After the Walmart annual meeting in June, three of the company’s directors will be stepping down from their positions. The exit of Jim Breyer, Michele Burns, and Arne Sorenson will leave Walmart’s Board of Directors will be even weaker and more compromised than it already was.
The board now includes:
Three members of the Walton family: Rob Walton, Jim Walton, and Greg Penner are all members of the family that owns half the company. In addition, CEO Mike Duke and former CEO Lee Scott are also board members, bringing the total of non-independent directors on the board to five.
Former and current company executives who reportedly knew about and mishandled allegations of bribery: According to the New York Times, Rob Walton, Mike Duke, and Lee Scott were all personally made aware of the bribery allegations in Mexico.
And in their roles as chairman of the company, head of Walmart International, and CEO of Walmart, they were in charge as senior management in the company allegedly stymied an internal investigation into the allegations. Lee Scott reportedly reprimanded internal investigators for being too aggressive in their investigation, and then handed over investigation of the allegations was assigned to an executive implicated in the allegations. That executive made a cursory report, after which the matter was considered closed and the company created a new and ineffective internal investigation protocol. Mike Duke was promoted to CEO in 2009 after Lee Scott’s retirement.
Directors who were part of audit committees that failed to meet their oversight responsibilities: Aida Alvarez, Jim Cash, and Christopher Williams are long-tenured members of the board’s Audit Committee: Alvarez has been on the committee since 2008, Cash since 2007, and Williams since March 2005. Williams was on the audit committee when the bribery allegations whistleblower came forward in September 2005, and he has chaired the committee since 2008. The revelation of alleged bribery demonstrates that they failed in their role of ensuring proper internal controls—despite repeated calls from shareholders to beef up compliance standards—and now the company, its shareholders, and its associates are paying the price. In an ironic twist, the outside firm that Walmart hired to conduct its internal investigation into the allegations is reporting to the Audit committee itself, and Walmart is paying Audit Committee members extra money for bribery investigation-related work—work they failed to do the first time around.
Directors with substantial other commitments, possibly preventing them from spending adequate time on their Walmart responsibilities: Marissa Mayer and Tim Flynn have many serious demands on their time, while Steve Reinemund is on three other public company boards in addition to being Dean of Wake Forest’s Business School. Do they have enough time to commit to making Walmart better?
With ongoing federal investigations, executives leaving, labor troubles in stores and in the company’s supply chain, and even failing at retail basics like having enough workers to put merchandise on the shelves and help customers, Walmart’s problems run deep right now. Walmart doesn’t need a board chock full of directors who are compromised because of their personal connections or obligations, or who have previously failed to meet their responsibilities to shareholders. It needs directors who will take the bull by the horns and invest serious time in making Walmart better.