Wal-Mart

Wal-Mart Stores, Inc. {{nyse|WMT}}, founded by Sam Walton in 1962, is the largest retailer and the largest company in the world based on revenue. For the fiscal year ending January 31, 2005, Wal-Mart reported net income of US $10.3 billion on US $285 billion of sales revenue (3.6% profit margin). If Wal-Mart were its own economy, it would rank 33rd in the world, with a GDP between those of Ukraine and Colombia. It is the largest private employer in the United States, Mexico and Canada. It holds an 8.9 percent retail store market share— $8.90 out of every $100 spent in U.S. retail stores is spent at Wal-Mart.

Criticism

Critics argue that a large portion of Wal-Mart's financial success is due to business practices harmful to employees, the community, the economy, and the environment. Specific areas of controversy include the company's product selection; treatment of suppliers, competitors, and employees; impact on local communities, and effects on world trade and globalization.

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In 2005, Wal-Mart officials made public statements and embarked on a campaign to counter some of the criticism through a web site, walmartfacts.com.

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Dumping

Five Rivers Electronic Innovations is located in Greeneville, Tenn. It employs more than 700 workers, and is the last American-owned color TV maker in the U.S.

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In May 2003, Five Rivers filed an anti-dumping petition in Washington, charging that color television makers in China were illegally dumping their larger-sized color sets in the U.S., thereby threatening to put Five Rivers out of business. The company tracked TV imports from China and found that sales of the Chinese televisions skyrocketed from just over 50,000 sets in 2001 to 1.5 million sets during the first nine months of 2003.

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In May 2004, the International Trade Committee unanimously agreed that the surge of these imports from China had injured Five Rivers, and then imposed duties averaging about 23 percent on these sets.

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Wal-Mart, standing to lose money if Five Rivers was successful, filed a brief in support of the Chinese suppliers during the hearing, since then it has come to the aide of several other Chinese companies found guilty of dumping. http://www.pbs.org/wgbh/pages/frontline/shows/walmart/china/trade.html

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Opposition to unions

In 1970, Sam Walton fended off an organizing push by the Retail Clerks Union in two small Missouri towns by hiring a professional union buster, John Tate, to lecture workers on the negative aspects of unions. On Tate's advice, he also took steps to win his workers over, encouraging them to air concerns with managers and implementing a profit-sharing program.

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A few years later, Wal-Mart hired a consulting firm named Alpha Associates to develop a "union avoidance program." Martin Levitt, the consultant who worked on the program, says that Wal-Mart does "whatever it takes to wear people down and destroy their spirit." Each manager, he says, is taught to take union organizing personally: "Anyone supporting a union is slapping supervisor in the face." http://www.motherjones.com/news/feature/2003/03/ma_276_01.html

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Wal-Mart aggressively, and sometimes illegally resists unionization efforts brought forth by their employees. Wal-Mart has fired workers and has closed stores and departments after workers have voted to unionize, the company also shows anti-union videos to all new employees. So far, only a few North American stores have successfully voted to unionize, of these, at least one (Jonquière in the province of Québec) was closed within one year. Wal-Mart denies that the vote in favor of unionization was the motive for their actions, however the Quebec Labor Board has ruled that this closing was made to punish workers for excercising their right to organize, and has ordered that Walmart pay the workers just compensation, the board will determine the "appropriate remedies" for the former employees at a later time.

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In a separate ruling, the labor board rejected Wal-Mart's request to turn over the names of all employees who signed up to unionize in some of their other stores. http://www.ufcw.org/issues_and_actions/walmart_workers_campaign_info/news/exworkerswin.cfm

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Wal-Mart had an illegal section of its anti-handbilling/anti-solicitation policy that said that workers were not allowed to meet with union representatives or recieve union literature while they were off-the-clock and in a non-sales area, Wal-Mart amended this policy in an informal settlement with the National Labor Relations Board http://www.nlrb.gov/nlrb/shared_files/admemo/admemo/4-CA-32391(11-19-03).htm

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Wal-Mart managers have a policy of calling the police and having union organizers arrested, for trespassing, in order to have them removed from the premises. http://www.nlrb.gov/nlrb/shared_files/admemo/admemo/z072502_walmart.asp

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Wal-Mart has maintained books to be passed out to its management, describing how to bust a union organizing attempt, one that leaked is titled "Labor Relations and You, at the Wal-Mart distribution center", and was prepared by a professional union buster named Orson Mason.

