So, What Else Is New?

What starts out as a straight forward ethical issue can sometimes turn quickly into a legal problem. Saturday (04.21.12) the New York Times laid out in detail (nearly 7,600 words and a baker’s dozen photos) the slide down the proverbial slippery slope that Walmart has taken over the last decade in Mexico. And maybe in other nations as well.

One in every five Walmart stores is in Mexico. The company is very popular south of the border and very profitable. Under the leadership of Eduardo Castro-Wright Walmart exploded in Mexico, opening new stores by the hundreds. This dazzling pace left their competitors in the dust. According to the Times account growth fueled by millions in bribes to local officials. Building permits, zoning and environmental issues, all the bureaucratic paperwork that normally takes weeks and months to clear, melted away in days. 

Castro-Wright was hailed for his success, promoted into a senior position in the United States and rumored to be a candidate for the top post at Walmart. There is, however, strong evidence that Castro-Wright encouraged the use of bribery to achieve the spectacular growth of Walmart de Mexico. So how could this happen without the knowledge of folks at headquarters? It couldn’t, it didn’t, they knew; in fact it appears it was decided at the highest levels to sweep it under the rug. 

When evidence surfaces that some individual or organization has strayed from the straight and narrow, invariably the number one response is, “everybody does it.” While that’s not what Walmart is saying now, it seems to have played a major role in overlooking the use of bribes in Mexico. 

Walmart headquarters’ rationale followed the “that’s just the way they do business down there” line of thinking. The most disturbing aspect of this mess is that it seems to have permeated every level at Walmart. That makes it part of the company culture. 

While Walmart has made positive moves on many fronts, it seems every time something big like this scenario rises, they fall short. That’s culture. The Times report isolates one of the moments in this scenario when Walmart lost their way big time. Their internal investigation had exposed the bribery in Mexico. Instead of putting an end to the misconduct and firing those responsible, they turned on their own investigators, “accusing them of being overbearing, disruptive and naïve about the moral ambiguities of doing business abroad,” AKA, everybody does it.

There is nothing morally or ethically ambiguous about what went on in this case. If their code of ethics amounts to anything more than words on paper, the first mention of a bribe should have been rejected out of hand. It seems inconceivable –given the jobs and taxes that a Walmart store offers a community– that bribes would have to be paid to local officials to get them built. So once again the culture doesn’t live up to the words in the Walmart Code of Ethics; surprise, surprise, surprise.

“It’s Official, Even the Banks Say They Messed Up” 

A Wall Street Reputation Study* commissioned by New York communications firm, Makovsky + Company unearthed some not too surprising outcomes, from a very surprising source. The study targeted communications and marketing types at mid-sized to large publicly traded and private financial organizations: banks, brokerages, insurance companies, etc.

They see the viewpoint held by the public that their behavior tossed America and the world into economic chaos as “The” biggest challenge they face. Almost all of those surveyed (96%) believe they brought it on themselves. Eight of ten see bonus swollen “C” Suite compensation packages as a major issue for the financial sector. Big surprise: three out of four believe that “increased regulation will help their firms improve reputations and trust with customers faster.” 

Now that’s not big news to anyone who has looked at the roll deregulation played in allowing the greed driven, crazy speculation fueled trip that took most of the world down the drain, but to hear it from the greed sector, WOW! We can imagine how that went over on “K” Street where the financial types have been pouring bucks by the tens of millions into the politicians’ pockets fighting even modest regulations.

It gets even more interesting; more than half admitted the “Occupy” movement had a “real impact on their business.” Four out of ten said they were surprised by “Occupy,” but only three out of ten think it’s over. Seven of ten say it will carry on at least through the November elections. Given the reaction of the Wall Street types who were pictured literally looking down their noses while enjoying pricy luncheons as the protesters marched outside their watering holes, this is a real surprise. Our guess is that those distaining the riff-raff were not the folks from communications, who likely saw the storm clouds gathering. That’s reflected in the 73% who said, “Their marketing/communications departments grew in importance over the past year.” Let’s hope their influence upstairs grew as well.

"With the six-month anniversary of the movement sparking a resurgence, the consensus is that Occupy Wall Street is not going away anytime soon, and financial services executives need to be better prepared to address this issue moving forward," Scott Tangney, executive vice president and head of the Financial Services practice at Makovsky, said in a news release. Time will tell if the warnings expressed by this study and clearly elucidated by Tangney sink in up in carpetland. 

When asked to take a look in the mirror and grade the industry, communications pros surveyed gave themselves pretty low grades, 57% graded "average," "below average" or "failing.” But then there were those with their heads in the sand, the 9% who gave themselves a “perfect” grade. This could be a watershed moment. Will the financial quarter embrace reform, or seek a return to the dark side? 

*Echo Research, February 22 through March 1, 2012

© 2012 GLG