Walmart: Successful Free Market Model

Argumentative Essay on Wal-Mart

Thesis Statement: Wal-Mart, the largest corporation in the world, is not a universal leader because the company takes advantage of its employees, taxpayers, and the United States government.

Introduction

The purpose of this essay is to prove that the Walmart Thesis Statement is true. In order to achieve this goal, information will be presented in regards to Wal-Mart’s background, economic status, and leadership capabilities. The types of leadership discussed in this Wal mart essay are formal and universal. A detailed review begins with information on how the company represents itself.

Wal-Mart: A Wrong Sense of Pride

            Wal-Mart prides itself on being a prosperous company that has a successful free market model. However, some citizens and policymakers are displeased. In fact, they believe that Wal-Mart makes undeserving profits that are paid for by Wal-Mart associates and taxpayers. These policymakers and citizens insist that the corporation “…is able to achieve record profits largely because it shifts to taxpayers many of the costs of doing business, such as employee health care, property taxes, and development costs” (Horsley 2007, par. 1). An analysis of the establishment similar to various components of the present economy, “[however]…ultimately depends on how one defines success.’ ‘Wal-Mart reveals both the achievement and the failure of an unregulated free market model-high private benefits alongside high public costs’” (Horsley 2007, par.1). To understand the significance of this issue, background information of the organization must be presented.

Wal-Mart’s Background

            Wal-Mart maintains the largest company status in the world. The corporation has over $250 billion in annual gross sales as well as over $10 billion in annual gross profits. Yet, the 2005 “New York Review of Books” advertised that Wal-Mart’s CEO, Lee Scott, indicated that the company did not have the right profit margin to pay higher hourly wages. This article also mentioned that the company was not able to offer employees more affordable health insurance. In fact, the review, as pointed out by Horsley (2007) discussed, “Wal-Mart paid at or below $8.00 per hour in 2004.’ ‘[Consequently,] If Wal-Mart’s 1.3 million US employees do not receive much benefit from such a profitable company, who does?” (“Show Us the Money?…”, par. 1). The majority of profits go to the Chief Executive Officer (CEO), shareholders, and the Waltons.

            Wal-Mart’s CEO, Lee Scott, had the opportunity to earn $27.2 million in terms of stock options, bonuses, and salary. This alone means the CEO received compensation that is over 870 times that of an hourly full-time Wal-Mart associate that is employed in the United States. In fact, Horsely (2007) wrote, [the amount is] “…50,000 times the wage of a Chinese worker for a Wal-Mart supplier, according to the Wal-Mart website and the National Labor Committee” (“Show Us the Money!…”, par. 1).

            Yet, Wal-Mart shareholders also benefit from Wal-Mart’s profitability. While the company does make significant contributions to a variety of charities, the fact still remains that the donations are given with selfishness in mind. For example, Horsley (2007) stated,

…Featherstone points out that this giving often paves the way for more taking. True, Wal-Mart stepped in after the failed government response to the hurricanes. But the company helped create the crisis in the first place by supporting efforts to dismantle the government. Wal-Mart and the Waltons regularly contribute to anti-government Republicans lawmakers, conservative think tanks, and groups like Americans for Tax Reform that favor large tax breaks for the rich. These contributions are self-interested because the Waltons benefit from their own “charity”. According to the AFL-CIO’s Food and Allred Service Trades Department, the 2003 Bush tax cuts gave the Waltons a tax break of $136 million, or $63,460 per hour. (“Show Us the Money!…”, par. 5)

Indeed, these types of actions are uncharacteristic of effective leadership qualities.

Wal-Mart is a Formal Leader

            In today’s world, only top-rate companies have their best practices benchmarked against. The fact that Wal-Mart is a very prosperous company is not enough to fit a world-class description. For example, based upon the information presented thus far, Wal-Mart demonstrates qualities characteristic of a formal leadership style. This type of leadership portrays the individuals behind organizations. What is displayed is not a good sign of high quality leadership.

