Making change at Wal-Mart

 By Tytti Kaasinen, Senior Engagement Manager at GES

Coinciding with Aung San Suu Kyi’s recent visit to New York and the United Nations’ 67th General Assembly currently taking place in the city, I crossed the Atlantic last week to connect with sources, experts and GES’ partners in the USA. While seeing heavily guarded blacked-out cars driving towards the UN headquarters has been as close as I have gotten to world leaders, I have had the pleasure of meeting plenty of other equally interesting people representing investors, UN organisations, trade unions and NGOs.

More of those encounters in due course. Right now, I want to share my experiences relating to one name rivalling Ban Ki-Moon’s in global recognition – Wal-Mart. You can always count on it being in the headlines and it is a company which GES and many of our clients also have a keen interest in. Accordingly, I have taken advantage of being on the retailer’s home ground to speak to people with first-hand experience of working with, for or on the company. Wal-Mart is the world’s third largest employer (after the US Department of Defence and the Chinese People’s Liberation Army, in case you were wondering) with its 2.1 million-strong workforce, and I have been fortunate enough to hear directly from seven of its associates in New York this week.

This is a critical time for the company, as worker unrest and stoppages are spreading to Wal-Mart’s distribution system while the community opposition continues to undermine its expansion efforts in US urban markets. The negative reputation following Wal-Mart everywhere is also hindering its ability to implement its business plan at certain markets overseas. These issues potentially affecting the company’s growth and profitability obviously pose very material risks to Wal-Mart and thereby also to those invested in it.

I got invited to a panel discussion for Wal-Mart investors and sell side analysts covering the company on Monday, an event also attended and subsequently reported on by Reuters. The five current Wal-Mart employees on the panel spoke about their experiences on the job, with some of them able to reflect on the changes that have taken place at the company during their 24-year-long careers on the retailer’s payroll. They described the feeling of being proud of working at Wal-Mart disappearing as the company has changed for worse, while other accounts covered issues such as employees not receiving appropriate training or equipment for doing their jobs; understaffing leaving associates unable do their jobs well, let alone providing good customer service; being ignored or disrespected by their superiors; lack of opportunities for rising up the ranks; the company’s “open door policy” not quite living up to its name; and retaliation against colleagues who have spoken out about the working conditions.

Nevertheless, these people stressed that they are not on a mission to tear the company down. Quite the opposite; they talked about their love for their jobs and about how the objective of the employee-centred OUR Walmart (Organization United for Respect at Walmart) Campaign is to challenge the company to improve its treatment of people and community relations, and to persuade it to become a better employer.

The Wal-Mart veterans on the panel have taken advantage of the company’s share plan to become stockholders, with one of them in fact having presented OUR Walmart’s shareholder resolution at the company’s 2012 AGM. Indeed, as the event on Monday was aimed at representatives of the mainstream investor community, we also heard about the impact of the company’s alleged labour mismanagement on its bottom line and share price development. The argument goes that the broken productivity loop due to the lack of investment in the quantity and quality of workforce and the resulting understaffing is having a negative effect on customer service. This both in the form of reduced interaction between employees and shoppers as well as through logistical issues whereby Wal-Mart struggles to keep the shelves stocked with the right products in the right place at the right time, with the latter leading to a waste of produce and missed sales opportunities.

Zeynep Ton, a professor in operations management also speaking at the event, highlighted the trade-off between low prices and bad jobs in retail, describing how companies often perceive labour as a large cost to be minimised when there is pressure to cut costs and/or achieve earnings increase even when the company is not growing. In her view, this is due to labour having clear, direct, short-term costs while its benefits are indirect, difficult to measure and transpire over a long term. This is an equation which the company managements as well as investors frequently have a poor understanding of according to professor Ton.

The following day, I attended another discussion with Wal-Mart employees and OUR Wal-Mart campaign representatives, this time organised by the Interfaith Worker Justice and focused on the working conditions and wages in Wal-Mart’s direct operations as well as in the warehouses supplying it with goods. Again, the employees shared with us their stories entailing feelings of mistreatment, inequality and lack of respect, with two warehouse workers also describing working conditions and arrangements in the US facilities not unlike something one might expect from Mexican maquiladoras or other similar export processing zones in developing countries.

Completing my run of three Wal-Mart sessions in consecutive days, the company was on Wednesday discussed at the triannual conference for the members of the Interfaith Center on Corporate Responsibility (ICCR). ICCR’s Wal-Mart group has a long history of engagement with the company over various issues, and this is something GES has also benefited from over the years through our cooperation with the organisation. ICCR continues to have regular meetings with Wal-Mart top executives and is frequently reached out to by the company seeking input and feedback on its corporate responsibility management and reporting. Yesterday, the group leading the engagement with Wal-Mart shared information on the issues most recently raised and detailed the company response to the ICCR comments along with the investors’ key expectations going forward.

Apart from keeping updated on ICCR’s work on Wal-Mart, I will continue my dialogue with the company, with GES’ focus being firmly on labour standards among Wal-Mart’s direct operations and supply chain alike. Hearing the workers’ and OUR Walmart’s views has been very useful for understanding what everyday life at its stores may look like and what is prompting the recurring negative headlines and fuelling the company’s persistently bad reputation. The concrete examples of the challenges Wal-Mart faces in the field of employee relations and their potentially material significance to shareholders are something I will certainly invite the company to comment on in the conference call I am due to have with its investor relations in the next few weeks.

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