What went wrong in 2012: Systems Failures at Walmart

Failures of Internal Oversight:  Massive Scandal Exposed; Federal Investigation Continues

  • New York Times publishes damning expose alleging a $24 million bribery scheme and an executive-level cover-up in the company’s Mexican division. A federal investigation is ongoing. Internal Walmart emails obtained by the House of Representatives’ Committee on Oversight and Reform suggest that Walmart executives were fully aware of the scandal as early as October 2005: CEO Mike Duke, then the head of Walmart’s International division, received a detailed report about the allegations—labeled “IMPORTANT”—from Walmart’s top lawyer on October 15, 2005. The NY Times reporting also revealed that Board Chair Rob Walton had substantial prior knowledge of the alleged illegal activity and was a member of the internal committee that approved the project most clearly linked to the bribery.

Current and former members of the Audit Committee, including Directors Aida Alvarez, Michele Burns, Christopher Williams, Arne Sorenson, and James Cash clearly failed in their role to ensure proper internal controls. The company, shareholders, and the public are now paying the price. Ironically, the so-called independent, outside firm hired by the company to conduct Walmart’s own investigation into the scandal is now reporting to the Audit committee itself – the same people implicated in the scandal.

Failures of Domestic Store Management:

  • Walmart Store Associates Launch Historic Strikes: Walmart associates across the country have been calling for respect on the job, but have faced management retaliation for speaking up. In response, Walmart workers struck in October. On Black Friday and the days leading up to it, Walmart associates again struck to protest the company’s attempts to silence worker activists. Associates and community allies organized nearly 1,200 actions nationwide in support of striking workers.

Failures of Domestic Monitoring Systems: Workers expose abuses in domestic supply chain

  • Warehouse Workers Strike Against Retaliation: Workers in Walmart-controlled warehouses in California and Chicago blew the whistle on dangerous working conditions and wage theft, only to face retaliation from management. Late last year, Walmart was added as a defendantin a lawsuit alleging wage theft from warehouse workers.
    Guestworkers in Louisiana Strike Against Forced Labor: Mexican guestworkers at Walmart seafood supplier CJ’s Seafood struck against slavery-like conditions. The New York Times’ editorial entitled “Forced Labor on American Shores” affirmed, “When companies force suppliers to slash costs, corners will be cut and workers will be abused.” After massive public outcry, Walmart suspended CJ’s as a supplier.

Failures of International Monitoring Systems: Human rights disasters in international supply chain 

  • 117+ Killed in Factory Fire; Walmart’s Responsibility Increasingly Clear:  In November, at least 117 workers were killed in a factory fire in Bangladesh. Walmart’s refusal to confirm its connection to the factory was swiftly debunked by photos of Walmart-brand apparel in the ashes of the fire. The New York Times reported that Walmart officials had played a key role in blocking efforts to upgrade fire and electrical safety in the nation.
  • Thai Shrimp Workers in “Debt Bondage”: In April, workers at Thai shrimp farms supplying Walmart went on strike, protesting low wages, inadequate toilet access, and substandard housing. Human Rights Watch reported that working conditions were akin to debt bondage: after paying company “fees,” workers struggled to afford food, and management seized workers’ identification documents so that they could not leave. This is proof that Walmart’s own “Ethical Sourcing Audit Process” has proved inadequate in ensuring safe, decent working conditions for workers in the Walmart supply chain.

What do you think?