Ethics and Corporate Governance in Wal-Mart

This article discusses the importance of corporate governance in Wal-Mart, including its leadership structure, board composition, and risk management strategies. It also explores the role of visionary and transformational leadership in the company's success, as well as its efforts to improve social responsibility and ethical reputation.

Ethics and Corporate Governance 1
ETHICS AND CORPORATE GOVERNANCE
By
Name
Professor
Course
Date

Ethics and Corporate Governance 2
Corporate Governance in Wal-Mart
General Management Issues
For any business organization to succeed, it is vital that it establishes a robust framework for its
corporate governance. Therefore, the creation of the “Wal-Mart Board" proves to be one of the
essential assets that the company possesses (Cobb, 2014). The asset is strategically vital in
oversight provision, governance, shared value delivery, and ensuring that the company operates
according to the laid mission and vision. As the manager of HRM Department, I am quite aware
that the company’s board meet five to six times every fiscal year to review developments and
issues that would most likely affect the operations of the company, act in matters of approval, as
well as taking part in processes of strategic planning (Brunn, 2016).
a) Structure of leadership
The leadership framework of Wal-Mart has three main categories, the CEO, Chairman, as well
as the Lead Independent Director. The work of the chairman is to provide oversight for the
board. Other related duties may, however, include presiding and governing meetings carried out
by shareholders and the board as well as counseling the CEO and managers on how to
appropriately handle business operations (Bruton, 2012). On the other hand, the Lead
Independent Director is charged with performing board evaluations annually, reviewing business
agendas, as well as presiding over business meetings among others. The most suitable candidate
for this position is elected every year by directors that are independent of the board. On the other
hand, there is the CEO who leads the company into performing every business operation. The
duties of CEO comply with general management responsibilities such as supervision and

Ethics and Corporate Governance 3
execution of sales and marketing tasks. All the same, the board is composed of seven committees
including:
- The Audit Committee
- CMDC (Compensation and Management Development Committee)
- The Executive Committee
- The Global Compensation Committee
- The Governance and Nominating Committee
- The Finance and Strategic Planning Committee; as well as
- e-Commerce and Technology Committee
As recommended by the New York Stock Exchange body, most of the Wal-Mart’s directors are
independent workers. Therefore, as listed in New York Stock Exchange body’s provisions,
management exceptions are provided to "controlled organizations," Wal-Mart will not rely on
such exemptions because it is confident that with most of its board members being independent,
a long-term shareholder interest is promoted (Coffman, Freire, Heaver and Soltis, 2012). The
governance and strategic oversight, for instance, ensure that the board gets entrusted with matters
that are sensitive to the company. All the committees highlighted above are chaired by directors
that are independent. Such is because the committees are vital components in the overall
operation of the company (Bustillo, 2011). Therefore, every committee is given access to
authority and mandate to choose and retain independent consultants and advisors.
On the other hand, Wal-Mart's committees are ruled by principles or a scribbled charter with
outlined roles for every position in the company. The Governance and Nominating Committee,
for instance, is charged with the provision of guidance and oversight to the entire corporation.

Ethics and Corporate Governance 4
The committee also defines the environment in which Wal-Mart operates including the
governance and social aspects of such environment (Conor, 2014).
b) The composition of the Board
Many global research activities have noted that business organizations face a lot of issues
regarding their business operations. Such management hurdles result from factors like
technology, globalization, shifting or changing demographics among other social trends. As a
result, the needs of clients are slowly getting reshaped while competition stiffens. Therefore,
Wal-Mart has realized that having a diverse board and operational team is a crucial functional
factor that would encourage success. Apart from that, the company will also be in the sole
position of providing its customers with quality goods and services. As the HRM Department
manager, I believe that delivering high-performance starts with management efficiency. Such
would also lead to improving business performance as well as the engaged associate base.
Therefore, Wal-Mart ensures that its shareholders are provided with an opportunity of choosing,
annually, independent directors who will oversee the general performance of the corporation
(Euromonitor, 2014).
Wal-Mart is also different from other corporations in the sense that it has a Corporate
Governance Guidelines. The Corporate Governance Guidelines has policies and principles of
governance. For instance, it is evident in the Corporate Governance Guidelines that independent
directors are given a term limit of 12 months. With the Corporate Governance Guidelines, the
board is confident that the framework will provide and improve the levels of discipline in the
processes of board refreshment (Gangar, 2013). Every policy, structure, or strategy put in place
to guide Wal-Mart in its operations also ensure that the corporation achieves an expertise mix

