Published CommPro.biz 2014.03.04

Walmart And The Tax Creators
 

Are you sure you are getting a bargain when you shop at Walmart? Are you sure that your Big Mac doesn’t cost more than the price on the menu board? Are you sure that the upfront low prices you pay wherever minimum wage jobs are part of the picture are all you pay? Don’t be too sure.

If you pay taxes of any sort, you probably help pay for food stamps. You definitely help pay for Medicaid and subsidized housing; even welfare might soak up some of your tax dollars on their way to help the working poor. So when, the working poor are paid minimum wage, you help make up the rest of their income. They are on your payroll. So even if you don’t shop at Walmart or eat fast food, you are still not only picking up part of their workers’ paychecks, you are cutting their customers’ bill.

The largest recipient of welfare in America is Walmart. It’s their business model, along with reported bribery, to smooth out their growth. Walmart is America’s largest employer, so you are not just subsidizing some mom and pop outfit; you are subsidizing a huge enterprise controlled by the Walton family. They own a little over half the stock in Walmart, so whatever happens at Walmart is under the full control of these unbelievably rich folks. How rich are they? The Walton family riches equals the total riches of everybody in the bottom forty percent of Americans.

The first argument against raising the minimum wage is that it will cost jobs; that businesses paying minimum wages will lay people off. That assumes that these organizations have too many employees, or that they don’t want to give their customers quick efficient service. Or that they will have to raise their prices so much that they won’t have as many customers. Of course that falls apart if the competition has to raise their wages and prices too.

Then there’s the teen argument. That most of these jobs are filled by teens who are learning how to work and therefore should be paid a bit less. If that was ever true, it isn’t true today. Yes there are teens in minimum wage jobs, but the vast majority of those at this pay level are adults, most trying to support a family. So how about the teens? Perhaps a case could be made for a two tier minimum wage that would allow for a lower pay scale for teens during their first few months on the job until they become as productive as the adults.

In the end all the arguments against a decent wage level fall apart. And by the way, Walmart doesn’t skimp on payroll to offer lower prices; they do it to make the Waltons richer. In the end that’s what it’s all about, save on payroll, keep the extra bucks and let the taxpayers make up the difference with food stamps, Medicaid, and anything else it takes to help your workers scrape by.

"Am I wrong?"--"Am I crazy?"

"What do you think?"--"Do you agree?"

Published in CommPro.biz 2013.04.30

A Better People

 

OK! We get it. We understand that manufacturing economics too often makes outsourcing the creation of goods a necessity, especially when a major hand assembly component is involved. And when horrific calamities strike in faraway places, such as the building collapse last week (2013.04.24) in Savar, a suburb of Dhaka, the capital of Bangladesh, the American companies whose goods come from these factories wring their hands and say they are doing everything they can. That is simply untrue.  There is an alternative.

A low wage outsourcing model that works indefinitely better. It’s better for the workers and still allows the production of goods at competitive price levels. Born in the mid-1960s – 30 years before NAFTA – the Maquiladoro concept continues to be a cost-effective outsourcing alternative for American manufacturers. This concept flourishes along the US border with Mexico. American companies build factories in Mexican free trade zones. The workers and most managers are Mexican nationals, but the working conditions and standards are firmly in the hands of the American owners.

That’s very different from the 5,000 +/- factories in Bangladesh. Their owners, Bangladesh nationals, are driven by nothing but cost. The disaster that saw an eight-story building collapse in a pile of rubble came one day after cracks in the building made it apparent that it was unsafe. The owners were told to close it, an order they simply ignored. This calamity that took hundreds of lives cannot be ignored by the brands that used this facility and others like it.

It’s not enough for these brands to promise to put pressure on the factory owners. It’s time for them to build their own factories in countries where labor costs are favorable. It’s time for the major global clothing companies, Walmart, Gap, Sears, Tommy Hilfiger and all the rest, to act. They owe it to the more than three million workers in Bangladesh that sew their goods for minimum wage, under $40.00 a month. It’s not enough for Apple to say that FoxConn, a manufacturer in China, is making improvements. Apple could buy out FoxConn and make things right for the workers in those factories. Americans can afford the tiny bump up in prices that these ethical moves would bring.

The Maquiladoro concept works. For half a century most Maquiladoro workers have had clean, safe working conditions. Many have access to free healthcare on site, to nutritious meals at reasonable cost, to simple things like showers that we take for granted. While their wages are low by American standards, they make what is a living wage in their society, and we benefit from the cost of the goods they produce. Ethically, how can we accept anything less in the creation of what we wear on our backs and carry in our pockets? We have been blessed with much. How can we see those who make these goods suffer, even die to save us pennies? We are a better people than that.

