Walmart Scandal in Mexico
Walmart is under investigation for the allegations of bribery carried out by executives in Mexico eager to boost the company’s growth in that Market. The New York Times was first to break the story describing the Mexican scandal as “a prolonged struggle within the company that pitted its much publicized commitment to the highest moral and ethical standards against its relentless pursuit of growth”. In Septemper 2005, a senior Wal-Mart lawyer received an email about how Wal-Mart de Mexico had orchestrated a campaign of bribery to win market dominance in its rush to build stores.
The New York Time lays out a seven-year campaign of unethical behavior, totaling more than $24 million in “suspect payments” and corporate aggression that has made Walmart the largest private employer in Mexico with one of every five stores and over 200,000 employees. I found it interesting that during the alleged scandal the Los Angeles Times comments that a 42% increase from the $312 billion Wal-Mart said it earned in the 2005 fiscal year, when much of the Mexican bribery was said to be occurring.
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It seems to be a very fine line with Wal-Mart regarding public scrutiny over balancing profits and growth with sustainability and ethical business practices. Along with the allegations in Mexico some critics question if the same has happened in the US. According to Al Norman, author of the Case Against Wal-Mart; is known as the “the guru of the anti-Wal-Mart movement. Mr. Norman comments about some claims that include situations where citizens testifying at public hearings have accepted cash in exchange for making pro-Wal-Mart statements.
In other cases, he claims, groups protesting Wal-Mart expansion have ceased to protest after accepting donations from the company or its partners. Mr. Norman cites an example that happened in 2004 in Tallahassee, FL where a group opposing Wal-Mart’s construction of a store said that a real estate broker representing the project offered them a six-figure contribution if they would support it. The group declined the offer and reported it to the county commissioners as having been bribed. However under Florida law, a bribe, to be illegal, must include criminal intent.
Ok but about just being morally wrong? According to Carol Cone, managing director of brand and corporate citizenship for Edelman, the public relations firm, shoppers really do care about the moral and integrity compass of the stores they shop. 87% of American consumers surveyed think businesses need to place at least as much weight on society’s interests as they on business interests. I believe that this could have been avoided had Wal-Mart committed to having a strong and effective global anti-corruption program in every country that they are in. The U. S.
Foreign Corrupt Practices Act (FCPA) prohibits bribes to win business overseas. Also I believe the consumer has to speak up by using the theory of voting with dollars! We need to do the research by probing the track record of our favorite stores to shed light on their business ethics, labor and human rights. Another point of how Wal-Mart can avoid this in the future is having a more proactive approach to corporate social responsibility (CSR) and an adequate crisis management system. The reactive steps Wal-Mart has put in place regarding its compliance program will help prevent this from happening in the future.
Randy Hargrove, a company spokesman, stated that Wal-Mart improved the way it reported and investigated accusations of ethical violations; it hired new executives to oversee compliance; and it combined its compliance, ethics, investigations and legal functions into one department. According to Wagner, Lutz and Wietz, “the importance for firms to communicate their social responsibility not only has risen substantially over the last few years but also continues to increase dramatically as a result of current worldwide economic conditions and the resultant skepticism of how corporate practices affect the well-being of societies”.
In addition, media and technology advances allow for immediate dissemination of both positive and negative messages about a company. When company actions are different than CSR statements, the company’s image and sales suffer. I believe as result of the improved CSR statements and the Wal-Mart bribe situation, American businesses working on foreign soil will improve. Furthermore, I believe U. S. companies operating on foreign soil will use the Wal-Mart example as company business lesson and ensure they have the above mentioned best business practices set up to avoid another repeat in history. Any further examples of this sort of unethical business behavior could be fatal to businesses from law suits and fines not excluding reputation. Also the consumer is much more aware and checking to make sure these companies are who they say they are! I know I will be following up a little more closely.