Part A: Introduction There are several ways to define ethics. Ethic is a set of principles of right and wrong behavior guiding. Ethical person will behave in accordance with sound moral principles based on fairness, justice and trust (Wiley, 1995). The purpose of ethic is to provide an environment that allows people to live a more structured, happy life than would exist without ethics (Warnock, 1971). Business ethic is examination of variety of problems that can arise from business environment and how employees, management and corporation deal with them such as fiduciary duty, insider trading, bribery, discrimination.
In other word, ethic of business is about making the right, moral, ethical business decision. Society has subsequently demand for higher business standards and ethics. Corporations are expected to be morally responsible for a variety of issues such as environment, product and workplace safety instead of only just making profit for their shareholder (Paine, 2003). Practice of ethics is an instrument of business strategy to enhance reputation and performance of business (Haddad, 2007). There are arguments that stakeholder debate is an important issue within the overall corporate governance and corporate policy area.
Thus, in this assignment, we will focus on and examine one entity in stakeholder group - employees by studying labour friendly corporate practice or unfair labour practice issues in a corporate and its impact. Unfair labour practice is conduct by employers or by unions that violates the right of employees. Unethical labour practices including low labour wages, child labour, unequal pay and treatment, unsafe working environments, racial, gender and sexual discrimination. Based on Immanuel Kant’s theory, everyone should have sense of duty and right thing to do (McNutt, 2010).
Thus, as a responsible corporation, management should comply and do right by its stakeholders especially toward employees, suppliers and local community such as ensured fair treatments and proper benefits given to employee. Besides that, feminist ethics also states that an organization should prioritize empathy, harmonious and healthy social relationships, care for one another and avoidance of harm above the abstract principles (Machold, 2008). Thus, corporation should build health relationship and shows care and empathy towards its stakeholders instead of iolate stakeholder right and interest. Utilitarianism theory is considered to be an ethnical theory because it deals with whether a person’s action are right or wrong. This ethical theory states that an act is morally right if it maximizes utility or creates the most usefulness to both parties. This ethical theory can be effectively applied to current pay scale for its workers according to act utilitarianism. This would mean that employees would have to be paid in a way that would allow them to prosper above poverty.
The initiative of this ethical theory of utilitarianisms is to bring the best outcomes, and depending on if those results are positive or negative established whether our actions are morally right or wrong (Rietti, 2009). The combination of benefit to harm after considering all parties potentially affected by the act must exceed the benefit to harm ratio of any of its substitute option. Following act utilitarianism, company decision to exploit low employee wages is morally wrong because it does not maximize utility for both parties.
There are different groups of labour include skilled or unskilled, black and white, or male and female whom will receive different wages according to some characteristic value in market. In standard economic theory, different wages is due to differences in productivity. However, in notion of discrimination involves additional concept that personal characteristics of worker that are unrelated to productivity are also valued on the market and decision such as race, ethnic background and sex (Arrow, 1971).
Thus, discrimination is generally understood to exist when some superficial characteristics such as skin pigmentation and any which unrelated to individuals’ talent and skill is used to restrict individuals’ access to available economic, political, and social opportunities for advancement (Thomas, 1987). In an empirical study, there are some other possible causes of productivity differences have been recognized such as differences in educational quantity and quality, family size, household headed by woman and other culturally and historical factors will vary attitudes toward work and future-orientation.
Thus, these differences may be the result of discrimination in their life especially female labour and disability labour. Moreover, it violates one formulation of Immanuel Kant’s categorical imperatives that ‘equals should be treated equally”. Equal Employment Opportunity Commission (EEOC) and Age Discrimination in Employment Act had form to prevent any discrimination act. Thus, this is unethical and unlawful if a corporate is practicing discrimination behavior in corporate culture due to its inappropriate practices, conduct, values, norms and violation of human right and interest.
Next, child labour is widespread in developing countries. According to International Labour Organization (ILO), at least 211 million children were working around the world and mostly in developing countries, with over 8 million engage in hazardous and exploitative forms of child labour in year 2001. Child labour is those below the legal working age or supposed to be in school. Thus, a child’s working reduces his or her educational attainment by about 2 years of schooling compare to non-working children. Fundamentally, child labour is a symptom of poverty.
There are two assumptions of child labour practice. The first one which call “luxury axiom” mean that a family sends children to labour market only if its income sources is very low, or in economic factor. The second is “substitution axiom” which states that from the point of view of firms, child labour is substitutable for adult labour to increase firm profit by reduced labour cost (Swinnerton & Rogers, 1999). This phenomenon is taken to be a product of avaricious or greedy entrepreneurs who seeking cheap labour and selfish parents. Child labour affects the current and future welfare of children.