            Zauderer (2006) stated, “[There are] Many individuals in formal leadership positions [that] become insulated and self-absorbed.’ ‘[Moreover] They develop defensive emotional routines that block new ways of thinking and acting” (22). This was evident in the fact that Wal-Mart’s CEO defended the company’s reasoning behind low wages and unaffordable healthcare benefits (Horsley 2007). Consequently, this information supports the fact that formal leaders are selfish because it is reflective of Wal-Mart’s actions. In fact, Wal-Mart has been known to request subsidies such as free land; infrastructure assistance; tax breaks on property taxes, state corporate income taxes, and sales taxes; and tax increment financing (Horsley 2007, “Economic Development Subsidies”, par. 3).

            This situation seems beneficial to some communities because they want to bring in better jobs and improve ruined areas. As a result, these communities provide subsidies to Wal-Mart. However, once the communities have given Wal-Mart the subsidies they find out that the situation brings in low-paying jobs that have little to no benefits and the tax revenues are not sufficient enough to support certain local government agendas. In addition, the presence of Wal-Mart causes “…suburban sprawl that threatens the environment and efforts at community leadership” (Horsley 2007, “Economic Development Subsidies”, par. 4). Therefore, rather than moving forward the communities are stuck in a bad predicament. Consequently, Wal-Mart receives even more attention that only creates additional issues.

            While too much focus is on Wal-Mart and the way the company treats its employees, the attention (to some extent) is needed. The main reason is because Wal-Mart is a retail giant that is the biggest agent of a system that needs change. In fact, the entire retail industry relies on government assistance and offers minimum wage jobs that have few benefits. Retail stores have an average of only 48% of employees who have health coverage (Horsley 2007, “A Bad Apple or a Rotten System?”, par. 1).

            Horsley (2007) mentioned, “The problem is that Wal-Mart is by far the biggest, baddest apple of the tree” (“A Bad Apple or a Rotten System?”, par. 2). Wal-Mart is a very large corporation. The company has many employees (1.3 million), stores (3,800), and distribution centers (over 90) in the United States alone. In 2004, Wal-Mart’s sales reached over $280 billion which, according to Horsley (2007),

…is about five times larger than the next biggest retailer, Target. That means that when the government provides $2,000 in service per associate because an employee uses public assistance, taxpayers are subsidizing Wal-Mart’s profits by about $2 billion every year. When local governments provide economic development subsidies to the tune of $1.8 million per store (multiplied by 1100 stores) and $7.4 million per distribution center (multiplied by 91 centers), we are subsidizing Wal-Marts profits by another $3.75 billion. (“A Bad Apple or a Rotten System?”, par. 2)

These factors are not characteristic of universal leadership, which should be Wal-Mart’s qualities as the company is the biggest corporation in the world.

Wal-Mart does not have Universal Leadership qualities

            The universal leader must demonstrate the following leadership qualities: 1)Be an active listener, 2)Build relationships, 3)Invest political capital and not spend it, 4)allows others to get the credit for work they have accomplished, 5)does things of value (Benison 2005, 13-14). Wal-Mart is not an active listener because the company has not gotten the message that employees should receive higher wages and affordable healthcare benefits. Seglin (2004) wrote about how Jerry of “Fortune Magazine” talked about the problems with how Wal-Mart treats its employees. Jerry suggested that illegal immigrants mop the floors. Overnight employees are locked in the store. A huge gender discrimination lawsuit still haunts the company. Employees of other establishments would go on strike if paid the same low wages that Wal-Mart associates receive. Wal-Mart’s actions, according to Seglin (2004), “…does [something] to weaker suppliers and competitors.’ ‘Crushing the dream of the independent proprietor—an ideal as American as Thomas Jefferson—it is the enemy of all that’s good and right in our nation” (“Is It Ethical to Shop at Wal-Mart?…”, par. 4).  Therefore, Wal-Mart is not the universal leader because it does not build relationships as evident by the way suppliers and competitors are treated.

