Shareholder firms question independence of Walmart board
Two reports released over the past week question how well Walmart’s board is handling an investigation into alleged violations of the Foreign Corrupt Practices Acts (FCPA) by company executives in Brazil, China, India and Mexico.
Institutional Shareholder Services Inc. (ISS) and Glass Lewis & Co., both companies that advise large institutional investors how to vote on corporate ballots, have questioned whether Walmart’s board is independent enough to carry out its duties. The family of Walmart founder Sam Walton currently controls more than half the company’s shares and Rob Walton is the chairman.
ISS, which opposes the re-election of Mr. Walton and former CEO Michael Duke to the Walmart board, issued a statement via Bloomberg News that the company has "failed to make progress in providing meaningful information to shareholders about any specific findings on the FCPA-related investigations and whether executives will be held accountable for related compliance failures."
Walmart spokesperson Randy Hargrove defended the company’s FCPA investigation and said it is cooperating with the Department of Justice. "We don’t have a timeline for when the investigation will be completed, but we haven’t waited to act," Mr. Hargrove told Bloomberg. "The board has authorized whatever resources are necessary to get to the bottom of the matter."
A union-backed group, Organization United for Respect at Walmart (OUR Walmart), has also asked shareholders to vote against Mr. Walton’s re-election and support an independent chairman. A letter signed by three Walmart associates points to a series of internal control and legal compliance issues over the time Mr. Walton has been chair.
"Recent breakdowns have included violations of environmental standards in California, the largest-ever complaint against the company by the National Labor Relations Board, and, most troubling, the global corruption scandal involving alleged bribery of foreign officials in violation of the U.S. Foreign Corrupt Practices Act that the company admits will cost more than $600 million by the end of the current fiscal year."
ISS has also taken issue with Walmart’s executive compensation practices. According to The Wall Street Journal, the firm, which supported the retailer’s pay practices in the past, has issues with changes it believes prop up executives’ earnings, even when performance dips. ISS said the steps taken by the company have come at a time when its "performance continues to lag peers."
- Wal-Mart Board Criticized by ISS – The Wall Street Journal (sub. required)
- Wal-Mart Draws New Rebuke From Advisory Firms Over Probes – Bloomberg News
- 2014 OUR Walmart Shareholder Letter – Scribd.
- Walmart Workers Launch Effort To Unseat Rob Walton As Chair – Forbes
Is Walmart’s board of directors any more or less independent than those of other large companies? What is your assessment of how well or badly Walmart has handled the FCPA issue and others of interest to shareholders?