Child labour exposes children to unsafe working environments and prevents normal child development in the short run. In long run, negative impact on future welfare of children such as poverty, disease, fertility choices problem will occur due to reduction in amount and quality of schooling (Vasquez, 2010). However, the measurement of ethical or unethical child labour practice depends on how it is defined. This is influenced by ethical and cultural views. Thus, there are some arguments that child labour practice will only be ethical when it located in poverty stricken areas where can helps establish economies in these poor countries.
Employee–employer relationship is often characterized as a social exchange relationship (Blau, 1964), whereby workers feel an obligation to respond to employers’ commitments by engaging in behavior that supports the goals of their common organization after an increase in employee pay and additional employee benefits provided. In contrast, if this social relationship is violated, negative feelings about unfair treatment on the part of the firm will arise, and any workers concerned will reduce their contribution to the organization. Employees may ct in various ways to express their negative feeling such as reducing their efforts (Rousseau, 1990), doing less overtime, or even by quitting (Robinson, 1994). According to Akerlof and Yellen’s (1990) in fair wage-effort hypothesis, workers will reduce their efforts proportionately as their actual wage falls short of what they think would be a fair wage. Negative feelings associated with the perception of being unfairly treated into a model call tournament model. In this model, negative impulsive effects and positive strategic affect will arise and affect the effort levels of relatively deprived workers.
Impulsive effects implied that workers reduce their effort level in response to the perception of being unfairly treated. The strategic effect implied that workers raise their effort level in order to improve their career opportunities and to avoid feeling even more unfairly treated in future. Positive strategic effect is support by Stark (1987) and Krakel (2000) if and only they assuming that no negative feelings arise from relative employee’s deprivation. However, to this end, survey data from Swedish municipal utility had indicated that the negative impulsive effect on the effort level dominates over the positive strategic effect.
Thus, unfairly treated workers will still adopt a lower level of effort than fairly treated workers at the end. Thus, this had show that ethical labour practices can contributes to employee commitment, then improves investor loyalty and customer satisfaction, and lastly maximizes corporate profitability. However, there are still corporate operate with unethical business practices. Therefore, one of a company will be chosen to discuss its unethical labour practices issue in this assignment. Part B: Content 1. 0 Background Wal-Mart was founded in 1962, with the opening of the first Wal-Mart discount store in Rogers, Ark.
Until nowadays, Wal-Mart serves more than 200 million times per week for its customer and members at more than 9759 retail units under 60 different banners in 28 countries. Wal-Mart is the world’s largest employer and biggest corporation. Wal-Mart is largest grocer, trucker, and third largest pharmacy in United States. However, Wal-Mart’s image as an employer has suffered tremendously in year 2006. Moreover, the true value of company’s “every-day low prices” has called into question as frequent exposures in the news about Wal-Mart’s mistreatment of its workforce and unethical labour practices.
Furthermore, there are major class action lawsuits accusing Wal-Mart of everything such as low wages, worker exploitation which related to its unethical labour practices at the National Labour Relation Board. Thus, we had chosen Wal-Mart as the company to discuss about its unethical issues in unfair labour practice, its impact and step taken to resolve its unethical issues. Besides that, we also will provide recommendation to Wal-Mart unethical case and issues in this assignment. Wal-Mart was criticized by a variety of groups which bring the negative impacts to its corporate reputation and image.
It includes the community groups, labour unions and its own employees. There are two actual examples that affected by unfair labour practices were being highlighted in our assignment. The first is favoritism (gender discrimination) and the second is the child labour. 1. 1 Favoritism Case According to the Did Wal-Mart Wake Up (2008), Wal-Mart has to fight against 1. 6 million female employees who claimed that they do not receive fair treatment for their positions. Furthermore, Richard Drogin of Drogin, Kakigi and Associates who was retained by plaintiffs of the Dukes vs. Wal-Mart stores, Inc. ase had conduct a report from 1996 to 2002 and it served as very important statistical evidence. The results revealed that women took a longer period to rise to a management position compare to men, at an average of 10. 12 years since the first day they start working in Wal-Mart, as opposed to 8. 64 years for men. In general, majority of the women (92 percent) work as cashiers in Wal-Mart however there is only 14 percent of store management. Besides, the lawsuit also claims that the usual proportion of female managers at Wal-Mart is 20 percent lower compare to the twenty largest retail stores in US.
