Wednesday, August 23, 2006

Wal-Mart as an Employer

I came across this article by Selena Maranjian at the Motley Fool's website. Marajian, like most investors, really admires Wal-Mart as an investment. The article was written in 2003 but it raises some important questions concerning Wal-Mart's treatment of it's employees. Here is her question.
But even if companies abide by the law, is there a point at which their actions are, simply, bad? By bad, I mean bad for society, bad for employees, unfair in the vague but grand scheme of things, and maybe even bad for business?
She goes on to point out that treating employees may not be the best thing for a company. You end up with:
Grouchy, resentful employees at best, and perhaps poor performance and even sabotage, at worst. From a company's point of view, unionization is probably the worst-case scenario here.

Negative media coverage, leading to a less lustrous reputation, an increase in customers' desire to shop elsewhere, and possibly even boycotts.

Society and government are drained, picking up the company's slack. If employees are uninsured or underinsured, then they put pressure on the health-care system. If they're having trouble making ends meet and living near or below the poverty line, they'll require more government services.
Many of us realize that those things are all currently happening due to Wal-Mart's poor treatment of its employees. She goes on to ask whether shareholders or employees should come first. Her answer is that both should be treated well and what's good for the employees will probably be good for the shareholders.
Right now, many communities fight to keep Wal-Marts away. Perhaps if the company were even more admired in America, if it were known not only for low prices and shareholder rewards but also for employing an enormous number of people and compensating them with somewhat generous pay and benefits, more communities would welcome it with open arms. Perhaps those better-paid employees would have more discretionary income to spend in their communities, boosting other businesses. Happy employees will take more genuine pride in their employer, and customers will see that. Satisfied employees generally don't need unions. They'll be less likely to sue, too, perhaps reducing the company's legal expenses.
She ends the article by saying:
I think that maybe Wal-Mart and even its shareholders could benefit if the company shares a little more of its wealth with employees.

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