That was the sentiment in a letter sent to Roland Hernandez, audit committee chairman on Wal-Mart’s Board, by the shareholder group, according to a news release .The group, which also demanded a public report on the audit committee’s review findings by year-end 2005, included:
- New York City Comptroller William Thompson, Jr., investment adviser to the $85 billion New York City Pension Funds
- Edward Smith, chairman of the $10.8-billion Illinois State Board of Investment
- Karina Litvack, head of Governance & Socially Responsible Investing of F&C Asset Management
- Jason Fletcher, Americas Equity Manager of the $36-billion UK University Superannuation Scheme.
Collectively, the group holds 11,455,206 shares of Wal-Mart common stock, with an estimated market value of $545.8 million.
“As long-term investors and shareholders of Wal-Mart, we are deeply concerned that the frequency of reports exposing legal and regulatory non-compliance at the company could be indicative of inadequate internal controls and a lack of board oversight and accountability,” Thompson wrote. “These negative reports and headlines have damaged Wal-Mart’s global reputation. The Board of Directors could help to bolster the company’s image and shareholder confidence by enabling a committee of independent directors to take the action we have requested.”
Illegal Immigrant Issues
Among the concerns cited by shareholders were the raids by US federal agents of 60 Wal-Mart stores in 21 states resulting in the arrest of 250 illegal immigrant workers, the related $11 million settlement of charges that Wal-Mart exploited illegal immigrants (See Wal-Mart Settles Illegal Floor Cleaners Suit ), and Wal-Mart’s 2005 settlement with the US Department of Labor of 24 violations of child labor laws in three states. In addition, the shareholders pointed to a federal court certification of a national class action sex discrimination lawsuit on behalf of 1.5 million current and former female employees (See Court Approves Wal-Mart Discrimination Suit Class ).
The letter also raised concerns over the circumstances surrounding the recent resignation of Wal-Mart Vice Chairman Thomas Coughlin, who allegedly abused his expense account with up to $500,000 in questionable transactions over a five-year period, and Coughlin’s admission that he filed false invoices to obtain reimbursements for anti-union activities. Wal-Mart’s firing of the whistleblower who reported Coughlin’s questionable transactions also was raised.
“Employees who fear for their jobs won’t report wrongdoing,” said Litvack, in the news release. “By firing a key Coughlin whistleblower, Wal-Mart may have struck a deathblow to its own compliance system, further weakening its internal controls at a time when it should be aggressively fortifying them. Independent directors need to demonstrate to shareholders that Wal-Mart hasn’t built an ostrich culture – where employees are better off sticking their heads in the sand than speaking up.”