Criticism of Walmart

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Bumper sticker critical of Wal-Mart

From a financial standpoint, Wal-Mart is one of the most successful corporations ever. Some praise Wal-Mart for benefiting consumers through low prices, while critics state that the company's success derives from business practices harmful to employees, local communities, the economy or the environment. Any organization on the scale of Wal-Mart will have problems at the level of individual stores; this article concentrates chiefly on systemic issues instead of single incidents.

Wal-Mart is the most-frequently sued corporate entity in the United States. Its legal department has a reputation for aggressive legal tactics, and the corporation has been sanctioned by several courts for improper courtroom behavior. Details of specific, major lawsuits are included in article sections below based on each lawsuit's primary subject.

Criticisms

Supplier relations and predatory pricing

(For more information of imports/outsourcing/globalization, see the appropriate section)

As the single largest customer to most of its suppliers, Wal-Mart openly uses its bargaining power to negotiate lower prices from suppliers.

Some suppliers say Wal-Mart has demanded access to their financial statements in order to look for "excessive profit margins." This information can be used as leverage in pricing negotiations, leading to reduced profit margins for suppliers.

Former suppliers have stated that Wal-Mart threatens to cease carrying a supplier's entire product line unless the prices of specific products are lowered. This is analogous, but not identical, to the illegal practice of product tying practiced by manufacturers and suppliers. As a purchaser rather than a seller, Wal-Mart is not bound by regulations in this regard, so the practice is not illegal in the United States.

Economic theory suggests that suppliers will not supply products to Wal-Mart at loss-making prices over the long term. According to this analysis, Wal-Mart is a force for reducing waste and inefficiency from the supply chain. Suppliers, however, do not always behave according to economic theory, and Wal-Mart does not attempt to make them do so. In addition, suppliers may not have the long term relationship necessary to recoup any short term losses incurred.

Wal-Mart's supporters point out that gross margin has been consistent over time, fluctuating between 20.8% and 22.9% over the last ten years. By comparison, the entire department and discount retail industry has an average gross margin of 34.9%. UBS Warburg found that Wal-Mart's prices are 17% to 20% lower than other grocers.

There have been few, if any, documented allegations of non-payment by its suppliers. Generally, Wal-Mart is praised by suppliers for paying bills on time.

Predatory Pricing

Wal-Mart has been prosecuted for predatory pricing behavior, which is defined as the practice of temporarily lowering prices in order to drive competitors out of business so that prices may be raised afterwards in a competition-free environment (a monopoly). The chain had been found guilty of predatory pricing in lower courts, but those convictions have been overturned on appeal. There are also several ongoing cases alleging predatory pricing. To date, there have been no successful federal or state actions to sanction Wal-Mart for practicing predatory pricing. It should be noted that many economists claim that laws against "predatory pricing" actually harm consumers by discouraging firms from lowering prices out of fear of prosecution for simply competing with other firms. Moreover, the theory of predatory of pricing is not considered credible by most economists today. ^[1]

The company does use certain products as loss leaders to increase business, but this practice is not illegal in most cases.

Slotting

Wal-Mart differs from its competitors by charging no fees to suppliers. Wal-Mart pays the supplier only for the actual cost of the goods themselves, and the supplier pays no fees to Wal-Mart. ^[2]

In contrast, most grocers charge several fees in order to carry a supplier's product. A slotting fee is charged for placing a product on the shelf. These fees easily approach $150,000 for a single product in high-demand markets. In addition to slotting fees, retailers may also charge promotional, advertising and stocking fees. According to an FTC study, the practice is "widespread" in the supermarket industry. Many grocers earn more profit from agreeing to carry a manufacturer's product than they do from actually selling the product to retail consumers. According to retailers, fees serve to efficiently allocate scarce retail shelf space, help balance the risk of new product failure between manufacturers and retailers, help manufacturers signal private information about potential success of new products, and serve to widen retail distribution for manufacturers by mitigating retail competition. Vendors charge that slotting fees are a move by the grocery industry to profit at their suppliers' expense. [3]

Supplier Negotiations

In its negotiations with suppliers, Wal-Mart requires that prices go down from year to year. If a vendor does not comply with Wal-Mart's request for reduced prices, they risk having their entire brand removed from Wal-Mart's shelves in favor of a lower-priced competitor or a less expensive store brand. This can put pressure on suppliers to shift jobs to factories in third world countries or reduce the quality of the product. A CEO of one of Wal-Mart's suppliers said that the price Wal-Mart requested from his company for a particular product was so low that he couldn't afford to keep production in America, even if he didn't have to pay his workers anything.[4]

Local community impacts

Political Cartoon regarding Wal-Mart's store in Teotihuacan, Mexico. "If the Spanish conquistadores built their churches over the pyramids, why not allow the people from Wal-Mart do the same with one of their stores?"

Community activists often organize campaigns against proposed new store locations. Critics and academic studies note that Wal-Mart displaces locally owned stores and results in the reduction of locally-owned corporate assets and real estate. Critics compare this sort of practice to that of an absentee landlord.

Wal-Mart asserts that the absentee landlord analogy is inaccurate. The transfer of local assets from local owners to Wal-Mart has no impact on local property tax revenues. Unlike an absentee landlord, Wal-Mart has full financial interest in maintaining and enhancing the property value of its stores. This often leads to an increase in appraised values used to assess local property taxes. Additionally, Wal-Mart stores often result in increased sales tax revenues to local municipalities.

Economic Impact

Wal-Mart claims that their entry into local grocery markets lowers prices, and that this is equivalent to an increase in consumers' real incomes in the local economy.

