Tension and opposition against Wal-Mart Stores Inc. continues to brew over the retail giant’s bribery scandal recently exposed in it’s Mexican subsidiary.
Monday (May 1) John Liu, comptroller and trustee of New York City pension funds, said his group has invested more than $250 million in Wal-Mart shares and will cast 4.7 million votes against five of company’s directors up for re-election.
“What happened in Mexico is disturbing and these serious allegations could be detrimental to the stock’s long-term value,” Liu said during an interview on CNBC Squawk on the Street.
His organization will oppose the re-election of CEO Mike Duke, board chairman Lee Scott, Robson Walton, Chris Williams and Arne Sorenson saying the company’s audit and compliance committees have failed to be effective for several years at policing internal activity and also squelching internal investigations when improprieties have been reported.
Wal-Mart shareholder and employee Venanzi Luna has gathered more than 7,200 signatures on her online petition calling for resignation of both Duke and Rob Walton amid the scandal allegations.
“Walmart needs to take responsibility for its actions and change its leadership. This company has lost its way and we can’t just stand by do nothing,” Luna said in a telephone interview with The City Wire.
She hopes to get the signatures of 10,000 shareholders who pledge to vote out anyone involved in the scandal. Luna is not a union member but worked in concert with OUR Walmart, which is supported by the United Food and Commercial Workers Union.
Wal-Mart Stores Inc. has more than 3.4 billion shares outstanding and financial analysts say effecting change through a shareholder majority is a daunting task.
First there is the Walton family vote which in total controls 1.62 billion shares or roughly 47% of the company, according to filings with the Securities and Exchange Commission.
James Bell, vice president and portfolio manager with Garrison Financial in Fayetteville, said aside from the family voting block, Wal-Mart is also widely held by thousands of individuals and dozens of institutions. Obtaining a majority consensus would be a chore, he said.
John Taylor, financial advisor with Sterne Agee & Leach Inc. in Fort Smith, said in the past the company has occasionally adopted a few shareholder recommendations not because a majority supported them, but because they made sense or were good for Wal-Mart’s image. He pointed to the company’s major sustainability platform as an example.
He also said proposals linked to union organizations are usually dead on arrival.
With respect to the NYC pension opposition, Taylor said if other large pension groups decide to join the cause, management might have to look at making some concessions.
For perspective it’s important to note that Wal-Mart is one of 81 companies known to be the subject of an ongoing and unresolved Foreign Corrupt Practices Act investigation, according to Richard L. Cassin the creator and principal writer of the FCPA Blog. This list was current through March 31 and based mostly on SEC disclosures.
Tyson Foods settled a FCPA investigation in Mexico last year paying $5.2 million in fines and damages for $90,000 in bribes to plant inspectors in Mexico.