The Walmart statement of ethics is the core of the company’s values:
Each business organization Walmart operates is expected to have a complete set of policies providing guidance to associates for whatever country they are working in. Walmart also publishes several “global policies,” which are designed to give associates a set of rules that are the same for all locations. — “Walmart Statement of Ethics”
Some members of Walmart’s board and its senior management are likely to be without jobs soon. The independent members of the board will have to replace them, if that happens
The extremely damaging article in The New York Times about a bribery scandal at Walmart’s Mexico operations may do more harm to the company, both legally and to its reputation, than any incident in the company’s history. The career of current Walmart Vice Chairman and former CEO of the firm’s Mexico operation, Eduardo Castro-Wright is over. He could face disciplinary actions by the company’s board and face bribery charges in the U.S. and Mexico if most of the Times piece is accurate. H. Lee Scott Jr, former CEO, may be asked to resign from the board as well because he “rebuked internal investigators for being overly aggressive” when he was head of the company and was informed of the investigation in Mexico. In addition, current CEO Michael T. Duke could be fired. The paper reports that he ran Walmart’s international operations during part of the company’s internal investigation. Writing about the investigation, the Times reports that “Michael T. Duke, Wal-Mart’s current chief executive, was also kept informed.”
If the scandal, and legal charges, spread to Walmart operations in other countries, even S. Robson Walton, current chairman and a board member since 1978, may have to leave to support the perception that Walmart’s ethics standards are the responsibility of every senior person involved in Walmart’s operations.
The four powerful board members who would be called on to oversee any investigation and perhaps handle the replacement of board members would be James W. Breyer, The Managing Partner of Accel Partners, the huge venture capital firm; Roger C. Corbett, the former CEO of Woolworths Limited: c, the former chairman and CEO of The Coca-Cola Company (NYSE: KO); and Linda S. Wolf, the CEO of Leo Burnett Worldwide, Inc. Each has experience as the head of a large company, and most have extensive board experience as well. Among these, the most well-qualified to head an independent director’s committee is Daft because he had the experience of being at Coke , with its its global presence in manufacturing and retail operations around the globe. In addition, he has the experience of a long career at Coke, beginning in 1969 and ending as CEO from 2000 to 2004. He has the experience of overseeing Coke during a period when federal prosecutors and the SEC investigated fraud allegations raised in a whistleblower law suit.
The logical person to take the chairman’s job is Jim C. Walton, who has been on the board since 2005. The family of founder Sam Walton will insist on retaining at least one seat. Jim Walton already has the background as a Walmart board member of long-standing. If the Walton family want to have a second board member, that person might come from the generation of Robson and Jim’s children.
The replacement of Duke will not be as simple. Walmart’s independent directors could believe it is essential to go outside the corporation for a CEO to show that they are prepared to tap someone who has had no relationship to the company management. The most logical internal candidates–C. Douglas McMillon, the President and CEO of Walmart International and William S. Simon the President and CEO of Walmart U.S., would have to be passed over.
Walmart’s sheer size means that a new CEO would have to come from a major corporation. Its revenue this year will probably reach $450 billion. Walmart employs over two million people around the world. The new chief executive would also need the governance experience to manage this extensive investigation and handle the legal fall-out both in the US and abroad.
Douglas N. Daft would be the most logical candidate to become the interim CEO, because of his experience as head of Coke and his time on the Walmart board. He is 70, however, and may not want to take on the challenge.
In a chief executive search, Gregg Steinhafel, the chairman of the board, president and chief executive officer of Target Corporation (NYSE: TGT) would be a candidate. Target is Walmart’s largest competitor, and its ethical standards are considered high. In 2011, Ethisphere Institute ranked Target as one of the “World’s Most Ethical Companies” for the fifth year in a row. But, Steinhafel may have no interest in leaving what is already a highly prized job. The third massive global retailer is Tesco, but it has had operational problems that would probably rule out any members of its senior management team
The other candidates would come from the largest US consumer multi-nationals. These corporations share a number of characteristics with Walmart–particularly worldwide marketing and logistics. Based on that standard, the CEO of Procter & Gamble (NYSE: PG), Robert A. McDonald, would be on the list, So would Indra K. Nooyi of PepsiCo (NYSE: PEP), and Irene B. Rosenfeld of Kraft (NYSE: KFT).
It may take years for Walmart to go through the process of rebuilding and repairing the damage to its reputation from this bribery scandal. That would make the challenges for a new chief executive extraordinary.
Douglas A. McIntyre
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