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The main objective of this paper is to discuss ethical issues regarding compensation of employees working in Wal-Mart. Similarly, it analyses the ethical issues regarding compensation and the stakeholder that are affected by the issues; moreover, it explains the challenges that are as a result of these ethical issues. Similarly, it illustrates the company’s responsibilities regarding the mentioned ethical issues and provides recommendations.
Wal-Mart Store is a multinational retail corporation in U.S that has a chain of grocery stores, discount department stores, and hypermarket. It is a family-owned company that was founded by Sam Walton in 1962 and was later incorporated in 1969. According to various sources, it is the biggest company in the U.S and has a great impact on U.S economy. Apart from being the biggest company in U.S, it is the biggest private employer in the world and it employs more than 2.2 million workers. Currently, Wal-Mart has more than 11,545 stores and clubs in 28 countries and it operates under a different name in different countries; however, in Canada and United States it operates as Walmart (Tilly, 2006).
Despite the fact that it is the biggest private employer in the world and it has a significant economic impact in U.S, the company faces various ethical issues regarding compensation of workers, gender discrimination, exploitation of workers, and worker health care. Another issue regarding the company is that the management was against the idea of establishing a union for the workers that could assist workers in improving working conditions and a scheme for airing their grievances against the company. In 2013, the company was sued by the National Labor Relations Board in relation to low wages. NLRB explained that the company was violating workers rights and exploiting foreign workers since it was offering wages below the minimum wage and it denied workers overtime. On the same case, the company was pushing the workers’ union. According to the suit, workers from Bangladesh worked from 7.45 am to 10.00 pm for seven days in a week for approximately six months without day-offs (Ferrell & Fraedrich, 2015).
Even with such issues, the company had pressure employees not to engage in strikes and it had illegally disciplined workers that had engaged in strikes. According to various critics, the company high turnover signified that the workers were unhappy, and the high turnover explained that workers were not properly compensated; however, they also claimed that other factors were involved. According to Eisenberg (2012), 70 percent of the company’s employees leave within the first years because they are not well paid despite the fact that they are exploited. It was important to deal with the issue of compensation since the company has a significant impact on the U.S unemployment rate. According to a Study conducted by the Oklahoma University, Wal-Mart being the biggest private employer, it has sustainably reduced the rate of unemployment in U.S and other countries; however, it had limited impact on the relative impact since other socio-economic variables were considered essential more than workers welfare. After some lawsuits regarding compensation of workers, Wal-Mart has increased the minimum wage with an objective of improving workers welfare and their standard of living, for example, in 2015, the company announced that it will increase its minimum wages to $10 an hour by 2016(Ferrell & Fredric, 2015).
It is essential for a company to understand that employees play a crucial role in the success of the company in an industry since they are the backbone of the company when it comes to performance. In other words, it is essential to properly compensate employees so that to motivate them and this has a positive effect on the performance of a company. According to Estreicher (2009), compensation of workers has a great magnitude on employee’s job satisfaction and motivation; however, it is not the only factor. He emphasizes that an appropriate compensation system has a positive impact mainly on workers’ performance. Employees feel comfortable and motivate in assisting their companies to succeed if the employer agreed to share the company profits in a fair and proper plan. There is a direct correlation between compensation and productivity, which have a positive impact on performance; therefore, if Wal-Mart established a proper compensation plan it would increase its productivity and at the same time, the company will be in a position to avoid some lawsuit against it, which are an expense to the company and consume a lot of time.
Exploiting workers have a negative impact on the company since the working environment does not suit their need; moreover, exploiting worker cannot retain them within a company for a long period. Retaining productive employees is very significant in managing a successful business since it saves the company time and cost associated with training employees. Apart from saving the cost of training new employees, it assists in maintaining efficiency and knowledgeable workforce. In order for the company to retain employees, they can offer health insurance cover and retirement packages so that employees may continue to work for a long period. Apart from having an appropriate compensation system, it is essential for a company to consider performance management as a strategy to motivate their workers, for example, Wal-Mart does not consider performance appraisal as a strategy to motivate women workers who make up 65 percent of Wal-Mart hourly paid workforce.
It would be recommendable for Wal-Mart to establish a proper workers’ Union that is managed independently and that negotiate issues such as poor remuneration on behalf of workers. Establish a properly managed Union for the workers would be appropriate so that it can be used as a platform for communicating their grievances instead of taking matters to court, which adversely affects the company reputation; moreover, advocating for such a union will enable the company retain workers for a long period since the union helps the company managing issues related to workers.
From the above evaluation and analysis, I realized that compensation of worker is a very significant matter that should be considered by a company’s management since it affects workers’ motivation, retention of workers, overall productivity, and the success of a company in an industry. Apart from being the company’s mandate ensure that employees are properly compensated, there are rules and regulation that are related to compensation of employees; therefore, it is mandatory for companies to ensure that their compensation system corresponds to rules and regulation established by authorities. Failure to have a proper remuneration and compensation plan can be termed illegal, this can be followed by lawsuits, which are expensive, and at the same time, they consume a lot of time to settle them.
Eisenberg, D. T. (2012). Wal-Mart Stores v. Dukes: Lessons for the Legal Quest for Equal Pay. New England Law Review, 46, 229-2012.
Estreicher, S. (2009). Compensation, Work Hours and Benefits: Proceedings of the New York University 57th Annual Conference on Labor (Vol. 57). Kluwer Law International.
Ferrell, O. C., & Fraedrich, J. (2015). Business ethics: Ethical decision making & cases. Nelson Education.
Tilly, C. (2006). Wal-Mart and its workers: NOT the same all over the world. Conn. L. Rev., 39, 1805.
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- William Njoroge (Autor), 2016, Ethical Issues Regarding Compensation of Wal-Mart Employees, München, GRIN Verlag, https://www.grin.com/document/337138