Abstract
Producing in developed countries is a challenge to many companies operating there. There are too many costs associated with producing. Among them are the wages demanded in the countries, safety and other regulations that governments set. The civil societies are empowered and have the ability to bring an entire company down if they prove that the latter has commited wrong-doings. The purchasing power of people in these countries is high. Companies must therefore present the ways to operate in the market and produce goods at a lower price in order to make a profit. That is the source of Ethical Dilemma. The most popular method devised by companies in the US, such as Walmart, is outsourcing the production from developing countries while they concentrate on marketing. This paper analyzes the ethical dilemma that Walmart faced when one of its production lines in Bangladesh caught fire resulting in the death of workers. The paper will analyze the ethical dilemma the company faced and the way the company has handled it. The paper will also explore the better ways of solving this issue, and my actions in case I were in the company’s decision-making body.
Fire on the Factory On 24th November 2012
On 24th November 2012, Walmart was faced the ethical dilemma when the factory owned by Tazreen Fashions caught fire resulting in the death of more than 110 workers. The fashion company was one of the many in Asia that Walmart contracts to produce its clothes. According to the managers, the factory was under Walmart’s dictation among other retailers. Many of the employees that died had earlier tried to free when the fire alarms rung. However, the manager ordered them to go back and closed the collapsible gates. The managers claimed it might have been a mere fire drill. The fire was similar to the ones that have plagued the Bangladeshi garment industry; the only difference was the number of fatalities. The firefighters had difficulties with combating the fire mainly due to the poor road network of the factory’s location. Walmart has been contracting companies in Bangladesh some of which have experienced fires before. A 16-year-old girl, Sumaya Khatun, had a terrible effect due to the tragedy that resulted in her death of inhaling the fumes. She had not received her November salary by the time of her death (NYTimes.com, n.d.).
To analyze the ethical failings of Walmart, its actions or lack of them for the period it has done business in Bangladesh will be explored. As a market leader, Walmart must be responsible for setting the bar high enough for the others to follow. It is not acceptable that the company took considerations of the profit interest as the only responsibility. The Friedman view best explains Walmart’s ethics philosophy as contained in the philosophies of ethics and social responsibility. Such a company should use the utilitarian view (Timmerman, 2009). The utilitarian philosophy would have guided the managers on the right ways to ensure that they work in the best way to benefit as many people as the company could have managed to. Certainly, a chance to live for the 112 victims is a ‘good’ that the company should have strived to achieve. Walmart is one of the companies with good ethics in the US; the problem is the company it contracts to supply it with goods. Therefore, I believe the ethics and corporate social responsibility subsection that the paper falls under is stakeholders’ identification (Hill, 2014). The company is poor in selecting the businesses it relates to, and knowledge of this subsection would have helped it avoid the dilemma.
Ethical Considerations and Walmart’s Handling of the Dilemma
In April of 2011, there was a stakeholders meeting, in which Walmart had representatives. The topic discussed included the ways to ensure that the factories remain safe. The labor unions that were the main conveners of the meeting requested the contracting companies to pay for the fire safety investment necessary to ensure that the factories remained safe. Walmart appreciated the importance of the investment and acknowledged that it knew of the low safety standards in the factories. However, the company stated it was impossible for it to pay for such an investment arguing that their negotiation with Bangladeshi companies did not factor such costs. It was therefore the responsibility of the companies that were running the factories. However, the company promised to assume measures concerning the fire safety.
In November of 2011, Walmart paid for the airing of an “educational documentary” that was to help its suppliers and workers to grow their fire safety awareness in the factories. However, the documentary did not prevent the death of workers a year later in one of its supplier’s factories. A report from Bloomberg quoted by New York Times claims that the Bangladeshi garment factory owners had offered to improve the safety standards of their factories in order to make them fire proof. The plans failed after Walmart and Gap claimed they would not pay higher fees to make them feasible (NYTimes.com, n.d.). Walmart’s actions proved that it could not meet the requirement of cultural relativism as explained in the philosophies of ethics and CSR. It is the easiest way for an internationalizing firm to demonstrate it is not interested in profits only and can meet the expectations of the local community.
