Wal-Mart's Culture of Crime and Greed

The Beast of Bentonville (better known as Wal-Mart) is grappling with a spate of management dismissals and investigations over the past few months that appear rooted in internal petty thievery. But rather than a few bad apples being rooted out, it's clear that crime, greed, wrongdoing, malfeasance and cronyism are deeply embedded in the Wal-Mart business model. Indeed, Wal-Mart could not survive without manipulating the system and breaking the law.

In case you didn't catch it, Thomas Coughlin--a former vice chair of the company and at one time a potential future CEO candidate--was forced to resign from the board because of, as the British Financial Times reported on its front page, an "alleged unauthorized use of corporate-owned gift cards and personal reimbursements that appear to have been obtained from the company through the reporting of false information on third-party invoices and company expense reports. The amount in controversy is estimated to be in the range of $100,000 to $500,000." Translation: the guy padded his expense accounts.

In the current investigation, three other employees, including a company officer, were also dismissed.  And back in December, three other executives and four employees were fired for violating "unspecified" company rules. I would venture to guess that those rules had nothing to do, for example, with treating workers badly (that kind of conduct actually calls for a promotion at the Beast of Bentonville, or at least a one-time visit to the company's executive washroom) but with other financial wrongdoing.

But why should this be surprising? The culture of Wal-Mart encourages and condones misbehavior among its leaders every day. Let me tick off just the highlights--or lowlights, as the case may be.

Less than two weeks ago, the Beast paid $11 million to settle charges that it used hundreds of illegal immigrants to clean its stores. In February, those nice family-values people from Bentonville agreed to pay a pathetic $135,000 and change to settle charges of child labor violations. Think about it: a corporate culture that tolerates endangering children. As an aside, when the child labor deal was announced, I wrote that the level of the fine was scandalous; the whole sweetheart deal is now under investigation by the Department of Labor's inspector general.

Wal-Mart is facing the largest gender discrimination lawsuit in history--involving 1.5 million women. I hear the company is deeply engaged in talks to settle the case for obvious reasons: it's guilty as hell. The depositions in the lawsuit, detailed in Liza Featherstone's new book, Selling Women Short, make it crystal clear that the company, as a matter of policy, consistently broke the most basic laws of workplace equality.

Not enough? Workers have been illegally fired for trying to form a union, and Wal-Mart spends millions to thwart workers' basic rights, giving its union-breaking staff priority on resources (like corporate jets) over even higher-placed managers. In 2000, meat cutters at a Wal-Mart in Texas voted for the union--and Wal-Mart promptly violated the law by shutting down the meat-cutting department in the store and, for good measure, closing every other meat-cutting department in 180 other stores, just to make sure they had stamped out any smell of unionism. Even the National Labor Relations Board--no friend of labor--saw through the company's actions and charged the Beast with illegal behavior.

And, to top it off, the Beast's business model could not operate without the connivance of the authoritarian regime in China. You probably never heard of a guy named Wang Jun, but he's one of Wal-Mart's main men in China. Aside from being involved in a company called Poly Technology, which is the weapons-trading arm of the People's Liberation Army, Jun runs a Chinese state-sponsored investment company and ensures that Wal-Mart's wishes are known and satisfied by those running the Communist Party. In China, Wal-Mart has a ready supply of underage children and under-waged adults to produce its products. The point here is that Wal-Mart is no free-market miracle: Its profits are a result of an artificial suppression of wages. Wal-Mart could not operate in a truly free market--if such a thing even existed. Instead, Wal-Mart is in cahoots with the Chinese government, raking in profits by condoning the violation of basic international labor standards. 

Greed is a theme with the Wal-Mart family. The family, worth a combined $95 billion, has given a stingy one percent of its wealth to charity. By comparison, Business Week, writing about Bill and Melinda Gates in a November cover story on the country's philanthropists, observed that the Gates made "history this year by giving their estimated $3 billion Microsoft Corp. dividend to their foundation. It's one of the largest donations in history by a living donor. To put it into perspective, that one gift is three times bigger than the amount that America's richest family, the descendants of Wal-Mart Stores Inc. founder Sam Walton, has given during their entire lifetimes." [Emphasis added]

The company's reaction to this record of law-breaking has been predictable: It's just a public relations problem--the standard response at a company that has built its image on myths. CEO Lee Scott, backed by millions of dollars of advertising on television and in print publications like The New York Review of Books, recently embarked on a public relations tour. Speaking in Los Angeles, he told business leaders, "We've got nothing to apologize for."

When you see all the law-breaking, malfeasance and greed around you, and your corporate leader thumps his chest in pride, a natural human reaction might be, "Where's my taste here? If my company routinely violates the law or runs right up to the edge of the law at every opportunity to squeeze out more profits, what's a few hundred thousand dollars in inflated expenses, morally speaking?"

Coughlin and the other management schlubs who have been shown the door are not anomalies. They are a reflection of a culture stretching back to Sam Walton himself--a man who was a classic bully, willing to trample on the little guy and make a profit off of the poverty of millions of people. That's the Wal-Mart way.

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