            Another reason why Wal-Mart is not the universal leader is because the company spends political dollars. While Wal-Mart does support political campaigns (as discussed earlier), the company also extracts from the economy by receiving subsidies which is basically money Wal-Mart does not have to pay to the various levels of government (Horsley 2007). Not only that, Wal-Mart likes to take credit for being the best (as reflected of its low price advertisements). However, when it comes to admitting mistakes and learning from them, the company talks about what it cannot do versus what it can. This is evident in the discussion made by Wal-Mart’s CEO on why the company cannot pay higher wages or offer affordable benefits (Horsley 2007). Furthermore, Wal-Mart does not always do things that adds-value back to the economy.

            Wal-Mart 1)lowers the basic standard of living, 2)furthers inequality, 3)lacks the technological advancements that can help change the world, 4)does not help non-market institutions. First, “Wal-Mart pays low wages and appears to aggressively seek to keep wages down.’ ‘[Yet,] on average, WM workers earn an estimated $8.00/hour with a 32 hour work week’” (Brownstein 2004, “Basic Standard of Living”, par. 1). This creates a win/lose scenario where Wal-Mart gets what it wants but the employees suffer. As a result, compromise is nonexistent.

            Second, “Wal-Mart is a major contributor to the creation of a US economy that is characterized by enormous numbers of people trapped in low pay, no benefit, dead-end service jobs” (Brownstein 2004, “Inequality”, par. 1). This is also an example of a win/lose scenario. While Wal-Mart’s profits continue to skyrocket, the US economy suffers in terms of more poverty and additional welfare recipients. As a result, avoidance exists in the fact that Wal-Mart desires to remain the leader in its industry and goes about it by lowering prices but at the same time, offering employees low wages and no benefits.

            Third, “Wal-Mart doesn’t produce new technology or innovations that improve the quality of life.’ ‘It takes business from existing firms by offering the same merchandise cheaper.’ ‘That’s all it does’” (Brownstein 2004, “Increased material and technological innovation and productivity, par. 1). This creates a win/lose situation as well. However, it does so in the sense that in order for Wal-Mart to remain on top, the company must stampede over its competitors (and others who get in the way, for that matter).

            Fourth, “Wal-Mart is both a cultural symbol and is an economic force that proclaims free market materialism uber alles.’ ‘It [also] destroys other institutions based on relationships of human connection and solidarity—be they neighborhood businesses or unions’” (Brownstein 2004, “Non-Market institutions, par. 1). In this sense, Wal-Mart compromises certain standards of ethics to ensure larger profit margins. Once again, this creates the win/lose scenario. This is not characteristic of qualities that the universal leader possesses.

Essay on Walmart Conclusion

            Wal-Mart needs to change as the world changes because universal leaders put others first. By Wal-Mart not doing so, the company goes against the macro-environment. As a result, Wal-Mart is only being considerate of self and this is formal leadership characteristics. In order for the company to develop the universal leadership style, it must be mindful of everyone by acting in the best interests of all. At this point, Wal-Mart does not possess these qualities because everything the company does is carried out to ensure it remains the largest corporation world-wide. This is, of course, in addition to maximizing profits.

References

Benison, Martin J. Martin J. Benison, CGFM Leadership in the Public Sector. 2005. The Journal of Government Financial Management, 54(4), 13-16.

Brownstein, Bob. Is It Ethical to Shop at Wal-Mart?: Notes from Bob Brownstein’s Presentation. 26 April 2004. Santa Clara University and Markkula Center for Applied Ethics. 20 May 2007 <http://www.scu.edu/ethics/publications/ethicalperspectives/wal-mart.html>

Horsley, Sarah. Wal-Mart’s Hypocrisy: A Free Enterprise “Success” Story That’s Not So Free. 2007. United for a Fair Economy. 20 May 2007 <http://www.faireconomy.org/general/2006/wal_marts_hypocrisy.html>

Seglin, Jeffrey. Is It Ethical to Shop at Wal-Mart?: A Transcript of Jeffrey Seglin’s Remarks. 26 April 2004. Santa Clara University and Markkula Center for Applied Ethics. 20 May 2007 <http://www.scu.edu/ethics/publications/ethicalperspectives/wal-mart.html>

Zauderer, Donald G. Leadership Lessons from World-Class Coaches. 2006. Public Manager, 35(3), 20-25.