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Investors' letter to Wal-Mart (PDF) New York City Comptroller's press release
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Institutional
shareholders concerned over non-compliance with laws and regulations: Wal-Mart should appoint independent committee to review controls Wal-Mart's board should appoint a special committee of independent directors to do a review of the retail giant's legal and regulatory controls. This is the demand put forward by a group of large institutional investors, who control well over 500 million USD worth of the company's stock. Wal-Mart's share prices have dropped 20 per cent in the last year. Today's (03.06.2005) shareholder meeting is therefore not necessarily going to be an easy ride for CEO Lee Scott and the rest of the Bentonville management. The investors' group is comprised of New York City Comptroller William C. Thompson, Jr., who is the investment adviser to the 85 billion USD New York City Pension Funds; Edward M. Smith, Chairman of the 10.8 billion USD Illinois State Board of Investment; Karina Litvack, Head of Governance & Socially Responsible Investing of F&C Asset Management, with 250 billion USD under management; and, Jason Fletcher, Americas Equity Manager of the 36 billion USD UK University Superannuation Scheme. They collectively represent holdings of 11,455,206 shares of Wal-Mart common stock, with an estimated market value of USD 545,840,565. - As shareholders, we are deeply concerned about potential contingent liabilities and negative effects on the company's stock price and reputation, the investors write to the chair of Wal-Mart's Audit Committee Roland A. Hernandez. - Accordingly, we urge the Audit Committee of the Board of Directors to establish a special committee of independent directors to conclude a comprehensive review of the company's legal and regulatory controls, they say. Non-compliance with laws and regulations are far too commonplace The investors' group tells Wal-Mart that "recent reports of legal and regulatory non-compliance raise serious concerns about the adequacy of the company's controls." They add that "the frequency of the reports suggests that non-compliance with internal standards, as well as with laws and regulations, may be far too commonplace at Wal-Mart." - Immigration and Customs Enforcement raided 60 Wal-Mart stores as part of an investigation that resulted in this year's $11 million settlement of charges that Wal-Mart exploited undocumented immigrants, the investors said, reminding management also about how the company was recently caught also for child labour violations in three US states. - In 2004, a federal court certified a national class action sex discrimination lawsuit on behalf of over 1.5 million current and former female employees, they added. Also the circumstances under which Wal-Mart Vice Chairman Thomas Coughlin resigned has raised concern with the American and British investors. They say that this has "bolstered public perception of a culture of non-compliance and disregard for ethical standards within the ranks of Wal-Mart's management." Reimbursement for anti-union activities, possibly involving bribes - Wal-Mart claims that Mr. Coughlin abused his expense account up to $500,000 in questionable transactions over a five-year period. Mr Coughlin explained that he filed false invoices to obtain reimbursements for anti-union activities, possible involving the payment of bribes, the investors say, before expressing concern over the dismissal of the vice-president who reported on Mr. Coughlin's "questionable transactions". Compliance breakdowns do not only create legal liabilities, but also harm the corporate image, and are of significant concern to shareholders, as well as damaging to employee morale, Wal-Mart is told. - Corporate responsibility is a valuable asset to shareholders, and Wal-Mart's reputation has interfered with our company's growth. For example, Wal-Mart's reputation has impeded its ability to open new stores in various local communities, including New York City and Inglewood, California. British investor says "reputation issues can very much hurt the company" One of the two British signatories to the letter is Karina Litvack, head of governance at F&C. She told BBC News this morning that "all of the scandals that erupted ... were clearly a result of a breach of ethics". - The company recently has encountered real difficulties in expanding and creating new stores ... reputation issues can very much hurt the company," Ms Litvack said to the BBC News. Ken Sylvester, New York's assistant comptroller agrees: There's just too much coming out of Wal-Mart," he says in a MarketWatch report yesterday. "We would like to know where the board stands on all of this and if it's actively doing oversight as it should." "We don't have any idea," Sylvester added.
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