Back to Article
Wednesday, November 2nd, 2005
Wal-Mart: is this the worst company in the world?
Andrew Gumbel/The Independent (UK)
There can be few chief executives in corporate America more uncomfortable at the moment than Lee Scott of Wal-Mart. Not that he should necessarily have our sympathy: his company, known unaffectionately as the Beast of Bentonville, after its corporate home, is the biggest single private employer in the United States. Its network of more than 3,500 discount retail stores has been lambasted repeatedly in recent years for its rock-bottom wages, which oblige thousands of its lower-end employees to resort to government subsistence, including food stamps, to make ends meet.
It has faced down critics for its reliance on overseas sweatshop labour, especially in China, to produce the goods with which it stocks its shelves. It has met community resistance to new store openings in many parts of the country because of its tendency to empty town centres of traditional family-owned businesses and foster suburban sprawl. It has been accused, in fact, of being the very emblem of everything that assails the modern American economy, as old-style industrial manufacturing jobs are outsourced overseas and are replaced with low-wage, low-security service-sector work.
All that, though, is only one of the multiple headaches confronting Mr Scott. His biggest problem is that he has been making energetic efforts to improve his company's lousy reputation, only to have his efforts undermined by embarrassing new information unearthed about the company and by a spirited organising effort by churches, small businesses, unions, environmentalists and rich coastal liberals to stop the Wal-Martisation of America dead in its tracks.
Things were looking distinctly promising a little over a month ago, when Wal-Mart threw considerable energy into volunteer efforts in the immediate aftermath of Hurricane Katrina in Louisiana and Mississippi. In stark contrast to both the federal and state governments, Wal-Mart was present with containers full of fresh water, food and medical supplies.
That was followed in mid-October by a flurry of touchy-feely proposals by Mr Scott - to make Wal-Mart stores more energy-efficient, to make health care at least ostensibly more accessible to his employees, and to lobby politicians for an increase in America's minimum wage, which has glaringly failed to keep up with inflation for more than 20 years.
But all the careful public relations work was demolished by the leak of an internal memo last week which acknowledged some shocking home truths about Wal-Mart - including the fact that 46 per cent of the children of company employees either had no health insurance or relied on emergency government programmes nominally set up for the indigent and unemployed. The memo, written by Wal-Mart's executive vice-president for benefits in conjunction with the management consultants McKinsey and Co., also showed the true purpose of rearranging the company's health plan was to cut costs further.
Sure enough, close examination of the health plan revealed that, while monthly insurance payments were being lowered in some cases, they came with a hefty deductible that many company employees were unlikely to be able to afford. The memo went so far as to suggest adding a physical element to sedentary jobs such as cashiering to deter unhealthy people from applying.
This week sees the arrival of a whole new public relations nightmare, in the shape of a documentary film which has already become an organising tool for anti-Wal-Mart activists across the country. Called "Wal-Mart: The High Cost of Low Price," it was made by Robert Greenwald, a prominent Hollywood liberal who has pioneered a new form of viral marketing in which politics and film promotion are merged, and screenings are arranged - often simultaneously -everywhere from private house parties to traditional cinema outlets.
Mr Greenwald's last two films, one citing a panoply of intelligence and national security experts on why they thought the Bush administration had lied its way to war in Iraq, and the other turning an unflattering spotlight on the rabidly pro-Bush Fox News channel, punched considerably above their low-budget weight and earned a torrent of press coverage, as much for the innovative way they were distributed as for their content.
This time, the marketing has gone into overdrive. The film is the focus of two anti-Wal-Mart groups, Wal-Mart Watch and Wake Up Wal-Mart, which were set up six months ago by an alliance of unions representing service workers and food and retail workers as clearinghouses for information -- especially damning information about a company they have come to regard as public enemy number one.
Through their networks, Mr Greenwald's film will be shown in more than 6,000 venues over the next couple of weeks - union halls, churches, small businesses and private homes as well as higher-profile venues like the Writers Guild Theatre in Beverly Hills. Screenings are being attended by mayors, city-council members, union leaders and showbusiness personalities.