Auditors working on behalf of Walmart had on numerous occasions visited Tazreen Garments factory. Their reports contained evidence of real fire safety dangers; however, the factory owners had not implemented the recommendations. After the fire, Walmart claimed that it had advised Tazreen to stop using the factory until it implements the audit report. It had even informed that it had stopped working with Tazreen. However, proof from Tazreen books proves that more than seven Walmart suppliers were picking garments from the factory. That was ten months before the fire. Walmart orders were the largest of those Tazreen handled during the period before the fire. Even after evidence that Walmart was the single largest customer of Tazreen, the company never paid any compensation to the families of the 112 workers who died in the fire. The company did not offer to assist the hundreds of survivors whose lives were destroyed by fire completely and who might never work again (Inkpen, 2013). To make matter worse, when stakeholders called a meeting to find the ways to help the dead people’s families and the incapacitated victims, Walmart did not even send a representative.
After a pressure from advocates of labor rights, Walmart promised that it would have a thorough inspection of its 300 facilities in Bangladesh to check the safety measures put in place by their management. The company said that the activity would take six months and would start releasing the safety reports in July of the year that followed. A year and a half later, Walmart had not released any report of the inspection. It had also not demonstrated any measures that it had taken on its suppliers’ factories it had found having poor or nonexistent fire safety measures in place. Recently, Walmart released a report concerning the factories in Asia that it had dropped from its suppliers list (NYTimes.com, n.d.). The report did not inform whether it had requested the factories to improve its employee working safety standards. For a market leader and a responsible company, one would think that they would have sought to put pressure on the factory owners to invest safety before opting out. Walmart did not offer any proof that the factories it opted for were safer than the ones that they dropped. The move may give critics the reason to argue that it dropped the factories for the purpose other than their poor factory safety measures.
The company has a zero tolerance policy on factories it contracts working with other enterprises on Walmart’s Orders without its authorization. The policy is in the supplier relations guidelines it released in January 2013. However, import records show evidence that the factories it had blacklisted still produce for them through subcontracting arrangements with the contracted suppliers (Smil, 2013). Critics who state that the Tazreen fire exposed how Walmart has always conducted its business quote the case of 2010. Two of its leading suppliers, NASA and Envoy, accused two labor movement leaders and had them under investigation for criminal offenses. The two leaders, Mr. Babul Akhter, and Ms. Kalpons Akter, were arrested and spent more than two months in prison. The two suppliers did not provide any sufficient evidence to prove their allegations and resulting in the leaders release. Walmart failed to put pressure on the two suppliers to drop the charges.
The legal framework for employee safety in Bangladesh is weak. Whereas the important role that garment export industry plays in the country, meant that there was little chance for the government to act on the factor owners or Walmart. As any other political issue, the Tazreen fire raised political temperatures only a few days after it had happened. Walmart realized the political risk it faced once the fire reports surfaced. At first, the company sought to deny any business relationship with Tazreen factory (Inkpen, 2013). Once there was too much evidence to deny, Walmart moved on to the next tool in handling political risk. They promised a lot as aforementioned. The promises were meant to calm people down while the company stabilized business. Nowadays, the plight of the victims is mentioned rarely.
Walmart Should Have Handled the Dilemma
As the Tazreen fire disaster was an event waiting to happen, the ultimate way to analyze the approaches Walmart should have handled the situation are multi-dimensional. The company should have performed a number of acts before and after the fire. Since it acknowledged the audit report done by their auditors before the fire, it should have implemented the report’s findings. The report informed that the building of the factory was still under construction and was not up to standard in fire safety (Schwartz, 2010). Walmart claimed that they had advised the factory managers to stop using it. However, a responsible company should have done more than giving advice. They should have stated that the company would remain in business with the factory only in case the latter stopped using the building. Walmart had operated in Bangladesh for a quarter of a century. During this time, thousands had died in factory fires. Walmart should have known what was waiting to happen if the conditions in the factories were not improved.
A giant corporation such as Walmart should always respect the interests of the stakeholders. While the company may not implement each of the stakeholder issues, it should give them serious consideration (Timmerman, 2009). When labor unions forum recommended the retailers contracting companies in Bangladesh to help improving the fire safety measures, they should have offered to help. The Bloomberg report is the argument that Walmart should have helped. The smaller retailers had offered to contribute; however, with the Walmart as the leader failing to pay any part, it was hard for such a proposal to pass. Walmart should have agreed to raise the prices it was paying for the companies running the factories to make the improvements feasible. If Walmart had offered to raise the money, the factories would have been at fault for not using that money to improve the working conditions. However, a person analyzing the fire tragedy will place the blame on Walmart for not giving an option for the factory owners.
