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Ethical Behavior in the Business World

In: Business and Management

Submitted By arditshehaj
Words 2067
Pages 9
A good reputation is something that all companies strive to have. With one public relations nightmare, a company with a good reputation can crumble, and that can lead to a loss of major business. It is important that companies can trust each other enough to be able to make large business deals together. It is also important that customers trust a company in order to make purchases from it. If customers feel that their money is going to be used for an unethical cause, they may choose to do business with another company. One often overlooked aspect of trust in a business setting is how much employers trust their employees and vice versa.
This paper focuses on two companies (Walmart and Hewlett Packard) that have taken a major public relations hit recently. We will describe the events that caused these major hits and steps that the companies could have taken to prevent them and their responses to the incidents.
Walmart
Walmart has been one of the most successful companies in recent history. According to cnnmoney.com, they have ranked as one of the top 2 companies in the Fortune 500 since 2007 (Fotune 500, 2011). Walmart has over 2 million employees and is the second largest employer in the world. In the next five years it is estimated that they will add 500,000 more employees (Gardner, 2011). Former Senior Vice President of Walmart, Ron Loveless gives ten reasons why Walmart has been so successful. He credits leadership, communication, corporate structure and ethics, among other things as the reasons for success. He says, “The effort to be an "ethical" company was a key ingredient to our success” (Walmart's Top Ten Building Blocks for Success., 2011). Many people would argue that Walmart’s lack of ethics is the reason that they are so successful. One reason they say that is because of the poor working conditions. According to “100 Best Companies To Work For”, Walmart is not considered to be one of the best 100 companies in the country to work for. This survey was based upon Fortune 500 companies of 2011 (100 Best Companies To Work For, 2011). This section of the paper will focus on the poor working conditions, specifically the low wages, poor benefits, and discrimination against women and will show the negative effect it has on job performance and organizational commitment.
One reason Walmart is rated so poorly is because they have been known for having lower employee wages than similar companies. Sam Walton, the founder of Walmart, has even said, “I pay low wages. I can take advantage of that. We're going to be successful, but the basis is a very low-wage, low-benefit model of employment.” (Lichtenstein, 2004). Nelson Lichtenstein, author of the book, The Retail Revolution: How Wal-Mart Created a Brave New World of Business describes it as “low wage, low benefit and high turnover system” (Lichtenstein, 2004). The average hourly wage for a full time employee is $12.31 (Cheng, 2011). Unlike most companies, you only have to work 34 hours a week to be considered a full time employee. An average employee working 34 hours a week earns under $22,000 a year, which is a lower than the poverty level for a family of four.
Walmart has also been accused of taking advantage of unpaid labor. In 2009, a class action lawsuit against Walmart was settled, with a payout of $40 million for 87,500 current and former employees (Edelson & Lynch, 2009). They accused Walmart of not paying them for working during breaks and controlling their time cards, among other things. Walmart expects to pay approximately $640 million more to settle 63 other suits similar to this one.
Another reason Walmart is rated so low is because of the disparity of wages and benefits male employees receive compared to female employees. The recently settled sex discrimination court case of Wal-Mart Stores Inc. vs. Dukes shed light on some startling statistics regarding this disparity. The plaintiffs used the following statistics in their case: women held 70% of the hourly jobs but only 33% of managerial positions, women received less money than men holding the same position for the same length of time and with the same credentials, and when compared to similar companies they received less money than other women (Discrimination Gets Easier, 2011).
Because of reasons, it can be concluded that the Walmart corporation has poor ethics when it comes to the fair treatment of their employees. This causes the employees to have low levels of trust in the organization. Employee trust has a moderate effect on their job performance. With low levels of trust employees are more likely to engage in counterproductive behavior such as theft, wasting resources, and taking breaks, among other things. Employees with low trust levels are also more likely to perform their jobs worse than someone with higher trust levels. Low trust levels also have a strong correlation to poor organizational commitment. Low trust levels will also reduce their affective commitment. This means that employees will be less likely to stay with Walmart because they do not enjoy it. It will also reduce their normative commitment, which is staying with a company because it is what you should do. The lower your trust value in a company is, the less valuable you see yourself being to the company which leads to poor work quality and quitting. In conclusion, when a company is engaged in unethical behaviors, it causes their employees to have low trust levels in the company which results in poor work being done, misuse of resources and high turnover ratios. Although Walmart may pay lower wages than similar companies, their total costs may be higher because of the employee’s responses to the unethical treatment.
Walmart understands this and has been working hard recently to clean up its image. They have hired LRN, a moral ethics company, to help them become more profitable (Murphy, 2010). Walmart’s hard work has paid off. According to careerbliss.com, Walmart’s employee happiness rating has increased 8.8% from 2010 to 2011, rating as fifth highest percentage (Smith, 2011). While they are not rated as one of the top 100 companies to work for in 2011, if they continue the progress that they have made so far, we should see them in there soon enough.
Hewlett Packard In 2006, the chairman and half a dozen top officials resigned from Hewlett Packard, the biggest computer and printer manufacturing company in the United States.
The chairman of Hewlett Packard, Patricia Dunn, had grown suspicious of information that the media was reporting about Hewlett Packard. She figured that the information the media was receiving could have only been leaked by upper management sources. These suspicions lead to an almost unimaginable illegal investigation.
Board members and employees had their phone records illegally obtained, surveillance taken without their knowledge, and spyware sent in emails to board members and the journalists. This was all done unlawfully in order to try and identify the source of the leaks.
The private phone records of employees were obtained using a method called “pretexting.” Pretexting was done by investigators constantly calling phone companies, falsifying their identities, and persuading the phone company that they are being targeted or need information regarding their account. Phone companies had no way of truly proving the identity of the person on the other end of the line, since the questions asked to verify their identity were being answered. The investigators would continue to call the phone company until their phone records and personal information was given out to them.
The spying scandal was led by Dunn, but she also had some help. She had help from Kevin Hunsaker, who is a senior attorney at Hewlett Packard. Dunn gave him specific directions on what to do and how to do it. However he passed this dirty work over to Anthony Gentilucci, head of Hewlett Packard’s global investigations unit, in Boston, who then passed it down to Ronald DeLia of Security Outsourcing Solutions, also in located in Boston. It was then passed out to the Action Research Group of
Melbourne, Florida, who hired subcontractors in Florida, Georgia, Colorado and Nebraska. They are the ones who actually conducted surveillance and they are the ones who gathered telephone records from Verizon and other phone providers. It is easy to see how many different people and even states were involved with this dirty spying scandal where the people working for this company had no idea this was taking place.
It is estimated that private information was acquired on as many as 300 separate cell, home, and office phones of Hewlett Packard’s directors, nine journalists, employees, including their spouses and even children. Also, laptops were stolen and spies were placed in the guise of cleaning workers in the San Francisco offices of CNET and the Wall Street Journal.
When Dunn appeared for her hearing to justify her actions, she replied by saying she had no idea how private investigators do their work and is unaware of the methods they take in order to gather information. She said she was clueless that anything the investigators did was done illegally. She went on to say she thought private phone records could be obtained by simply calling the phone provider and asking them. She didn’t think anything was wrong with this.
People were baffled and taken aback with the chairman’s responses because she made herself look incompetent and oblivious to the fact she believes she did nothing wrong. Keep in mind; this is all coming from a chairman of the largest computer and printer company. How could she try and fool the nation that her actions weren’t intended to gain information illegally and not know she was doing it?