Published 2012.01.24 in CommPRO.biz 

http://www.commpro.biz/news/thursday-january-24-2013/

Do The Math

Those of us who have spent time in communications, be it journalism or public relations, are familiar with what we call a “Grandstand Move.” That’s when an outfit with a well-deserved lousy image will roll out some event or policy designed to make them look good. With luck they garner a ton of positive media attention. So it is with Walmart. Their latest is a pledge of a job for every returning veteran during their first year out of the service. It got Walmart more positive media than they’ve seen in years. Even we were impressed until we got to thinking about it.

The majority of jobs in the Wonderful World of Walmart are low-wage, part-time with zilch benefits. When you’ve served in the workplace culture prevalent in our military, who wants that kind of job?  Bill Simon, who runs the Walmart stores in the United States, joined the company less than ten years ago. He was paid about $8.5 million last year. Our guess is that not many of the hundred thousand vets Simon estimates Walmart will hire over the next five years will take home even the average US paycheck, let alone much above that figure. A hundred thousand hires over five years is just 20,000 a year, roughly four or five a year per Walmart store. So if you do the math Walmart’s offer to our veterans doesn’t add up to all that much.

Ironically, Bill Simon’s big announcement came just a few days before Fortune magazine rolled out their 2013 listing of the 100 best places in America to work. It’s no surprise that Walmart didn’t make the list. It was dominated at the top by Google and other enterprises that employ mostly high-skill, high-wage people. Except for the one in fifth place, Wegmans, a family owned supermarket chain.

Wegmans is one of only thirteen companies that have been on the Fortune list since its debut. They have more employees than any other company in the top forty on the list, and while they pay well, the majority of their people are not in the upper brackets. The Fortune research model includes a scientific sample drawn from all full-and-part time employees. In Wegmans’ case that includes the young people who round up shopping carts from the icy and snow-covered parking lots in the northeast where their stores are located.

The message is pretty clear, it’s the culture. Walmart can roll out all the PR events and policies they can come up with, it won’t change their culture. Their people on the front line do not create the culture – that comes from the top. Wegmans is in the hands of the fourth and fifth generations of the Wegman family who carefully guard their culture. Walmart is controlled by the Walton family. Their wealth is close to a hundred billion dollars; sadly that’s about all they have to show for it.

Walmart,,, Again?

Tazreen Fashions Ltd., that’s the company where a fire left scores injured and 112 dead. At first Walmart claimed they had no connection to the Bangladesh factory. Then they said they had cut their association before the fire. Then when it turned out that more than a third of the massive eight-story factory was producing goods for five Walmart suppliers, they claimed the suppliers acted on their own against instructions from the company. It may be true that Walmart told their suppliers that Tazreen was no longer to produce their goods. However, that message was likely lost under the pricing pressure the retail giant exerts on all their suppliers.

The details of this fire are horrific. When the fire alarm went off the stairwells that served as the sole exit from the upper floors were blocked by managers who told the workers that it was just a drill, to return to their sewing machines. In a few minutes screams from below and smoke filled the workspace, the managers had disappeared and a stampede of workers jammed the narrow stairwells. The windows were covered with iron grilles. Sixty-nine of the dead were found on one floor. Scores were saved by a worker who escaped. He then climbed a scaffolding, smashed a window grille and helped workers out and down the scaffold.

Bloomberg reporters Renee Dudley and Arun Devnath dug up information on a retailers’ meeting in the spring of 2011. Concerned with safety lapses and deaths from fires in Bangladesh, the group attempted to forge an agreement that would provide support for the factory owners to create safer working conditions. Only two brands, Tommy Hilfiger and German retailer Tchibo, were willing to sign on. Minutes from that meeting included this statement: “We are talking about 4,500 factories, and in most cases very extensive and costly modifications would need to be undertaken to some factories. It is not financially feasible for the brands to make such investments.” 

According to published reports Walmart “most strongly advocated this position.” Walmart says their objections were taken out of context. Gap, however, has put forward a plan to, “Make Bangladesh garment factories safer. It includes hiring a chief fire safety inspector to inspect factories, giving suppliers as much as $20 million in capital to make safety improvements.” 

Walmart and the others feeling pushed on one hand for higher shareholder value and on the other to lower prices, have chosen the wrong path in Bangladesh. To put the lives of human beings at extreme risk to cut a buck or two off the cost of some piece of clothing, tool or toy is not an acceptable choice. Walmart and the others struggling to meet the demands of the marketplace as they see it ignore the evidence that an ethical business model makes you more competitive and more profitable.