Wal-Mart's entry into local grocery markets lowers prices by an average of 14%. This is equivalent to an increase in consumers' real incomes in the local economy. Local competitors are forced to lower prices, so consumers benefit from declining prices whether or not they shop at Wal-Mart. Those who do shop there experience an additional increase in real income; Wal-Mart's prices on groceries are 15-30% lower than rivals. Washington Post columninst Sabastian Mallaby notes that the "the average Wal-Mart customer earns $35,000 a year, compared with $50,000 at Target and $74,000 at Costco. Moreover, Wal-Mart's "every day low prices" make the biggest difference to the poor..." ^[5]

Location and Styling

The "Bland and Boxy" architecture of its buildings has also created problems with members of city planning and architectural community. Most major retailers follow the same inexpensive style (such as Home Depot, Target, Bed Bath and Beyond, etc).

Community activists often organize campaigns against proposed new store locations, but the effects of Wal-Mart stores on the communities in which they operate is a topic of some controversy.

The company responds to all critiques of store openings by explaining that it extensively studies potential locations before deciding to build a store. (Wal-Mart has used satellite imagery to plan store openings based on such criteria as traffic flow and location of existing, competing, retail businesses.) The company's rule-of-thumb is that a location must have the economic base to support one-and-a-half Wal-Mart stores. In other words, there is more than sufficient customer demand for a Wal-Mart to be built in the locations it ultimately selects.

Political/lobbying activities

Wal-Mart sometimes garners subsidies from local municipalities in exchange for building new stores or distribution centers. Municipalities typically grant these subsidies with the goal of expanding tax or employment bases. In some cases, Wal-Mart has purchased land after successful eminent domain actions by municipalities. Such support from local governments is often extended to Wal-Mart and not to existing, local businesses.

Specific instances of community protests

Wal-Mart has sought to open new stores in Chicago and failed due to community pressure. Despite multiple well-funded attempts to develop Supercenters in at least two wards, unions and community groups such as ACORN focused effective community opposition. In September of 2004, Mayor Daley said this of the debate, "Wal-Mart has a PR problem. I feel sorry for them. They've got a big problem."

In late 2003, the company undertook an unusual step after failing to gain the support of the Inglewood, California City Council for a proposed development of a supercenter. The council had cited a wide range of concerns, including traffic, the environment, labor practices, and public safety. In response, Wal-Mart obtained the signatures of thousands of voters, forcing the council to call a special election. The resulting 71-page measure, Initiative 04-A, asked voters to allow the company to create its supercenter and a collection of chain shops and restaurants on a sixty acre (243,000 m²) parcel near Hollywood Park Racetrack. The proposal exempted the company from all of Inglewood's planning, zoning and environmental regulations. The special election was held April 7, 2004; by a 60-40 margin the Wal-Mart proposal was defeated.

On the night of August 28, 2004 a partially completed Wal-Mart Supercenter was repeatedly crashed into by two on-site dump trucks in Asheville, North Carolina, causing nearly $1 million in damage. The building in question was incredibly controversial in the community.[6]

The city of Guelph, Ontario, Canada has continually blocked the corporation's efforts to set up a store there. Community activists and Guelph city council have consistently rejected plans to develop, however Wal-Mart has appealed to the Ontario Municipal Board, a quasi-judicial body that adjudicates municipal disputes. As of August, 2005, the proposal was still in litigation.

On 26 May 2005, suspected anti-Wal-Mart activists planted a home-made bomb outside a newly-opened store in Ithaca, New York. Workers discovered the bomb early in the morning and called the police, who successfully contained the device. In addition to local law enforcement, federal investigators were called to the scene. The construction of a Wal-Mart in Ithaca had been fiercely debated for over seven years before it was finally built. [7] [8]

Protest marches have occured in small communities in regard to Wal-Mart. An article in the Northwest Arkansas Times describes a "group of about 40 people" marching for a better working conditions including a living wage and health entitlements. [9]

Complaints about international locations

Wal-Mart opened their Teotihuacan Superstore 1.9 miles from the Pyramid of the Moon (shown) amid community protests.

Wal-Mart has been accused of "insensitive placement of stores" abroad. In 2004, amid local community resistance and protests, both from environmental groups and groups opposed to what they consider to be globalist policies. Wal-Mart opened a new Superstore in Teotihuacan, Mexico, near ancient Pre-Columbian pyramids. During construction, an ancient altar, 3 feet square, was uncovered 1 foot beneath the grade of the parking lot being constructed. It was preserved in situ. Homero Ardijis, one of the store's lead opponents in the community characterised the opening as being, "extremely symbolic" and "...like planting the staff of globalization in the heart of ancient Mexico".[10]

Employee/labor relations

(For information on the large-scale impact of Wal-Mart's employment practices, see the local community impacts section.)

Treatment of employees

As with many US retailers, Wal-Mart experiences a high rate of employee turnover (approximately 50% of employees leave every year, according to the company). Although they average nearly double the federal minimum wage, wages at Wal-Mart are about 20% less than at other retail stores. Founder Sam Walton once argued that his company should be exempt from the minimum wage. (Palast, 121).

Time Management

It is alleged that Wal-Mart's salaried managers have pressured hourly employees to work "off-the-clock" in order to avoid overtime pay. Wal-Mart policy states that associates can be disciplined and/or terminated for working off the clock. Wal-Mart stresses that employees should be paid for work they complete, going as far as requiring employees to fill out time adjustment sheets for any amount of time worked, regardless of the task. While overtime control is a high priority for salaried management, managers cannot ask associates to perform work off the clock (facing the same consequences of an hourly employee for working off the clock). In most cases, if it is necessary for an hourly associate to work longer than they have been scheduled, management must ask (they cannot force) the associate to stay later. If overtime cannot be granted, the associate will be asked to either leave early during the next scheduled work day, take that workday off, or take an extended lunch break.

In 2000, Wal-Mart paid $50 million to settle a class-action suit that asserted that 69,000 current and former Wal-Mart employees in Colorado had worked off-the-clock. These employees, as well as several former managers, have testified that Wal-Mart had an unofficial policy requiring off-the-clock work, to keep the cost of payroll down; as of the time of printing of Wal-Mart's 2005 Annual Report, the company faced 44 wage and hour lawsuits in states including California, Indiana, Minnesota, New Jersey, Oregon, and Washington.

