Wal-Mart Scandal Demands Spirit of Sam Walton

Agenda-Setting Financial Insight.
April 23 2012 12:55 PM

Wal-Mart Scandal Demands Spirit of Sam Walton

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S. Robson Walton, Chairman of Wal-Mart Stores, Inc., willneed to channel his father’s spirit of integrity and initiate an independent probe into how top executives participated in an alleged cover-up of widespread bribery and corruption at the company’s Mexican subsidiary.

Photo by Alex Wong/Getty Images

S. Robson Walton, Wal-Mart’s multi-billionaire chairman, is about to prove money can’t buy happiness. He’ll need to channel his father’s spirit of integrity and initiate an independent probe into how top executives, possibly the chief and another director, participated in an alleged cover-up of widespread bribery and corruption at the company’s successful Mexican subsidiary. It won’t be fun for the son of Wal-Mart’s founder. But the $213 billion company can recover by doing the right thing.

The alleged infractions revealed in an in-depth New York Times investigative report over the weekend are less worrisome than the way the mega-retailer appeared to handle them. Through 2005, the newspaper reported, millions of dollars of bribes were paid by Wal-Mart to fixers, who then sprinkled them around to local officials to remove impediments to Wal-Mart’s growth in the country. Illegal though this may be for a U.S. corporation, it’s not uncommon in Mexico and other parts of the developing world.

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The trouble is that top brass at Wal-Mart’s Bentonville, Arkansas, headquarters had been made aware of the shenanigans and willfully sought to sweep them under the carpet, according to the Times. Among the executives were two current directors, then-CEO H. Lee Scott and his successor Michael Duke, who ran international operations at the time. Current Wal-Mart vice chairman, Eduardo Castro-Wright, ran the Mexican unit.

Rather than root out the problem, Bentonville asked the general counsel of the Mexican business, who allegedly approved the bribes, to investigate, the Times reports. Not surprisingly, the scandal disappeared. Now that it’s public, any attempt to whitewash the charges risks sinking Wal-Mart further into the mire. U.S. authorities are investigating possible violations of the Foreign Corrupt Practices Act, the Times reports.

Walton and his board have only one good option: to get to the bottom of what happened and come clean. The company notes that many of the alleged activities are six years old and do not reflect “who we are and what we stand for”. That may be true. But if Duke and Scott ignored the law, they must go. As Sam Walton once said, “high expectations are the key to everything.” That’s as true in merchandising as it is in ethics.

Read more at Reuters Breakingviews

Rob Cox helped establish breakingviews in 2000 in London. From 2004 he spearheaded the firm's expansion in the U.S. and edited its American edition, including the daily breakingviews column in the New York Times. Prior to joining breakingviews, Rob held senior editorial positions at Bloomberg News in London, Milan, and New York.

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