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Wal-Mart maintains a "Labor Relations Hotline" for managers to call if they suspect union activity.http://www.ufcw.org/issues_and_actions/walmart_workers_campaign_info/relevant_links/anti_union_manuals.cfm

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Wal-Mart has an anonymous survey given to each one of its employees, called "Grassroots", the purpose of this survey is to let them calculate a Union Probability Index number for each facility, that tells them how likely a union is to form there, they also have a 60 x 60 foot room at their corporate headquarters in Bentonville, Arkansas where it employs people to listen in on telephone calls and e-mails at these facilities, looking for people speaking about unionization, if a union is likely to form, Wal-Mart flies a team of professional union busters to that location to try and stop the union from getting in. http://www.findarticles.com/p/articles/mi_m5072/is_6_26/ai_113457677

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In March of 2005, Tom Coughlin was forced to resign from Wal-Mart's board of directors, the company claims that they found evidence of embezzlement by Coughlin, Coughlin claims that the money was used for an anti-union project involving cash bribes paid to employees of the United Food and Commercial Workers union in exchange for a list of names of Wal-Mart employees that had signed union cards; Coughlin also claims the money was unofficially paid to him, by Wal-Mart, as compensation for his anti-union efforts. http://www.mindfully.org/Industry/2005/Wal-Mart-Coughlin8apr05.htm

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Wal-Mart describes its position on unions as follows:

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"Our Walmart union stance is simple. There has never been a need for a Walmart union due to the familiar, special relationship between Wal-Mart associates and their managers. Wal Mart has encouraging and advantageous relationships with both our loyal and happy associates on the floor of each Wal Mart facility and our wonderful managerial staff. There has yet to be a standard in Walmart union history for a union to be needed.

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Due to our amicable relationships between our associates and managers and executives, we believe there is no need for third-party representation. Our Walmart union stance does not suggest that we feel unions are unnecessary for all corporations. We merely believe that a Walmart union is unnecessary. Since we believe in fostering an environment of open communications and encouraging associates to express their ideas, comments, and concerns to their managers where they can be addressed in a personal and timely manner, a Walmart union is superfluous. Our direct relationships with our associates will provide the best protection for our alliance with our associates. Wal-Mart and our associates have consistently chosen not to have a union step into the middle of our partnership." http://www.walmartfacts.com/wal-mart-union.aspx

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Treatment of employees

Wal-Mart keeps its wages low, even by general industry standards. According to a government report, as of 2001, the average supermarket employee earned $10.35 per hour; in comparison, stock clerks at Wal-Mart made $8.23 per hour on average. A 2003 wage analysis reported that cashiers, the second most common job at Wal-Mart, earn approximately $7.92 per hour and work an average of 29 hours a week. This brings in annual wages of only $11,948.

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Founder Sam Walton once argued that his company should be exempt from the minimum wage, and took advantage of an exception in the minimum wage law that, at the time, excluded small businesses from having to pay the minimum wage. While the federal minimum wage in 1962 was $1.50 an hour, Walton regularly paid his employees only 50 to 70 cents per hour. (Palast, 121).

Related Topics:
Sam Walton - Minimum wage

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According to a report by Democratic congressman George Miller, a 200-employee Wal-Mart store may indirectly cost federal taxpayers $420,750 per year. This cost comes from the following, on average:

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$36,000 a year for free and reduced lunches for just 50 qualifying Wal-Mart families.

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$42,000 a year for low-income housing assistance.