Wal-Mart also has strict policies regarding time management, with hourly employees facing disciplinary actions or termination for not taking scheduled breaks and lunches. This system is so precise, that the timeclock will not allow hourly associates to clock back in from lunches until their scheduled lunch period (either thirty minutes or an hour, depending on the duration of the shift) has expired.

Drug Testing

Wal-Mart, like many large American corporations with low-wage employees, screens potential hires through a drug test, in addition to a multiple choice personality test, which asks applicants to express their level of agreement with statements such as "rules have to be followed to the letter at all times." (Ehrenreich, 124)

Class-Action Suits

Class-action suits were filed in 1995 on behalf of full-time Wal-Mart pharmacists whose base salaries and working hours were reduced as sales declined, resulting in the pharmacists being treated like hourly employees. Initial judgments ruled in favor of the plaintiffs, but an appeal by Wal-Mart resulted in the cases being remanded to a lower court in February 2005 due to insufficient evidence that Wal-Mart committed the offense often enough that the salaries were equivalent to hourly wages. [11]

Wages

In some positions, Wal-Mart employees earn less than those performing similar jobs at other stores. As of 2001, according to US federal statistics, the average supermarket employee earned $10.35 per hour, industry-wide; in comparison, stock clerks at Wal-Mart made $8.23 per hour on average. A 2003 wage analysis reported that cashiers, the second most common job at Wal-Mart, earn approximately $7.92 per hour and work an average of 29 hours a week. This brings in annual wages of $11,948, about $1000 less than the United States federal poverty line for a parent and one child.

Wal-Mart founder Sam Walton once argued that his company should be exempt from the minimum wage, and took advantage of an exception in the minimum wage law that, at the time, excluded small businesses from having to pay the minimum wage. While the federal minimum wage in 1962 was $1.50 an hour, Walton regularly paid his employees only 50 to 70 cents per hour.^[12] Former managers have reported that they were judged by upper management based on their ability to keep payroll costs low, and that they sometimes pressured more senior, higher-paid employees, in the hopes that they would quit. [13]

Critics complain that Wal-Marts move to argue for a higher federaly mandated minimum wage is a direct attack on many competitors, including local competitors, many of whom who only pay their employees minimum wage. Since Wal-Mart pays no associate at minimum wage they would not see any increased costs while many of their competitors would.

Costs to Social Services

Critics of Wal-Mart have argued that Wal-Mart indirectly incurs costs for federal social service programs, due to the low wages it pays its employees. A report by U.S. Democratic Party congressman George Miller argued that a 200-employee Wal-Mart store may indirectly cost federal taxpayers $420,750 to finance free-lunch and health-care programs for children of low-income Wal-Mart employees, tax credits for low-income families, and similar programs.^[14]

Child labor violations

In January 2004, the New York Times reported on an internal Wal-Mart audit conducted in July 2000 which examined one week's time-clock records for roughly 25,000 employees. According the the New York Times, the audit "pointed to extensive violations of child-labor laws and state regulations requiring time for breaks and meals" including 1,371 instances of minors working too late, during school hours, or for too many hours in a day. There were 60,767 missed breaks and 15,705 lost meal times. Wal-Mart’s vice president for communications, Mona Williams, responded that company auditors had determined that the methodology used was flawed. "This audit is so flawed and invalid that we did not respond to it in any way internally." [15]

Today Wal-mart gets a fifteen day's notice before child labor inspections.

Working conditions

The report by congressman Miller alleged that in ten percent of Wal-Mart's stores, nighttime employees are sometimes locked inside, making them unable to leave. In some cases employees who had sustained injuries requiring medical attention were forced to wait inside the store for hours for a manager to arrive and unlock the door.^[16]

Labor Laws

Under an arrangement, disclosed by the New York Times, Wal-Mart will be allowed 15 days to investigate and rectify employee complaints before the Department of Labor conducts any investigation. Upon receiving a complaint about a potential violation of wage and hour laws, DOL’s field offices around the country are now instructed to notify the DOL office in Little Rock, Arkansas, which will then notify Wal-Mart’s headquarters in Bentonville, Arkansas of the complaint. The Department will not launch its own investigation during that time and it remains unclear under what circumstance it would launch an investigation after the 15 day period ends, Representative George Miller (D-California) requested an investigation by the DOL’s Inspector General to determine whether the arrangement represents a sweetheart deal between the Bush Administration and Wal-Mart. [17]

Critics respond that Wal-Mart’s labor law violations range from illegally firing workers who attempt to organize a union to unlawful surveillance, threats, and intimidation of employees who dare to speak out. [“Everyday Low Wages: The Hidden Price We All Pay for Wal-Mart," A Report by the Democratic Staff of the Committee on Education and the Workforce, 2/16/04]

Further Claims

Further claimed is that:

• Wal-Mart reviews the books of its suppliers on a regular basis to help their suppliers cut down unnecessary costs, which routinely include laying off all union employees and contracting more work outside of the USA to countries such as China.
• In China, children are paid an average wage of .38 cents per day.
• According to striking workers at a Chinese factory that supplies Wal-Mart, "half of their wages were deducted to pay for their housing expenses while living in housing facilities." [18].

Illegal use of undocumented workers

Since 1997, investigators have found 250 illegal immigrants working at Wal-Mart stores. These individuals were employed by custodial services subcontractors used by Wal-Mart. Many of the janitors worked seven days a week without overtime pay or injury compensation. To settle federal criminal charges relating to these incidents, Wal-Mart paid $11 million in March 2005 without admitting wrongdoing or liability. [19] There were no charges brought against Wal-Mart or any of its associates. Several of the custodial services firms that employed the illegal immigrants pled guilty to criminal charges.

