Businessorganizations across the globe are increasingly being scrutinized bythe public and regulatory authorities to make sure that they complywith the ethical standards of operations1.In such cases, the operations of the firms should not violate therules that have been established not only to ensure fair competitionbut also protect consumers from exploitation by unscrupulous businessestablishments. The violation of ethics in by corporations can beanalyzed based on two approaches namely shareholder theory andstakeholder theory2.
Shareholdertheory states that the primary duty of a business organization shouldbe to increase the profits of the shareholders. As such, companieshire management teams with the most appropriate skills to acts asagents in ensuring the firms are beneficial3.On the other hand, stakeholder theory postulates that theresponsibilities of companies go beyond shareholders. It includes awide coverage of stakeholders. These are individuals that are likelyto be affected by the operations of the business entities4.As such, they may include customers, suppliers, and the competitors.It is this theory of business ethics that is associated with theelement of corporate social responsibility. This paper discusses theWalmart Scandal and the corresponding model of business ethics.Moreover, it establishes the impacts of the decision and theconsequences of such practices.
Walmart is one ofthe leading companies dealing with retail products. It has branchesin various countries. Approximately 20% of the firm’s stores arefound in Mexico5.The scandal relates to a 2012 investigation that unearthed extensivemisappropriations by Walmart de Mexico. It was established that thecompany had continuously issued bribes to the Mexican authorities toseek favors. The bribes, estimated to be $24 million, had been givento Mexican government officials with the aim of circumventing theMexican laws on the opening of new firms within the country6.As a result, the company was allowed to open new branches in Mexicoat a faster rate than could have been authorized by the state’slaws. To avoid the vice being detected, the company committedaccounting fraud by disguising the bribes as regular legal bills.
According to theinvestigations, it was established that the company’s vice chairmanEduardo Castro-Wright had played a significant role in the scheme. Heis considered to have approved the payment of the bribes during histenure as the head of the Walmart de Mexico. He was praised for hisexemplary performance in Mexico by the senior management of the firmand later on promoted to be in charge of the enterprise’soperations in the United States7.
Walmart utilizedthe Shareholder Model of Business Ethics since the primary aim ofmaking the fraudulent payments was to improve its profitability andexceed the shareholders’ expectations8.By opening additional stores in Mexico, the company increased itsrevenue base and as such offered better returns to its shareholders.Had Walmart followed the Stakeholder Model of Business Ethics, theprimary objective of operations would have been corporate socialresponsibility. The company would have improved its association withthe stakeholders rather than focus on profits.
The stakeholderbusiness model is the most appropriate framework for the operationsof business since it encompasses various variables such as thecustomers, suppliers, competitors, and the community9.Additionally, through corporate social responsibility initiatives, acompany can improve its public image and increase its market share.
1Tricker, R. Ian. Corporate Governance: Principles, Policies, and Practices. 2015. Print
2 Viswanatha, Aruna & Barrett Devlin. “Wal-Mart Bribery Probe Finds Few Signs of Major Misconduct in Mexico.” The Wall Street Journal, 2015.
3 Tricker, R. Ian. Corporate Governance: Principles, Policies, and Practices. 2015. Print
4Blodget, Henry. “BUSTED: Walmart Caught In Huge Bribery Scandal — Senior Management Knew About It And Tried To Cover It Up.” Business Insider, 2012.
5Viswanatha, Aruna & Barrett Devlin. “Wal-Mart Bribery Probe Finds Few Signs of Major Misconduct in Mexico.” The Wall Street Journal, 2015.
6Gandel, Stephen. “Not just Wal-Mart: Dozens of U.S. companies face bribery suspicions.” Fortune (April, 2016)
7Viswanatha, Aruna. “Walmart Is Paying Legal Fees For Big Number Of Execs.” Huffington Post, 2014.
8Blodget, Henry. BUSTED: :Walmart Caught In Huge Bribery Scandal — Senior Management Knew About It And Tried To Cover It Up.” Business Insider, 2012.
9 Tricker, R. Ian. Corporate Governance: Principles, Policies, and Practices. 2015. Print