Legal but Unethical Situations in Business
Wal-mart is among the largest corporations in the United States that sell products at a discounted cost. The company’s products are tagged “Made in the USA”, and it has a contractual agreement with manufacturers, some are sweatshops in Latin America, China, Asia, and in developing countries (Jacques, Thomas, Foster, McCann & Tunno, 2003). Such business tactics were maximizing profits by minimizing production cost, translating to lower discounted products.
However, the National Labour Committee reports highlighted the plight of workers working in a sweatshop in Honduras and China. For instance, in 1996, the National Labor Committee found that Gifford’s clothing was manufactured at a sweatshop in Honduras that employed children between 13-to-15 years old who worked for 72 hours with minimal pay of 13cents an hour. Furthermore, in 1997, the committee reported that Kathie Lee products were manufactured at Chun Si factory, a Chinese sweatshop that is notorious for labour abuses. For example, the Chinese sweatshop subjected its employees to physical beatings, low wages, long working hours, and unpaid forced overtime (Jacques, Thomas, Foster, McCann & Tunno, 2003). Despite that report, Wal-mat Company refuted such claims and avoided instituting independent monitoring systems.
Therefore, the firm engaged in unethical practice by providing misleading information to its customers, and allowing organization abuse of the right of workers and promoting child labour (Jennings, 2014). Even though the company a legal contract with international manufacturers, it had an ethical obligation to ensure to set ethical standards for such engagements (Jennings, 2014). Furthermore, the company had the moral obligation to conduct independent vetting and monitoring of the companies before engaging in any contractual agreement. Following the failure to institute separate monitoring system, the firm allowed organizational violation of rights outside the United States, therefore a breach of social responsibility to respect, promote and defend international conventions on children, labour, anti-slavery and human rights. Moreover, by tagging their products as “Made in the USA”, the firm failed to disclose to the customer’s origin of the products, therefore misleading them to believe the products are discounted (Jennings, 2014). Consequently, Wal-mat knowingly failed in its social responsibility by creating an environment that permitted organization abuse, for instance, child labour practices and violation of human rights in foreign countries, and giving the false impression that their products are original and made in the USA.
Consequently, such legal but unethical practices come with negative ramifications on its customer base. First, the customers who bought the products under the false impression of being manufactured in the USA have a right to demand refunds (Jennings, 2014). Secondly, the failure of the company to comply with social responsibility creates a negative impression of the firm, hence may result in attrition in the loyal market segment. Lastly, public outrage may result in civil litigation that may result in huge compensation and litigation cost, and as a result, the company may close its branches and lose revenue.
Jennings, M. M. (2014). Business: Its legal, ethical, and global environment. Nelson Education.
Jacques, P., Thomas, R., Foster, D., McCann, J., & Tunno, M. (2003). Wal-Mart or World-Mart? A Teaching Case Study. Review Of Radical Political Economics, 35(4), 513-533. doi: 10.1177/0486613403257808