Monday, October 31, 2005

Wal-Mart: Image vs. Substance

I'm sorry. I know that I mentioned that I would try for shorter articles, but there is just a lot to say about Wal-Mart.

According to an article in the Washington Post, Wal-Mart recently hired a consulting firm, McKinsey & Co., to make recommendations to overhaul the company's poor public image. In doing so, Wal-Mart executives proved once again that they simply do not understand the essence of being good, moral citizens.

Public Relations and Ethics

The first question that I have regarding this type of practice is: What does a public relations company know about ethics? Public relations have to do with image and appearance. Morality is concerned with the heart. We can see the distinction in what a person does when he thinks that nobody is watching. The moral person will still do the right thing. The image-conscious person will do the wrong thing, if he thinks he can get away with it.

The fact that Wal-Mart is looking to a public relations company to solve its problem proves that it does not understand this distinction. Its executives seem to have no idea that 'wrong' means 'you should not do it, even if it would profit you to do so."

One example of Wal-Mart's focus on image over substance shows up in the statement, "The federal minimum wage is $5.15 an hour. Wal-Mart says its full-time workers are paid an average of $9.68 an hour."

However, what do Wal-Mart's part-time employees get paid? One of the charges against Wal-Mart is that it has a policy of hiring low-paid part-time workers that do not qualify for benefits and other expensive employee packages. In fact, this was a recommendation of an internal company memo – to reduce medical care costs by using more part-time workers who do not qualify for these benefits.

Also, as I mentioned in a previous blog entry, averages are often used to hide unpleasant facts. A set of ten workers, where nine of them makes $5.00 per hour and one makes $55 per hour (about $115,000 per year), will yield an "average wage" of $10 per hour. Note that Wal-Mart's statement is not talking about non-exempt hourly employees, but all full-time employees, all the way to the executive rank.

Again, this is all image, and no substance, suggesting that the company is more interested in looking good than in being good.

Corporate Welfare

Another deplorable practice on the part of Wal-Mart is its tendency to demand corporate welfare from city and regional governments. Wal-Mart uses the tax breaks and other advantages it squeezes out of city government in order to lower its prices, which in turn is detrimental to other (competing) businesses in the community.

Wal-Mart does not win the corporate battle on the basis of free-market principles. It is more than happy to break those principles, go to the government, and say, "We insist that you help us in our quest to drive the other businesses in this community out of business."

Furthermore, the business owners that Wal-Mart is threatening are the same tax payers that will be required to contribute to the corporate welfare package that, in turn, will allow Wal-Mart to lower its prices which will put those businesses out of business. This practice has a lot in common with the wild-West habit of forcing condemned prisoners to purchase the rope that would be used to hang them.

If Wal-Mart was not the beneficiary of this corporate welfare, if it was forced to compete with these other businesses fairly in the open market, we can openly wonder how successful the company would be.

Low Wages/ Low Prices

There is one argument that I have often heard used against Wal-Mart that does not have any merit. These people argue that when Wal-Mart moves into an area, wages tend to drop. The argument states that Wal-Mart tends to pay its employees a lower wage than other, neighborhood stores. As a result, they say, "If we let Wal-Mart into our town or neighborhood, people here will be making less money."

However, wages are only half the issue. If my boss, at my next review, were to call me into his office and say, "We are going to cut your salary by five percent. However, at the same time, the company is giving you this card that will allow you to purchase anything you want at 10% off," I would jump at the offer. It is a pay-cut in name only. In practice, it is the financial equivalent of a five percent raise.

Wal-Mart's low prices are available to the entire community. This means that everybody -- every household in the community – from the hotel maid to the free-lance computer programmer -- will be able to pay lower prices for many of the things they buy. This means that they can buy more things, meaning more things will need to be produced, adding jobs to the volume of goods and services being produced.

As an atheist, I am all too familiar with people who have gotten it into the head that they want to hate somebody, who then accept whatever anybody else tells them as long as it supports the conclusion, "hating these people is good." The "low wages" argument against Wal-Mart is exactly that type of argument.

When it comes to using this type of hate-based reasoning, I would like to simply say, "Please, don't."

Note that this does not apply to the argument that Wal-Mart forces many of its employees into a situation where they must turn to financial aid to cover their basic necessities such as medical care. In doing this, Wal-Mart is effectively demanding another tax-payer subsidy – one in which the tax-paying community pays for the health care costs of Wal-Mart employees rather than Wal-Mart, while every other business covers its own health care costs.


What Wal-Mart needs is not an image consultant to tell it how to look like a better company, but an ethics consultant to help it actually become a better company. The fact that it sought out an image consultant instead shows that it has no interest in actually being a better company -- that, to Wal-Mart, appearances matter more than substance.

Still, no person or company should be criticized for wrongs that are substantially made-up. If Wal-Mart is guilty of genuine wrongs, then nobody needs to invent new wrongs to have good reason to dislike the company. If people need to make up wrongs to justify their dislike for the company, then that dislike is, in fact, unjustified, and unjust.

This is the way that the mind of the bigot works -- accepting arguments for hate without question, simply because it keeps the hate well fueled.


Boelf said...

I have a problem with the expectation that corporations will be moral. I don’t see corporations being amoral as a good thing or bad thing but merely in the nature of what they are.

Consider a practice that a corporation might undertake being 1) fundamentally immoral, 2) profitable.

Now I will allow the possibility that the CEO’s and senior executive of most companies have some sense of morality so lets say that 90% of companies in the field reject the undertaking on the grounds that it is immoral. The remaining 10% exploit this option to varying extents. Now most investors invest through funds that manage large portfolios so that they are generally only aware of the relative performance of the various funds. So that 10% gains an advantage not only in terms of profits but also in the availability of investment capital. Inevitably that 10% grows and becomes even bolder in exploiting the unethical undertaking.

My point is that industry self-regulation is in general not to be trusted. Vigilant government regulation is required to keep moral order in the market place. That’s not to say that every little thing needs to be regulated. Its just that the 10% in my example need to know that the heavy hand of government is a very real possibility if they persist in the immoral act. That very possibility will also encourage the investment community and the rest of the industry to bring pressure on the rogue members to get in line.

One other thing. Its not clear to me that the reduction of wages in a community will be fully offset by the lower prices at Wal-Mart. I don’t have any statistics to contradict you with but I can’t imagine an economic argument that would make it so.

Alonzo Fyfe said...

Actually, I made no claim that it would. My objection was against those who provide only half of the equation and, then claim that this proves their position.

Also, note that certain communities will benefit by lower prices in other communities. As the price of certain items drop, people can buy more things. The city that produces the things that Wal-Mart sells will gain jobs to meet the higher demand for whatever they produce.

I am not claiming that I know what the overall effects are. I am claiming that those who use these arguments do not know what the final answer is either. The problem is that those who use these faulty arguments do not seem to care that they are faulty. If they did, they would not use them.