Ethics and Corporate Governance 5
regarding business development, sustainability achievement, development of human capital; and
technological advancement. All the same, the result of expertise mix will also help the company
in improving its brand throng proper marketing and management as well as improve the finances
and reporting capability (Fanno, 2012).
Wal-Mart will be able to achieve a balance in its age, tenure, racial, and gender composition
within the workforce if it adopts new, diverse cultural perspectives. As a result, the company
ensured that the board members conform to the gender disparity ratio by having 25% women and
40% men all under fifty years of age. Apart from that, Wal-Mart decided to appoint a woman by
the name Sarah Friar, Square Inc’s chief financial officer as one of its new independent directors
and a member of the board. In the history of the company, Friar is considered as the 12th woman
to be a member of the board. She would also take part in significant issues in the Board’s
Finance and Strategic Planning as well as the Audit Committee. Her appointment was gender
disparity fulfilling because the board believes that a woman with her skills would introduce a
fresh set of skills and perspectives to the corporation. Such decision was also reached for because
the committee felt that the company required strong expertise in the fields of operations, finance,
technology, and strategy. Finally, yet importantly, the corporation is committed to ensuring that
it achieves total inclusion beyond the board as well as a commitment by every stakeholder.
Role of Corporate Governance and Risk Management
i) Protection of price advantage by HR
The pricing strategy of Wal-Mart merely is "to generate value for customer’s hard earned
money.” Therefore, ensuring that prices are as low as possible is the reason why Wal-Mart’s
competition is clobbered. Apart from that, the rates are as little as possible because the sales team

Ethics and Corporate Governance 6
ensures that certain products are sold at low prices while workers provide that they manage
controllable expenses. Otherwise, this is a strategy that allows the corporation to sell particular
goods at most economical prices leaving workers with one job, to ensure that they undertake
processes that hold such costs low. Besides, employees are also capable of reinforcing social
values all by themselves (Ghosh, 2014). When prices are low, inventory turnover is driven that
alternatively, reduces overall costs. With this strategy in place, competitors are losing their calm.
They also wonder how Wal-Mart keeps its prices that low. Each time that the corporation is
successful in having its expenses lowered, it is because savings are passed to customers in the
form of reduced prices. By doing so, more pressure is heaped on the competitors (Faulkner and
Bowman, 2015).
ii) The HR focusing stakeholders on ensuring operational success
Wal-Mart has more than 8400 stores that offer approximately 300 000 products. Apart from that,
the company is involved in several operations including distribution, IT, as well as a supply
chain that are vital in the maintenance of profitability. From a personal perspective, Wal-Mart is
best considered as a supply chain driven corporation with retail stores as well. However, by
critically observing the company from an operational risk angle, it is clear that if the company
did not have stakeholders with the skills of proper functional executions, the corporation would
fail most probably (Flannery, 2016).
The main reason why this activity chooses to use Wal-Mart as a case study is that it has the best
operational practices at the store level, in its supply chain, as well as its distribution. The reason
why Wal-Mart has been a success, and many research activities benchmark the corporation is
because of its proper supply chain. Apart from that, it was mentioned before that the