Originally published in CommPRO.biz

Business Ethics Is Not 

An Oxymoron

 

Every day all but a few of us go out into the world and try our best to do the right thing. That’s true in our personal life; that’s true in our workplace. Why then does it seem that all we hear about are the bad things? The Enrons, the Adelphias, oil spills in the Gulf of Mexico, bribes at Walmart, reckless bankers destroying the world economy. Given all that and more, how can we say “Business Ethics is not an Oxymoron?”

It has to do with what we human beings consider news. By and large we aren’t interested in the good stuff. Quiet day-to-day happenings occasionally make for an interesting feature story, but the front page headlines tend more toward mayhem, treachery, and such. We don’t go to the race track to see the drivers make left turns; we go to see the cars crash. We don’t head for the movies to see ordinary life. We don’t pick up novels about good folks doing well, but in real life good folks doing the right thing and doing well is actually the norm.

Several years ago two academics and a writer published Firms of Endearment documenting their research into business ethics. They set out to find companies that maintain the highest ethical standards. Companies that deal with all their stakeholders at the highest ethical levels: their customers, their employees, their vendors, their community, the environment and finally their bottom line, their lenders and shareholders. They found them, great examples, nice outfits to deal with and have around. However, the remaining question was, do they make any money?

It turns out that over the ten years prior to the Firms of Endearment study, the public companies that met their ethical bar returned eight times the Standard & Poor’s average. Not eight times the worst, eight times the average return. 

That’s pretty impressive. It shows that if you take care of everything else your bottom line will take care of itself. It doesn’t mean that it’s always easy to follow this path or that everyone who follows it will succeed. There are times when the right thing is not clear. Unforeseeable factors come into play, such as economic downturns, competitive issues, market trends; even a natural disaster like Super Storm Sandy can wipe out a thriving enterprise.

It takes smarts. It takes hard work. It takes courage to succeed. You have to be lucky and you have to follow the oldest of moral guides, the Golden Rule. That’s what ethics is really all about. Nor is it writ large that cutthroat bad guys won’t succeed. It just means that all things being equal, an ethical business model will dramatically outperform any alternative. Instinctively we know that; it’s why the vast majority of us are out there trying to do the right thing every day, enjoying the great feeling that comes from that effort win or lose.

Walmart, Ethics & the Law

Walmart announced that Daniel Trujillo came on board last week (2012.10.29) as SVP and Chief Compliance Officer for Walmart International. It’s a new post and part of a restructuring of the retail giant’s legal structure. General Counsel Jeff Gearhart now heads compliance, legal, ethics, and investigations ops, according to published reports. They also added Jay Jorgensen, an attorney, as Global Chief Compliance Officer and FBI veteran Tracy Reinhold, as VP Global Investigations.

This reflects a flurry of activity triggered by the exposure of what looks like their widespread use of bribery in Mexico. If true it would open Walmart to charges under the Foreign Corrupt Practices Act (FCPA). Earlier this year (2012.02.21) in an in-depth investigative piece, The New York Times painted a picture of bribery fueling Walmart’s growth in Mexico. Tens of millions were paid to overcome any obstacle in their effort to fast-track new store construction across the country. It worked; twenty percent of the world’s Walmart stores are now in Mexico.

Walmart employees in Mexico who tried to alert headquarters “Carpet-Landers” were ignored or marginalized. When the top leaders could no longer turn a blind eye to the problem they did their best to minimize the issue. Their Investigations Unit was rebuked for being “overly aggressive” by then Walmart CEO, H. Lee Scott Jr., who is still on their Board of Directors. A few days later their report was shipped to Walmart’s Mexican headquarters never to be mentioned again.

These new hires and this consolidation in the headquarters legal office looks like an extension of the cover-up that has been at the core of Walmart’s response to the bribery scandal. Looking at their newly minted SVP, and Chief Compliance Officer for Wal-Mart International, Daniel Trujillo’s chief qualification for the job is pretty obvious. He was Chief Compliance Officer at oilfield services company Schlumberger Ltd. Our Justice Department just bailed on a bribery investigation involving Schlumberger, an outcome Walmart is probably hoping for.

There are a couple things wrong here. Compliance and ethics don’t belong in the same basket. Compliance has to do with the law; ethics falls way outside what’s legal. It’s about corporate culture and reputation. The corporate communications folks deal in that arena. Were Walmart really interested in fixing this problem, they would be focused on new hires to create a culture to repair their reputation.

You would think that the 2006 Hewlett-Packard Board of Directors spying case would burn that into the minds of every major corporation. Kevin Hunsaker, HP Senior Counsel and Director of Ethics and Standards of Business Conduct, green-lighted a stupid telephone spying operation. He thought it was legal, it wasn’t. Hunsaker and several others were charged with a felony; he pleaded no contest. From an ethics viewpoint this plan wasn’t even close to being OK, but that’s not the viewpoint lawyers work from. Ethics and reputation are not in their skill set.

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.