, but does Walmart honestly provide returns to all of their shareholders? Do they invest the same quality of care in their employees as they do in their customers? The company’s mission of “saving money so that people can live better” seems like it is being achieved as evidenced by the low prices the superstore offers but a different story looms behind the scenes of Walmart’s stage stealing success. What expenses must Walmart’s employees pay so that Walmart’s customers can live better? What the Walmart 2013 Annual Report fails to put a numerical measure on is the company turnover rate, the amount of negative community relationships, the amount of union strikes and upheavals, and warehouse and factory violations. In this paper I will highlight the corporation’s failure to value interrelations inside the company both nationally and internationally and make suggestions for how the company can become a more morally sound and ethical corporation.
Upon closer inspection of the company’s priorities, it becomes apparent that making a profit is the chief concern of the booming business: despite its significant income, the company does much more damage than good for its staff. Reports have frequently been published that Walmart violates the rights of its employees. The majority of Walmart associates face wages falling below the poverty line and less-than-adequate healthcare(ethicalfootprint.com). The Walmart business model, while successful, is certainly far from being ethically appropriate.
I am writing to Walmart CEO Mike Duke, Walmart China President and CEO: Greg Foran, as well as Walmart’s ethical standards team to discuss the work that you must all do together to improve Walmart’s standards. Walmart is an ethically illegitimate company in terms of employee wages, employee treatment, worker punishment in response to union and protest activity, conditions in domestic and foreign factories, and company transparency and honesty. The company must inprove in all of these facets and it is the high up administration of Walmart that must see that these changes start taking place.
Mistreatment of Employees: Low Wages
Walmart employees are given the short end of the stick in a myriad of ways: quality health care, fair wages, and an encouraging company culture are all left completely absent from the company’s business portfolio. This mistreatment has not gone unnoticed by employees: “Making Change at Walmart” is a recent development—a coalition of Walmart associates, union members, small business owners, advocacy groups, and community organizations that band together in an effort to repair economies and people that have been negatively effected by Walmart’s monopolizing business efforts.
Walmart continually targets lower-class Americans, and, though the company itself is extremely profitable, it does little to nothing to help improve the lifestyles of its dedicated workers. On average, Walmart employees make $15,500 a year, this is more than $5,000 below the poverty line. Walmart also misleads the public about its health care plan—though they show off the fact that they have low health care premiums, employees have to pay more than $5,000 of their own money before the company makes any payments at all (ethicalfootprint.com). An article titled “Is Walmart’s Request of associates to help provide thanksgiving dinner for co-workers proof of low wages?” recently surfaced that caused a lot of controversy. Storage containers were placed outside a Walmart location in Cleveland, Ohio in the attempts of collecting food for workers. Many people were angered that Walmart would go as far as thinking it is appropriate to ask low-wage earners to donate to other low-wage earners in need. If employees at America’s biggest retail superstore cannot afford the food that their store sells on one of the most American holidays, something is definitely wrong (www. Cleveland.com). Employees working overseas (particularly those in Bangladesh and China), are exploited and paid far below minimum wage (makingchangeatwalmart.org). Reports released on Walmart show that “the Walmart Workforce reliance on public assistance including food stamps, healthcare, and other needs is estimated to utilize $900,000 per year of taxpayer funds at just one of the company’s stores,” (enewspf.com). Walmart workers consistently battle poverty, and receive no aid from their company. However, the owners of Walmart, the Walton family, have a combined wealth of 42% of American families. Mike Duke, Walmart’s CEO, made an annual salary of over $12.2 million in 2010 (ethicalfootprint.com). Comparing the immense wealth of the owners and higher-ups in the company with the borderline poverty of Walmart employees easily puts the business’ goals and business strategies into perspective—and those goals are to make a large profit, whatever the costs.
Mistreatment of Employees: Unsafe Working Conditions
Not only are employees not given sufficient pay, they are also continually placed in poor working conditions. Employees in America are frequently forced to work in unsafe subcontracted warehouses (makingchangeatwalmart.org). In 2011, John Juanitas, then a Walmart employee, was injured on the job, forcing his hours to be cut—at the time, he worked a 20-34 hour week and made $11,000 a year, but his hours were forced to be cut after his injury. Juanitas faced abuse and bullying by his managers at work, the hostile work environment making it even harder for him to continue making ends meet to support his family (makingchangeatwalmart.org). Walmart, because of the lack of support it gives its employees, perpetuates employees’ inability to recover from injury.
