Wal-Mart Mole Threatens Corporate Trust

Wal-Mart Stores Inc. said it’s troubled with the breach of trust from one member of its corporate ranks who recently played reporter at a Feb. 1 officer’s meeting and proceeded to distribute his or her personal notes in an email to a Bloomberg journalist.

“This is a violation of trust and we are taking it very seriously,” Wal-Mart spokesman Dave Tovar said Tuesday (Mar. 5) in a phone interview. Tovar said the so-called meeting minutes were not an official document in any way and the “wildly inaccurate statements were taken out of context.”

Bill Simon, CEO of Walmart U.S., said Tuesday during an investor conference in Orlando that the infamous email was one of 10 million outgoing emails sent that week from the corporate offices.

“There have been 50 million emails since, and this same reporter is still trying to find stories from the one source,” Simon said as he addressed a question from the audience on the news bureau’s report about Wal-Mart efforts to source more online products from the direct market place to better compete with Amazon.

The Amazon video piece was the third story generated by Bloomberg that vaguely used the rogue email as its source.

During Simon’s prepared remarks he made it clear that Wal-Mart is playing to win more market share across all of its shopping channels through its low-price strategy to save people money when and where they chose to shop.

CORPORATE CULTURE
Tovar said Wal-Mart’s corporate culture fosters an environment of open lines communication.

“There is often robust information sharing at our officer meetings in which roughly 300 people attend. We have to trust these conversations are confidential in nature. But we do also have Saturday morning meetings where outside guests are invited and routine business is also discussed,” Tovar said.

Corporate culture expert Larry Johnson, who authored a book on the subject “Absolute Honesty,” says a breach of trust from within the officer ranks is a betrayal with which no company wants to face.

But he adds it’s imperative they do because of the risk to future loyalty and confidentiality.

“Core culture is unique, it makes a company what it is and helps to unify a diverse group under a common purpose and goal. Conversation and open lines of communication are key for any company to establish the type of environment where employees can be honest with one another,” Johnson said.

He has spent nearly two decades counseling with some of the country’s largest companies on the subject of corporate culture and his clients include: Harley Davidson, J.P. Morgan and American Express.

Johnson said it’s rare for a company even the size of Wal-Mart to have a breach of trust from within its officer ranks, unless there is some perceived motive for the “greater good” in a whistle blower role.

Instead, the recent email leak spawned stories that attempted to show operational weaknesses from within the giant’s vast supply chain and logistics division, negative economic news that shoppers were still waiting on tax refunds and most recently that Wal-Mart was attempting to go after more direct market place suppliers for its online business.

The first story did the most damage as it warned of slumping sales just ahead of the company’s earnings report. The Wal-Mart share (NYSE: WMT) price began a 3.8% decline from the time the story broke on Feb. 15 until Wal-Mart addressed the concerns during its quarterly earnings call on Feb. 21. The loss has been recovered.

Allen Ellstrand, University of Arkansas professor and expert in corporate governance, said it’s rare for Wal-Mart to experience a breach of trust given its tightly knit culture. He said unlike the whistle blower, this leak looks to have come from someone with a personal axe to grind, as the contents of the email were reportedly personal notes passed off as minutes from an official meeting.

DAMAGE CONTROL
Ellstrand said Wal-Mart and other companies that face this type of breach have to work quickly to repair any damage to corporate credibility and the risk of future leaks.

“Companies have to act fast when this happens within a group of chosen leaders. That means sending strong signals that such breaches in loyalty will not be tolerated,” he said.

Johnson agrees it’s important for companies to handle information leaks and breaches of trust as quickly as possible by locating the source, but also more importantly reinforcing the company’s corporate culture and protocol.

Financial analysts with CNBC recently praised Wal-Mart officials for how they addressed the media claims and for putting them in context. Investors likely concurred as the Wal-Mart share price has rallied to close Tuesday at $73.72, up 46 cents on the day, and up from the $71.39 level before the leak was revealed.

Johnson said the larger the company the more systemic the risk for disloyalty which makes stoking the fire of corporate culture all the more important.

“I would be running a campaign reinforcing the loyalty message about how together we can serve the world as long no one works to sabotage that effort,” Johnson said.