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$125,000 a year for federal tax credits and deductions for low-income families.

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$100,000 a year for the additional expenses for programs for students.

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$108,000 a year for the additional federal health care costs of moving into state children's health insurance programs (S-CHIP)

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$9,750 a year for the additional costs for low income energy assistance.

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The report also claimed that ten percent of Wal-Mart?s stores are subject to a nighttime lockdown, where employees who had sustained injuries requiring immediate medical attention were forced to wait inside the store for hours for a manager to arrive and unlock the door. http://edworkforce.house.gov/democrats/WALMARTREPORT.pdf

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In January 2004, the New York Times reported on an internal Wal-Mart audit which

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found ?extensive violations of child-labor laws and state regulations requiring time for breaks

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and meals.? One week of time records from 25,000 employees in July 2000 found 1,371

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instances of minors working too late, during school hours, or for too many hours in a day. There

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were 60,767 missed breaks and 15,705 lost meal times.

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Among the uninsured working families in America are a significant number of Wal-Mart employees, many of whom instead secure their health care from publicly subsidized programs and emergency rooms.

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Fewer than half of Wal-Mart?s employees are insured by the company?s health care plan, compared to a national average of 66 percent of employees at comparable large firms who receive health benefits from their employer.

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In recent years, the company increased obstacles for its workers to access its health care plan.

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In 2002, Wal-Mart increased the waiting period for enrollment eligibility from 90 days to

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6 months for full-time employees. Part-time employees must wait 2 years before they may enroll

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in the plan, and they may not purchase coverage for their spouses or children. The definition of

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part-time was changed from 28 hours or less per week to less than 34 hours per week. At the

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time, approximately one-third of Wal-Mart?s workforce was part-time. By comparison,

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nationally, the average waiting period for health coverage for employees at large firms comparable to Wal-

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Mart was 1.3 months.

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The Wal-Mart plan itself shifts much of the health care costs onto employees. In 1999,

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employees paid 36 percent of the costs. In 2001, the employee burden rose to 42 percent.

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Nationally, large-firm employees pay on average 16 percent of the premium for health insurance, unionized grocery workers typically pay nothing.

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Despite $10 billion in profits in Fiscal Year 2004, Wal-Mart President and CEO Lee Scott said, "In some of our states, the public program may actually be a better value - with relatively high income limits to qualify, and low premiums."

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At Wal-Mart, managers are judged in part on their ability to keep payroll costs at a strict percentage of sales, according to former managers. Some say that puts extra pressure on higher-paid workers to be more productive. "You keep people making $10 an hour to a high standard, putting more pressure on them for small mistakes.", says Lyndol Jackson, a former Wal-Mart manager. "Often, those workers quit and can be replaced less expensively.", adds Mr. Jackson. http://www.careerjournal.com/salaryhiring/hotissues/20030626-tejada.html

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Wal-Mart is currently facing an $11 billion sex discrimination lawsuit that has been granted class action status by the district court hearing the case.

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In 2000, Wal-Mart paid $50 million to settle a class-action suit that asserted that 69,000 current and former Wal-Mart employees in Colorado had worked off-the-clock. These employees, as well as several former managers, have testified that Wal-Mart had an unofficial policy requiring off-the-clock work, to keep the cost of payroll down; as of the time of printing of Wal-Mart's 2005 Annual Report, the company faced 44 wage and hour lawsuits in states including California, Indiana, Minnesota, New Jersey, Oregon, and Washington.