Keeping with the subsection of stakeholders identification this paper explores, Walmart should do better in identifying the companies that relates to it. It is obvious that Walmart did not want to play any part in improving the facilities of the companies it contracts. In case this is their business model, they should choose companies with factories that do not need improving. Thus, they would have received the same quality of goods without risking their reputation or even legal action against it. Once the fire incident had occurred, Walmart should have accepted its responsibility immediately. It was still not too late to act in the right manner. There were still some actions that would have been committed in proper way by its intervention. The injured people in hospitals and families of the dead need and deserve some help from the company. Walmart should have offered some form of compensation or even an apology. It would have helped for the suffering people to know that there was someone who took responsibility for the tragedy that happened. The construct of people viewing corporations as being run by those with a human heart receive a lot of emphasis in the study of ethics and CSR (Timmerman, 2009).
What I would have Done Different
If I were the CEO of Walmart, while I appreciate the need to give shareholders as much profit as possible, I would have acted differently. I would have used the guidelines from the agreed way of managing the corporate social responsibility. One of the key guidelines I would have used is labor conditions and human rights. It requires that a company monitors the work of the employees. I would ensure that all my suppliers in the foreign countries the companies set of agreed terms of engagement. The term of engagement would require the company to treat its employees as Walmart treats its employees at home. Companies that my company enters into business would sign the agreements. Breach of the agreement would result in termination of all business concerning immediate effect (Mataloni, 2011). With legal precedence in place nowadays where corporations can receive punishment for violating the human rights, such kind of agreement would insulate the company I manage from legal liability. The activists in the US are using Alien Torts Claim Act to have organizations violating human right abroad punished.
The next guideline that I would use is the fair trade practice as formulated by Starbucks. I would copy Starbucks by seeking to alleviate the plight of the workers in the companies that Walmart contracts to supply it with goods (Mataloni, 2011). I appreciate that it would be hard to raise the employees’ wages to the level that employees in the US take home. However, Walmart would help in constructing schools and hospitals to make their lives easier. If I were the CEO of Walmart, I would have helped to pave the road leading to the Tazreen factory. Had the road been good, the firefighters would have accessed the factory easily; thus, few people could have died.
I would also improve the transparency issue. Transparency brings trust, and it is one of the constructs of Ethics and Corporate Social Responsibility. The company seems to not concentrate on giving the correct information. It is very hard for people to trust the company that promises to not do business with a certain company only for import record to show that it is doing exact opposite. The result of this action is a lack of trust from the people. I believe the trust should be the first benefit that any CEO should seek to achieve for the company that he/she works for (Hill, 2014). To gain trust as the Walmart managing director, I would tell the hard truth concerning the issues I cannot solve or time deadlines that I cannot beat.
The reason people criticized Walmart were the measures it promised to take; some of them, the company was not planning to do, but the management went ahead and promised people. Consequently, people had doubts as to whether the company did that or not. The company also promised to solve the issue within short period of time that was not possible. The result of this is breaking the promise or doing poor work. A large corporation such as Walmart will always receive scrutiny. If the media realizes that a company management broke its promise or did a poor job, they will report about it for weeks. Such a bad publicity will always affect the business negatively and will make people fail to trust it even more. The companies that intend to make a similar mistake in future will have negative effects for long period. For a retail market leader such as Walmart, such mistakes should never happen, and as CEO, I would guarantee it.
Finally, I believe that as a business leader, I have a responsibility to do my best and make the world and people living in it better. Even if made efforts to improve the lives of the workers under Walmart, there would be other sufferings. I would therefore be at the forefront supporting the labor organizations in Bangladesh get better working conditions. As a leading customer in the leading foreign currency earner for a country, I believe Walmart can influence the political leaders. Walmart can lobby parliament to pass laws that would guarantee better-working conditions and better pay (Hill, 2014). Thus, I can contribute in helping the employees in the country have better lives.
Conclusion
In conclusion, incidents such as the Tazreen fire tragedy provide companies with a big ethical dilemma. The theories of Ethics and Corporate Social Responsibility can help companies avoid them or manage them better when they happen. Walmart managed the dilemma poorly, and that is the reason people blame the company nowadays. There are always lessons to learn from such an issue, and I hope that Walmart learned from its mistakes and bad choices. As an aspiring business leader, I believe I would have handled the dilemma differently, hence having protected lives in the factory and the business good name.
