A van covered by a mural sits parked outside a Walt-Mart Super Center in Mexico City, Saturday, April 21, 2012. Wal-Mart Stores Inc. hushed up a vast bribery campaign that top executives of its Mexican subsidiary carried out to build stores across Mexico, according to a published report by the New York Times. Wal-Mart is Mexico's largest private employer.
Back when Wal-Mart Stores Inc. was just a blip on the retail landscape, a vendor said he couldn’t even get Wal-Mart executives to accept a free cup of coffee.
So intent was the company to project pure business ethics.
But as the Arkansas-based chain ballooned from its 1962 founding by Sam Walton to become the world’s largest retailer and private-sector employer, perceptions of its business ethics changed in the court of public opinion.
Big size and big profits made it an especially big target. Accusation after accusation piled up: scores of lawsuits for violating wage and hour laws, charges that it was fouling the environment, and the potent attack that it was driving other U.S. businesses out of business.
Wal-Mart fought back. It countered the labor lawsuits and environmentalists. It mounted ad campaigns touting its delivery of low-priced merchandise to the masses.
To polish its ethical image, in the middle of the last decade it created a war room to respond to complaints. It pointed out its generous philanthropy and efforts to become more environmentally friendly and increase the promotion of women.
The past problems, executives said, represented a Wal-Mart of the past.
Last week, though, all those efforts suffered a huge blow. The New York Times published allegations that a crop of Wal-Mart executives bribed Mexican officials to pave the way for store sites. And then, The Times report said, beginning in 2005 top-level company executives covered up their knowledge of the payoffs.
Wal-Mart didn’t tell the U.S. Justice Department about the matter, reportedly involving $24 million in payouts, until last year — after it learned of the newspaper’s probe.
Current CEO Mike Duke headed the company’s international division in 2005, when Wal-Mart began its internal investigation. If the government pursues the case, legal authorities said Duke could face charges under the Foreign Corrupt Practices Act.
A Wal-Mart corporate spokesman said last week that the case was being thoroughly investigated, steps were being taken to assure adherence to the law, and that, if true, the payments were “not a reflection of who we are or what we stand for.”
But, once again, critics had another bullet to aim at Wal-Mart, questioning how often its relentless pursuit of growth and profits tests ethical standards.
“What is the cost of their low prices? That’s what I ask myself every day,” said Mary Pat Tifft, a Walmart Supercenter employee who’s worked for the company for 24 years.
Tifft, who works in Wisconsin, said she decided to speak out as a member of OURWalmart, a group of employees and supporters who formed the Organization United for Respect at Walmart. She saw the Mexico allegations as a springboard to spotlight low pay and other employee issues.
Wal-Mart’s public relations team didn’t respond to The Kansas City Star’s request to clarify how the company sees its own public image.
Communication consultants agree that the bruise from the Mexico allegations might have been lighter if Wal-Mart had been upfront about a business practice gone awry.
“There is no way this one is going to go (away) quietly,” said James Haggerty, a lawyer, communications consultant and author of “In the Court of Public Opinion.”
In a blog post titled “In the Wal-Mart C-suite, it’s the PR battle that matters,” Haggerty wrote:
“Better to have gotten the story out on the right terms, in the right context, acknowledging mistakes and providing a complete description of the steps being taken to ensure it can never happen again.”
Others wonder whether public relations firestorms and employees’ grievances matter to the more than 200 million customers a week who pour into the company’s retail properties around the world.
Do the new allegations, added to long-standing complaints about sex discrimination, mandatory off-the-clock overtime and pricing demands that put vendors and competing retailers out of business really matter to those who make the cash registers ring?
“There are some people, like me, who would say Wal-Mart bit into an ethical jalapeño in Mexico,” said Al Norman, a company critic in Massachusetts who got energized 20 years ago to fight a proposed store in his community. “There are others who would say ethics aren’t on their shopping list. Their sense of ethics, of community, may be no bigger than their shopping cart.”
Norman is hardly an impartial judge. He’s already authored “The Case Against Wal-Mart.” His new book, “Occupy Walmart,” will be published this week. But he concedes Wal-Mart’s lure.
“I think there are a lot of different images of Wal-Mart,” Norman said. “A lot of people who shop at a Walmart couldn’t care less if they’re bribing Mexican officials to build their stores. And you can talk about Chinese sweatshops, but if you’re standing in a Walmart, you’re seeing folks whose most important thing is buying cheap, and they don’t care how it got to the shelf.”
And, don’t discount this: For investors, Wal-Mart stock has been a consistent winner.
Over the last five years, Wal-Mart shares outperformed the S&P 500 by 30 percent. From 2007 to 2011, Wal-Mart revenues rose 18 percent, profits jumped 27 percent, and earnings per share leaped 42 percent.