It is defined that trust is the willingness to be vulnerable to an authority based on positive expectations about the authority’s actions and intentions. In this particular case, there is no way any employer working for Hewlett Packard is going to fully trust the intentions of a person in authority because they were literally stripped away from all their privacy inside and outside of work. Yes, I do agree that employers have the right to monitor certain actions of an employee, but to take it to the level Dunn did in this particular situation is beyond taking the right precautions. When an employee has trust for whoever is in an authority position, there is a moderate positive effect on job performance and a strong positive effect on job commitment. When that trust is taken away from the employees, their motivation to work hard and devotion to the job is lost. They are not going to give their all to a company like they would if they did have that trust. Also, I believe this scandal goes against the definition of ethics. Ethics reflects the degree to which the behaviors of an authority are in accordance with generally accepted moral norms and can be used to explain why authorities choose to act in a trustworthy manner. The chairman and the other top officials did not act ethically because they went behind their employees’ backs and dug inside their personal lives without the employees having any knowledge of this (Martin 2006).
In conclusion, trust in a company comes from the decisions the company makes on a daily basis. Employees look to be treated equally and with respect. Unhappy employees can lead to an inefficient business, which can potentially cause unsatisfied customers. It can be argued that having good employees is just as crucial to running a successful business as having good customers is. If employees feel that they are being mistreated, their levels of organizational commitment and job performance will greatly decline. This can also lead to lawsuits against the company for mistreatment and discrimination like it occurred in the Walmart case. It is also important for companies to be seen as ethical in the eyes of the public. Negative publicity from a company’s unethical dealings can severely hurt the business. Unethical behaviors in organizations can be directed at employees, customers, financiers, or the society as a whole. In the cases of Hewlett Packard, management made unethical decisions that were made public and hurt the company’s image. Major mistakes can lead to boycotts of companies and millions or billions of dollars in losses from lawsuits and from the loss of business.

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