Reference no: EM133674737

Question: Discuss reasons for the failure of corporate governance at Walmart from the given case. When Sam Walton founded Walmart, one of his core values was that if the company treated

employees with respect, tied compensation to the performance of the enterprise, trusted them with important information and decisions, and provided ample opportunities for advancement, they would repay the company with dedication and hard work. For years the formula seemed to work. Employees were called "associates" to reflect their status within the company; even the lowest hourly employee was eligible to participate in profit-sharing plans and could use profit[1]sharing bonuses to purchase company stock at a discount to its market value. The company made a virtue of promoting from within (two-thirds of managers at Walmart started as hourly employees). At the same time, Walton and his successors always demanded loyalty and hard work from employees- managers for example, were expected to move to a new store on very short notice and base pay for hourly workers was very low. Still, as long as the upside was there, little grumbling was heard from employees.

However, more recently the relationships between the company and its employees have been strained by a succession of lawsuits claiming that Walmart pressures hourly employees to work overtime without compensating them; systematically discriminates against women; and knowingly uses contractors who hire undocumented immigrant workers to clean its stores, paying them below minimum wage.

For example, a class-action lawsuit in Washington State claimed that Walmart routinely (1) pressured hourly employees not to report all their time worked; (2) failed to keep true time records, sometimes shaving hours from employee logs; (3) failed to give employees full rest

or meal breaks; (4) threatened to fi re or demote employees who would not work off the clock; and (5) required workers to attend unpaid meetings and computer training. Moreover, the suit claimed that Walmart has a strict "no overtime" policy, punishing employees who work more than 40 hours a week, yet the company also gives employees more work than can be completed in a 40-hour week. The Washington suit is one of more than 30 suits that have been filed around the nation in recent years. With regard to discrimination against women, complaints date back to 1996, when an assistant manager in a California store, Stephanie Odle, came across the W-2 of a male assistant manager who worked in the same store. The W-2 showed that he was paid $10,000 more than Odle. When she asked her boss to explain the disparity, she was told that her coworker had "a wife and kids to support." When Odle, a single mother, protested, she was asked to submit a personal household budget. She was then granted a $2,080 raise.6 Subsequently, Odle was fired, she claims for speaking up. In 1998, she filed a discrimination suit against the company. Others began to file suits around the same time, and by 2004 the legal action had evolved into a class action suit that covered 1.6 million current and former female employees at Walmart. The suit claims that Walmart did not pay female employees the same as their male counterparts and did not provide them with equal opportunities for promotion.

In the case of both undocumented overtime and discrimination, Walmart admits to no wrongdoing. The company does recognize that with more than 2 million employees, some problems are bound to arise, but it claims that there is no systematic company-wide effort to get hourly employees to work without pay or to discriminate against women. Indeed, the company claims that this could not be the case because hiring and promotion decisions are made at the store level.

For their part, critics charge that while the company may have no policies that promote undocumented overtime or discrimination, the hard-driving cost containment culture of the company has created an environment in which abuses can thrive. Store managers, for example, are expected to meet challenging performance goals, and, in an effort to do so, they may be tempted to pressure subordinates to work additional hours without pay. Similarly, company policy requiring managers to move to different stores at short notice unfairly discriminates against women, who lack the flexibility to uproot their families and move them to another state at short notice.

While the lawsuits are ongoing and may take years to resolve, Walmart has taken steps to change its employment practices. For example, the company has created a director of diversity, and a diversity compliance team, and restructured its pay scales to promote equal pay regardless of gender. Walmart has also taken action to stop employees working overtime without pay. For example, it programmed cash registers to shut down after an employee had exceeded a certain number of hours and has told managers to make sure that employees take lunch and rest breaks.