Memo Reinforces Wal-Mart’s Bad Image
Posted on October 30, 2005 by webteam
From the Washington Post
A series of image-improving initiatives announced by Wal-Mart in recent days closely follows the recommendations of a consultant’s report that found that the public believes the retailer treats its employees poorly and is a negative force in communities where it operates. The report, by consulting firm McKinsey & Co., was obtained from Wal-Mart Watch.
“Sincere concerns exist that Wal-Mart is not treating its employees well, is too aggressive and is hurting local companies,” the Aug. 24, 2004, report said. “The challenge is likely only to intensify,” said the report, which went on to lay out a plan to defuse those concerns. Wal-Mart CEO Lee Scott announced in a recent speech that Wal-Mart would add a new health care plan. He introduced a program that would reward environment-friendly suppliers and pledged that Wal-Mart would curb its energy use. Scott also called on Congress to raise the minimum wage.
But those initiatives left critics wanting more. “We’d be the first to applaud them. But the jury’s out on how much of this will amount to real and meaningful, lasting change,” said Wal-Mart Watch spokesperson Tracy Sefl.
Wal-Mart has spent much of the past several years appearing to ignore critics who claimed that the company paid poverty-level wages and provided minimal health care benefits, forcing employees into government programs. Community groups have blocked development of new stores in some areas. Wal-Mart has also been the focus of major lawsuits, including an ongoing sex-discrimination class action, the largest private-employer civil rights case in history.
But even as Wal-Mart introduced initiatives to soften its image, the company continued to take hits. Another internal memo, disclosed by Wal-Mart Watch to the New York Times, suggested how the company might cut health care costs—including hiring healthier, younger workers. The memo also confirmed that 46 percent of the children of Wal-Mart’s employees are uninsured or on Medicaid. Scott’s support for raising the minimum wage also generated criticism that the company was trying to drive up costs for lower-wage competitors. Meanwhile, Scott said Wal-Mart would not change its own wage structure.
And next week, the company faces the release of ”Wal-Mart: The High Cost of Low Price.” The movie, directed by Robert Greenwald, paints a dark picture of the company as a destroyer of small business and a ruthless opponent of unions. It includes interviews with current and former Wal-Mart workers who claim that the company forces employees to work off the clock, encourages them to sign up for welfare benefits, and discriminates against women and minorities.
Wal-Mart’s public relations problems, and the rising costs and threats to its rapid expansion, have dragged down the company’s stock price and frustrated investors. The stock price is down nearly 14 percent this year.
Bernard Sosnick, a retail analyst at Oppenheimer & Co., described the company’s response to critics as a two-step process that began a year ago. He said the first step was to hire scores of lawyers to respond to lawsuits and improve the company’s compliance with laws and regulations. The second step, just getting started, is to reshape the company’s image to allow expansion into major urban areas while also attracting more affluent customers who might not shop at a company with a poor labor and environmental image.
“There’s little question that Wal-Mart isn’t so much initiating as responding,” said Harley Shaiken, a labor professor at the University of California at Berkeley. “Economists call this the union threat effect. It’s not that Wal-Mart fears it’s going to be unionized soon, but a major PR campaign is out there, raising the labor issues.”
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