Wal-Mart CEO says co. committed to compliance
FAYETTEVILLE, Ark. (AP) — Wal-Mart Stores Inc. CEO Mike Duke said Friday that the retailer is committed to integrity in the wake of recent bribery allegations in Mexico.
Duke joined Chairman Robson Walton, the son of founder Sam Walton, at the company's annual meeting on Friday in pledging that Wal-Mart will get to the bottom of the allegations.
This comes after the world's largest retailer said in recent weeks that it is overhauling its compliance program and expanding its internal investigation into the accusations to other countries.
"We've all heard about the recent allegations about the company," Duke said to a crowd of about 14,000. "Let me be clear: Wal-Mart is committed to compliance and integrity everywhere we operate. I want to personally assure you, we're doing everything we can to get to the bottom of this matter."
The meeting could have been a triumphant moment for the world's largest retailer, which is celebrating its 50th anniversary and seeing its U.S. results make a comeback. But instead executives spent much of the meeting reassuring shareholders that the company will be able retain its integrity as it continues to expand globally.
The meeting, which capped a weeklong slate of events, follows a story by The New York Times in April that the world's largest retailer allegedly failed to notify law enforcement after finding evidence that officials authorized millions of dollars in bribes in Mexico to get speedier building permits and other favors.
Following the allegations, it's been reported that federal authorities in the U.S. and Mexico are investigating Wal-Mart for potential violations. Investors are suing top executives. And some shareholders are calling for the removal of several board members, including Walton, Duke and former CEO Lee Scott.
Wal-Mart disclosed in a regulatory filing late Friday that several executives including Duke, Scott, and Walton are the target of 11 "derivative" lawsuits, a type of legal action that seeks to change corporate governance. The lawsuits charge that the executives neglected their responsibilities in handling the alleged bribery scandal. Wal-Mart also noted in its filing that a securities class action lawsuit was filed against the company on May 7.
Preliminary results from Friday show that all directors up for re-election were re-elected, although final results will be announced Monday. Descendants of Wal-Mart's founder own about 50 percent of Wal-Mart's shares, so activist shareholders have little chance of voting out the board members.
Corporate governance executives say they'll be watching the final tally to see what percentage outside of the Walton family voted against re-electing the directors. Anything above 10 percent would send a clear message for change, says Michael Garland, who represents the New York City Comptroller's Office, which oversees the public pension funds of New York. The group, which owns 5.6 million shares of Wal-Mart, voted against five members of the board including Scott, Duke and Walton.
On Friday, Wal-Mart went back-and-forth between addressing the allegations and talking about other things during the annual meeting, which was held in the basketball arena at University of Arkansas. That's about 30 miles from Wal-Mart's headquarters in Bentonville.
The event opened with Walton walking on stage to a replica of his dad's first store. Walton then swapped stories with his siblings, Jim and Alice, about the early days of working with their father.
"It's a family business. It's just grown a lot," said Robson Walton. He also noted that his father didn't measure success by financial achievement, but rather by "the lives we improved."
Pop singer Justin Timberlake hosted the event, arriving in a hula skirt to symbolize a story told about the founder dancing a hula on Wall Street after losing a bet. Musical interludes included performances by R&B legend Lionel Richie, singers Celine Dion and Taylor Swift, gospel jazz group Take 6 and Latin singer Juanes.
Protests were expected during the meeting, but none took place.
"Some folks want to interrupt our meeting, but we're hoping they respect all of you," Walton said at the start of the meeting. "But don't be surprised if we do have some interruption."
Another interruption is the last thing Wal-Mart needs at a time when it's beginning to turn around its business.
The discounter had struggled during the U.S. economic downturn as its core low-income customers were hard hit by joblessness and other challenges in the weak economy. At the same time, its namesake U.S. unit had veered away from its "everyday low prices" strategy and got rid of popular merchandise.
But Wal-Mart last year began adding back 10,000 products. The company also refocused on keeping prices low. Its strategy is just beginning to pay off.
Wal-Mart reported better-than-expected first-quarter profit. Its U.S. namesake unit, which accounts for 60 percent of net sales, turned in its best performance in three years. And its shares are at a 12-year high, trading at about $65. That more than makes up for the 7 percent drop in price after the bribery allegations surfaced.
But the accusations still threaten to distract the retailer as it tries to continue its momentum. Wal-Mart officials have said in recent weeks that the accusations haven't impacted its plans for growth in the U.S. or overseas.
In fact, Wal-Mart executives say they plan to use this crisis as an opportunity to strengthen controls across all areas, including food safety.
"We will be a better company because of this," Duke told analysts after the shareholders' meeting.
AP Retail Writer Mae Anderson contributed to this report.