Sort by

Walmart’s Wall of Denial Begins to Crumble

Amy Traub

This wasn’t a good week for Walmart. The business model of the nation’s largest private employer is built on a lack of accountability. Walmart’s efforts to externalize as many costs of its business as possible onto taxpayers, its workforce, the environment, its suppliers, and the communities where it operates have enabled it to become one of the nation’s largest and most profitable companies -- and left the Walmart heirs among the wealthiest people on earth.  

Yet this week, Walmart’s wall of denial was breached in three critical places: the company’s efforts to claim top executives knew nothing about the practice of illegally bribing foreign officials; its ability to dodge accountability for the illicit labor practices of subcontractors it relies on and closely controls; and its success in reaping profits as one of the nation’s largest sellers of firearms while rejecting any responsibility for the epidemic of violence they facilitate; all suffered blows this week. As a result, the powerful company may finally find itself beginning to answer for the consequences of its actions.

First and most obvious is the Mexican bribery case. U.S. law prohibits American companies from bribing foreign officials. Yet, as the New York Times revealed in an exhuastive investigation last month, Walmart systematically violated the law.

Wal-Mart de Mexico was not the reluctant victim of a corrupt culture that insisted on bribes as the cost of doing business. . . . Wal-Mart de Mexico was an aggressive and creative corrupter, offering large payoffs to get what the law otherwise prohibited. It used bribes to subvert democratic governance — public votes, open debates, transparent procedures. It used bribes to circumvent regulatory safeguards that protect Mexican citizens from unsafe construction. It used bribes to outflank rivals.

Walmart’s top corporate officials denied knowing anything about the corrupt practices its Mexican subsidiary was using to attain profitable new store locations. Except that an investigation of internal company documents by U.S. Representatives Elijah Cummings and Henry Waxman reveals that senior executives, including CEO Michael Duke, knew exactly what was going on.

In a letter to the CEO published yesterday, the congressmen noted that “documents obtained by our staffs from a confidential source indicate that you and other senior Wal-Mart officials were personally informed about these bribery allegations on multiple occasions.” In addition to the congressional inquiry, the new revelations may provide more evidence for the mulitple lawsuits Walmart already faces from pension funds and other large shareholders suing the company in an effort to force reforms in its corporate governance.

While Walmart apparently wrings some profits from bribery, a far more central part of its business model is its ability to outsource as many core functions as possible to outside contractors and subcontractors and then demand such tight control and low prices that the ostensibly independent companies are obliged to break the law to meet their terms. Walmart profits from the unjust or illegal labor practices but can deny all responsibility. November’s deadly fire in a Bangladeshi factory supplying Walmart goods – complete with revelations that Walmart was a leader in  blocking efforts to improve fire safety in Bangladesh -- is a case in point.

But Walmart’s efforts to distance itself from the practices of its subcontracts suffered a blow this week when a judge ruled that Walmart could be charged as a defendant in a class action lawsuit alleging that a company shipping Walmart goods and temporary staffing agencies that provided workers failed to pay minimum wage or overtime. Walmart continues to insist that it’s not responsible for the actions of subcontractors. Yet, as Josh Eidelson reports in the Nation this week, the plaintiffs point out that “Walmart owns all equipment in the buildings, dictates that they be run in exactly the same manner as Walmart’s non-subcontracted warehouses, and keeps a full-time Walmart manager on site.” In other words, there’s a strong case that Walmart should be held legally liable for any wage theft that occurred at the warehouse. The judge evidently agrees.

Finally, consider the question of gun violence. Walmart is one of the nation’s largest purveyors of firearms, helping to increase the availability of assault weapons across the nation. In 2012, Walmart did 16.8 million background checks for gun purchases, and buyers may have bought multiple weapons with a single check. What did these millions of gun purchasers do with their new weapons? Walmart doesn’t know, and beyond the legally required background check, it disavows any responsibility for the flood of small arms it pours into communities. Yet this week also saw a tiny fissure in that wall of denial: after initially rejecting an invitation from Vice President Joe Biden to participate in a roundtable on gun violence, Walmart reversed its position yesterday and agreed to send a representative to the meeting.  It’s a small crack, but an acknowledgment on the part of the company that it plays a role in the proliferation of firearms used to perpetrate violence.

Facing new demands for accountability as it profits from corruption, exploitative practices by its subcontractors, and gun sales, 2013 is off to a bad start for Walmart. Yet the crumbling of denial may signify good things for the rest of us. After all, while Walmart is a particularly prominent example of corporate greed, it is far from the only multinational corporation that maximizes its own profitability by systematically externalizing its costs onto the rest of us. If Walmart can be made to answer for the consequences of its actions, other demands for accountability may succeed as well.