Women employees are at all times overlooked or ignored when it came to the time to promote. There was evidence revealed that the percentage of women employed by Wal-Mart had decline from 76 percent to 63 percent since 1996 (Rock, 2001). On the other hand, a report by Equal Employment Opportunity Commission revealed that Wal-Mart was sued 48times since 1990, mainly for discrimination hiring practices (Joyce, 2004). Furthermore, Wal-Mart had fewer female managers in stores than its competitors between 1975 and 1999 with only 34. 5% VS 56. 5% respectively (Freedman, 2003).
In addition, there is an unfair salary treatment between women and men in Wal-Mart. It was observed that women working at Wal-Mart stores are paid much lesser than men in every region that pay disparities exist in most job categories (PBS, 2004). According to Drogin, in 2011 at Wal-Mart, men earned approximately $5,200 more than women. There was also a declaration that about 5 to 15 percent additional pay received by men are not related with the seniority or performance reviews, they felt that men would get promoted before them due to the reason of gender. . 2 Child Labour Case The Fair Labour Standards Act and state wage and hour laws govern child labour and work breaks. In January 2004, the New York Times reported on an internal Wal-Mart audit which found extensive violations of child-labour laws and state regulations requiring time for breaks and meals. One week of time records from 25,000 employees in July 2000 found 1,371 instances of minors working too late, during school hours, or for too many hours in a day [ (Greenhouse, 2004) ].
In 2005, the company settled federal charges in three states for allowing at least eighty minors to use hazardous machinery (Johansson, 2007). In December 2007, Wal-Mart was accused of selling Christmas decorations made in Chinese sweatshops. The information came from a National Labour Committee study indicating that workers as young as 12 were working 15-hour days for as little as 26 cents an hour (Ferrel, 2010). Moreover, Wal-Mart’s factories abroad have also abused children. In Bangladesh (2006), it was estimated that as many as 50,000 Bangladeshi children were discovered sewing pants for Wal-Mart.
They were routinely beaten, forced to work overtime, cheated out of their wages, given phony time cards, and told to lie about their age (Nancy Cleeland, Evelyn Iritani & Tyler Marshall, 2003). During an investigation by the Department of Labour it was discovered that Wal-Mart was violating the “youth employment provisions of the Fair Labour Standards Act” by allowing eighty-five minors operate hazardous equipment such as paper scrap balers and forklifts (Augsburger Jillian & Mishra Jitendra, 2008). Wal-Mart recently paid $135,540 to settle the case with the U.
S. Department of Labour. The case alleged that the company violated child labour laws in Arkansas, Connecticut and New Hampshire between 1998 and 2002 (Bernhardt, 2005). 2. 0 Impact towards the company 2. 1 Loss of reputation Wal-Mart is a company whose name rhymes with controversy, mainly for its labour abuses. The image as an employer has suffered tremendously in 2006. The low-road strategies implied by Wal-Mart lead to sweated workers, economic insecurity, rising inequality, poisonous labour relations, and degraded natural environments (Johansson, 2005).
These troubling headlines have generated concern among Americans who want to see better treatment for the company’s 1. 3 million employees (Johansson, 2007). By October 2002, the number of lawsuits grew to over 8000 where numerous lawsuits were over charges of widespread violations of federal employment laws. Analysts report that Wal-Mart is sued more than any other American corporation and is second only to the United States government (Slater, 2003). In 2001, Wal-Mart was required to pay over $6 million to settle thirteen federal discrimination lawsuits (Miller, 2004).
In 2005, the company settled federal charges in three states for allowing at least eighty minors to use hazardous machinery. Wal-Mart paid $135,540 to settle the case with the U. S. Department of Labour (Kalra, 2005). The company continues to face dozen of lawsuits because of community concerns about the firm’s impact on the environment, small businesses, and quality of life. When all the ethical issues are combined, they add up to a small-sized corporate ethical disaster. As a result of ethical misconduct, Wal-Mart’s reputation is damaged (Ferrell, 2005).
In the last five years that Business Ethics Magazine has been auditing and compiling lists, Wal-Mart despite being the number one corporation in the world in terms of size, it has never been listed among the 100 most ethical corporations even in the USA (Sheehy, 2006). 2. 2 Decrease of employment rate. Due to the poor working conditions, Wal-Mart has not been able to attract and keep skilled workers and managers. Wal-Mart employee dissatisfaction is high. Employees at low-wage companies have significantly higher turnover rates than those at well-paying companies.