On October 23, 2003, federal agents raided 61 Wal-Mart stores in 21 states, in a crackdown known as "Operation Rollback". [20] When they left, the agents had arrested 250 nightshift janitors who were undocumented workers. Following the arrests, a grand jury convened to consider charging Wal-Mart executives with labor racketeering crimes for knowingly allowing undocumented workers to work at their stores. The workers themselves were employed by agencies Wal-Mart contracted with for cheap cleaning services. While Wal-Mart executives have tried to lay the blame squarely with the contractors, federal investigators point to wiretapped conversations showing that executives knew the workers were undocumented.

Additionally, some of the janitors have filed a class-action lawsuit against Wal-Mart alleging both racketeering and wage-and-hour violations. According to the janitors, Wal-Mart and its contractors failed to pay them overtime totaling, along with other damages, $200,000. One of the plaintiffs told the New York Times that he worked seven days per week for eight months, earning $325 for 60-hour weeks ($5.41 per hour), and that he never received overtime pay. A legal question now being raised is whether these undocumented workers even have the right to sue their employers.

The October 2030 raid was not the first time Wal-Mart was caught using undocumented workers. In 1998 and 2001, federal agents arrested 102 undocumented workers at Wal-Mart stores around the country.

In February 2004, "the civil rights suit filed against Wal-Mart Stores Inc. by illegal immigrants was expanded Monday to accuse America’s biggest retailer of locking its janitors inside stores during their shifts."[21]

In March 2005, Wal-Mart settled the lawsuit the government brought against them, for $11 million. "We acknowledge that we should have had better safeguards in place to ensure our contractors were hiring only legal workers," said Mona Williams, a Wal-Mart spokeswoman. "That's why we are agreeing to pay the $11 million." [22]

In November 2005, 125 alleged illegal immigrants were arrested while working on construction of a new Wal-Mart distribution center in eastern Pennsylvania. According to Wal-Mart, the workers were employees of Wal-Mart's construction subcontractor. [23]

Health insurance

Georgia Survey

According to a September 2002 survey by the state of Georgia, 10,261 of the 166,000 children enrolled in PeachCare for Kids, the state's health-insurance program for uninsured children, had a parent working for Wal-Mart. For every four of its employees in Georgia, one Wal-Mart child was covered by the program. In contrast, the state's second-biggest employer, Publix, had one child in the program for every 22 employees. [24]

In December 2004, Wal-Mart commissioned a nationwide survey from Segmentation Co., a division of consulting outfit Yankelovich. The survey showed the use of public-assistance health-care programs by children of Wal-Mart workers was at a similar rate to other retailers' employees, and at rates similar to the U.S. population as a whole. However, Wal-Mart has refused to release its survey, nor will it say which other retailers are included in the report. [25]

Internal Memo

On October 26, 2005, The New York Times reported that a Wal-Mart internal memo sent to the firm's board of directors advised trimming over $1 billion in health care expenses by 2011 through measures such as attracting a younger, implicitly healthier work force by offering education benefits. The memo also suggested giving sedentary Wal-Mart staffers, such as cashiers, more physically demanding tasks, such as "cart-gathering", and eliminating full-time positions in favor of hiring part-time employees who would be ineligible for the more expensive health insurance [26] — policy proposals which may violate the Americans with Disabilities Act of 1990.

According to the article, the memo accused Wal-Mart's lower paid employees of abusing emergency room visits, "possibly due to their prior experience with programs such as Medicaid", whereas such visits may actually be due to the reduced ability of uninsured or underinsured people to make timely appointments to see a regular physician. [27]

The memo reportedly also expressed concern that an employee with seniority earns more money, but is not more productive than a new employee.

Critics point to the story as evidence that Wal-Mart purports to be generous with its employee benefits, while in reality the company is working to cut such benefits by reducing the number of full-time and long-term employees and discouraging supposedly unhealthy people from working at Wal-Mart. [28]

State Legislature Actions

On January 12 the Maryland legislature enacted a law that requires the retail giant to spend at least 8% of their payroll on health benefits - or put the money directly into the state's health program for the poor.[29]

On January 19, "Fair Share Health Care" legislation in Wisconsin was defeated. Wal-Mart spokesperson Nate Hurst stated: "That this bill failed even to make it out of committee in the Wisconsin Assembly is a big setback to the Washington, D.C. union leaders driving these state-by-state attacks against large employers. We're hopeful that more state legislators across America -- like those in Wisconsin -- will come to realize that these bills are harmful to working families. Not only will they do nothing to control the cost of health care or improve access to health coverage, they will cost jobs and hurt economic growth. The American people want their legislators to resist special interest pressure and instead work with colleagues and businesses of all sizes to solve the health care challenges facing America."[30]

Opposition to unions

Wal-Mart is resistant to the organization of labor union efforts to organize workers in the corporation's stores. The company argues that unionization is unnecessary because the management and workers maintain a positive working relationship without need for outside representation or involvement.

Corporate Strategy

The consulting firm AT Kearny has stated that above all, low labor costs are a big source of cost advantage for Wal-Mart. Wal-Mart's employees might begin at as little as $8 an hour which is 20-30% less than unionized workers at rival discount stores.

Wal-Mart's CEO, H. Lee Scott Jr. Scott is on record as saying that Wal-Mart sees no upside to the higher labor costs and "a bunch of work rules". In both cases, Wal-Mart has claimed that the increased costs associated with a unionized workforce would lead to unprofitability at current retail price levels. Rather than raise retail prices, the company elected to eliminate those jobs.

There have been several other votes to unionize at North American stores. In most cases, unionization proposals are defeated by employees. Critics argue that this is due to employees' fear of corporate retaliation. Wal-Mart states that employees are aware of the company's cost structure and corporate strategy, so the employees assume that the store will not raise prices in order to accommodate union-related costs.

