Sam Walton would be spinning in his grave,” ventures the taxi driver as we cruise through the lush Arkansas countryside towards Bentonville, spiritual and administrative home of Wal-Mart, the biggest company on earth. Over the course of two days last week, as the retailer hosted its annual shareholder conference, this view about Wal-Mart’s charismatic founder is proffered time and time again in hotel bars and restaurants, often in hushed tones.
The past 12 months have brought a whirlwind of bad publicity and internal soul-searching for Wal-Mart. It has been attacked for paying low wages, aggressively fighting unions (when a store in Quebec gained union recognition recently, the retailer swiftly shut it down) and criticised for poor benefits packages for staff.
It is also facing a class action sex discrimination lawsuit; has recently settled government claims that it repeatedly broke child labour laws; and paid $11m to settle a federal inquiry that found legions of illegal immigrants working as cleaners in its stores.
Added to that, suppliers have complained both publicly and privately that trading terms with Wal-Mart are bleeding them dry as the retailer pushes ever harder for deals to support its ‘Always Low Prices’ promise to shoppers. Some even hold the retailer directly responsible for causing them to go bust. Meanwhile, former vice-chairman Tom Coughlin, a protégé of founder Sam Walton, is under criminal investigation for allegedly faking $500,000 of expenses.
In the days leading up to last week’s conference a leading pressure group - the Center for Community and Corporate Ethics - was gaining many newspaper column inches for sparking up an automated phone message campaign in the company’s own backyard. It was asking any disgruntled Wal-Mart employees to spill the beans on “wrongdoing” within Wal-Mart.
The day before the famous annual jamboree,with some 20,000 shareholders and hand-picked frontline Wal-Mart ‘associates’ from around the globe, including 200 or so from Asda, were due to pack into the Bud Walton Arena at the University of Arkansas (named after Sam’s brother and company co-founder), six protesters in their 20s were arrested for trying to hang anti Wal-Mart posters outside the arena.
To add insult to injury, both these events were given high-profile coverage in the souvenir edition of The Benton County Daily Record, in which delegates, including influential shareholders, could paw over no fewer than eight sponsored editorial pull-out sections extolling the company’s virtues.
Quite what the late ‘Mr Sam’, as the locals call him, would make of all this hullabaloo will obviously never be known, but that does not stop commentators from all walks of life from trying to second-guess him posthumously. “He would have hated it,” offers one supplier. “What the company has turned into is not what it was all about. Sam was just a normal guy who came up with this great business idea that would help millions of ordinary Americans afford basic stuff. Sure, he was in it to make money, but it wasn’t just about that. Even his ranch wasn’t that spectacular, even though he was possibly the richest man in the world.”
Indeed, the man who was once pictured having his hair cut at the barber shop in Bentonville for a national US business magazine under the headline ‘A $5 haircut for a $5bn head’ is still held in great affection by his fellow townsmen. It is difficult to say quite how accurate this view is of the man who grew Wal-Mart from a single general merchandise store into a multi-billion dollar empire. But it is still believed.
What is certainly not up for question is the current retail domination that Walton, who died in 1992, set in motion when he opened the first stores in 1962. Today, the company employs 1.7 million people worldwide, has 3,744 stores in the US and another 1,606 in nine countries, including 290 Asdas in the UK. Group sales reached $288bn last year and profits rose to $10.3bn.
“What Sam set in motion was incredible,” says another supplier on the eve of the conference - which turns out to be an extravagant, Wal-Mart ‘whoop’-ing affair with entertainment, between the serious bits, from rocker Jon Bon Jovi and country & western star Garth Brooks. “Just look at this,” says the supplier, pointing towards Bentonville where Wal-Mart has its base. “This was total Hicksville until Sam came along, and still is in many ways, but look at the pulling power this company has. Investors from all over the States and Wal-Mart workers from all over the globe have come for this conference. Whichever way you look at it, you have to admit that’s pretty impressive.”
However, the same supplier who stands in such admiration of the retailer also admits it nearly broke his top 500 fmcg company - and still could. “Wal-Mart has been responsible for making big companies out of small brands, just because of the sheer size of its buying power and its number of stores. But fall out of favour and there’s only one way to go - down.”
Wal-Mart now openly admits that it has been slow on the damage-limitation front after initially thinking it could ignore its critics. Staff from minor management upwards now appear to have the favourable facts learned by rote. If you go to any part of the Wal-Mart US empire, you can guarantee that the same facts and figures will be quoted again and again, including how 38% of management positions are now filled by women (compared with the national average of 35%) and that the proportion of workers from ethnic minorities also beats the 30% national average, albeit only just. How more than seven out of 10 Wal-Mart store managers started with the company as ‘hourly’ workers such as checkout staff and shelf stackers is another favourite, as is its donation of millions of dollars to good causes.
Putting on a brave front at this year’s jamboree, chairman Rob Walton, son of the legendary Sam, declared that the management would be held accountable for “holding true to the principles on which this company was founded, of integrity and mutual respect” and added: “Every one of our actions, good or bad, is scrutinised and much more is expected of us than just running good stores.”
These may have sounded like the right words to dish out to the disgruntled elements in the conference audience but few could have missed Walton’s wry smile as he reported that a series of motions put forward to a shareholder vote, including a demand for only performance-related awards for senior management, had been overwhelmingly defeated.
Former CEO and chief executive David Glass expressed his amazement at some of the things being said, including stories about how the company strangled local business and suppliers. “That is the furthest thing from the truth,” he claimed.
Final word then went to current president and CEO Lee Scott who, among other issues, sought to smooth over a faltering share price as investors get jittery. He also had a rally cry for workers: “You had better be ready to be better because your company is the focus of one of the most well-organised and well-financed corporate campaigns in history. This means that your company and you as an individual are going to be judged at a higher standard than other companies and other individuals.”
Nice words, but will they really help Wal-Mart fight its enemies?