Checking in with the Beast of Bentonville...it's shareholder meeting time for the Beast. And a few people are asking the Beast to try to clean up its act. Check out this story from the Wall Street Journal today:
Wal-Mart Urged to Review Controls
Press For Study of Its Standards On Regulation and Laws
By JAMES COVERT DOW JONES NEWSWIRES June 2, 2005
A group of institutional shareholders called on Wal-Mart Stores Inc. to review its legal and regulatory controls, citing recent lawsuits over the company's employment practices and a scandal over a top executive's alleged expense-account abuses.
"Recent reports of legal and regulatory non-compliance raise serious concerns about the adequacy of the company's controls," New York City Comptroller William C. Thompson Jr. said in a May 25 letter to Roland A. Hernandez, who chairs the audit committee on Wal-Mart's board.
The letter, which also was signed by the heads of the Illinois State Board of Investment and two British investment funds, calls for Wal-Mart's board to form a special committee to conduct a "comprehensive review" of the company's legal and regulatory controls, "as well as its internal system for ensuring compliance with its own policies and standards."
The shareholders, who collectively own nearly 11.5 million Wal-Mart shares valued at nearly $550 million, are asking that the board publish its findings and recommendations by December.
"We have received the letter; the audit committee will review it and will respond appropriately," said Marty Heires, a Wal-Mart spokesman.
News about internal lapses at Wal-Mart have endangered the confidence of shareholders and exposed the company to legal liability, the shareholders said. They cited a federal-court decision that gave class-action status to a sexual-discrimination suit. The suit represents 1.5 million current and former female employees.
The shareholders also point to Wal-Mart's $11 million settlement with the U.S. Department of Justice this year over charges that it knowingly hired contractors that furnished illegal immigrants to clean its floors, and a settlement with the U.S. Labor Department for violations of child-labor laws in three states.
"It used to be that we had to go to a third-world country to find this kind of exploitation," said Ed Smith, chairman of the Illinois State Board of Investment. "Now, I am appalled and embarrassed to find these practices at Wal-Mart, one of our holdings."
Karina Litvack of F&C Asset Management PLC in Britain added that Wal-Mart may have weakened its internal controls when it fired an employee who spoke out in the expense-accounting abuse case surrounding Wal-Mart's former vice chairman Thomas Coughlin. "Independent directors need to demonstrate to shareholders that Wal-Mart hasn't built an ostrich culture -- where employees are better off sticking their heads in the sand than speaking up," Ms. Litvack said.
The shareholder group didn't submit a proxy resolution for Wal-Mart's annual meeting to be held tomorrow, because it wanted to give the company time to respond. "If we are not satisfied by the response, I imagine we might take additional steps -- including a shareholder proposal next year," said Kenneth Sylvester, assistant comptroller for pension policy in the New York City Comptroller's Office.