Meat Cutters

In 2000, meat cutters in Jacksonville, Texas voted to unionize. Wal-Mart eliminated in-house meat-cutting jobs in favor of prepackaged meats on the claims that it cut cost and was a preventive measure to lawsuits. Wal-Mart also claims this nationwide closing of in-store meat packaging had been planned for many years and was not related to the unionization. In June 2003, a National Labor Relations Board judge ordered Wal-Mart to restore the meat department to its prior structure, complete with meat-cutting, and to recognize and bargain with the union over the effects of any change to case-ready meat sales.^[31]

Canada

The documentary "Wal-Mart the High Cost of Low Prices" shows one successful unionization of Wal-Mart in Canada in 2004.(Jonquière in the province of Québec) but Wal-Mart closed the store within the year claiming the store had become unprofitable. According to Québec law, Wal-Mart must pay all workers the same wage until they are offered similar employment. Wal-Mart stated that it has no intention of re-opening the store, but the labor union and workers argued the store closing was a retaliation against unionization on the grounds that Wal-Mart has not sold the property.

In September 2005, the Québec Labour Board ruled that the closing of a Wal-Mart store amounted to a reprisal against unionized workers and has ordered the company to compensate former employees.[32] Michael J. Fraser, the union's national director said; "Wal-Mart is trying to send a message to the rest of their employees that if they join a union the same thing could happen to them," The union will be filing unfair labor practice charges against Wal-Mart in Quebec.

The United Food and Commercial Workers Union has drives in at least 25 Canadian stores. Workers at the Jonquiere store received union certification in August 2004 and Saint-Hyacinthe, Quebec has the only remaining unionized Wal-Mart in North America. The Quebec Labour Relations Board found the company guilty of harassing and intimidating workers trying to join the United Food and Commercial Workers Union at another store in Ste-Foy, Quebec. [33]

Germany

In Germany, all companies of considerable size are required by law to consider the views of workers through each company's or store's so-called "workers' council", but Wal-Mart has, so far, failed to comply and have been seriously criticized by the German media.

Anti-Union Tools

In 1970, Sam Walton resisted a unionization push by the Retail Clerks Union in two small Missouri towns by hiring a professional John Tate, to lecture workers on the negative aspects of unions. On Tate's advice, he also took steps to instruct his workers on how the company had their best interests in mind, encouraging them to air concerns with managers and implementing a profit-sharing program. Shortly after this, Wal-Mart hired a consulting firm, Alpha Associates, to develop a union avoidance program. [34]

The United Food and Commercial Workers (UFCW) asserts that Wal-Mart maintains a phone hotline for managers to call if they suspect union activity.^[35]

Wal-Mart has an anonymous survey given to each one of its employees, called "Grassroots". The UFCW claims that the purpose of this survey is to let Wal-Mart calculate a Union Probability Index number for each facility, that tells them how likely a union is to form there. UFCW representatives also claim that Wal-Mart listens in on store telephone calls and e-mails, looking for signs of unionization.[36] Wal-Mart also uses this survey to understand associate concerns including pay, relationship with managers, and views on managerial policy and leadership.

It was the opinion of the National Labor Relations Board that Wal-Mart had an illegal section of its anti-handbilling/anti-solicitation policy which according to the NLRB stated that Wal-Mart “strives to provide a solicitation-free atmosphere for our customers” and later added "Our Associates are to be focused on being productive and providing excellent service."; which in the opinion of the NLRB was determined to be too broad and intended to keep associates from receiving solicited material while in store and off the clock. In 2003, Wal-Mart amended this policy in an informal settlement with the National Labor Relations Board so that it now disallows any form of solicitation to take place within the store. [37]

In March of 2005, Tom Coughlin was forced to resign from Wal-Mart's board of directors. The company claims that they found evidence of embezzlement by Coughlin. Coughlin claims that the money was used for an anti-union project involving cash bribes paid to employees of the United Food and Commercial Workers union in exchange for a list of names of Wal-Mart employees that had signed union cards. Coughlin also claims the money was unofficially paid to him, by Wal-Mart, as compensation for his anti-union efforts.^[38] Coughlin's claims have, according to the New York Times, seemed less credible with his agreement to plead guilty to federal wire fraud and tax evasion. As the Times notes: "...the lack of evidence that he used the missing money to spy on unions raise doubts as to whether such a project even existed." [39]

Workforce diversity

Gay and Lesbian Employees

Wal-Mart has received improving scores on the Corporate Equality Index, published by the Human Rights Campaign, a measure of how companies treat gay and lesbian employees and consumers. The company received a 57% rating in the 2005 edition which equaled the rating of several competitors including Costco and Whole Foods. Previously Wal-Mart had received a 43% rating in the 2003 and 2004 editions, and a 14% rating in the 2002 edition. [40] [41] Wal-mart's improved score in 2003 accompanied an expansion antidiscrimination policy to protect gay and lesbian employees [42], Walmart's improved score in 2005 accompanied a new definition of family that included same-sex partners. [43]

Allegations of gender discrimination

According to data from the Equal Employment Opportunity Commission, Wal-Mart in 1999 ranked well below its current retailing peers, which have an average of 56% female managers, female employees at Wal-Mart make up 73% of its workforce, but only one-third of its management, a percentage that was typical in 1975.[44][45]

Wal-Mart is currently facing an $11 billion gender discrimination lawsuit that has been granted class action status by the district court hearing the case. As of November 2005, according to the class action webpage, the case is "currently awaiting the Ninth Circuit's decision on Wal-Mart's appeal of the class certification order. The trial court has stayed (i.e. frozen) the case until the Court of Appeals rules in the class certification order." [46]

A class-action suit alleging sex discrimination, Dukes vs. Wal-Mart, was brought against Wal-Mart. Representing 1.6 million women, it comprised both current and former employees and is based on statistics that show that women working at Wal-Mart are paid less than men in every region and in most job occupations and take longer to enter management positions. It is the largest class-action suit in American history. In June 2004, a California judge ruled against Wal-Mart and in favor of the plaintiffs.

Wal-Mart is appealing the decision. Wal-Mart asserts that statistics used in the suit were flawed, because aggregated numbers failed to take into account differing demographic characteristics of employee groups. After statistically accounting for age, education and length-of-service, Wal-Mart claims that statistical analysis shows no difference between male and female employees.