Turnover among full-time employees has now increased from between 30 to 45 percent in 1995 to almost 56 percent in 2000. Without realizing, this makes the productivity of the company decreases. Besides, this turnover has a price which is the cost of replacing the 600,000-700,000 employees that leave Wal-Mart each year is estimated at $1. 4 billion (Jolenne, 2005). Researchers have computed the total costs of such turnover as equal to one month’s salary for unskilled workers and more than a year’s salary for skilled ones (Goldsmith & Hesselbein, 2009). . 3 Consumer boycott Wal-Mart has been the object of many boycotts. Wal-Mart participates in many unfair labour practices around the world and therefore some people and companies have decided to boycott it. The boycott approach has been used to apply pressure for changes to corporate practice in the clothing and footwear industry: living wages, no forced overtime, no child labour and improved occupational health and safety (Low, 2009). Many people have been refusing to shop at Wal-Mart because they disagree with its policies.
The communities such as labour union, grass root organization, religious organizations and customers of Wal-Mart were criticizing on the company’s policies. This is causing Wal-Mart to lose business as well as money. The consumers believe that it was unethical to shop at Wal-Mart. They perceived that they were supporting the action taken by the Wal-Mart towards its employees if they continue consuming the products of Wal-Mart. People are not comfortable buying products when they learn all the suffering and mistreatment of children that went into making the products to begin with.
Some are boycotting shopping at Wal-Mart and it's sending a clear message to other to follow in their example (Freeman, 2003). A number of publicity campaigns and consumer boycotts have been targeted to hurt the sales of the company which is linked to sweatshop production abroad. The sweatshop issue really came to the fore in 1996, when the National Labour Committee reported to news organizations that clothing sold at Wal-Mart, endorsed by television personality Kathie Lee Gifford, was being made using child labour in factories in Honduras (Hiscox, 1996). Hence, the sales of Wal-Mart decline due to the bad spread word of mouth.
Furthermore, the communities felt that the company was irresponsible and not sincerity in solving the unethical issues when the company tried to deny its action. 2. 4 Decrease of Stock price After the ethics issue of bad publicity, Wal-Mart lost $350 million in value between February 1993 and early 1994. By the end of 1994, an additional $250 million is lost (Jacques, 2003). Wal-Mart’s stock decreased 27 percent between 2000 and 2005 which also affect the company’s profitability (Ferrell, 2010). 3. 0 Steps taken by the company The management team of Wal-Mart had taken some effective ways to response and overcome the unethical issues.
Wal-Mart denied all charges regarding the women discrimination cases and brought the cases to the court. This includes Dukes v Wal-Mart which is the largest gender discrimination lawsuit in history (“Ninth Circuit Approves Largest Title VII Sex Discrimination Class Action in History,” 2010). Due to the unethical issues, Wal-Mart has losing about 2% - 8% customer to consume in their store. Nevertheless, Wal-Mart did not change their practices (“Wal-Mart’s Latest Ethics Contrversy,” 2007). On the other hand, there was also a press posted on the Wal-martfacts. com about the typical line of defense adopted by Wal-Mart.
In additional, the communication department of Wal-Mart is responsible to deal with this discrimination case. Over these few years, the department and the management teams of Wal-Mart are the key personnel who aid to protect its reputation. There was another press was being posted by Wal-Mart about a settlement of Janice Smitch v. Wal-Mart which is another discrimination lawsuit that filed by Equal Employment Opportunity Commission. Besides, Wal-Mart had contributed $12 million to settle this discrimination (“Corporate Statement Regarding the Recent Settlement of an Employment Discrimination Lawsuit,” 2010).
Moreover, Wal-Mart agreed to make significant changes in its treatment of female employees. Secondly, Wal-Mart formed the Global Ethics Office and released a revised Global Statement of Ethics to spread an ethical corporate culture among its global stakeholders. A guidance and resource for ethical decision making which consist of a confidential reporting system for violations of their statement of ethics and oversee any resulting investigations of those violations are provided to their stakeholders (“Global Ethics Office,” 2010). Wal-Mart also implemented Code of Conduct which sets forth five standards relating to compliance with pplicable law and practices, employment conditions, workplace environment, concern for environment, factory inspection, and Wal-Mart’s gift and gratuity policy (Kenny, 2006). In addition, Wal-Mart is also empowering women in various countries including Peru, Bangladesh and India by contributing $2million to CARE. Thus, through the education, literacy and job training programs in agricultural and factory settings, more than 5000 women were helped to develop new skills and create new opportunities (Wal-Martstores. com, 2011). Furthermore, the step taken by Wal-Mart is by increasing number of people trained by ethical standards staff.
