Analysis of Walmart's Governance, Ethics, and CSR: A Case Study

This report provides a comprehensive analysis of the Walmart case study, focusing on the company's governance and ethical failures. It examines the implications of these failures, including breaches of director duties, ethical principles, and corporate social responsibility (CSR). The report delves into the legal, ethical, and moral implications of Walmart's actions, considering various ethical theories such as utilitarianism and deontology. It also explores the concept of ethical relativism and its relevance to corporate governance. Furthermore, the report offers recommendations for directors to implement ethical principles and improve governance, addressing challenges such as conflicts of interest, accountability issues, and cultural differences. The analysis considers the agency relationship, moral implications, and the importance of a strong corporate culture in promoting ethical decision-making. The report emphasizes the significance of CSR and its impact on stakeholders, highlighting the need for transparency and ethical conduct in business operations. The analysis considers the implications of the Walmart case in light of the Foreign Corruption, and the role of the directors in a corporate. The board paper will conclude with a range of recommendations to the directors of the company.

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.

Hence, the above duties state that the directors in light of the fiduciary relationship must
conduct the business of the corporate. On the analysis of the above issues of Walmart, it can
be stated that the company executives breached the various duties of the directors. It was the
responsibility of the directors of the company to manage the affairs of Walmart in good faith
and best interest; however, directors hid the useful information and did not abide by the
fiduciary relationship with the corporate. Thus, the legal guidelines applicable on the
directors were not abided by as prescribed in general duties. In addition to the same, there
were other regulatory breaches of the internal control framework of the enterprise.
Ethical implications
Ethical principles are a collection of the rules of the legal framework and moral principles
that guide the individuals and organisations to do what is right (Barry, 2016). Thus, the
ethical principles lead to the belief that a business organisation is developed with the aid of
the various societal resources, which implies consideration of the interests of each of the
stakeholder groups and not just shareholders is essential for the long term success. The
ethical implications of the above-mentioned issues are elaborated as follows, which must be
considered by the directors. The analysis based on the various ethical theories such as
utilitarianism and deontology is as follows. The ethical theory of utilitarianism state that an
action would be considered as ethical, if the same is considerate of the mass interests and
leads to the general happiness or utility (Hollander, 2016). In this regard, the acts of the
company executives of not abiding by the applicable laws and not acting sufficiently by
hiding the deficiencies is an unethical act. This is because; only the personal interests are
satisfied of the directors of the international expansion through the subsidiaries at the cost of
cost cutting and corruption. Additionally the ethical theory of deontology states that an act is
ethical if the related duties are complied with (Chandler, 2019). Yet again, the acts of the
company directors of Walmart would be termed as unethical as there is breach of the director
duties as stated in the previous sections.
Moral Implications
The agency relationship of the company is essentially based on the moral principles of the
agents, because the central principle of the moral agency is responsibility. The analysis of the
agency relationship by Jones and Ryan (1998), lead to the observation that there are four
components for an agent to reach an ethical decision that are the individual moral awareness,
moral judgement, intent and the moral behaviour. The two chief factors that play a key role in

the ethical decision-making are the individual sense of morality and the corporate culture.
The efficient individual sense of morality is further developed with the aid of the higher
moral cognitive skills. In addition, the moral approbation or the desire of the individuals to be
seen as moral also plays a critical role. Hence, in order to establish a sound corporate
governance framework, it is quite important for the directors to lead from the front. In
addition to the individual morality, the corporate environment is of much significance. The
entities having a strong system of internal control comprised of the leadership, accountability,
and transparency are likely to motivate the individuals to act in the best interests of the
corporate as a whole (Trevino and Nelson, 2011). A situation must first be analysed in the
light of the individual moral, followed by the judgement of its legitimacy and the legal and
ethical norms on stake. This is followed by the intention of the agents and implementing the
same into the actions. Hence, the directors of the company must employ the above-mentioned
principles while indulging into ethical decision-making.
CSR implications
The analysis of the above-mentioned case in the light of the corporate social responsibility is
conducted as follows for the consideration of the directors. The corporate social
responsibility (CSR) refers to a self-regulating business model that facilitates the business
organisations to be socially accountable towards the providers of the various resources such
as the investors, customers, regulators, employees and general public. The principles of the
corporate social responsibility states that the companies must be conscious of the influence
they render on various societal aspects such as the economic, social, and environmental
(Aguinis and Glavas, 2012). Thus, apart from the revenue earning motives of the entity, the
activities must enhance society and the environment, instead of the negative impact on the
same. The analysis of the case study of the Walmart in light of the CSR principles leads to
the observation that the company directors undermined the interests of the investors,
regulators and the shareholders. Thus, the lack of transparency in the transactions is well
evident. The conclusion of the said activities in case of Walmart is that the entity not only
underwent legal trials, but also was exposed to fines as part of the settlement procedures to
the Securities and Exchange Commission, the chief regulator of the publically listed
companies in US. The work of Scherer and Palazzo (2011) is empirical in this regard. Some
of the key highlights of the work is that a by indulging into the CSR programs, volunteer
efforts, and philanthropy, business organisations derive benefits in the form of boosting their
own brands together with the benefits to the community. The significance of the CSR is that

it leads to long-term value for a company, by creation of a stronger bond between
stakeholders and corporation.
Ethical Relativism
The yet another aspect to ethical analysis is the concept of ethical relativism. The ethical
relativism principle states that that morality of a situation or an act is relative to the norms of
a society or culture. This means that a same action can be morally wrong in one society and
be morally right in another, at the same time. The principles state the absence of universally
applicable moral standards for individuals as well as the organisations. Nevertheless, the
ethical relativism principles do not hold true in case of the directors of the corporations,
because irrespective of the place of formation of an entity, the number of directors and
diversity in the stakeholder groups, the directors would still share the fiduciary relationship
with the shareholders and other members of the entity. These days increasing number of
corporates are taking the shelter of the ethical relativism principles for the conduct of the
unjustified acts which is unethical.
Recommendations
Some of the key challenges faced by the directors on the way to implement ethical principles
based governance in the entity are the conflict of personal interest of the directors,
accountability issues, cultural differences, lack of leadership and resources and others
(Mellahi, Morrell and Wood, 2010). The same can be managed effectively by the
employment of the recommendations as elaborated follows. The first recommendation for the
directors is to develop and implement a stringent and disciplinary code of ethics for the
employees and other members of the entity, which includes the company directors too. The
individual legal duties, expectations, and responsibilities must be set out in the same in
context of the applicable legal frameworks. In addition, the delegation of responsibilities
must be combined with the transparency in reporting and sufficiency in internal controls. The
transparency must be further extended in the management of the assets, reporting of risks and
interests in the business transactions (Woodbine, Fan and See, 2014). Further, the norms at
stake in the event of the non-compliances of any legal frameworks must be clearly set out in
the reports.
Conclusion

The following conclusions can be drawn from the discussions carried on in the previous
parts. Firstly, good governance is essential for the functioning of the business entities,
because of the associated stakeholder interests. Secondly, it can be concluded that the role of
the directors of a company is critical and former must at all times act in the fiduciary
capacity. The case study of the Walmart Inc. facilitated the understanding of the compliance
of ethical and legal frameworks while discharging the director duties. Further, the various
ethical principles and CSR principles aided to conclude that the societal wellbeing would lead
to long term value addition to company as well.

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