(The author is a Reuters Breakingviews columnist. The opinions expressed are her own.)
By Agnes T. Crane
NEW YORK, May 25 (Reuters Breakingviews) - Wal-Mart (WMT.N) shareholders can make their votes count at next week’s annual meeting – even if mainly as a protest. With half the votes sewn-up by the Walton family, directors tainted by the retailer’s Mexican bribery scandal are probably safe in their seats. But investors disturbed by Wal-Mart’s cover-up of the affair should make their displeasure known just the same by targeting Chairman Robson Walton himself.
Walton holds the real and symbolic power at Wal-Mart. He’s the son of founder Sam Walton, whose legacy he has pledged to honor. He also heads the family that controls half of the company. A no-confidence vote in his leadership would send a message to the board that actions that may have violated the Foreign Corrupt Practices Act, as some evidence and allegations suggest happened as Wal-Mart pursued its Mexican expansion, are not acceptable. True, the number of nays will have to be large - say more than half of minority stakeholders - for the protest to resonate. That would make for some 26 percent of all shares.
Zeroing in on the chairman doesn’t mean other board members should get off scot-free. Chief executive Mike Duke and his predecessor Lee Scott were allegedly aware of the palm greasing south of the border between 2002 and 2005, according to a report last month in the New York Times that Wal-Mart has not denied. Those calling for directors’ heads – including The New York City Comptroller, California public pension funds and proxy advisers Glass Lewis and ISS - all agree they should go. Other targets include Christopher Williams, who chairs the audit committee and allegedly brushed off investor concerns about a “cavalier attitude toward legal compliance at the highest levels of management” back in 2005.
But since shareholders only can make a symbolic gesture, it might as well be one that punches by targeting Walton. That’s a far preferable course to giving up on the company, as the stock’s performance since the bribery allegations were first aired illustrates – it’s now at a 12-year high. Wal-Mart’s retail dominance isn’t likely to be derailed by scandal. But strengthening its governance will only make it a better investment.
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- Wal-Mart shareholders will meet at the Bud Walton Arena at the University of Arkansas, Fayetteville, Ark for its annual meeting on June 1.
- The California Public Employees’ Retirement System and sister state pension fund the California State Teachers’ Retirement System, the New York City Comptroller on behalf of its public pension funds, and proxy advisers Glass Lewis and ISS have recommended shareholders vote against some or all of the board members for their handling of the bribery scandal at the retailer’s Mexican operation.
- Directors of the board are elected by majority vote. The Walton family owns nearly 50 percent of the shares. Wal-Mart shares currently trade around $64.5 – a 12-year high.
- NY Comptroller Letter: link.reuters.com/kuk48s
- Reuters: CalPERS to vote against 9 Wal-Mart board members [ID:nL1E8GN7D1]
Ay caramba [ID:nL3E8FN7J9]
Greasy palms [ID:nL2EFNBYE]
- For previous columns by the author, Reuters customers can click on [CRANE/]
(Editing by Richard Beales and Emily Plucinak)
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