The New York Times recently dropped a bombshell about Walmart, the world’s largest retailer and biggest private U.S. employer. The Times revealed that in 2005, an internal Walmart investigation found evidence that its rapidly growing Mexican affiliate had distributed $24 million in bribes to speed approval of new stores by government officials. Rather than pursue the evidence or alert U.S. and Mexican authorities as required by law, Walmart shut down the investigation.
The news probably didn’t surprise Betty Dukes. She was the lead plaintiff in a class action lawsuit filed on behalf of 1.5 million female workers who accused Walmart of gender-based discrimination regarding pay and promotions. The Supreme Court rejected the suit last year when its conservatives deemed the “class” of current and former Walmart employees as too broad.
Walmart wasn’t as lucky in dozens of other lawsuits. Its current and former workers have repeatedly sued it for forcing them to work extra hours without pay. The company has lost or settled over and over at a cost of hundreds of millions of dollars. Walmart also got into legal trouble for responding to successful union organizing drives by closing unionized stores or departments in the United States and Canada. After Walmart bought Chile’s largest supermarket chain in 2009, labor law violations in those South American stores spiked. Viewing Walmart’s overall record, it’s hard to avoid concluding that this is a habitual offender. The corporation is so arrogant that it seems to think it can ignore the law.
But it would be a mistake to view Walmart as a single bad apple. Just to take one example, sex discrimination suits have been brought against numerous other retail chains, including Abercrombie & Fitch, Best Buy, Home Depot, and Publix. Even Costco, sometimes held up as a worker-friendly “anti-Walmart,” has faced similar lawsuits. And looking beyond retail, we know that leading up to the market’s 2008 crash, dozens of financial service firms and executives bent or broke the law. The problem isn’t a few bad actors. It’s an environment that incubates unethical and even illegal corporate behavior.
It’s tempting to throw up our hands. What can we do when a dog-eat-dog market pushes companies to compete even to the point of cutting corners?
There’s an answer to be found where you might not expect it: Brazil. In that sometimes chaotic country of 200 million people, Walmart is the No. 3 retailer and a relatively responsible corporate citizen. Walmart generally complies with Brazilian labor laws, engages in collective bargaining with Brazilian unions, and has even cooperated with unions and government officials to eliminate child labor in the meat-packing plants that supply its stores.
Tight regulation contributed to this distinction. Since 2002, the Brazilian government has stepped up the enforcement of its labor laws, supporting unions and boosting pay for those at the bottom as part of a drive to increase productivity and build a bigger middle-class market. Brazilian regulators have particularly targeted large companies like Walmart without hurting the economy. Brazil has enjoyed rapid and across-the-board growth as nearly 30 million people moved out of poverty in the past decade.
The irony of the latest revelations on Walmart’s wrongdoing in Mexico is that Mexico had been viewed as the biggest success story in Walmart’s global empire. At a time when Walmart’s U.S. stores were experiencing declining same-store sales, Walmex continued to boom. Now it appears that boom may have been bought, not earned.
What the cases of Mexico and the United States, on the one hand, and Brazil on the other, tell us is that corporate wrongdoing flourishes where it’s permitted. Corporate arrogance will reach its limit only if we draw the line.