It was only a few breezy spring Sundays ago that the New York Times produced a headline sure to provoke heartburn in Bentonville Arkansas, the corporate HQ for Walmart:
“Vast Mexico Bribery Case Hushed Up by Wal-Mart After Top-Level Struggle”
“Vast,” “bribery” and “hushed up” are four words you don’t want to see topping a front-page story in the Sunday New York Times related to your business practices, even if you are the powerful World’s Largest Retailer, ruler of supply chains and ruthless queller of labor dissent.
The lengthy article dropped the bomb that Walmart de Mexico (called “Walmex”—no kidding) was alleged to have spread around $24 million or so in bribes to make sure Walmart’s presence there expanded at a rate that eclipsed the competition.
The whistleblower who provided the Times more than 50 hours of interviews explains:
“The idea, he said, was to build hundreds of new stores so fast that competitors would not have time to react. Bribes, he explained, accelerated growth. They got zoning maps changed. They made environmental objections vanish. Permits that typically took months to process magically materialized in days.”
Walmart sent in investigators who brought back evidence of the bribery scheme—and then, according to the Times, top-level execs ordered it shushed up and investigations shut down. The company itself is now under investigation on allegations it violated the U.S. Foreign Corrupt Practices Act, which prohibits bribes to foreign government officials.
For a quick Walmart Bribery Scandal primer, take a look at this clip from finance.yahoo.com, with commentators Aaron Task and Henry Blodget having a chat about the scandal.
The piece runs under five minutes and does a great job explaining the bribery accusations and the Who’s Who of Walmart officials implicated. Go to 3:30, and hear the interchange.
It’s “ironic,” Task says, “that for all the heat Walmart has taken over the years for its labor practices, for what it pays its employees, for trying to put mom and pop stores out of business here in the U.S. it’s what they did in Mexico that’s getting them in hot water.”
Blodget observes: “People object to the labor practices and so forth, but Walmart is transparent about those…I think in fact Walmart should take more of its profit and pay its employees and make less money but you say that to a stockholder and they want to shoot you dead because it’s blasphemous.”
Stockholders may have indeed wanted to shoot somebody dead after the NYT piece came out–stock prices took an 8.2 percent dive. But Reuters reports that this week Walmart expects to post its third consecutive quarter of sales growth in U.S. stores and share prices have been climbing—so party on, Walmart stockholders.
The bribery accusations aren’t completely shocking when you look at Walmart’s approach to becoming the World’s Largest Retailer.
While Walmart touts its transparency in posting wage comparisons on its Web site, the company’s figures are far higher than those of the world’s largest independent publisher of U.S. industry research, IBISWorld. The industry research source puts Walmart’s average wage at $8.81 an hour–$18,324.80 for a full-time, no vacation, 52-week year.
One retired Walmart higher-up in his memoir copped to a high-turnover policy as a cost-saving strategy—new-hires get paid at a much lower rate than employees who have been there a while.
Walmart’s command of the manufacturing supply chain enables it to squeeze wages at factories the world over—which it does with gusto. This from a 2003 Los Angeles Times Pulitzer Prize-winning series: “From its headquarters in Bentonville, Ark., the company has established a network of 10,000 suppliers and constantly pressures them to lower their prices. At the same time, Wal-Mart buyers continually search the globe for still-cheaper sources of supply. The competition pits vendor against vendor, country against country.”
We here in the city of Los Angeles have witnessed the corporation do its utmost to barge into L.A.’s market in pursuit of the potential $100 billion market left unclaimed in the nation’s urban centers after the megachain conquered the USA’s rural areas and ‘burbs.
In March, hours before an L.A. City Council vote that would have thrown up roadblocks for a 33,000-square-foot Walmart in Chinatown, Walmart obtained the necessary construction permits. The top L.A. building and safety official delivered the word that Walmart had secured them just the day before.
No one’s saying that there was anything illegal about the Chinatown permitting process. But Walmart’s L.A. moves show you how Sam Walton’s behemoth retailer rolls. Bribery in Mexico would just be a more muscular version of tactics that Walmart has used to expand elsewhere.