Fundamentals of Human Resource Management 6th Edition by Raymond Noe, John Hollenbeck, Barry Gerhart,Patrick Wright

Exercise 28

CAN INCENTIVES PROMOTE ETHICS
In recent years, the federal government has investigated allegations that Walmart had engaged in bribery in Mexico, China, and Brazil. Walmart reacted with changes aimed at promoting legal, ethical conduct-efforts costing hundreds of millions of dollars. It launched an internal investigation and linked a portion of executives' pay to meeting standards for compliance with legal requirements. The expectation for the compliance-related incentive pay was that if corporate executives are rewarded for the company behaving ethically, they will be more careful to ensure that it does so.
In 2014, Walmart issued a Global Compliance Program Report. According to the report, the compliance objectives fall into three categories: people, policies and processes, and systems. The people objective includes a company reorganization that brings together employees responsible for ethics and the law into one group reporting to a global chief compliance officer, increasing the number of employees charged with monitoring compliance, and training employees in ethical standards. The policies and processes objective focuses on establishing clear standards of conduct that apply globally. The systems objective is a plan for using technology to support efforts at maintaining compliance.
At the end of the year, the corporate audit committee determined that Walmart had "achieved substantial progress" on these objectives. Corporate executives were able to receive their bonuses without any compliance-related cuts.
Review the principles for incentive pay described in the first section of this chapter. How, if at all, could Walmart apply these principles to strengthen its effort to promote compliance with legal and ethical standards