The Business Ethics Blog

I recently had the pleasure of helping out at a student-run event where the focus of discussion was ethical assessment of Wal-Mart.
I had the unenviable (but not impossible) task of saying some nice things about Wal-Mart.

Here are the highlights of what I said:

• It’s important to keep separate our moral evaluation of some of the bad business practices that have been observed at Wal-Mart (forced overtime, discriminatory hiring & promotion, etc.), on one hand, and our moral evaluation of Wal-Mart’s business model and its large-scale impact. The former are indefensible, and must be changed. The latter are at least worthy of debate.
• Wal-Mart’s business model is to focus on price. Low, low, prices, mostly for consumers who are very sensitive to price. (Contrast this with Starbucks; their business model is to sell boutique coffee to those of us willing to spend $5 for a shot of caffeine.) The primary beneficiaries of this business model are Wal-Mart’s low-income customers. (Not all of their customers are low-income, of course. But for those who are, Wal-Mart’s prices can mean saving as much as a couple thousand dollars a year, per household. That has a very, very significant effect on quality of life.)
• Wal-Mart has been criticized for its anti-union stance. But we have to remember that while unions may typically benefit employees, they typically hurt consumers. Unionization would mean Wal-Mart’s costs would go up; and in a retail environment in which even a successful company like Wal-Mart has only a 3.5% profit margin, that can only mean that prices would have to rise (which, of course, would hurt the working poor).
• Wal-Mart didn’t get where it is by being a monopoly (it’s got lots of competitors), or by advertising (it does very little advertising, for a company its size). It got where it is by being really good at delivering decent products at very, very low prices. It’s done that by adopting excellent supply-chain management techniques (including cutting-edge information systems), and by forcing suppliers to become more efficient.
• A lot of the frustration with low wages and poor health benefits at Wal-Mart are off-target. We have to remember that retail jobs, in general, are not well-paying. Nor is Wal-Mart a laggard in terms of health insurance, compared to others in that industry. A lot of the troubles experienced by Wal-Mart employees are the sad result of having few opportunities, and living in one of the few industrialized nations without universal health insurance.
• Finally, my prediction for Wal-Mart? You can quote me: within 5 years, Wal-Mart will be at the TOP of at least some business ethics / corporate social responsibility / corporate citizenship rankings. (They currently lag just barely behind their major competitors.) It has the resources, both financial and organizational. And it’s facing intense public scrutiny. It’s got a lot at stake. Those are the ingredients that turned Nike from a sweat-shop horror-story into an model of socially responsible apparel manufacturing. My guess is that, 5 years from now, Wal-Mart will be a leader (at least in terms of the standard, measurable indicators), and will be pushing its competitors and suppliers alike to meet their standard.

Here are some relevant links:

• From The Economist Opening up the big box:
• From The Washington Post Progressive Wal-Mart. Really.
• The Wal-Mart Effect : How the World’s Most Powerful Company Really Works (a book by Charles Fishman)
• Measuring the Economic Impact of Wal-Mart on the U.S. Economy (a study by Global Insight)
• From Maclean’s magazine: Why Wal-Mart is Good.

(Thanks to Joe Heath & Wayne Norman for useful feedback & discussion on this.)
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(Edited April 2010 to remove one dead link and fix a broken one.)