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Under an arrangement, disclosed by The New York Times, Wal-Mart will be allowed 15 days to investigate and rectify employee complaints before the Department of Labor conducts any investigation. Upon receiving a complaint about a potential violation of wage and hour laws, DOL?s field offices around the country are now instructed to notify the DOL office in Little Rock, Arkansas, which will then notify Wal-Mart?s headquarters in Bentonville, Arkansas of the complaint. The Department will not launch its own investigation during that time and it remains unclear under what circumstance it would launch an investigation after the 15 day period ends, Representative George Miller (D-California) requested an investigation by the DOL?s Inspector General to determine whether the arrangement represents a sweetheart deal between the Bush Administration and Wal-Mart. http://www.mindfully.org/Industry/2004/Wal-Mart-Labor-Violations14feb04.htm

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In the past, Wal-Mart took out corporate owned life insurance policies on low level employees, such as janitors, cashiers, cart pushers, and stockers. This type of insurance is usually purchased to cover a company against financial loss when an executive or other high ranking employee dies. In this case it is usually known as Key Man Insurance, but the policies that Wal-Mart took out on its rank-and-file workers are usually known as "Dead Peasant Insurance" or "Janitor Insurance". Critics charge that the company was trying to profit from the deaths of its employees, and take advantage of a loophole in a tax law which allowed them to deduct the premiums.

Related Topics:
Corporate owned life insurance - Key Man Insurance

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The practice was stopped in the mid-1990s when the federal government, which had previously called the financing scheme "tax arbitrage," closed the tax loophole and began to pursue Wal-Mart for back taxes. http://fsnews.findlaw.com/articles/andrews/bf/dcl/20050908/20050908walmart.html

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Illegal use of undocumented workers

On October 23, 2003, federal agents raided 61 Wal-Mart stores in 21 states. When they left, the agents had arrested 250 nightshift janitors who were undocumented workers. Following the arrests, a grand jury convened to consider charging Wal-Mart executives with labor racketeering crimes for knowingly allowing undocumented workers to work at their stores. The workers themselves were employed by agencies Wal-Mart contracted with for cheap cleaning services. While Wal-Mart executives have tried to lay the blame squarely with the contractors, federal investigators point to wiretapped conversations showing that executives knew the workers were undocumented. Additionally, some of the janitors have filed a class-action lawsuit against Wal-Mart alleging both racketeering and wage-and-hour violations. According to the janitors, Wal-Mart and its contractors failed to pay them overtime totaling, along with other damages, $200,000. One of the plaintiffs told the New York Times that he worked seven days per week for eight

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months, earning $325 for 60-hour weeks ($5.41 per hour), and he never received overtime pay. A legal question now being raised is whether these undocumented workers even have the right to sue their employers. This recent raid was not the first time Wal-Mart was caught using undocumented workers. In 1998 and 2001, federal agents arrested 102 undocumented workers at Wal-Mart stores around the country.

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Wal-Mart eventually settled the lawsuit the government brought against them, for $11 million dollars.

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Workforce diversity

Wal-Mart has received low scores on the Corporate Equality Index, published by the Human Rights Campaign, a measure of how companies treat gay and lesbian employees and consumers. The company received a 57% rating in the 2005 edition, a 43% rating in the 2003 and 2004 editions, and a 14% rating in the 2002 edition. http://www.hrc.org/Template.cfm?Section=About_HRC&CONTENTID=23128&TEMPLATE=/ContentManagement/ContentDisplay.cfm http://www.hrc.org/cei_press/full_report.pdf

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Product controversy

Wal-Mart is accused of allowing right wing, conservative and religious viewpoints to influence its product selection. Critics claim that this effectively forces the company's opinions on morality onto customers and suppliers.

Related Topics:
Right wing - Conservative - Religious

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Examples of items that Wal-Mart does not sell are music with explicit lyrics, certain magazines such as "Maxim", and a number of different types of birth control.

