Wal-Mart: Abusing Its Power for 40 Years

By Megan Barnett  OCT 09, 2009 12:00 AM

You don't have to be a bully to be a good capitalist.


Editors Note: Welcome to Love It or Hate It, a regular dual-column feature that will capture the love-hate relationship America has with some of its biggest, most controversial companies. For past columns, click here. For the opposing view on Walmart, see Walmart: The Leaders We Deserve.

I live 8.2 miles from the nearest Wal-Mart (WMT), and sometimes that feels too close.

I'm grateful that the distance makes it easy to avoid, however. That's because I'm one of those believers that Wal-Mart has done more bad than good for this country since it was established more than 40 years ago. See also Wal-Mart to Kill Two Cultures With One Stone.

Now, just for the record, I'm not some union-loving, left-wing, tree-hugger who doesn't believe in capitalism. I'm not being financed by any anti-Wal-Mart website or union group and I haven't read any of the countless books on Wal-Mart, such as The Bully of Bentonville, The Wal-Mart Effect, or The United States of Wal-Mart. I haven't even seen the movie Wal-Mart: The High Cost of Low Price.

I've just observed the rise of the world's biggest retailer and watched what it's done to competitors, suppliers, taxpayers, and employees along the way. It's been an ugly show.


The criticisms against Wal-Mart are well documented. The company employs 2.1 million people, many of whom subsist on near-poverty wages. About half of its US employees have company-sponsored health insurance; the rest have to fend for themselves or depend on the government for health care. Wal-Mart has been accused of predatory pricing by its competitors. Suppliers claim that its persistent demand for lower prices have led to bankruptcies, closed plants, and lost jobs. It imports so much product from China it's been blamed for the growing US trade deficit there. It's been accused of sexual discrimination, gender discrimination, child-labor violations, anti-Semitism, employing undocumented immigrants, denying overtime wages, dodging taxes, excessive pollution, and general thuggishness.

Of course, any company Wal-Mart's size is going to be scrutinized heavily. It's easy to attack the strongest, and not all allegations made against it will be true. And it's hard to deny the fact that Wal-Mart does provide a valuable service to our battered consumer economy: People need cheap stuff like never before.

But a company with the kind of influence Wal-Mart has over consumers, manufacturers, government, and international relations needs to conduct itself at a higher standard than Wal-Mart does. In recent years, it has teamed up with Democratic lobbyists and public-relations specialists to help it improve its image after years of lawsuits and bad press on its treatment of its workers. See The Bad Boys of Business: Wal-Mart.

It’s troubling that Wal-Mart has to go to such lengths to shine its image instead of simply avoiding the practices that tarnished it in the first place. In a desperate attempt to keep its costs down, Wal-Mart -- which clocked in as the fourteenth most profitable company in the world last year as measured by Fortune -- has established corporate policy that calls for stepping on virtually everyone it’s involved with. In a 2005 memo to the Wal-Mart board of directors, a human resources executive outlined myriad ways to save money on benefits, including ways to hire healthier people and requiring physical activity for all associates. She even raised the problem that comes with employees who are happy enough to stay at Wal-Mart for longer than they’d like:


“[T]he cost of an Associate with seven years of tenure is almost 55% more than the cost of an Associate with one year of tenure, yet there is no difference in his or her productivity,” she wrote. “Moreover, because we pay an Associate more in salary and benefits as his or her tenure increases, we are pricing that Associate out of the labor market, increasing the likelihood that he or she will stay with Wal-Mart.”

The horror! If we treat our people well, they might actually want to stay. This kind of thinking by a senior human resources executive at one of the world’s biggest companies is simply unconscionable. Over the years, there have been too many examples of this kind of pervasive thinking among Wal-Mart’s top ranks.

When you have to hire an army of people to help improve your image, you’ve been doing something very wrong. That’s a lesson Wal-Mart seems incapable of learning.

Even more troubling to some is Wal-Mart’s practice of instilling its own moral values into the public domain through its retailing. It’s refused to stock countless albums due to their “offensive lyrics,” forcing some bands to produce sanitized records just so they can be sold there. It’s ripped mainstream magazines off its shelves and turned away best-sellers simply because it didn’t approve of their messages. Its decision to carry emergency contraceptives was made only after public outcry in what was yet another transparent effort to help its image.

Recently, Wal-Mart made its most astonishing image repair effort ever. It teamed up with a Democratic think tank and a leading union to support President Obama’s health-care reform proposal, which includes employer-mandated insurance. It’s not clear what Wal-Mart’s motive is behind this move. It insists it’s always advocated for health-care reform. For more, see our video A Healthy Debate About Healthcare.

I applaud Wal-Mart’s move, but knowing the company’s history with health care and its mandate to keep costs down, I remain skeptical. It could be a politically savvy move that will cement its place at the table when the details of the reform get ironed out. It's certainly hard to believe it actively wants to provide health insurance to its employees.

I have no problem with a single company acquiring the influence and reach that Wal-Mart has attained. What I have a problem with is a company of its stature abusing its power time and time again, relying on hired image saviors to help bail it out.

I don’t plan to ever travel the 8.2 miles to save a few cents on my shampoo, and fortunately I don’t have to. I’ve got a Target (TGT) just a few blocks away.

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No positions in stocks mentioned.

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