The number of suppliers and factory management personnel trained by ethical standards staff increased from 4,644 in 2003 to 11,000 in 2005 (Joanna Barry ; Michelle Jacome, 2007). Next, Wal-Mart join the anti-child labour campaign which began in 1992, with a united push by consumer groups, U. S. politicians, the U. S. State Department, and United Nations organizations to end the employment of children under fourteen in Bangladeshi garment factories. Wal-Mart is committed to establish “a fund for factories and/or garment associations in order to help educate the children of Bangladesh” (Nielsen, 2005).
In 1992 to 1993, items sold in Wal-Mart stores were produced by children in Bangladeshi factories which made Wal-Mart to develop a set of standards for its vendor partners, who contract with manufacturers to produce goods for Wal-Mart. By February 1997, the firm had barred 115 factories from receiving contracts for violation of the company code, and instituted a vendor screening and monitoring process to assure compliance (Freeman, 1998) Wal-Mart is among several firms who has voluntarily established a code of conduct regulating labour practices (Deardorff, 2000). . 0 Evaluation and Criticism Various efforts taken by Wal-Mart may bring different impacts towards the company. One of the steps taken was Wal-Mart denied the women discrimination issue and it was an ineffective way to deal with the issue. This is because Wal-Mart was viewed as an irresponsible company and it will damage its reputation and image. There was a survey showed that the consumers of Wal-Mart mistrusted the company’s labour practices and its impact on the community (Schneider, 2004).
Wal-Mart has been the target of many special interest groups included the feminists (gender discrimination in employment practices) which had a cumulative impact on consumers’ perceptions of Wal-Mart’s corporate citizenship. In order words, it was adversely impacting the Wal-Mart reputation among consumers (Hemphill, 2005). As a result, it will lose the consumer loyalty. The consumers will boycott Wal-Mart due to the unethical practices and the company fails to give an appropriate respond to the public. Thus, Wal-Mart will face difficulties to rebuild their image and also the confidence of their consumers.
Based on the second step taken by Wal-Mart used to deal with the unethical issue, Global Ethics Office is an ineffective way to overcome the problem even though it served as a chance for those unsatisfied employees to express their anger and feelings. According to the Wal-Mart Sustainability Report 2007, interview need to be conducted and only the cases that raising legitimate concern will be investigated by Global Ethics Office. In order words, some cases may not be entertained once it is determined that the cases are not raising a legitimate concern.
Therefore, some employees fail to get a proper way from that particular party to solve the problem even though they have made the complaint. Besides, there are a lot of procedures for a single case. The cases assigned to different parties to handle. Thus, the employees may still be unsatisfied because the cases may take a long period to be investigated and unable to solve their problems immediately. Furthermore, if there are a lot of complaints from employees, Global Ethics Office may take a longer period to handle all cases and even may ignore some of the cases. As a result, the problem still exists.
Banning child labour will very likely make the family poorer, thus lowering the welfare of the child. For many families, the work of children is essential to the survival of the family. Furthermore, attempts by high-income countries to enforce a ban on child labour with import tariffs could have the effect of lowering the wages of children who continue to work. One example of this type analysis is developed by Maskus and Holman (1996). There is no guarantee that the children who leave the work force will find themselves in more desirable occupations (Deardorff, 2000).
Bangladesh dismissed an estimated 50 thousand children it formerly employed. UNICEF and others investigated what had happened to these children. It was found that about 10 thousand children did go back to school, but the rest went to much lower pay occupations (Bardhan, 2005). Although using child labour has bring some positive effects but the cost of doing nothing to it is actually much higher. By addressing the issues of health and safety at work by using child labour could save a lot of resources and is in the interests of governments, companies and workers alike.
It is in the interests of society as a whole (Takala, 2003). Using children to keep labour costs down is not an efficient labour strategy. Employing child as a labour is categorized as a violation to the human right (Pitriyan, 2006). Child labour has causes minors not being able to do well in school. They are essentially being deprived of a good education (Greenhouse, 2004). Education is seen as fundamental to improving the quality of life in developing countries, by lifting the people who are educated out of poverty and by improving the quality of human resources that are available for national economic development.
