Could This Be the Beginning of the End for Wal-Mart?
Wal-Mart (NYSE:WMT) land deals and building permits all across the country are being questioned and investigated by regulators, lawmakers, and area residents in light of the bribery scandal involving the retailer’s Mexican subsidiary.
Hostility toward Wal-Mart and its developments is nothing new, but the revelation that the company was complicit in the bribery of city officials at its Mexican subsidiary, Wal-Mart de Mexico, has led communities from coast to coast to take a closer look at the company’s business practices.
In New York, for example, the City Council is investigating a possible land deal with the retailer’s developer in Brooklyn. In Boston and its suburbs, residents are pressuring politicians to disclose whether they received campaign contributions from the big box retailer. Three thousand miles away in Los Angeles, a Wal-Mart building permit is getting a second look, while a state senator in California is pushing for a formal audit of a proposed Walmart store in San Diego. All of these inquiries began after The New York Times last week disclosed that Wal-Mart Stores Inc. had found and buried evidence that its biggest foreign operation had paid bribes.
Having largely saturated suburban and rural areas in the U.S., Wal-Mart has been focusing on building stores in the nation’s biggest cities, which requires it to navigate a lot of red tape. Over the past few years, Wal-Mart has smoothed the way with donations to politicians and local nonprofit organizations. Now many critics are asking whether, in at least some of those cases, it went too far.
For years there has been opposition to new stores, in large part because small store owners and complained they would be put out of business by the company’s low prices, and now the scandal is giving Wal-Mart’s existing critics new ammunition in their fight to block expansion plans, while adding to their numbers.
But despite the backlash, a Wal-Mart spokesman said the company would not change its pattern of giving to politicians and non profits in areas where it wants to open stores. “We are proud of the work our foundation has done,” said Steven Restivo. “We support those who stand for issues that are important to our customers, associates and shareholders in the areas where we do business. When we make political contributions, we do so in an ethical, legal and transparent way.”
While the company claims its contributions are, in part, meant to benefit its employees, labor unions have for years accused the retailer of not paying fair wages, while many female employees have claimed discrimination. And while the company claims charitable donations were meant to help customers and community, many have accused the company of being a major polluter and hurting local businesses, only to pick up and leave, abandoning stores after only a few years and leaving many people jobless.
For all those reasons and more, Wal-Mart has for years been denied entry into city after city. But the company slowly began to remedy its reputation about seven years ago. Executives met with activists to improve labor and healthcare records, to outline an aggressive energy conservation plan, to bring fresh, affordable food to underserved areas, and to develop initiatives to help promote female workers.
Now it looks like a lot of that work will be lost. According to the Times report, at the same time H. Lee Scott Jr., a board member who was then Wal-Mart’s chief executive, began efforts to improve the company’s reputation in the U.S., he also helped keep quiet the company’s internal bribery investigation in Mexico.