Wal-Mart hit by fallout from Mexico bribery scandal

A lot has happened in the two weeks since The New York Times broke the news of a widespread bribery scandal at Wal-Mart’s subsidiary in Mexico. The Comptroller of the City of New York, John Liu, on behalf of the New York City Pensions Funds (NYC Funds) launched a campaign urging Wal-Mart shareholders to vote against five key Wal-Mart directors — including the company’s chairman and CEO — at the annual meeting on June 1. Liu in a letter to fellow Wal-Mart shareholders dated May 2, cited the alleged cover-up by top management and concerns with the board’s independence as reasons for ousting half the board. In a lengthy press release he also accused the retailer of hypocrisy. “Wal-Mart presents itself as a leader in corporate ethics, but it is clear that the company’s leadership does not practice what it preaches.

The next day, one of the nation’s largest pension plans, the California State Teachers’ Retirement System (CalSTRS), accused Wal-Mart management of breaching its fiduciary duty in connection with the scandal. The suit names the board and several current and former Wal-Mart executives as defendants.

While both groups hold less than 1% of Wal-Mart’s shares — NYC Funds holds 5.6 million shares, while CalSTRS owns about 5.3 million — their actions are more than symbolic. By publicly voicing their displeasure, institutional investors can create a public relations nightmare and even foster changes in corporate governance at companies.

Actions taken by Wal-Mart itself since the unseemly news broke include creating a new Global FCPA Compliance Officer position, though it’s unclear if anyone has been appointed to the post. In a statement issued on April 24, a Wal-Mart spokesman said: “the new position will have responsibility for compliance with the FCPA in every market around the world and will oversee five FCPA compliance directors based in the international markets,” including Mexico.

Last year, the retailer’s annual meeting drew more than 14,000 shareholders and featured Will Smith and the Black Eyed Peas. Indeed, the star-studded, multi-day events at the Bud Walton Arena on the University of Arkansas campus are known for mixing big-name entertainment (lots of American Idol winners and runners up) with management addresses in a celebration of southern culture and capitalism.

No word yet on who this year’s headliners will be, but Wal-Mart’s board and management are sure to be in the hot seat.

Alexandra Biesada

Alexandra Biesada shops everyday, whether she wants to or not, and pines for the days when it was strictly a recreational activity. She has covered the retail beat for Hoover’s since 2001. Follow her on Twitter.

Read more articles by Alexandra Biesada.

Leave a Comment