It is believed that when the supply of child labour fall, it will drive up wages for adult workers. The opportunity cost of a child's working time would shrink, making the possibilities of staying in school higher. In principle, a virtuous circle would follow with more schooling, so that the children would get more skills and become more productive adults, raising wages and family welfare (Heady, 2000). Even though Wal-Mart had increased the number of people it trained between 2003 and 2005, education alone is still not sufficient to ensure compliance with ethics of conduct (Joanna Barry & Michelle Jacome, 2007).
A strict approach, involving firing child workers or terminating relationships with suppliers that employ them, does not change underlying causes (Kolk, 2002). A much better policy than banning imports is needed. It should be possible to employ workers at competitive wages without also exploiting child labour. Ending child labour will require action on many levels such as economic growth, law enforcement, social mobilization, and building schools and making them affordable, accessible and appropriate (S. L. , 2000).
Wal-Mart has been running from responsibilities against child labour litigations by responding that suppliers are the main cause of them. It is unfair that Wal-Mart be allowed to place all the blame for the use of child labour on its Bangladeshi suppliers. The every-day low prices Wal-Mart pays to suppliers encourage the use of cheap labour, including child labour. As well, suppliers are often forced to subcontract parts of production to other factories in order to meet unreasonable order deadlines. Instead of cutting and running from its responsibilities, Wal-Mart should work with its uppliers to eliminate future use of child labour and provide sufficient compensation to the current child labourers and their families to allow the children to receive a decent education (Joe Bandy & Jacky Smith, 2005). Part C: Recommendation 1. 0 Favoritism According to the case of Price Waterhouse v. Hopkins (as cited in Lindgren, Taub, Wolfson & Palumbo, 2010), women is still being recognized as the labour whom is inability to handle the work in the high position, and they were still consider as the labour whom are not as important as the men which referring to the case of Doyle and Paludi.
Even the court state that gender is not a consideration for employer to employ or promote the employee, but there are still lots cases keep happening. 1. 1 Structured Evaluation Techniques In order to reduce this problem, the company should create a program that can help the evaluator in evaluation before the decision is making. The evaluator can rely on this structured program to decide whom to hire, promote, or how much the salary should be increase. This structured program will helps to ensure that men and women are being evaluated in the same criteria in every formal personnel decision (Welle and Heilman, 2005).
For the purpose to make the program to be more effective, there are at least two factors are needed. First, the accurate assessment of employees’ contribution must be facilitated. For the quantifiable indicators such as test performance of employees, number of projects completed, amount of revenue generated and others which are relatively easy to collect and judge. They are also harder to distort in gender-consistent ways than more subjective measures.
But for the other indicators of success, it may not be so easily to analyzed and collected so the formal evaluation tools for the job analysis is required to ensure that women and men are evaluated in the same dimensions (Welle and Heilman, 2005). Second, the explicit decision-making rules are required to be defined in the company. To ensure that all the information of the employees are used in the same way and job candidates, a formula should be devised to the evaluators since the stereotypes may lead the evaluators to pay more attentions to different types of information for men and women (Welle and Heilman, 2005).
As a result, to ensure that the entire individual are being judged on the same criteria, the formalization of information-collection and decision-making procedures should factor into the policies ranging from the job interviews to performance evaluations. 1. 2 Fair Labour Association (FLA) Fair Labour Association (FLA) is a non profit organization which representing a multi-stakeholder coalition to combine the effort of the companies, colleges and universities and civil society organizations to promote the international labour standards and improve working conditions worldwide (Yperen, 2006).
There are around 35 companies participating in the FLA and 20 companies out of 35 are the leading brand-name companies in the spot industry (Yperen, 2006). The company join in FLA including Nike, Adidas, Puma, Asics, Eddie Bauer and others. In order to bring these companies’ manufacturing sites into compliance with the FLA, the strict program of Workplace Standards implementation, monitoring and remediation is needed. For the companies which joined FLA, it will provide the internal monitoring to the company which helps the joined company to evaluate the workplace conditions of their factories.
FLA may use either their internal staff or hire an external monitor who is non- governmental organization or commercial monitor to evaluate the factory based on the FLA Workplace Code of Conduct, country labour law and international standards. Having the interviews with the factory management, workers, and trade union representatives usually are including in the internal audit. For the documentation, they will review of the factory policies, payroll, benefits and hours of work and a tour of the facility to assess conditions.
