Following the revelation of the bribery scandal last spring, several large Walmart shareholders voiced concerns about Walmart’s governance. New York City Comptroller John Liu, a trustee for the NYC Pension Funds, announced the Fund’s decision to vote against re-electing Walmart directors who were implicated in the bribery scandal. He stated:
“Wal-Mart’s failure to pursue a timely, independent investigation in fall 2005 has potentially exposed the corporation and its shareowners to even more serious financial and reputational harm. Two current inside directors, CEO Michael Duke and former CEO H. Lee Scott, were aware of the allegations and, in Mr. Scott’s case, took affirmative steps to shut down a thorough independent investigation. The audit committee of Wal-Mart’s board of directors failed to ensure adequate internal controls with respect to Wal-Mart’s legal and regulatory compliance, as evidenced by the company’s failure to respond appropriately when the bribery allegations surfaced in 2005.”
Other funds joining the NYC Pension Funds in voting against all or some incumbent board members include CalSTRS, CalPERS, Massachusetts PRIM, and the Illinois State Board of Investment. Two prominent proxy advisory firms, ISS and Glass Lewis & Co., also advocated against reelection of multiple directors. Final tallies after the company’s annual shareholders meeting showed that votes against incumbent directors had increased tenfold over the previous year.