Ethics and Governance Research Paper 2022

ETHICS AND GOVERNANCE

Agenda Item: Significance of governance in corporates
Paper Type: Board Briefing Paper
Sponsor: Chief Executive Officer
Draft Resolution: For the analysis of the case of Walmart in light of the director duties,
ethical principles and theories, and the corporate social responsibility.
Executive Summary: A business enterprise is comprised of various components of the
society and thus the consideration of the ethical, moral, and legal principles is of utmost
significance. The management of the company is guided through the board paper about the
significance of agency relationship, the manner to arrive at ethical decisions and the
components therein in different business circumstances, with the aid of Walmart Inc. case
study.
Background:
The following paper has been proposed to the directors of the company to shed light on the
issue of the vitality of practicing ethical relativism in the modern globalised world. The issue
would be analysed with the aid of the case study of Walmart in context of the Foreign
Corruption. The various ethical theories developed over the last years would be reviewed to
examine the issue of the Walmart. In addition, the role of the directors in a corporate, along
with the moral leadership, and the challenges present in the same would be evaluated. The
board paper will conclude with a range of recommendations to the directors of the company.
Issue:
With the increased globalisation, there has also been increment in the complexities of
business operations. This exposes business organisations to varied types of business risks,
one of them being the corruption and the conflict of interests of the members of the
organisation. One such recent case is that of the US based, global business retail giant
Walmart Inc. The company has recently settled the criminal and federal charges against it by
paying $ 282 million to the Securities and Exchange Commission and the Justice Department
of the country US. The corporate was in news because of the various irregularities in the
internal reporting and payment of illicit amounts to the third parties for the conduct of the
various business transactions. The cases belong to the entity’s subsidiaries in varied countries
such as Brazil, Mexico, and China. One of the significant aspect of the mentioned
irregularities is that the executives of the company Walmart hid the same for a long period

even when the company auditors and the lawyers exposed the risks. The details of the
irregularities are presented as follows.
The directors of the company had made certain decisions in the personal interests of the
between the period from the year 2000 to 2011. The third-party intermediaries were involved
by making certain payments to them and no consistent assurance was provided to the fact that
the said payments did not undermine the corruption laws of the countries of operation of the
subsidiaries. The reports of the auditors had highlighted the fact of certain breaches, however
no sufficient steps were taken to address the risks or reduce the same as in the interests of the
shareholders and stakeholders of the company. In addition to the above, the internal
accounting control procedures were not efficient enough as highlighted by the reports of the
Mexico Subsidiary Lawyers. The lawyers had additionally extended certain recommendations
for the Walmart subsidiary at Mexico in light of the additional procedures of the internal
accounting records, which were not considered. The above deficiencies can be termed as
violations of a number of legal rules as were prescribed in the Securities and Exchange Act of
the United States. The violations were of sections Section 12, Section 13(b)(2)(A), and the
Section 15(d) (Securities and Exchange Commission, 2019). The said sections were
concerned with the proper maintenance of books and other financial records, fair and
comprehensive details of the assets of the business and the transparency in the business
transactions.
Implications:
Statutory implications
The analysis of the implications of the above mentioned deficiencies in the functioning of the
business of the Walmart Inc. are stated as follows. In Australian context, the analysis of the
duties and responsibilities of the directors is done in the light of the Corporations Act, 2001
(Cth). The act prescribes the four chief duties of the directors of the corporations, termed as
the general duties (Australian Institute of Company Directors, 2019). These four key duties
have been presented in the sections 180 to 183 of the Act. The mentioned duties of the
director prescribe that it is the prime duty of the directors to conduct the business of the
organisation in the best interests of the shareholders and the stakeholders. In addition, of
acting in good faith, the rules of the duty state that the responsibilities must be carried with
due care and diligence. Further, the directors of the corporation must not engage in the
gaining an unfair advantage over others by using the powerful position unfairly over others.