In order to remediate any non-compliance reported during the internal monitoring process and verify that the remediation has been completed, the FLA will work with the factories (‘Fair Labour Association Code Implementation and Monitoring Program, 2011). The FLA Workplace Code of Conduct focuses on many social standards, such as forced labour, child labour, harassment or abuse and others. Non discrimination also one of the provisions of the FLA, it states that there is the employment including hiring, salary, benefits, termination and others shall not be subjected to any discrimination by any person on the basis of ender, race, age and others. Since the discrimination is under the provision, the FLA may help the company to reduce the discrimination of female workers in the company (Yperen, 2006). There are many companies create their own code of conduct to reduce the problem their faced after they joined FLA. For example, the health and safety issues are the main topic of attention of the Adidas. Adidas has an internal auditing team which stand from 30 people to take responsible for enforcing the company’s standards as well as training and supporting suppliers.
Sometimes, they will collaborate with FLA accredited auditors (Yperen, 2006). All in all, FLA is the non-profit organization to help company to improve the working conditions in the worldwide and protect the employee right. Joining FLA not only gained to reduce the problem of workplace, but it also help to build the good image for the company and attract more investor to invest in the company. This is because FLA will post their report on their website to the public so there are many investor and consumers making their buying decision through the public reporting provided by the FLA. 2. 0 Child Labour
Recent years, Wal-Mart has enrolled into many unethical business practices. One of the most critical issues is to use child labour in productions. Child labour refers to any economic activity performed by a person under the age of 15, defined by International Labour Organization (ILO) of the United Nations (Millennieum, 2010). Nowadays, organizations are practicing ethically in their business courses and people are getting more and more concern about these issues. Wal-Mart was questioned with “Is It Cost Worth for Wal-Mart involving in Child Labour? ” (Cate, 2005). The answer from the journal was obviously no.
Therefore, Wal-Mart should take corrective active as soon as possible before it grows more serious. 2. 1 Changing business practices Business practice is a method, procedure, process or rule employed or followed by a company in the pursuit of its objectives. Wal-Mart should change their business organization or operations to address child labour (Kara Murphy, 2009). There is variety of reasons for a company to make systematic changes, including pressure from the international community or labour right organizations, negative publicity and discovery of child labour where it was not known before (Kara Murphy, 2009).
For example, in 2004, several world largest retailers such as Tesco, Levi Strauss, Gap and others decided to boycott Uzbek cotton in Uzbekistan because of using child labours. It had forced Uzbek government to signed 2 International Labour Organisation (ILO) conventions against child labour in order to gain back their trustworthy and reputation (Mirzioev, 2008). 2. 2 Date collection, research, risk assessment and communicating information Corrective actions should be taken, since Wal-Mart has enrolled into this issue.
Moreover, preventive action should be implemented effectively to prevent same mistake happen twice. Therefore, data collection and research are important for Wal-Mart to understand the potential harmful situation by conducting in-house research, perform root-cause analysis, administer surveys or interviews (Kara Murphy, 2009). Then, Wal-Mart may use risk assessment to evaluate the risk that child labour will exist when entering a new market, setting up a production facility or contracting with a new supplier (Kara Murphy, 2009).
Moreover, communicating of information can raise the awareness of labour right and condition among workers and their communities to prevent mislead or misunderstanding (Kara Murphy, 2009). For example, Patagonia, Inc is a private owned designer, developer and marketer of clothing and gear for a wide range of outdoor sport, travel and everyday wear which is based in Ventura, California. In 1990, they began to formalize their contractor review process. They unveiled something called “a contractor relationship assessment”.
They invited representatives from every factory they worked with and used scorecard to evaluate each factory’s performance in different area. They refused to cooperate with those who fail the evaluation because of their demands for high quality which kept them on the responsible side of social compliance (Anonymous, Patanogia and Corporate Social Responsibility, 2007). 2. 3 Labelling or Certification Scheme Wal-Mart can actually label those products indicating to consumers that the products were manufactured under fair and equitable conditions without using of child labour (Anonymous, Business and Child Labour, 2000).
Although product labelling cannot eliminate child labour completely, however it can force the export firm to substitute adult for child labour, thereby reducing total child labour (K. Brown, 2006). Furthermore, Wal-Mart can sell labelled product by incurring premium paid by consumers for adult-made products to increase the adult wage so that their children will be removed from labour force or to find service for displacing child labour as well (K. Brown, 2006).
