LEGAL FRAMEWORK

FOR RETAIL BUSINESS

Group 12
Saurav Sharma (21RM953)
Gyanesh Chauhan (21RM22)
Akarsh Makheeja (21RM904)
Sreehari Krishnan (21RM959)
Aakanksha Ranjan (21RM971)
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CASE ANALYSIS

Wal-Mart Stores Inc., the world's largest retailer, is undoubtedly the

most problematic company in the United States. It employs almost 1.7
million people. Walmart faces a significant difficulty in managing
stakeholder relationships. Wal-Mart professes to be dedicated to raising
the level of living for its consumers all around the world. The
fundamental objective is to offer a diverse range of high-quality goods
and services at everyday low prices (EDLP) while cultivating a culture
that promotes mutual respect, integrity, and diversity. The focus of this
instance is on how successfully the business implements this. Wal-Mart
has excelled in market orientation, which focuses on customers,
outperforms competitors, and increases shareholder value. Only lately
has shareholder value fallen behind the performance of key stock market
indices.
Employees, suppliers, and communities have been considered as
second-class citizens in the pursuit of cheap consumer costs. Wal-Mart,
for example, is not among the Fortune 100 greatest corporations to work
for. Wal-cheap Mart's pricing has both positive and negative
consequences for society. Wal-Mart is estimated to save consumers
$100,000 billion every year. According to one research, where Wal-
Mart stores are located, total payroll earnings per person have decreased
by about 5% as a result of Wal-Mart pushing down wages. According to
an internal document obtained by Wal-Mart Watch in 2005, 46% of
Wal-Mart employees' children were on Medicaid or were uninsured.
Until 1962, the company's sole purpose was to operate variety stores.
People who live in families with annual incomes of less than $30,000
give Wal-Mart the highest scores, demonstrating that those who respect
Wal-Mart the most are those who most need Wal-low Mart's costs. In
2005, it became the first retailer to be ranked number one on the Fortune
500 list, with revenues exceeding $300 billion; in 2006, it was ranked
second, behind Exxon Mobil.
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Wal-Mart is concentrating on keeping its EDLP expenses low. It

accomplishes this by simplifying its operations and requiring its
suppliers to follow suit. It asks that its suppliers regularly cut product
prices by at least 5% from one year to the next; if a supplier refuses or is
unable to do so, Wal-Mart will either stop carrying the product or find
another source who will sell it at the price they desire. Suppliers, on the
other hand, profit because their systems for Wal-Mart become more
efficient and streamlined, which benefits their other clients as well.
Women are not promoted to senior managerial positions at Walmart and
are paid less than males. Walmart does not hire persons with disabilities.
Pregnant women's applications were even turned down. There was little
oversight of labor conditions, which included being paid less than
minimum wage and being abused by supervisors. Without a background
check, illegal immigrants were employed. 60% of employees and part-
time workers are not covered by health insurance. Meal breaks were not
provided, and unionization was not permitted. Since 1994, the Equal
Employment Opportunity Commission (EEOC) of the United States has
brought fifteen cases against Wal-Mart. There was a situation involving
unethical leadership. The allegations that former vice chairman Thomas
Coughlin misappropriated business funds for personal gain gained
traction. Jared Brown initiated this investigation, however he was
dismissed by Walmart due to "a general lack of confidence" in him. The
corporation handled the issue improperly and infringed on
whistleblower laws. After pleading guilty to wire fraud and filing
fraudulent tax returns, Coughlin was sentenced to 28 years in federal
prison. Walmart's senior executives have been accused of sponsoring
anti-union efforts and thereby breaching the Taft Hartley Act.
Wal-Mart and several of its construction contractors are accused of
violating the EPA's stormwater standards at various locations around the
country, according to the EPA and the states of Tennessee and Utah.
Wal-Mart was sued by the state of Connecticut in 2001 for violating
state environmental laws and failing to get the necessary licenses and
keep the needed records pertaining to stormwater management
procedures at twelve of its locations. Wal-Mart allegedly discharged
wastewater linked with vehicle maintenance and photo-processing
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activities without legal licenses, according to an updated lawsuit filed in

2003 by the state. Wal-Mart is accused by the Environmental Protection
Agency of violating air-quality regulations in Massachusetts and
Connecticut, including state and local limitations on the length of time
truck engines are permitted to idle.
The EPA charges that Wal-Mart and one of its construction contractors
violated EPA stormwater laws at a location in Caguas, Puerto Rico, in
another environmental issue. The administrative complaint filed by the
agency seeks a $157,500 administrative penalty. The parties are now in
talks to find a solution to this problem. Many campaigners are worried
about the impact of Wal-Mart outlets on urban sprawl. Furthermore,
there are worries regarding the amount of acres of green area that a new
Wal-Mart shop may consume in a community. Another concern is the
amount of closed stores left over after Wal-Mart outgrows its modest
discount stores and relocates to a new supercenter. Over 26 million
square feet of Wal-Marts are vacant.
Walmart used a number of strategies to boost its image. To
communicate its ethical principles to all Wal-Mart facilities and
stakeholders, company developed an updated "Global Statement of
Ethics." In McKinney, Texas, and Aurora, Colorado, Wal-Mart opened
two ecologically friendly shops. Because the two locations had distinct
weather and climatic conditions, they were picked. Pervious pavement,
an experimental urban forest, water conservation, wildflower meadows,
wind turbines, solar energy, recycling efforts, climate control, Xeriscape
and bioswale (pro-environmental landscaping methods), as well as
internal lighting and construction experiments are among the features of
the new stores.
Wal-Mart and the National Fish and Animal Foundation collaborated in
2005 to protect key wildlife habitats for future generations.
Wal-Mart saves energy in three ways. Daylighting allows stores to dim
or switch off lights when daylight levels rise and enter through
skylights, lowering electricity consumption during peak hours. Wal-
Mart shops in the contiguous forty-eight states have their heating and
cooling centralized in Bentonville, Arkansas, allowing Wal-Mart to
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actively regulate and manage energy use. T-8 low-mercury fluorescent