Ethics and Corporate Governance 7
corporation’s workers put a lot of effort into ensuring that operations are successful. Another
essential factor to consider is the fact that Wal-Mart has a massive IT infrastructure which works
for hand in hand with the efforts of workers to ensure that customers receive the best services
ever. Therefore, under this strategy, the HR in conjunction with functional managers works
tirelessly to enforce scorecards and performance standards towards the measurement of every
expense and sales management metrics. To wrap it up, the company’s HR department invests its
time, effort, and energy towards training and orientation workers on the benefits of ethical
executions (Ferrell and Hartline, 2012).
iii) Fostering cultural commitment through the HR to ensure business success
Immediately managers are employed, the corporation offers them training and orientation on the
culture of the company. Such adjustment must include working in one of the stores providing
services to clients. Afterward, newly appointed managers undergo a week of training on the
culture of the organization. The HR must ensure that employed managers go through rigorous
cultural practice, so they acclimate to the manner in which Wal-Mart performs its operations.
Indoctrination of culture is vital in ensuring that the corporation meets world management
processes. With a company as large as Wal-Mart, the workforce and culture of the organization
are crucial in ensuring that the standards of the organization are maintained (Colbert, Judge, Choi
and Wang, 2014, pg. 681).
Strategic Leadership and Management concerning Governance Policies and Frameworks
There are many leadership styles that Wal-Mart employ to ensure overall organizational success.
Providing that leadership is successful requires inspiration, support, as well as confidence among

Ethics and Corporate Governance 8
the stakeholders to ensure that organizational goals are achieved (Chan and Maubourgne, 2012,
pg. 126).
i) Visionary Leadership
Wal-Mart Corporation encourages visionary leadership in all its operational levels. Any leader
who is visionary has to be capable of interpreting the reality surrounding the organization in
which he or she leads and then transforms the organization to achieve sustainability goals.
Therefore, Wal-Mart has consistently urged its managers to use this style of leadership so that
they can help the organization make its vision of provision of low priced products (Bysani,
2013).
As mentioned before, Wal-Mart is different from other corporations in the sense that it has a
Corporate Governance Guidelines. It was suggested that the Corporate Governance Guidelines
has policies and principles of governance that require visionary leadership to deploy (Cambridge
Dictionaries, 2014). With the Corporate Governance Guidelines, a component established from
the visions of the company, Wal-Mart is confident that the framework will provide and improve
the levels of discipline in the processes of board refreshment. Every policy, context, or strategy
put in place to guide Wal-Mart in its operations also ensure that the corporation achieves an
expertise mix regarding business development, sustainability achievement, development of
human capital; and technological advancement associated with proper, visionary leadership.
Otherwise, visionary leadership is essential in the provision of a sense of direction and
motivation of employees. Managers would then be encouraged to find appropriate ways of
saving money and passing the same to customers (Bustillo, 2011).
ii) Transformational Leadership

Ethics and Corporate Governance 9
This style of leadership is what makes management in Wal-Mart appear as it is. In other words,
this is the style of leadership at the core of Wal-Mart’s management. Therefore, the company
recognizes that transformational leaders need to have four factors to ensure organizational
success. The founder of Wal-Mart, Mr. Walton, was a good leader in himself. He had idealized
influence, and in turn, he gained control and trust. Afterward, he became inspired and motivated
enough to start Wal-Mart (Brea-Solís, Casadesus-Masanell, and Grifell-Tatjé, 2012). Therefore,
the company believes that employee motivation and commitment to vision is the only way to
keep going even if the company faces hurdles such as a recession.
All in all, this leadership style also requires individuals to be intellectually stimulated to ensure
creativity and innovation is encouraged in the organization. As mentioned before, when Wal-
Mart recruits its managers, it offers them training and orientation on the culture of the company.
Such adjustment must include working in one of the stores providing services to clients.
Afterward, newly appointed managers undergo a week of training on the culture of the
organization. The HR has to ensure that employed managers go through rigorous cultural
practice, so they acclimate to the manner in which Wal-Mart performs its operations.
Indoctrination of culture is vital in ensuring that the corporation meets world management
processes. All the same, when managers finish their training processes, they are required to be
stimulated towards encouraging innovation and challenging themselves to perform even better
(Belcher, 2009).
Contextual, Conceptual, and Ethical Concerns
There are, however, two issues that Wal-Mart is working extra hard to improve. One is social
responsibility while the other is its ethical reputation. With regards to the same, the company