Mistreatment of Employees : Oppression of Rights
Workers subjected to Walmart’s harsh working conditions oftentimes try to fight back against their employer, but are unable to produce any lasting results. Countless strikes and protests occur at Walmart locations all over the world, but to no avail—the company can easily replace their workers, as their jobs typically require little skill (but much mundane work). This presents a risky catch-22 for Walmart employees: they can go on strike to fight against the violations, which puts their job and risk and usually yields no results, or they can continue to work in unfavorable conditions. As recently as a month ago, the National Labor Relations Board reported that Walmart had illegally disciplined and fired employees over strikes and protests as well as threatened employees who were considering participating in the protest. 43 workers were disciplined and at least 23 workers were fired. The National Labor Relations board took action and the federal government announced it would be prosecuting Walmart for illegally firing and prosecuting workers that were exercising their rights (nytimes.com).
The previously mentioned John Juanitas formed The Organization United for Respect at Walmart, and in November of 2013, Walmart workers from three different stores in the Chicago area banded together to protest their wages and working conditions, asking Walmart to make an effort to prevent illegal retaliation against employees after strikes, and to raise the minimum wage to $25,000 a year. Additionally, the National Labor Relations Board (NLRB) has filed over 100 charges against Walmart—but the company has made no effort to appease its workers (enewspf.com). Employees have continually made claims that Walmart has never reimbursed them for “work done on their breaks or other off-the-clock intervals,” which can add up to a lot of free labor for Walmart (ethicalfootprint.com). Walmart is genuinely a force to be reckoned with—it is “the world’s largest company with the most employee complaints,” (nydailynews.com). And though there is a constant struggle against Walmart’s harsh treatment of its workers by those being mistreated, these problems are largely overlooked.
Company Dishonesty and Overseas Exploitation
On December 22, 1992 Dateline NBC featured a piece where the news station focused on Walmart’s business practices and created a persuasive and indisputable attack on the corporation. This particular dateline program was seen in 14 million households and drew the highest ratings the program had seen since the airing of its first episode (Dateline NBC’s Persusive Attack on Wal-Mart,1996). It would propel Walmart as an easy target for public ridicule for many years to come. In their attack, NBC highlighted many of Walmart’s corrupt and illegal business practices such as the company’s dishonesty in where their products come from. Walmart in starting an ethnocentric and offensive “Buy American” campaign and then marked foreign clothing and goods as having been produced in the United States. Hidden cameras revealed that products that were being advertised as American made were actually imported foreign goods. Dateline had also collected footage from Walmart factories in Bangladesh which showed multiple floors of a factory using 9 and 10 year old children as their workers. The children were getting paid under 10 cents an hour and worked over time to meet quotas. Walmart CEO at the time, David Glass responded to the Dateline episode in a defensive, dodgy and denying manner. (Dateline NBC’s Persusive Attack on Wal-Mart,1996). NBC was successful in revealing Walmart as a deceptive and sleazy company. Walmart had transitioned from domestic manufacturers to foreign manufacturers in order to cut costs, was buying goods from factories that exploit children and was dishonest about where their products were being made.
Interestingly enough, even after being slammed by NBC about this over 10 years ago, last January Walmart released a statement that they would be investing fifty billion dollars into their new ‘Buy American’ Campaign in which the company has set goals to “spend more on domestic goods over the next decade, hire 100,000 veterans within 5 years.” Is this new campaign a false and desperate attempt by Walmart to assure America of its support despite the companies many foreign manufacturers and suppliers.(thehuffingtonpost.com)
Walmart has transitioned from domestic partnerships to overseas businesses in order to cut costs so that they can deliver on their “Save More Live Better” promise. China, for example sells Walmart products at a much cheaper price than domestic manufacturers ever did. From 2001-2006, Walmart terminated 196,000 of its United States employees as the company transitioned the majority of its business transactions from employing American suppliers to importing products from China. (Making Change at Walmart, 2011) Walmart’s foreign relations have become so strong, especially with China, that the company now makes up 11 percent of the United States trade. Table 1 Shows the relationship between the United States’ trade deficit and China.(Walmart: Rolling back on Ethics)
Today, Walmart has 281 stores and 10,000 suppliers in China (Walmart- Rolling Back on Ethics). After the China Labor Watch completed investigations of randomly selected Walmart suppliers throughout China in 2009, many violations and exploitations were found in Walmart’s supply chain. In recent years Walmart has pledged to increase sustainability by promising to improve their audit system and create higher standards for supplier factories however none of the suppliers that were inspected evidenced these changes (China Labor Watch, 2009). After these 2009 inspections many violations were found at every factory that was randomly selected. At the Schenzhen Shengfeng Shoe Factory the China Labor Watch found that there was discriminatory hiring, excessive overtime, wage deductions when quotas were not met, worker abuse, and insurance issues within the factory.
