Why the Wal-Mart Bribery Scandal Doesn’t Really Matter
The recent allegations of bribery at Walmart de Mexico are, if true, a damning indictment of a significant handful of senior executives. But they tell us little about the company as a whole, and even less about capitalism.
One of the most pervasive, and least endearing, characteristics of human beings is our tendency to project instances of failure on the part of one or a few individuals onto entire groups or institutions, and to use such individual failures as evidence confirming deep, dark suspicions to which we are already committed. The nationalist and racist versions of this pattern are too familiar to need description. But this tendency plays a role in our evaluation of various corporations, too.
This is precisely the risk with regard to the recent Wal-Mart bribery scandal.
Many critics of Wal-Mart, or of the corporate world more generally, are, I suspect, secretly or not so secretly pleased at the revelation that executives at the highest levels of the company are (allegedly) implicated in this scandal. It supports, after all, a thesis that critics believed all along. It proves, doesn’t it, that the company is rotten to the core. And perhaps it even proves, or at least adds substantial weight to the thesis, that capitalism itself is inherently evil. After all, we now see credible allegations that the most senior executives at one of the world’s biggest companies — that very paragon of ruthless efficiency and expansionary capitalistic zeal — were engaged in a practice so thoroughly discredited that it is illegal even in places where, unfortunately, it is still common.
It’s a tempting conclusion, but also a very bad mistake.
First, it’s a mistake because the (alleged) behaviour of Eduardo Castro-Wright (president of Walmart de Mexico during the events in question), Mike Duke (CEO of Walmart Stores, Inc.), and other top executives tells you nothing about the other 2.2 million people who work there. It tells you nothing about the character of the people who stock the shelves and work the cash registers. And it certainly tells you nothing about the sincerity of the people hard at work to implement the company’s ambitious sustainability and CSR goals. Nor do the recent revelations help with the big question about Walmart’s overall impact. Some people hate Walmart; others literally think the company deserves a Nobel Peace Prize. The corrupt actions of a handful of executives tell us nothing about whether the company is, on net, a force for good or evil. Walmart serves as a go-between, joining poor factory workers in Asia with (mostly) poor consumers in North America. It improves lives at both ends, while notoriously squeezing the middle-man. Whether that is on balance a good thing has nothing to do with who bribed whom to do what.
Nor do the recent accusations tell us anything, factually or ethically, about capitalism itself. Bribery isn’t a feature of capitalism; rather, it is anti-capitalistic, the very opposite of proper, competitive, capitalist behaviour. The accusations, if true, don’t prove that capitalism is inherently corrupt, but merely that a handful of executives at one particular company were corrupt.
Not to be clear: none of this is exculpatory, nor is it intended to trivialize the very significant impact that this scandal might have on Walmart, its employees, and its suppliers. None of what I’ve said above excuses the reprehensible behaviour that seems to have gone on at the world’s biggest retailer. That behaviour violated fundamental moral principles. It violated the law. It violated the company’s own standards of ethics. It violated the fundamentals of capitalism. But we must not confuse the actions of individuals, even highly-placed individuals, with the virtues or vices of entire organizations or of the market itself.
The Business Ethics Blog 
I get where you’re coming from here, Chris, but I think I disagree with your contention that bribery is anti-capitalistic. From a definitional, best-interpretation sense, perhaps, but if we step away from the idealistic version and examine the ethos of capitalism *as practiced,* I think bribery is perfectly congruent with capitalism. The whole reason we need a legal, regulatory, and moral infrastructure to constrain capitalism is because much of its motivating spirit is an expression of greed, selfishness, and zero-sum competitiveness. What motivates people in capitalism is not the invisible hand (If I act in my best interest, the entire system will be better off) but the short-term best interest of the actors themselves. Bribery is perfect expression of self-interest. And while we know that it gives the briber an unfair advantage, pretty much the last thing practical capitalists seem to be concerned with is fairness. So sure, our abstract, generous version of the free market proscribes bribery, but the greed that makes actual capitalism go all but guarantees that it’s going to happen.
James:
My point is that bribery has no place in a well-functioning capitalist system. It is a violation of the standards that underpin the moral justification of that system. Bribery is no more part of capitalism than theft is part of living in a community. It happens, sure, but when it does it is a violation, rather than something to be accepted. Good, hard-nosed capitalists must reject bribery, just as they reject force and fraud and deception.
Chris.
An analogy: when a hockey player intentionally hits another in the face with his stick, that’s BAD hockey, not GOOD hockey. Slashing the face is anti-hockey.
Chris, I get where you’re coming from this, I just think we’re talking about two different aspects of system. I agree that for capitalism to work at all, we have to put in place rules to counteract the greed that is the motivating force of the system. I assume by the moral justification of the system you mean either (or some combination of) the utilitarian argument that capitalism delivers the greatest good for the greatest number or the rights-based argument predicated on freedom and property rights. I would argue that neither of these moral justifications have much to do with why people go to work, compete, and make economic decisions. Those are made mostly from a egoistic, very local perspective on utility. That being the case, we shouldn’t be surprised when a system which depends on (and encourages) greed results in people acting, well, greedy.
And I think your analogy is actually a good one, though I’d use for an example American football. We could talk about how it’s all about the love of competition, the tactics, the battle of brains and brawn that plays out on the gridiron (a moral justification, if you will). But the fact is that it is a brutal, violent sport that is only barely held together by the rules. What I’m saying is we should be no more surprised by bribery in a system predicated on greed than we should be shocked (shocked!) that the New Orleans Saints were paying bounties to injure other players in a game predicated on violence.
The system depends on self-interested behaviour, but of an emphatically limited kind. See Ronald Coase and Amartya Sen on their clarification of Adam Smith in this regard.
By the way, I blogged about the New Orleans Saints scandal here: http://www.canadianbusiness.com/blog/business_ethics/73891
after all these alleged unethical behavior, Walmart still is a succesful business, would that proof ethics is not important in business?
No, that’s not really proof. There’s probably somebody who did well at university without studying; but that doesn’t prove that studying isn’t important.
Yes, you are right. I am not advocating for unethical behavior, however, I wonder why so many business like Walmart behave unetically and and stay in business, what makes shareholder invest in then and worst why thier leaders are promoted or hired by others; aparently there is big gap between ethics theory and practice.
I am not an expert in ethics just trying to underestand and learn.