Moreover, Rugmark is a voluntary scheme that seeks to control loom owner from committing to work without illegal child labour, pay at least minimum wages and others (Anonymous, Business and Child Labour, 2000). For example, the Rugmark Foundation was established to redress the falling market share of hand-knotted carpets from South Asia due to abuse of child labour. Manufacturers that sell carpets under the Rugmark label, exporters must agree to pay an annual fee equal 0. 25% of the price to support Rugmark’s certification and monitoring system and importers must pay a levy 2% to support education and rehabilitation initiatives for children. . 4 Monitoring, compliance, enforcement and certification Although Wal-Mart has taken steps to overcome the child labour problems, however it seems to be insufficient. This is because Wal-Mart is lack of enforcement to its action and Wal-Mart policies are unlikely to be translated into reality (Kara Murphy, 2009). Enforcement efforts can enhance the policies prohibiting child which include monitoring, auditing, compliance, verification and certification (Kara Murphy, 2009).
According to the International Labour Office (ILO), “an effective social audit can make an important contribution to identify, prevent and eliminate of illegal labour” (Hunter, 2008). For example, Gap partnered with the non government organization Verite that was widely viewed as a success in improving Gap’s social accountability by providing monitoring services as well as helping to strength their Code of Conduct. Verite’s mission is to ensure safe, fair and legal working condition for people about the world (Kara Murphy, 2009).
In 2003, Gap was the first retailer to release a social responsibility report, offering a comprehensive overview of their approach to social responsibility and the report has won Business Ethics magazine’s Social Reporting Awards for “unprecedented honesty in reporting on factory conditions” (Patrick M. Wright, 2006). Part D: Conclusion Ethic is important in our life. It is a set of principal which guide the right and wrong of human behaviour. In business world, ethic is relatively important too. Business ethics examine how the entities in business environment face and solve the variety of problems that occur in the industry.
Will they act ethically when they deal with some critical issues such as fraud, bribery, discrimination and so on? Wal-Mart as the largest retailer in the world, does Wal-Mart conduct its business ethically? As the biggest corporation with huge amount of employees, does Wal-Mart treat its employees fairly? From the above, the answer is not necessary. From the research, Wal-Mart has caused some ethical issues during its conduct of business such as low wages, working overtime without extra payment, discrimination on female employees, child labour and so on.
Therefore, a discussion which focuses on Wal-Mart unethical practices has been conduct in this assignment report. There are two main cases had been further explain during the content, favouritism and child labour. Favouritism or gender discrimination is define as unfair treatment towards the employees base on gender while child labour is using under-age children as labour in the industry. However, the common issue among these two cases is they are being under-paid with a lower wages compare to others. Wal-Mart conducts an unfair salary treatment between its male and female employees.
Women usually will be paid lesser compare to men and they have lesser chance being promoted to a higher position in the organization. Consequently, this unethical practice has brought some negative impacts towards Wal-Mart in the area of employees, industry and community. For the child labour case, Wal-Mart employs under-age children to work for them in order to lower their cost. Those minor were forced to receive lower wages and work overtime in Wal-Mart. They are losing their chances or time being educated as other same age children. Besides, they may also be order to operate those dangerous equipments in the factory too.
Thus, this issue has badly affected the health and safety of those children. Due to the unethical issue, Wal-Mart has taken some steps to overcome the problem. Wal-Mart has provided job training programs for female employees to help them develop new skills and create new job opportunities. Furthermore, Wal-Mart also joins the anti-child labour campaign and established a set of standards for its partner. However, some of the steps taken by Wal-Mart are not consider effective in order to solve the problems. Those steps taken by Wal-Mart are subjective.
Therefore, some recommendations which have been successfully adopted by other organization have been provided. Wal-Mart can use structured evaluation techniques in measuring the performance of the employee. The evaluation will be mainly base on the quantifiable indicator which not related to employee’s gender. Moreover, Wal-Mart can join the Fair Labour Association (FLA) which will improve the organization policy. An internal monitoring will be provided by FLA to evaluate the workplace of the organization. Furthermore, Wal-Mart should change its business practice and enforce the management to comply with the policies.
This may help Wal-Mart to increase back its reputation and the confident from the employees and consumers. In conclusion, there are several ways that Wal-Mart can conduct its business more ethically. However, this has to depend on the principle of Wal-Mart during its business of conduct. If Wal-Mart is willing to change its behaviour, it can free from those ethical issues around it. Therefore, Wal-Mart can put more effort during its business operation and the employees are willing to contribute more towards the organization. Thus, it will reach a win-win situation. References About Us. (2011).
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