lamps with electronic ballasts are used in all new Wal-Mart shops and
supercenters, making for an extremely efficient lighting system. The
amount of energy used by each store will be lowered by around 15% by
upgrading older stores with T-8 lighting rather than T-12 systems. Wal
Mart began converting its older locations in 2000, and the company
expects to be finished by 2007.
Wal-Mart launched a website in 2005 to refute charges made by its
detractors. The website contains information regarding Wal-legal Mart's
battles, including what the company feels about the claims and lawsuits,
as well as information about its environmental initiatives.
Wal-Mart also ran a full-page ad in over a hundred newspapers around
the country in 2005. The commercial featured a direct letter from Wal-
Mart CEO H. Lee Scott, who stated that it was time for the public to
know the "unfiltered truth" about Wal-Mart and for the firm to stand up
for its 1.2 million-strong workforce.
Wal-Mart's expansion from 1985 to 2004 coincided with a 9.1% drop in
food-at-home costs, a 4.2 percent drop in commodity prices, and a 3.1
percent drop in total consumer prices as assessed by the Consumer Price
Index. The 3.1 percent drop in prices was somewhat offset by a 2.2
percent drop in nominal salaries, while real disposable income increased
by 0.9 percent overall. Wal-Mart has also generated 210,000 jobs across
the country.
Walmart has been accused of being singled out because of its enormous
size. Wal-Mart, on the other hand, is expanding into new areas, focusing
more on organic goods and even moving into more expensive products
for upmarket customers. Wal-Mart continues to be divisive, with
various points of view.
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1. Evaluate how Wal-Mart has ranked and responded to various

stakeholders?
There are concerns about Wal-Mart's treatment of employees,
suppliers, the environment, and the overall economic impact on
communities. Feminists, human rights activists, anti- sprawl
activists, and labour unions believe that Wal-Mart has engaged in
misconduct to provide bw prices to consumers.
Wal-Mart is predicted to save consumers $100,000 billion every
year. The entry of Wal-Mart into some markets decreases food
prices by 25%, including savings from rival price reduction. When
rival supermarkets close, union workers may lose their
employment. According to one research, where Wal-Mart stores
are located, total payroll earnings per person have decreased by
about 5% as a result of Wal-Mart pushing down wages. According
to an internal document obtained by Wal-Mart Watch in 2005,
46% of Wal-Mart employees' children were on Medicaid or were
uninsured.
Customers are the first priority at Walmart, followed by staff. It
provides low-cost items, increasing consumers' discretionary
money. It requires suppliers to deliver consignments correctly and
on schedule, and it is unconcerned with losses incurred by them. It
never allowed for the successful development of labor unions
within the organization. It has squandered acres of land by closing
low-profit outlets.

2. Why do you think Wal-Mart has had recent number of ethical

issues that have been in the news almost constantly?
 Female and disabled employees –
They paid women less than men without assigning them top
management position in the organization. abled persons
were not considered for jobs at Walmart.
 Suppliers –
Walmart has been in the headlines frequently due to its
unethical and unjust treatment of its different stakeholders. It
asks that its suppliers regularly cut product prices by at least
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5% from one year to the next; if a supplier refuses or is

unable to do so, Wal-Mart will either stop carrying the
product or find another source who will sell it at the price
they desire. Walmart mandated that all items have RFID
tags, which proved to be ineffective for some of them.
 Illegal Immigrants –
250 illegal immigrants were detained while working on
cleaning crews at sixty-one Walmart shops in twenty-one
states, according to federal officials. Despite pledging to
ensure that no employees at Wal-Mart were illegal
immigrants, federal, state, and local officials conducted
another raid in November 2005, resulting in the arrest of 125
illegal immigrants.
 Ethical Leadership Issues –
Thomas Coughlin, vice chairman of Wal-Mart Stores Inc.,
resigned in January 2005. He was the company's second-
highest-ranking executive and was a contender for CEO.
Coughlin pleaded guilty to federal counts of wire fraud
and tax evasion. Despite receiving millions in salary,
Coughlin had Wal-Mart cover some of his own costs,
including hunting holidays, a $2590 dog kennel at his house,
and a $1359 pair of handcrafted alligator boots.
 Low Benefits and Poor Working Condition –
Employees at Wal-Mart were not treated with respect. Food
breaks, minimum salaries, and health insurance were not
provided, and they were assaulted by supervisors.

3. What do you think Wal-Mart could do to develop an improved

ethical culture and respond more positively to its diverse
stakeholders?
 A well-developed and supervised personnel management
and welfare committee should be in place.
 Employees should be prioritized because they are the ones
that manage the stores and are in charge of sales and income
generating.
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 Ethics and principles should be instilled in the minds of all

employees globally so that, as in the instance of Thomas
Coughlin, the company's image is not compromised.
 Gender equality should be practiced throughout the board.
 It should treat its suppliers with respect and not impose its
demands on them. Only those who can meet the financial
and quality requirements should apply.