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Originally, Wal-Mart did not label their compact discs as being edited, and did not accept returns due to copyright concerns. Only after critics claimed this to be a ploy by Wal-Mart to push the sales of censored products, did Wal-Mart start labeling these discs "EDITED". http://www.cexx.org/snicker/walmart.htm

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Wal-Mart was criticized for selling The Protocols of the Elders of Zion, a fraudulent document purporting to describe a plan to achieve Jewish global domination on its website with a description that suggested it might be genuine; It was withdrawn from sale in September 2004, as 'a business decision'. {{ref|doc_film}}

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Supplier relations and predatory pricing

Wal-Mart has been prosecuted for predatory pricing behavior, temporarily lowering prices in order to drive competitors out of business and develop local monopolies. The chain has been found guilty of predatory pricing in lower courts, but those convictions have been overturned on appeal. There are also several ongoing cases alleging predatory pricing. There have been no successful federal or state actions to sanction Wal-Mart for practicing predatory pricing.

Related Topics:
Predatory pricing - Monopolies

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Most grocers charge several fees in order to carry a supplier's product. A slotting fee is charged for placing a product on the shelf. In addition to slotting fees, retailers may also charge promotional, advertising and stocking fees. According to an FTC study, the practice is "widespread" in the supermarket industry. According to retailers, fees serve to efficiently allocate scarce retail shelf space, help balance the risk of new product failure between manufacturers and retailers, help manufacturers signal private information about potential success of new products, and serve to widen retail distribution for manufacturers by mitigating retail competition. Vendors charge that slotting fees are a move by the grocery industry to profit at their suppliers' expense. http://truckandbarter.com/mt/archives/000496.html Wal-Mart pays the supplier only for the actual cost of the goods themselves, and the supplier pays no fees to Wal-Mart. {{fn|7}}

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In its negotiations with suppliers, Wal-Mart requires that prices go down from year to year. If a vendor does not comply with Wal-Mart's request for reduced prices, they risk having their entire brand removed from Wal-Mart's shelves in favor of a lower-priced competitor or a less expensive store brand. This can put pressure on suppliers to shift jobs to factories in third world countries or reduce the quality of the product. A CEO of one of Wal-Mart's suppliers said that the price Wal-Mart requested from his company for a particular product was so low that he couldn't afford to keep production in America, even if he didn't have to pay his workers anything. http://www.fastcompany.com/magazine/77/walmart.html

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Local community impacts

; Economic impact: Community activists often organize campaigns against proposed new store locations, but the effects of Wal-Mart stores on the communities in which they operate is a topic of some controversy.

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: Critics of Wal-Mart and some academic studies, particularly out of the University of Iowa, claim that Wal-Mart displaces locally-owned stores resulting in the reduction of locally-owned corporate assets and real estate, and the destruction or displacement of higher paying jobs. Other studies, including several recently from the University of Missouri, have claimed that Wal-Mart stores either do not have negative impacts or have been found to positively impact a community by affecting lower prices, increased employment and increased establishment counts.

Related Topics:
University of Iowa - University of Missouri

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:Wal-Mart claims that their entry into local grocery markets lowers prices, and that this is equivalent to an increase in consumers' real incomes in the local economy.

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; Cultural impact: When Wal-Mart opened a Superstore in Teotihuacan, community members protested the opening as being, "like planting the staff of globalization" (http://www.democracynow.org/article.pl?sid=04/11/08/1513234), because of its proximity to cultural landmarks such as the Pyramid of the Moon. Archaeological experts were on hand during construction, and assisted in recovering a Pre-Columbian altar, to make way for the store's parking lot.

Related Topics:
Globalization - Pyramid of the Moon - Pre-Columbian

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Trade with China

Some have criticized the company for buying so many products from businesses in the People's Republic of China, contributing to the enormous U.S. trade deficit with China. Wal-Mart accounted for $12 billion dollars of the $103 billion dollar US trade deficit in 2002. http://www.freep.com/money/business/trade8_20030708.htm Critics say this trade helps support China's oppressive government and helps them fund their military to further threaten Taiwan, and leads to joblessness and poverty in the United States. Others would note, however, that as economic development has occurred in China, affluence and greater appetite for civil liberties have grown as well.

Related Topics:
People's Republic of China - Trade deficit - Taiwan

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Industry observers also note that most major retailers purchase goods produced in China as well as other countries, because the cost of labor is less than in the United States.

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