Disability Discrimination

In 2001, the EEOC had to file more lawsuits against Wal-Mart for cases of disability discrimination than any other corporation. In July 2001, a top EEOC lawyer told the magazine Business Week, "I have never seen this kind of blatant disregard for the law." [47] Wal-Mart and EEOC settled in December of 2001 with the EEOC's chief negotiator commenting: "Wal-Mart's willingness to enter into this global settlement, which includes significant nationwide training on the ADA and job offers, clearly demonstrates Wal-Mart's commitment to the ADA." [48]

Company Actions

In January 2006, the company announced that "diversity efforts include new groups of minority, female and gay employees that have started meeting at Wal-Mart headquarters in Bentonville to advise the company on marketing and internal promotion. There are seven so-called Business Resource Groups: women, African-Americans, Hispanics, Asians, Native Americans, Gays and Lesbians and a disabled group."[49]

Imports and globalization

Worldwide, Wal-Mart has become a symbol of globalization to the Anti-globalization movement by encouraging imports and carrying what detractors term "sweat-shop" products.

Imports

Critics argue that Wal-Mart's pricing pressure forces the relocation of manufacturing capacity to China, because China currently offers the lowest-cost manufacturing environment in the world.

Supporters argue that the shift of manufacturing capacity to China is part of an inevitable trend towards globalization due to China's comparative advantage in labor intensive manufacturing.

In the mid-1990s, Wal-Mart had a "Buy American" campaign, but it was eventually cancelled. As of 2004, about 70% of the products sold in Wal-Mart stores have at least a component manufactured in China. It has been estimated that Wal-Mart alone makes 10% of the US imports from China and if taken separated from the US, it would be China's 8th largest trading partner, ahead of countries such as Germany and Russia. The growing deficit with China, heavily influenced by Wal-Mart imports, is estimated to have moved over a million American jobs to China.

Wal-Mart supporters counter that it buys merchandise and services from more than 68,000 U.S suppliers and supports over 3.5 million supplier jobs in the United States.

Use of overseas labor

Like most major retailers, Wal-Mart purchases the bulk of its goods from countries where the cost of labor is significantly less than in the United States and other wealthy industralized nations. Wal-Mart has been criticized for failure to maintain adequate supervision over its foreign suppliers. This lack of supervision has led to incidents where Wal-Mart products have been made using sweatshops or alleged slave labor.

Wal-Mart is criticized for failure to maintain adequate supervision over its foreign suppliers. This lack of supervision has led to incidents where Wal-Mart products have been made using sweatshops or slave labor. Greg Palast reports that Chinese dissident Harry Wu (Wu Hongda) discovered, in 1995, that Wal-Mart was contracting prison "slave labor" in Guangdong Province. Wu and Palast argue that numerous items at Wal-Mart are made by the Chinese People's Liberation Army rather than being "made in America".

In Bangladesh, Palast reported that in 1992 teenagers were working in "sweatshops" approximately 80 hours per week, at $0.14 per hour, for Wal-Mart contractor Beximco. In 1994, Guatemalan Wendy Diaz reported that, at the age of 13, she had been working for Wal-Mart at $0.30 per hour. (Palast pp. 119-120)

According to Wal-Mart, as well as many advocates of free trade, comparisons of wage levels between vastly different countries is not a useful way to assess the fairness of a trade policy. The company also asserts that wages paid to overseas workers are comparable to or exceed local prevailing wages. In that case, the company states that the overseas manufacturing jobs it creates are often an improvement in the quality of life for its employees. The company has also asserted that factory jobs with its suppliers are often safer and healthier than local alternatives, which may include prostitution, the drug trade or scavenging.

Walmart currently uses in-house monitoring, which, critics say, leaves outsiders unable to verify reforms. As BusinessWeek points out, "...since no outside body such as SAI or the FLA is involved and Wal-Mart won't release its audits or even its factories' names, the public is left to take the company's word for it."[50]

In 2004, Wal-Mart began working with Business for Social Responsibility (BSR), a San Francisco nonprofit, to reach out to groups active in monitoring overseas plants. "Wal-Mart is at an early stage," says BSR President Aron Cramer, "and it's likely that they, like most companies that engage in these processes, will adapt their approach over time."[51]

Dumping

In May 2003, Five Rivers filed an anti-dumping petition in Washington, alleging color television makers in China were illegally dumping their larger-sized color sets in the U.S., thereby threatening to put Five Rivers out of business. The company tracked TV imports from China and found that sales of the Chinese televisions skyrocketed from just over 50,000 sets in 2001 to 1.5 million sets during the first nine months of 2003.[52] The ITC findings detailed that "some imports.. have been imported directly by retailers such as.. Wal-Mart", but the report did not indicate that Wal-Mart was the primary reason for this increase.[53]

In May 2004, the International Trade Committee (ITC) unanimously agreed that the surge of these imports from China had injured Five Rivers, and then imposed duties averaging about 23 percent on these sets.

Wal-Mart filed a brief in support of the Chinese suppliers during the hearing.[54] Some claim that Wal-Mart's brief was motivated by standing to lose money if Five Rivers was successful. Since then Wal-Mart has come to the aide of several other Chinese companies found guilty of dumping.

The argument presented by Wal-Mart and the government of China claimed that the makers of these sets were pricing them fairly. As detailed in the ITC finding, Wal-Marts argument was that "imports, which are not sold under well known brand names, have lower perceived quality and hence price." [55] Some characterize Wal-Mart's argument as: if American companies cannot compete, that is their own fault.

It should be noted that whether dumping itself is a good or bad thing is a matter of dispute. Some believe governments are unjustified in forcefully preventing consumers from having access to imported low cost products. [56] [57]

Product controversy

Wal-Mart's product selection is a controversial subject. As a privately-controlled corporation, Wal-Mart may retain the right to control what products are sold in its stores, but many criticize the company for allowing right-wing, conservative and religious viewpoints to influence its product selection and thereby effectively impose their own view of morality onto their customers instead of allowing the customers to make their own decisions. Critics claim this effectively forces the company's moral opinions on customers and suppliers.

