Wal-Mart Shareholders to Vote on Board, Sweatshops

At 6:45 a.m. Friday, the world’s largest retailer will hold its biggest party of the year in Bud Walton Arena on the University of Arkansas campus in Fayetteville.

At that wee hour, a video will be shown and groups of bleary-eyed Wal-Mart employees from various countries will lead the company cheer. Reports from company executives will begin 15 minutes later. The official business meeting starts at 8:45 a.m.

The annual shareholders meeting is viewed by many as more of a pep rally than a business meeting. But there are a couple of issues on the agenda.

Shareholders as of April 6 will be able to vote on the election of the company’s 13 directors, a shareholder proposal concerning the company’s stance on sweatshops and any other matters that are “properly introduced” at the meeting.

Sweatshop Issue

The General Board of Pension and Health Benefits of The United Methodist Church of Evanston, Ill., and other shareholders are asking Wal-Mart’s Board of Directors to prepare a document stating that the company won’t purchase goods from suppliers who “manufacture items using forced labor, convict labor or child labor, or who fail to comply with fundamental workplace rights …”

Wal-Mart is asking shareholders to vote against the proposal.

Citing an October 2000 article in BusinessWeek magazine, the proposal said Wal-Mart’s auditors missed most of the “more serious abuses” at the Chun Si Enterprise Handbag Factory in China, including beatings and confiscated identity papers.

“Currently, Wal-Mart’s monitoring program is heavily dependent on auditors who do not have the trust of workers and miss serious labor rights violations,” said the proposal.

Wal-Mart replied in the proxy, saying a third-party audit system is already in place to “ensure that suppliers’ factories meet and adhere to the Wal-Mart Factory Certification criteria.” The process includes on-site visits, accounting audits and personal interviews with workers.

Wal-Mart said audits of all factories producing goods sold in its stores are conducted at least once a year.

“During 2000, our agent, Pacific Resources Export Limited, conducted over 5,000 audits, while other third-party monitors conducted another 2,000 factory audits,” the proxy states.

“In the case of the Chun Si factory, the factory’s failure to correct those issues identified by the auditors led Wal-Mart to drop the factory well in advance of the negative publicity cited by the proponents,” the company said in the proxy. “We cancel all orders from factories where egregious issues are observed and advise the supplier involved in the cancellation.”

The proxy states that Wal-Mart is “proud of its factory inspection program and believes that much good has been accomplished through the program.”

The vote comes two weeks after KLD & Co., the largest mutual fund aimed at social responsibility, sold its shares of Wal-Mart stock and removed the company from its Domini 400 Social Index because of sweatshop allegations.

Board of Directors

At the time of last year’s shareholders meeting, Wal-Mart had 15 on its board of directors. Gone from last year’s list are John A. Cooper Jr., Dr. Frederick S. Humphries, E. Stanley Kroenke and Dr. Paula Stern.

Since then, John T. Chambers, president and CEO of Cisco Systems Inc., has joined the board, and the company plans to add J. Paul Reason, president and chief operating officer of Metro Machine Corp., with shareholder approval on Friday.

The board has the authority to fill vacancies and increase or decrease the size of the board between annual meetings.

The board held four regular meetings and two telephone meetings during the past year. Outside directors were paid $50,000, with at least half of that amount coming in the form of Wal-Mart stock. In June 2000, outside directors also received a stock option grant of 3,393 shares each to “more closely link their compensation to the interests of shareholders,” according to the company’s proxy statement.

(For more on Wal-Mart and its shareholders’ meeting, click here.)