Figure 3 shows that at one Walmart supplier factory workers were required to sign a false pay stub that claims workers are getting paid much more than they actually are. At a Dashing factory in China workers earn 65 cents per hour, have no paid vacation days, and no paid maternity leave (China Labor Watch). Walmart has demonstrated a full on disregard when it comes to continuing business with unsafe suppliers. While the company released a list of workshops it refused to work with in Bangladesh because of unsafe conditions, it has come to light that Walmart continues to receive shipments from at least two of the factories it has claimed to have cut off business association with (business-ethics.com).
Figure 3. Source: China Labor Watch 2009
Walmart’s Environmental Damage
The corporation has also, on multiple occasions, been linked to serious environmental damage. This year, a Walmart was discovered to be disposing of “liquid pollutants and solid waste” improperly in California and Missouri. Though a spokesperson from the company claims to have “fixed the problem,” this is not, in fact, the first time something like this has happened with Walmart: in 2010, the company was ordered to pay a $27 million fine for similar environmental damage (inhabitat.com). It seems as though Walmart is set in its ways, as a few million dollars is not much for this financial business leader.
Both the China Labor Watch and the U.S. Department of Labor have outlined the changes that must be made within Walmart retail locations, supplier factories and within the company’s policy many times, the problems however remain. What seems to be happening is that obstacles and challenges are constantly coming into play to even get the true results of these investigations. In the past, Walmart has hired auditors that conduct corrupt investigations and will accept bribes in order to not report violations. Legislation must be created that requires all of Walmart’s warehouses and factories, domestic and foreign, to have external monitors present at investigations to ensure that auditors are conducting them properly. Legislation and mandatory policy must be made by the U.S Department of Labor. If factories fail to meet these standards, there should be extreme consquences for the factories and the businesses that use them as suppliers. Walmart as a corporation must stop turning a blind eye to their illegitimate business practices and develop a stronger set of business ethics. Instead of making excuses for poor factory conditions, Walmart should simply admit their faults and make improvements. If these improvements are made, maybe Walmart will begin to employ more company transparency because they will no longer have anything to hide. Walmart must have more open communication about company practices. Walmart should strive to employ ethics and morals in all dimensions of the company.
Walmart must stop demanding such low prices from their suppliers. Walmart currently pressures its suppliers to sell goods at prices that are too low to be sustainable. This starts a vicious cycle within the retail industry where other brands feel a huge pressure to pay less as well. Walmart eventually has too much control over its suppliers. The prices Walmart pays for goods from suppliers need to be raised.
Lastly, Walmart must raise the wages they pay to all of their employees. At the very least, employees should be earning $35,000 per year. Walmart must create opportunities for employees to be able to start with full time jobs, and not just part time jobs and literally living paycheck to paycheck. Walmart must pay their employees for overtime. Walmart also must never threaten, punish or prosecute employees for exercising their rights in the form of protests and union gatherings.
Walmart’s net sales in 2013 were approximately $466 billion, meaning that they earned more than any other corporation in that year. Walmart has an influence on this country that is both prominent and, unfortunately, unlikely to go anywhere anytime soon unless the suggested changes are made. It is important that a leading business in America whose ethical standards are so corrupt faces some kind of legal consequence, but Walmart has thus far been untouchable by any of its employees, and by the National Labor Relations Board. A corporation this large and this important needs to have better funding and more support behind its opponents—and only if changes are made in the upcoming years, struggling workers will find that backing.
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