Examples of items that Wal-Mart does not sell are certain men's magazines such as Maxim, and emergency contraception pills. Critics point out apparent hypocrisy in that Wal-Mart sells other controversial items such as rifles and shotguns, R-rated movies, and violent video games — although Wal-Mart did remove the video game Grand Theft Auto: San Andreas from its shelves due to an allegedly sexually explicit scene accessible by modifying the game's code via a software patch.

Pharmaceuticals

In 1999, Wal-Mart announced that it would not stock the morning-after pill in its pharmacies.[58]

Magazines

In 2003, Wal-Mart announced that it would not carry magazines it deemed inappropriate or magazines that generated customer complaints. At the time of the announcement, men's magazines including Maxim, FHM and Stuff were removed from stores.[59] Other titles deemed offensive by the company were moved to displays that obscured the magazines' covers. Magazines such as Redbook, Cosmopolitan and Marie Claire were among those magazines relocated.[60] Editors and publishers of these titles criticized the action as an infringement upon editorial freedom.

Music

Wal-Mart does not carry music albums marked with RIAA's Parental Advisory Label. The store does carry edited versions of those albums. Record labels release edited versions with obscenities completely removed or overdubbed with less offensive lyrics. Such versions, sometimes referred to as radio edits, are produced by music publishers to increase retail sales.[61] Notably, albums critical of Wal-Mart itself have been removed from the shelves.[62]

As a specific example, in 2005, Wal-Mart rejected the original cover of Willie Nelson's reggae album, Countryman, which featured marijuana leaves, in an apparent pro-marijuana statement. To satisfy Wal-mart, the record label, Lost Highway, issued the album with an alternate cover, without recalling the original cover.[63] Countryman entered the Billboard album charts on July 30, 2005, at number 6 on the Country Album chart and number 46 on the Billboard 200 album chart. Though the Billboard charts do not distinguish between the two different versions of the album, Amazon.com's "Top Sellers" list showed in July that the version with the cover banned by Wal-mart was a much more popular item than the version with the "clean" cover.

Movies

Wal-Mart strongly encourages motion picture studios to present DVDs in a fullframe format where the picture is reformatted to fill a 4:3 TV screen as opposed to just the widescreen format that presents films as exhibited in theatres. Although widescreen versions of new releases can be found at Wal-Mart, they are usually not as easy to find and once the inital order is sold out, the store will generally carry only the fullframe version. Widescreen DVDs can be ordered through their website.

File:Walmartaes.jpg

Controversial "Planet of the Apes" listing at Walmart.com

In January 2006, Wal-Mart came under fire for the "See Also" section of the Walmart.com listing for the DVD of Planet of the Apes (TV series) [64]. The recommendations offered by the site were all related to African Americans, including Introducing Dorothy Dandridge and documentaries on Martin Luther King. Wal-Mart quickly corrected the page, and insisted it was a software glitch, though it finally blamed the matter on human error. Wal-Mart has apologized for any perceived insensitivities, and many experts agree that it appeared to be an unintentional accident. [65] The problem was first noted by San Diego blogger, John Pappas III on his San Diego Johnny blog on October 20, 2005 [66].

Books

In 2004 Wal-Mart sold the notoriously anti-Semitic The Protocols of the Elders of Zion on its website. Most scholars consider the text to be a forgery, but Wal-Mart's product description suggested the text was genuine. The company ceased selling the book in September 2004, citing "a business decision".

Wal-Mart was criticized for selling The Protocols of the Elders of Zion, a fraudulent and anti-Semitic document purporting to describe a plan to achieve Jewish global domination. Wal-Mart sold the book on its website, including a description that suggested it might be genuine; It was withdrawn from sale in September 2004, as a business decision. The document is still available for purchase from many other booksellers, who sell it in the interests of freedom of speech. ^[67]

Philanthropic efforts

An article in The Nation criticized Wal-Mart's philanthropic efforts [68], noting that their donations coincide with their negative image. Indeed, while the Waltons contributed over $1.1 billion between 2001 and 2005, BusinessWeek noted that they donated a total of $250 million between 1962 and 2000 [69]. Some criticize the article for not adjusting for corporate growth and inflation to make a more meaningful comparison.

Taxes

Until the mid-1990s, Wal-Mart took out corporate-owned life insurance policies on low level employees, such as janitors, cashiers, cart pushers, and stockers. This type of insurance is usually purchased to cover a company against financial loss when an executive or other high ranking employee dies. In this case it is usually known as "Key Man Insurance", but the policies that Wal-Mart took out on its rank-and-file workers were derided as "Dead Peasants Insurance" or "Janitor Insurance". Critics (such as the U.S. Internal Revenue Service) charge that the company was trying to profit from the deaths of its employees, and take advantage of a loophole in a tax law which allowed them to deduct the premiums. The practice was stopped in the mid-1990s when the federal government, which had previously called the financing scheme "tax arbitrage," closed the tax loophole and began to pursue Wal-Mart for back taxes. [70]

Response to criticism

Wal-Mart and unions

Wal-Mart states that it is not anti-union but "pro-associate", arguing that its employees need not pay third parties to discuss problems with management as the company's open-door policy enables employees to lodge complaints and submit suggestions all the way up the corporate ladder, though most employees state that they undergo fierce intimidation and scare tactics when attempting to report problems in the workplace. [71][72]

Wal-Mart "factories"

The documentary "Wal-Mart: the High Cost of Low Prices"[73] states that "Wal-Mart factories" were in poor condition and that Wal-Mart factory workers were subject to abuse and inhumane conditions.

