Wal-Mart knows that they have done something wrong, and the question is how they can justify what they have done? By using the Utilitarianism theory of Bentham (1748 – 1832) and Mills (1806-1873), Wal-Mart argues that they have acted ethically in Bangladesh. The utilitarianism holds that an action or practice is right if it leads to the greatest possible balance of good consequences in the worlds as a whole. In taking this perspective, utilitarian invite considerations of the overall purpose of function of morality as a social institution. Basically it focuses on taking the action that will result in the ‘greatest good for the greatest number of people’. Wal-Mart is supported by this theory in that they provides jobs to Bangladeshian that they couldn’t get somewhere else, but they have to accept the bad working condition long working hours and low pay to satisfy the US customer that goes to Wal-Mart stores and shops that can offer cheap product that are made in sweatshops in Bangladesh. This again gives Wal-Mart the opportunity to open more shops and employ more peoples who breaks down unemployment and so on in the US. However, this theory is not adequate and Locke (1632-1704) argues against utilitarian theory saying that there is a ‘natural law of ethics’ in that every human being has a right to life, liberty, justice and property’. This right is being effectively prevented since the workers in sweatshops in Bangladesh still has to work under the same condition and with the same amount of money as they always have.
Wal-Mart and other multinational companies must accept and understand that they have conducted their business within framework of social responsibility. “Social responsibility can be defined as conducting the business of an organisation in a manner that meets high social and environmental standard” (Norman Barry, p68). In other words it suggested that business has more than an obligation to make profit and that they need to look at the triple bottom line’, which involves not only how well the business is performing in financial terms, but also in terms of the effect on society, the economy and the environment. Wal-Mart provides strong social responsibility to local community in the US by donating millions of pounds every year to schools, charities, sport events and other different events. By doing this they show that they care about other things than just the business and people will get another picture of the Wal-Mart. but this is just in their own country and they completely ignore the people that are making their products in sweatshops in Bangladesh which are the so-called ‘third bottom line’.
Milton Friedman (New York Times Magazine1970) on the other hand argues that there is only one social responsibility for business, and that is to increase its profit and shareholder value. This view supported Wal-Mart in that they didn’t provide Bangladesh with any support.
This case also raises the question about corporate governance, which is defined as ‘the system by which companies are directed and controlled’ (Peter W F Davies, p40). Sir Adrian Cadbury states that the heart of the matter of governance ‘is how to achieve a balance between the essential power of companies and their proper accountability’ (Peter F W Davies, p41). According to Monks and Minow (1991), accountability consists of two relationships, firstly the accountability of boards to shareholders, and secondly, the accountability of both to society. Wal-Mart is directed and controlled by an internal board of directors and shareholders that have one goal and that is to build them more powerful by increasing shareholder value and ignore the needs of the stakeholders, in this case employees, local communities and the government in Bangladesh. According to Hosmer (1994) this is not the right strategy. He believes that trust, commitment and effort on the part of all stakeholders of a firm are essential to competitive success, because of the integrity of common purpose will produce co-operative actions and help the innovation process. Lately shareholders of Wal-Mart have expressed their concern about that they ignore stakeholders
The Wal-Mart also abuse their enormous power to get people to work for them in sweatshops in Bangladesh for as little as 22 cent an hour since it is the only opportunity they have to get a job, and some of the directors earns as much as $2000 dollar an hour. How is this possible to justify that it is ethically right when their working condition are terrible and some of the workers are forced to work double shifts because of increased demand on their product?
Managing legal and moral responsibility in the marketplace can be a significant part of a corporation’s activities. In the Wal-Marts case, a third party (non-executive directors) could have been employed to prevent any imbalance of power within the boards. Higgis report, 2003 advises that ‘50% of the board should be non – executives to discourage the old boys network’, which could in theory lead to exploitation of the environment and human rights abuses all in the name of profit.
The aim of this essay was to show if the academic material of the management ethics unit could help me see that there are ethical theories, frameworks and research that can be useful to analyse real life’s ethical problems. Wal-Mart which state they have done nothing wrong when putting up the sweatshops in Bangladesh have been “axed” as a real life ethical problem. Kant’s non-consequentially theory and Locke’s ‘natural law of ethics’ explain that the company has been unethical. However, there are also those that state they have acted ethical, for example the utilitarian theory, ethical relativism and cultural relativism. Due to this it is difficult to say how useful they are in analysing since there always are some that have arguments for and against. The same is within framework as social responsibility and corporate governance.
It is clear that Wal-Mart have acted unethical, and because of that there are companies around the world refusing to do businesses with Wal-Mart, such as Norway’s largest insurance companies. They refuse to do businesses with Wal-Mart because the company does not meet its minimum ethical standards, including labour rights conduct.
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Lecture notes:
Weeks 1, 2, 3, 4, 5, 6