Free-enterprise darling
On its way to becoming the global retail leader — its most recent annual sales were three times the combined sales of Target, Sears, Kmart, J.C. Penney and Best Buy — Wal-Mart won accolades as the kind of Horatio Alger story that America loves.
From a small storefront in Rogers, Ark., to incorporation in 1969, to trading on the New York Stock Exchange in 1972, Wal-Mart became a free-enterprise darling. The Cato Institute, a libertarian think tank, says Wal-Mart succeeds because it sells what people want at prices they want to pay.
Admirers especially tout the company’s fervor in fending off unions that would raise employee costs. And Sam Walton himself was on record fighting laws that would increase the minimum wage.
The company is famous for its never-ending drive to keep operating costs low, all the better to deliver low prices to customers.
As Wal-Mart grew in the 1970s and 1980s, most anti-Wal-Mart sentiment came from those who saw its heft overpowering small town retailers. Those who couldn’t compete on price or merchandise array shut their doors, and Main Streets withered.
The furor prompted academicians to study whether Wal-Mart was an economic savior and job creator or a killer of small towns.
But, as often is the case, opinions remained divided because the evidence wasn’t clear. A 2008 study by economists at the Federal Reserve Bank of Minneapolis compared 40 small counties in its district that had Wal-Mart operation come to town between 1986 and 2003 with 49 similar-sized counties that had no Wal-Mart presence.
“One could call the results mostly a wash,” the report concluded. “Wal-Mart’s presence (or lack thereof) has little or no predictive power regarding the economic success or failure of a county.” Or on the poverty and employment status of residents.
Growth dominated Wal-Mart’s agenda in the 1990s. Led by CEO David Glass from 1988 until his retirement in 2000, the company during his tenure introduced its Supercenter and other concepts and opened its international division.
(Later in 2000, Glass paid $96 million to become the sole owner of the Kansas City Royals.)
How notable was Wal-Mart’s growth? It bumped Woolworth in 1997 as a component of the Dow Jones industrial average.
By about 2004, a year before Wal-Mart executives allegedly put an internal report about the payments in Mexico on the back burner, public sentiment against Wal-Mart had heightened.
Business and general-interest publications began running articles with such headlines as “People problems on every aisle.”
Charles Fishman, a reporter for Fast Company magazine, earned widespread attention for an expose on “The Wal-Mart you don’t know,” focusing on the low-cost pressure it put on vendors.
“To survive in the face of its pricing demands, makers of everything from bras to bicycles to blue jeans have had to lay off employees and close U.S. plants in favor of outsourcing products from overseas,” Fishman wrote.
Wal-Mart’s economic clout, he said, caused most business partners to keep mum or say only nice things about the company.
Mid-decade, a documentary called “Wal-Mart: The High Cost of Low Price” got a lot of air time. It began with then-CEO Lee Scott sharing company highlights but mostly gave voice to critics of the company’s rapacious expansion, its environmental impact and its treatment of workers.
The film, in part, led Wal-Mart in late 2005 to create its public relations war room, the Action Alley.
Clearly, executives in the Bentonville, Ark., headquarters understood that Wal-Mart’s immensity made it a big target — for everything from Harvard Business School studies to not-in-my-backyard rallies to some of the nation’s biggest labor lawsuits.
About the same time, after 13 years advertising the same slogan, “Always low prices. Always,” Wal-Mart aimed its message a bit differently: “Save Money. Live Better.” Along with upgrading some store fixtures and merchandise, the new slogan aimed to emphasize more than just cost savings.
Meanwhile, Wal-Mart workers began rebelling.
A sex discrimination case filed by Wal-Mart women charged that they were paid less than men in comparable jobs and denied management promotions despite their greater numbers in the stores.
What could have been the largest class-action discrimination lawsuit in U.S. history slogged through the courts until the U.S. Supreme Court last year rejected the suit because the plaintiffs failed to prove that Wal-Mart had a nationwide policy that led to gender discrimination.
Wal-Mart’s lead lawyer fought the class action by arguing that allowing it to proceed would deprive the company of its right to contest the claims of each woman individually.
The case returned to a California district court, and separate lawsuits continue to be pursued.
Around the country, according to a count by Bloomberg News, Wal-Mart has been involved in more than 3,000 federal court lawsuits since 2009. More than 1 in 10 involved workers’ complaints of discrimination, bias or wage violations, such as being required to work off the clock.
Brad Seligman with the Impact Fund, a nonprofit organization of public-interest litigators, served as co-lead counsel for the women plaintiffs in the class action case.
When he read about Wal-Mart’s corporate response to the Mexico allegations, Seligman said, “I thought this latest mess — a great embarrassment to them — indicates the internal knee-jerk reaction at Wal-Mart often isn’t to address the problem but paper it over.
“What’s more important is that Wal-Mart has been trying to put out the message for years that ‘We’re not the old Wal-Mart. This is the new Wal-Mart.’ But it’s not. It’s the same old Wal-Mart.”
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