Detailed criminal allegations against Walmart, indicating that it engaged in illicit and potentially illegal bribery in its efforts to expand its presence in Mexico, have not yet been adjudicated. The U.S. Department of Justice continues to review the facts, and no one has been formally charged with anything. Yet Walmart already has invested in extensive, and expensive, adjustments to its executive personnel, corporate culture, and organizational structure.
The allegations that senior executives had consistently bribed Mexican officials to obtain building permits and other perks that would help the retailer expand first came to light in 2012, when The New York Times published its investigation. Those initial reports alleged that Walmart had been violating the U.S. Foreign Corrupt Practices Act for years. In response to the widespread publicity this report sparked, Walmart initiated a systematic response.
First, at least eight of the executives identified as participating in the bribery or at least being aware it was going on have left the company. Although none of the departures has been formally identified as a “cleaning house” effort, the coincidence seems remarkable.
Second, Walmart has spent nearly half a billion dollars to establish a compliance department and investigate the allegations internally. This new compliance division represents an expansion of Walmart’s operational staff, adding around 2,000 new employees. Furthermore, new directives mandate that any reports of corrupt acts be reported directly to the board, in an attempt to eliminate any potential that executives might try to defend themselves by pleading ignorance in the future.
Third, these moves represent a notable exception to and possible shift in Walmart’s corporate culture. When a retailer known mainly for its pursuit of efficiency increases the staff of a division by approximately 30 percent, and spends millions of dollars to do so, it signals a new and different tact.
Such proactive moves, before the U.S. Department of Justice even hands down any punishments, represent a savvy move by Walmart, according to many observers. By showing that it is taking care of the problem on its own, Walmart might avoid more stringent punishments by the government. It also needs to consider its image among consumers and stockholders. As one commentator noted, “When you have a company like Walmart that is so important to investor portfolios, to the consumer world and to the labor market, you may need to be more open than the common company, to restore trust.”
Discussion Questions:
- Why is Walmart in trouble with the Justice Department?
- What has it done to mitigate these problems?
Source: Elizabeth Harris, The New York Times, June 4, 2014