Ethics and Corporate Governance 10
decided to create an office known as the “Global Ethics Office” with an Ethics Statement. This
global office is to develop means and strategies through which the corporation spreads its ethical
corporate culture that its global stakeholders would be part (Chandran, 2013).
On top of that, the company has created a social and ethical standards team to have suppliers'
compliance monitored. To meet such goals, the organization has interviewed more than 2,000
marketing personnel in several nations to gauge their views on ethical marketing conditions. In
response to the same, it was clear that several organizations were caught in marketing bribery
scandals. As a result, Wal-Mart completely overhauled is marketing programs to enforce “no
bribery” campaigns and policies. By doing so, its sales and marketing processes would be just
and fair (Basu, 2010).
On the other hand, there is the CEO who leads the company into performing every business
operation. The CEO also has to comply with general management responsibilities like
supervision and execution of sales and marketing tasks as well as ensuring that workers are
treated fairly while customers receive services justly. Finally, yet importantly, the company has
been associated with several societal management programs such as contributing towards
establishing projects for disaster management and women’s economic empowerment. The
corporation gave out close to $3 million to cater for those who suffered from occurrences of
natural disasters like Hurricane Sandy. This money provided clothing and food for the victims
(ACSI, 2014). Otherwise, the moral sanity of such management positions and processes is that
fairness is greatly considered when a suitable candidate for this position is elected by directors
that are independent of the board.
Organizational Approaches to Risk management and Corporate Governance

Ethics and Corporate Governance 11
Wal-Mart Corporation made a couple of changes in its management systems to encounter risks
fully. As mentioned before, a new framework of control has been imposed in which three main
categories, apart from ordinary managers and project compliance teams have been given more
power and mandate (Articadv, 2014). As a result, the company will entirely be able to:
i) Protect price advantage to reduce market price lapses
As highlighted before, one of the most significant strategies in fighting market price lapses is the
pricing strategy adopted by Wal-Mart. The approach allows the corporation to sell particular
goods at most economical prices leaving workers with one job, to ensure that they undertake
processes that hold such costs low. Besides, employees are also capable of reinforcing social
values all by themselves (Ghosh, 2014). When prices are low, inventory turnover is driven that
alternatively, reduces overall costs. With this strategy in place, competitors are losing their calm.
As mentioned earlier on, by doing so, more pressure is heaped on the competitors (Faulkner and
Bowman, 2015).
ii) Absolute stakeholder management
Absolute management of workers and other stakeholders is vital because Wal-Mart has several
stores with thousands of products made available for customers. Since stakeholder management
concerns are the most challenging and directly attached to organizational success, Wal-Mart
ensures that it involves stakeholders in all management operations including distribution, IT, as
well as a supply chain that are vital in the maintenance of profitability (Ferrell and Hartline,
2012). It comes without saying, therefore, that Wal-Mart is the best supply chain driven
corporation because of how it manages its stakeholders (Flannery, 2016).
iii) Fostering cultural commitment towards overall success

Ethics and Corporate Governance 12
Wal-Mart believes that innovation, commitment to productivity, proper and ethical relationships
between stakeholders, as well as trust and loyalty, are some of the attributes associated with
good work culture. Therefore, teaching a good work culture in the business environment is best
likely to encourage organizational growth and reduce the risks of employee detachment and
negative attitudes. Thus, fostering such corporate culture requires good governance. The HR
must then ensure that employed managers go through rigorous cultural practice, so they
acclimate to the manner in which Wal-Mart performs its operations. With a company as large as
Wal-Mart, the workforce and culture of the organization are crucial in ensuring that the standards
of the organization are maintained (Colbert, Judge, Choi and Wang, 2014, pg. 681).

