GENERAL MANAGEMENT CASE 1: Working Conditions at Wal Mart

When Sam Walton founded Wal-Mart, one of his core values was that if you treated employees with respect, tied their compensation to the performance of the enterprise, trusted them with important information and decisions, and provided ample opportunities for advancement, they would repay the company with dedication and hard work. For years the formula seemed to work. Employees were called associates to reflect their status within the company; even the lowest-paid hourly employee was eligible to participate in profit-sharing schemes and could use profit-sharing bonuses to purchase company stock at a discount from its market value; and the company made a virtue of promoting from within (two-thirds of managers at Wal-Mart started as hourly employees). At the same time Walton and his successors always demanded loyalty and hard work from employees-managers, for example, were expected to move to a new store on very short notice-and base pay for hourly workers was low. Still, as long as the upside was there, little grumbling was heard from employees. In the last 10 years, however, the relationship between the company and its employees has been strained by a succession of lawsuits claiming that Wal-Mart pressures hourly employees to work over-time without compensating them, systematically discriminates against women, and knowingly uses contractors who hire undocumented immigrant workers to clean its stores, paying them less than minimum wage. For example, a class action lawsuit in Washington State claims that Wal-Mart routinely (1) pressured hourly employees not to report all their time worked, (2) failed to keep true time records, sometimes shaving hours from employee logs, (3) failed to give employees full rest or meal breaks, (4) threatened to fire or demote employees who would not work off the clock, and (5) required workers to attend unpaid meetings and computer training. Moreover, the suit claims that Wal-Mart has a strict no overtime policy, punishing employees who work more than 40 hours a week, but that the company also gives employees more work than can be completed in a 40-hour week. The Washington suit is one of more than 30 actions that have been filed around the nation in recent years. With regard to discrimination against women, complaints date back to 1996 when an assistant manager in a California store, Stephanie Odle, came across the W2 of a male assistant manager who worked in the same store. The W2 showed that he was paid $10,000 more than Odle. When she asked her boss to explain the disparity, she was told that her coworker had a wife abd kids to support. When Odle, who is a single mother, protested, she was asked to submit a personal household budget. She was then granted a $2,080 raise. Subsequently Odle was fired; she claims this action was taken in retribution for her complaint. In 1998 she filed a discrimination suit against the company. Others began to file suits around the same time, and by 2004 the cases had evolved into a class action suit that covered 1.6 million current and former female employees at Wal-Mart. The suit claims that Wal-Mart did not pay female employees the same wages as their male counterparts and did not provide them with equal opportunities for promotion. In the case of both undocumented overtime and discrimination, Wal-Mart admits to no wrongdoing. The company says that with 1.4 million employees, some problems are bound to arise; but it claims that there is no systematic, companywide effort to get hourly employees to work without pay or to discriminate against women. Indeed, the company claims that this could not be the case because hiring and promotion decisions are made at the store level. Critics charge that although the company may have no policies that promote undocumented overtime or discrimination, the hard-driving cost containment culture of the company has created an environment where abuses can thrive. Store managers are expected to meet challenging performance goals, and in an effort to do so they may be tempted to pressure subordinates to work additional hours without pay. Similarly, company policy requiring managers to move between stores at short notice unfairly discriminates against women, who often lack the flexibility to uproot their families and move them to another state at short notice.

QUESTIONS:

1.Do you think that the values and practices that Wal-Mart founder Sam Walton articulated recognized the claims that employees, as stakeholders, have on the firm?

2. What might have changed in the ethical climate of Wal-Mart in recent years to contribute to the lawsuits by disgruntled employees?

3. Do you think Wal-Mart has an ethical problem? Is the company right to claim that with 1.4 million employees, some problems are bound to arise?

4. If you were running Wal-Mart, what steps would you take to address any potential ethical issues, particularly with regard to employees?