With the departure of three independent directors and Walton family ownership of the company crossing the 50 percent threshold, Walmart investors are expressing increased concern about the strength and independence of Walmart’s Board of Directors.
That’s a reasonable concern given the multitude of problems the company faces: an alleged bribery scandal that top executives were aware of and grossly mishandled, mounting costs related to investigation of said bribery scandal, failing at Retail 101-level duties like keeping shelves stocked, earnings weakness, human rights disasters in the supply chain, and persistent strikes by workers in its U.S. stores. Typically, in a time of crisis, the right thing to do is bring on strong, independent leaders to do some major problem-solving, beef up oversight, and steer the company back on track.
But instead it looks like the board and the Walton family are doing the exact opposite. There will be fewer independent directors. (Most of the “independent” directors actually have financial connections to the company, and shareholder advisory firm Glass Lewis has called on Walmart to increase its disclosure of these connections.) And they’re sticking with board members who failed in their role of ensuring proper internal controls, rebuffed repeated calls from shareholders to beef up compliance standards, and have too many other commitments to properly take on leadership role at Walmart.
What’s the potential fallout from these choices? As a Kantar Retail analyst told Bloomberg, a weak board may be less vigorous in addressing the challenges the company faces: “When [a company] is that closely held, they could end up doing less risk-taking and just care more about safe returns.” That’s great news for the Walton family—they rake in billions of dollars in dividends each year, and the Board of Directors just voted to increase dividends by nearly 20 percent—but it’s bad news for shareholders, and Walmart associates who want to see change at the company.