Ethics and Corporate Governance 13
Reference
ACSI. (2014). Benchmarks By Company. Retrieved from http://www.theacsi.org/index.php?
option=com_content&view=article&id=149&catid=&Itemid=214&c=Wal-
Mart&i=Department+and+Discount+Stores (Accessed 23 Nov. 2018)
Articadv. (2014). Supply Chain Management HiMolde. Retrieved from
https://www.arcticadv.com/reading/supply-chain-management-himolde-PJXh.html#read-
frame (Accessed 23 Nov. 2018)
Basu, S. (2010). Cost Leadership and Differentiation Strategies at Walmart. Retrieved from
www.researchgate.net/...Cost_Leadership_and_Differentiation_Strategies (Accessed 23 Nov.
2018)
Belcher, L. (2009). Benefits of Retaining Good Staff. Retrieved from
http://www.insidebusiness360.com/index.php/benefits-of-retaining-a-good-staff-22012
(Accessed 23 Nov. 2018)
Brea-Solís, H., Casadesus-Masanell, R., & Grifell-Tatjé, E. (2012). Business Model
Evaluation: Quantifying Walmart’s Sources of Advantage. Retrieved from
http://www.hbs.edu/faculty/Publication%20Files/13-039%20Nov%202012_612ce7e2-7f81-
4eea-9126-3c0964f2be2f.pdf (Accessed 23 Nov. 2018)
Brunn, S. D. (2016). Wal-Mart World: The World's Biggest Corporation in the Global
Economy. New York: Routledge.
Bruton, J. (2012). Walmart Case Final. Retrieved from
http://jmbruton.com/images/WalMart_Case_FINAL.doc. (Accessed 23 Nov. 2018)
Bustillo, M. (2011). Wal-Mart Loses Edge. Retrieved from
http://www.wsj.com/articles/SB10001424053111904253204576510503450823240
(Accessed 23 Nov. 2018)
Bysani, V. K. (2013). Analysis and Evaluation of Wal-Mart's Global/Transnational Strategy.
Retrieved from
http://retailindia.typepad.com/retailindia/files/global_and_transnational_strategy_walmart_fu
ll_report_.pdf (Accessed 23 Nov. 2018)

Ethics and Corporate Governance 14
Cambridge Dictionaries. (2014). Sales Figures. Retrieved from
http://dictionary.cambridge.org/dictionary/business-english/sales-figures (Accessed 23 Nov.
2018)
Chan, K. W., and Maubourgne, R. A. (2012). Parables of leadership. Harvard Business
Review, 123-128.
Chandran, P. M. (2013). Walmart Supply Chain Management Practice. Retrieved from
http://mohanchandran.files.wordpress.com/2008/01/wal-mart.pdf (Accessed 23 Nov. 2018)
Cobb, C. (2014). Wal-mart and the Transformation of the Retail Sector in Mexico. Inc
Journal, 1(1). Retrieved from http://www.inq.pdx.edu/ (Accessed 23 Nov. 2018)
Coffman, R., Freire, A., Heaver, S., and Soltis, J. (2012). The Discount Retail Industry:
Walmart VS K Mart. Retrieved from http://web.njit.edu/~soltis/rhetoric/mgmt390report.doc
(Accessed 23 Nov. 2018)
Colbert, A. E., Judge, T. A., Choi, D., and Wang, G. (2014). Assessing the trait theory of
leadership using self and observer ratings of personality: The mediating role of contributions
to group success. The Leadership Quarterly, 23(4), 670–685.
Conor, J. O. (2014). To what extent is WM’s competitive advantage sustainable? Retrieved
from http://www.academia.edu/7516044/Walmart_Corporate_Strategy_Presentation
(Accessed 23 Nov. 2018)
Euromonitor. (2014). WAL-MART STORES INC IN RETAILING (WORLD). London:
Euromonitor International.
Fanno, A. (2012). WALMART – PART 3: INTERNAL ANALYSIS. Retrieved from
https://andrewfanno.wordpress.com/2012/02/23/walmart-part-3-internal-analysis/ (Accessed
23 Nov. 2018)
Faulkner, D., and Bowman, C. (2015). The Essence of Competitive Strategy. Upper Saddle
River: Prentice Hall.

Ethics and Corporate Governance 15
Ferrell, O. C., & Hartline, M. D. (2012). Marketing Strategy. Mason: South-Western
Educational Publishing.
Flannery, D. M. (2016). Wal*Mart Case Study. Retrieved from
http://people.ucsc.edu/~rbaden/Case%20Study%20Example.pdf (Accessed 23 Nov. 2018)
Gangar, M. (2013). Walmart Strategy Analysis. Retrieved from
http://www.scribd.com/doc/192916317/Wal-Mart-Strategy-Analysis#scribd (Accessed 23
Nov. 2018)
Ghosh, K. (2014). SAM WALTON: THE EXEMPLARY RETAIL LEADER. AFBE
Journal, 7(1). Retrieved from http://www.afbe.biz (Accessed 23 Nov. 2018)