And that's just the tip of the iceberg. Last weekend, anti-Wal-Mart activists went Halloween trick-or-treating outside more than 100 Wal-Mart stores to raise money to help meet the healthcare costs of struggling company employees. Starting on 13 November, a Wal-Mart "week of action" promises more documentary screenings, street protests, TV and newspaper advertising campaigns and other, as yet unannounced gimmicks.
The existence of Mr Greenwald's film has been no secret. He not only cultivated an advance fan club on the internet, he even consulted them to select a title. Initially, Wal-Mart appears to have thought the best strategy was to pay no attention. One company spokeswoman said: "I guess we will pretty much ignore it -- because to all but a handful of anti-Wal-Mart activists, it simply will be irrelevant."
That, though, was before the sheer size and scope of the accompanying organising effort became clear. Now the company has gone to the other extreme, putting out a 10-page press release accusing Mr Greenwald of getting his facts wrong even in the short trailer he has put out -- the company has seen no more for now -- and attempting to discredit him by digging out the most embarrassing item on his long resume -- the disastrous 1980 Olivia Newton-John vehicle, Xanadu - and reprinting as many scathing reviews as it could find.
Mr Greenwald believes his film actually occasioned the entire charm offensive undertaken by the company in the past couple of months. "Listen, I understand, I'd be nervous too," he said in an interview. "I wouldn't myself waste millions of dollars in PR money to attack the messenger rather than trying to address some of the problems. This is a company that spends $3.8m [£2.2m] a day on telling its story -- not on milk and eggs but on propaganda. If that money was spent on providing adequate healthcare to its employees it could make a huge difference."
Wal-Mart, for its part, cannot quite bring itself to acknowledge Mr Greenwald's work as a film. Rather, it is referring to it as a "special interest video" -- the special interests in question being labour unions and environmentalists. And it has started pumping out some high-charged rhetoric of its own to counter the often emotional accusations being hurled by its detractors. "Let's be clear about Mr Greenwald's intent," the company press release said. "It is not to present a fair and accurate portrayal of Wal-Mart. It is a propaganda video -- pure and simple." Among the issues it has challenged is the testimony of an Ohio hardware store owner, who explains on camera how his bank refused to keep his line of credit going once it learned Wal-Mart was coming to town and so forced him out of business. Wal-Mart argues first that it cannot have been responsible for the closure, because its store did not open until after the hardware shop closed, and second that it cannot have deterred hardware businesses because another one sprang up on exactly the same site shortly afterwards and is still going.
Depending on your point of view, this is either an attempt to nitpick the film to death, or an illumination of Mr. Greenwald's slanted view of the company.
One of the film's most powerful sequences has, however, prompted no comeback to date from Wal-Mart. It concerns a former company executive, Weldon Nicholson, who describes how he was ordered to bust attempts at union organisation, "ignore" the existence of undocumented immigrant cleaning crews, make campaign contributions to local politicians who indicated their opposition to new Wal-Mart projects, shave hours off employees' time-cards, and inform workers about government healthcare programmes so the tax-payer, not the company, would meet any medical costs. " You won't ever find these policies in a Wal-Mart handbook, but every single manager in this country is taught how to do these things," Mr Nicholson alleges. "If you learn to do them well, you are promoted. If not, then they find a way to force you out... There's so much wrong with this company, I wouldn't even know how to begin."
Such incendiary accusations aside, Wal-Mart is an extraordinary phenomenon in American society. First because of its size: with more than 1.3 million employees and revenues of $285bn this year, it is larger than quite a few countries. And second because the very thing that makes it so attractive - low prices on everyday consumer goods - may be the very thing that is strangling the communities it serves.
The company denies this, of course, but a newly published academic paper argues in scientific fashion that Wal-Mart stores reduce employment by anywhere from 2 to 4 per cent in communities and depress local wages by as much as 5 per cent. What makes the paper so powerful is that its lead author, David Neumark of the Public Policy Institute of California, has been sceptical of union-led "living wage" campaigns in the past.