Wal-Mart states (and financial reports confirm) that it is a retail store and owns no factories and creates no products of its own [74][75]. Wal-Mart states that it "believes in doing the right thing" and that it is "developing monitoring systems to ensure contractors that do business with us comply with all relevant laws and regulations." [76]

Wal-Mart and illegal aliens

According to Jay Nordlinger of the National Review, Wal-Mart executives did know that contractors were using illegal aliens as because they had been helping the Federal government with the investigation for the previous three years. [77] Some critics argued that Wal-Mart personally hired illegal aliens, while Wal-Mart claims they were employees of contractors who won bids to work for Wal-Mart. [78]

Wal-Mart and local communities

Critics argue Wal-Mart destroys communities and suggest the chain forces competitors out of business.

Defenders argue the company operates through competition, meaning that all transactions with Wal-Mart are voluntary. Wal-Mart's competitors include thousands of local and national businesses. Wal-Mart operates in competitive economies where consumers are free to choose any number of other competitors such as:

• other discount stores such as Target and Kmart
• dollar stores and similar dollar-style store formats such as Dollar General, Dollar Tree, Fred's, and Family Dollar
• department stores such as Sears and Dillards
• grocery stores such as Kroger, Food Lion, Albertsons, Safeway, and Winn-Dixie, and
• other types of retailers, such as wholesale club Costco, toy retailer Toys R Us, and convenience stores such as 7-11.

Economic research also often suggests Wal-Mart results in more employment.[79][80]

Wal-Mart, through research done by Global Insight, claims it saves working families more than $2,300 a year, while creating more than 210,000 jobs in the U.S. (10% of the jobs created). [81] Other investigations have revealed that for every 2 jobs created by Wal-Mart, 3 jobs are lost through due to many smaller companies going out of business. [82] There has been much debate about the effects of Wal-Mart in the community, with some organizations calculating that taxpayers pick up the tab for Wal-Mart employees who cannot get health care through their employer, thus relying state and federal health care supplemental programs which are paid for by American taxpayers, at an average cost of $2,300 per Wal-Mart employee per year. [83]

Wages and benefits from Wal-Mart

Wal-Mart has said that it pays all employees above minimum wage, and that wages for each locality are determined by the cost of living, wages of competitors, and supply of labor within the local market.[84] Critics opine that Wal-Mart pays below an average wage of its competitors, but have not presented evidence to prove this. According to a Global Insight study, a "limited analysis...based on a large sample of employee wage data, did not find evidence to conclude that Wal-Mart pays its workers below-market." According to the Cato Institute, a libertarian research organization, Wal-Mart employees receive the fair wage that consumers are willing to pay for that service. [85]

Many critics of Wal-Mart, including those in "Wal-Mart: the High Cost of Low Prices"[86] argue that employees are paid so little they cannot afford health insurance. According to Jay Nordlinger of the National Review, fifty percent of Wal-Mart employees receive health care coverage through Wal-Mart. This could be in part because Wal-Mart only offers benefits to its part time employees who have been employed there for at least 2 years.

In a move to silence critics of Wal-Mart's hourly wages, CEO Lee Scott has advocated a federally-mandated raise in the minimum wage. [87]

Economist Jerry Hausman argues that Wal-Mart's low prices and savings are more effective at combating poverty than government programs. [88]

According to Jay Nordlinger, and Wal-Mart, more than 80% of Wal-Mart associates have healthcare coverage; and according to Wal-Mart more than 150,000 associates have been given healthcare coverage under the new healthcare plan implemented in 2005.

Wal-Mart and Product Controversy

As a part of the principles of free enterprise, Wal-Mart is free to stock and sell whatever products it wishes, even if the exclusion of certain products leads to lost profits. Consumers are always free to shop at competitors who have no moral objection to the same products rejected by Wal-Mart. See Free enterprise to get a better understanding about why product discrimination is a petty criticism of Wal-Mart given the fact that Wal-Mart operates exclusivly in competitive markets.

Wal-Mart and Economic Criticism

Wal-Mart has been accused by some of engaging in predatory pricing despite the noted fact by microeconomists that predatory pricing is generally not a profitable venture even in the long run. It is so difficult to come out ahead under predatory strategies that very few ever attempt it. It is thus, not likely that Wal-Mart actually engages in this behavior.

Wal-Mart has also apparently been criticized as a monopsony, which means they are the source of demand for a particular economic factor. Wal-Mart rarely, if ever, actually fits the definition of monopsony. Conversely, Wal-Mart has never fit the definition of monopoly, or the source of supply for a particular economic factor. See monopsony and monopoly for your own comparisons.

References

1. ^ DiLorenzo, Thomas. The Myth of Predatory Pricing Cato Institute Policy Analysis no. 169 (1992)
2. ^ Mallaby, Sabastian Progressive Wal-Mart. Really. Washington Post. November 28, 2005; Page A21
3. ^ Wal-Mart Butchers Force Anti-Union Retailer to Eat Crow, Labor Research Association July 7, 2003; NLRB Judge Orders Wal-Mart To Bargain With UFCW In Texas Labor News, Wal-Martyrs In These Times, Vol. 24, No. 12, 2000, Wal-Mart Wins a Round In Its Struggle To Keep Unions At Bay Voice of America, 25 February 2005; Rally for union bid, Rocky Mountain News, February 24, 2005
4. ^ Reclaim Democracy, Internal Documents of Wal-Mart Including "A Manager's Toolbox to Remaining Union-Free", A standard manual for all Wal-Mart managers.
5. ^ The World According to Sam, Gourmet. June, 2005
6. ^ A documentary film, Protocols of Zion (2005), connects the original document to a resurgence of anti-Semitism following the September 11 World Trade Center attacks.

External links

• Measuring the Economic Impact of Wal-Mart on the U.S. Economy Global Insight study determining the net economic impact of Wal-Mart at the national, city, and county level
• Stop the Attack on Wal-Mart by Thomas Woods
• The Wal-Mart You Don't Know
• Is Walmart good for America
• Progressive Wal-Mart. Really. by Sebastian Mallaby in Washington Post November 28, 2005; Page A21
• Americans For Walmart AmericansForWalmart.org