Good business ethics is just one of many ingredients necessary for a successful business. You cannot have a successful business if you take advantage of stakeholders that support and have a vested interest in your business. History has shown time and again that, when the opportunity to grab quick profits presents itself, ethics can all too readily take a back seat to the entrepreneurial spirit. Incidents or abusive behavior, harassment, accounting fraud, conflicts of interest, defective products, and bribery and employee theft can happen at any business.
Corporations have a social responsibility, an organization obligation to maximize its positive impact on stakeholders and to minimize its negative impact. Wal-Mart and PETCO were both founded in the early 1960s’ and today have stores nationwide providing goods and services to millions of consumers. The steps taken by these two companies’ in regards to address and correcting allegations of unethical issues greatly impacted their reputation and sustainability. The founder of Wal-Mart Sam Walton success was attributed to his belief in customer satisfaction and hard work.
Associates had to abide by the “ten-foot-rule,5 look the customer in the eye, greet him or her, and ask if he or she needed help with anything. 5 Over the next 40 years the company grew from a small chain of stores5 into the largest nongovernment employer in the United States, Mexico, and Canada. Today Wal-Mart focuses on keeping cost low to achieve its “everyday low prices”. Unfortunately, Wal-Mart also applied this same philosophy to its employees in the form of low wages, poor benefits, unfair treatment of employees in the workplace, discrimination; the using illegal immigrants and sweatshops all to save a buck.
Wal-Mart claimed early on that a formal ethics program was unnecessary because it had Mr. Sam’s ethics to follow. 5 The result, they have subjected Wal-Mart to numerous law suits costing the company millions of dollars and dozens of allegations of unethical practices. This bad press and criticism of Wal-Mart’s treatment of employees, suppliers, and economic impacts on communities, causes a decrease in Wal-Mart stock between 2000 and 2005.
Action was taken in 2006 to improve relations with employee stakeholders, Wal-Mart pay tied pay tied to performance in about one-third of its stores. 8 Two years later the company improved its health benefits package and made an announcement that 90 percent of employees are currently insured and they intend to increase this number in the future. 8 However, Wal-Mart denied any allegations in regards to discrimination and unfair work conditions, and tried to justify why it failed to end ties with the contractor using illegal immigrants working in its stores.
To make matters worse, in March 2005, Coughlin the second highest-ranking Wal-Mart executive and a candidate for CEO was forced to resign from the board of directors for stealing over $500,000 from the company. The company was also targeted as a violator of safe environmental practices and was subpoena by a grand jury in Los Angeles, California, seeking documents and information relating possible environmental misconduct by the company. Wal-Mart has worked to improve its ethical reputation through new initiating, new leadership, involvement in the community and the creation of its ethics program.
Wal-Mart spent millions to reestablish its’ reputation promoting the company’s concern with ethics and its stakeholders from full-page newspaper ads12 to charity donations and significant contributions to disaster management project12 and by appealing to special interest groups by going green to reduce energy consumption and selling more “green” products. 12 The company has also introduced its “Global Responsible Sourcing Initiative,” which contains policies and requirements that will be in new supplier agreements. 7 However, the company has not acknowledged any wrong doings and has done little to train its managers and employees.
Walter Evans started his business as a mail order veterinary supply store. United Pharmacal CO; known today as PETCO became one of the nation’s largest pet supply specialty retailers with over 950 stores. 14 PETCO had in place a comprehensive code of ethics program, emphasizing that animals always come first. 17 PETCOs’ also address other stakeholders such as employees, customers, and businesses; as well as selling practices, advertising policies, pricing and buying practices in its code of ethics. 17 PETCO does business in a highly competitive industry where it is up against other major companies’ such as Pet Smart and Wal-Mart.
PETCOs’ commit to pets and animals in general,16 however, has not excluded them from experiencing incidents of unethical behavior by its employees. Between 2000 and 2005, PETCO faced several allegations of cruelty and neglect16 of its animals; overcharging customers on sale items,16 contamination in pet food which caused the deaths of animals of pet owner. The company appeared willing to acknowledge and correct mistakes17 made by its distributors/employee by quickly halting its business dealings with North American Pet Distributor, Inc. 16 increase manager and employee training regarding the care of animals,17 and responding quickly to any recall notices from the FDA. 17 PETCO ability to expose and correct issues indicates the effectiveness of its ethics program. 17 PETCOs quick responded to negative issues, and the implement and sponsoring of various fundraisers within the pet industry like Think Adoption First, Tree of Hope18 and We are Family18 convey to its stakeholders that it desire to do the right thing and to train employees to make proper ethical decisions assures not only success in the marketplace and society.
On the other hand, Wal-Mart continues to improve stakeholder relations however, due to its future endeavors have sparked consumer attention dealing with sustainability initiatives and social responsibility. Its new ethics and compliance program is a step in the right direction only time will tell if the company can avoid another controversy.