Certainly, Mr Greenwald would argue that the Wal-Mart economic model is by definition unsustainable. He calls it a "suicide economy" and cites a multiplicity of people in his film -- Republican small business owners who feel stifled, residents of gated communities who resent Wal-Mart changing the land-use rules and moving in next door - who might otherwise be moved to applaud capitalist enterprise in action.
The film charts one particularly striking instance in which a community slammed the door on Wal-Mart -- the middle-class, predominantly black Los Angeles neighbourhood of Inglewood, which voted against admitting the chain in a referendum last year despite a long and costly campaign by the company. That, in turn, has spooked Wal-Mart into thinking it has to stop being the bogeyman of American business and try to make itself, at the very least, less visible.
That lower-profile approach has been employed at Asda, Wal-Mart's British subsidiary, which has in large part avoided hitting the headlines, while attempting to import simlarly controversial tactics into the UK. Asda managers, it is claimed, have adopted a softly-softly approach to marginalise unions under a so-called "chip-away" strategy. One internal document proposes increasing employees' productive time by cutting back on lavatory breaks, putting pressure on shop stewards to spend less time on union business and creating channels for communicating with employees without the involvement of the GMB general union. Asda has continued, nonetheless, to insist it is not anti-union.
Perhaps Asda's most unpopular initiative, however, was to try to cut costs by withdrawing a Christmas discount offered to the group's 140,000 employees. The supermarket chain was forced last week to reinstate most of the price cuts after a rebellion by staff. The acting general secretary of the GMB, Paul Kenny - together with a number of his members - contacted bitter rival Tesco asking if it would honour the discount instead. Asda is desperately trying to take customers away from Tesco, which enjoys the lion's share of the market.
These problems pale into insignificance when compared with the trouble brewing back home. According to a piece in USA Today this week, Wal-Mart has built up a very cosy relationship with the California governor Arnold Schwarzenegger, whereby Mr Schwarzenegger receives lavish contributions to causes close to his campaign organisation and in return votes down legislation aimed at curbing Wal-Mart's more odious labour practices - such as its habit of locking overnight shift-workers into the store where they work.
Wal-Mart nevertheless has one more trump card with which to counter Mr Greenwald and his friends: a rival documentary film, casting Wal-Mart in a uniformly positive light. According to the publicity materials: "The documentary explores why Wal-Mart is one of the greatest success stories in business history, how it improves the lives of individual working Americans and their communities and the pathology behind the escalating attacks on the company by special interest groups."
The title of the film, due out later this month, says it all: Why Wal-Mart Works, And Why That Drives Some People C-r-a-z-y.
Dead Peasant's Insurance
Wal-Mart has taken out life insurance policies, known as "dead peasants" , on low-wage hourly employees that pay benefits to the company when the workers die. On top of that - before Congress began cracking down on the practice in 1996 - companies were able to take out loans against the value of these policies and enjoy a tax write-off on the interest payments.
Employees are locked in stores until managers return in the morning. Wal-Mart uses this practice to ensure overnight shelf-fillers cannot pilfer goods and they don't need to pay supervisors. In one case a pregnant employee who was unwell had to wait more than two hours to be released.
Wal-Mart is the subject of a class action lawsuit by past and present female "associates" who claim they were systematically paid less and promoted less than their male colleagues.
No unions, no way
New Wal-Mart supervisors receive a booklet called Manager's Tool Box For Remaining Union Free. Managers are "the first line of defence against unions", and encouraged to report organised labour activity to a special hotline. In 2000 the company closed its meat counters nationwide in response to 10 of its butchers in Texas forming a union.
Thousands of workers have reported being forced to work after hours without overtime. Regular tactics include having "associates" clock off and then calling them back in to clean stores. This has helped the company to get average sales staff pay down to $14,000 a year, $1,000 less than the American poverty line.
A Wal-Mart internal memo focused on ways to reduce the "unacceptable" 15 per cent annual rise in health benefits, including adding a "physical element" to all jobs - eg, making checkout staff gather trolleys - to discourage the overweight or infirm from applying in the first place.
Back to Article