Lack of accountability at Walmart highlighted by Target resignation

Target announced the resignation of its Chief Information Officer yesterday.

The news comes about two months after revelations that hackers exploited weaknesses in Target’s information technology infrastructure to steal a massive trove of customer data during the holiday shopping season.

Apparently, some mega-retailers believe accountability extends to high-ranking executives.

Alas, that’s not the case at Walmart.

In April 2012, The New York Times reported on well-documented allegations of a massive bribery scandal at Wal-Mex – the company’s Mexican subsidiary – and a subsequent cover-up by top executives in the U.S.

Two years later, the proverbial heads have yet to roll.

The bribery allegations reported by the Times, if proven true, would represent violations of both Mexican law and the U.S. Foreign Corrupt Practices Act (FCPA), with potentially significant penalties or settlement costs. These allegations are currently the subject of a Department of Justice investigation.

This is serious – and expensive – business. Through FY 2014, Walmart has spent $439 million on its own internal investigation and a global compliance review. The company expects to spend another $200 to $240 million in FY 2015, and has acknowledged the possibility of further revelations of illegal activity.

Given the enormous expense, the reputational damage, and the negative implications for overseas growth, shareholders might reasonably expect aggressive action by the Walmart board of directors to hold the responsible parties accountable.

One of the executives the Times identified as having knowledge of the bribery is Mike Duke. Duke was head of Walmart International and a member of the Wal-Mex board of directors in 2005/6 when the bribery allegations came to light inside the company. He recently retired as CEO and landed gently on the company’s board of directors, where he serves alongside his predecessor as CEO, Lee Scott.

According to the Times, it was then-CEO Scott who in January 2006 “rebuked internal [Walmart] investigators for being overly aggressive” and directed that the investigation be placed under the control of Wal-Mex executives who had themselves been implicated in the illegal bribery.

Scott and Duke are just the highest-ranking members of a larger group of current and former executives who have been implicated in alleged wrongdoing (the original Times piece provides a pretty handy reference guide to the key players).

Let’s briefly return to the contrast between Walmart and Target with respect to executive accountability.

At Target, the Chief Information Officer resigned within months of a data breach that revealed serious problems within the executive’s area of responsibility – but no suggestion of criminal activity on her part.

More than seven years ago at Walmart, top executives allegedly suppressed evidence of criminal activity and failed to report that activity to authorities, which would itself constitute a criminal violation. In the years that followed, executives allegedly responsible for both the original criminal activity and the alleged cover-up have received major promotions and/or been allowed to retire gracefully. And although the company is being forced to spend more than $600 million to clean up the resulting mess, executives allegedly at the center of the FCPA scandal continue to serve in high places.

The evident lack of accountability at Walmart should raise questions about the willingness of the board of directors – beginning with long-time Chairman Rob Walton – to act on serious governance problems. And it must be noted that Walton was himself the recipient of an anonymous email in January 2006, alleging corruption by certain Wal-Mex executives.

Rob Walton should have used his chairmanship and his position as the leading representative of Walmart’s majority shareholder (the Waltons) in order to effect a clean sweep of the executive ranks. Yesterday’s news from Target is a stark reminder of his failure to do so.

What do you think?