Wal-Mart Shareholders Vote No on Sweat Shop Proposal

FAYETTEVILLE — Only two weeks after KLD & Co., the largest mutual fund aimed at social responsibility, sold its shares of Wal-Mart Stores Inc., 91 percent of the firm’s shareholders voted down an anti-sweat shop proposal.

The vote came Friday morning during the company’s annual stockholder’s meeting where an estimated 15,000 shareholders nearly filled Walton Arena on the University of Arkansas campus. Shareholders and employees from around the world began arriving in northwest Arkansas early in the week, and the annual event culminates with today’s meeting.

Lee Scott, Wal-Mart’s CEO, also addressed the company’s struggles in Germany, and 97 percent of the shareholders approved the addition of J. Paul Reason, president and chief operating officer of Metro Machine Corp., to Wal-Mart’s board.

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

KLD & Co. removed Wal-Mart from its Domini 400 Social Index because of sweatshop allegations. The proposal, designed to guarantee work place rights in the manufacturing facilities of Wal-Mart suppliers, urged Wal-Mart’s board 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 …”

It was brought forward by The General Board of Pension and Health Benefits of The United Methodist Church of Evanston, Ill., and other shareholders.

Wal-Mart replied in its 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 yearly on-site visits, accounting audits and personal interviews with workers.

The proposal’s defeat was predicted by most industry analysts.

Despite losing $200 million in Germany last year, Scott said the world’s largest retailer will rebound there. Analysts say 2000’s losses are more of an embarrassment, really, than a problem for the $191 billion retail giant.

Scott said Wal-Mart must implement its culture and convince its employees in Germany to have faith in the company in order to be successful there.

“We as a company have made mistakes in Germany this last year,” Scott said. “We lost sight of what makes this company …

“We are on track in Germany to make the improvements we need to make. We’re taking the right steps. We appreciate [the German associates in attendance] staying with us. We are going to be successful in Germany.”

Scott also said Wal-Mart competitors are getting better. He called several by name, including Lowes, Walgreens and Best Buy, and said those competitors have made today’s retail market tougher.

“Our competitors are getting better,” Scott said. “The weakest links are having to drop out because they can’t compete.”

Friday morning’s voting and executive speeches were followed by a question and answer session for stockholders. The meeting was expected to end around 1 p.m.

rWal-Mart to Offer Internet Servicer

rThe Internet arm of Wal-Mart Stores Inc. said during the meeting that it will launch Wal-Mart Connect, which will offer Internet access for under $10 a month.

rThe service comes in partnership with AOL Time Warner Inc.’s America Online.

rJeanne Jackson, chief executive officer of Walmart.com, told shareholders that Wal-Mart customers would be able to receive Internet access and instant messaging with the service, available this fall.

rAlso Friday, the retailer declared a quarterly cash dividend on the common stock of 7 cents per share payable July 9 to shareholders of record on June 22.

Shares of Wal-Mart (NYSE: WMT) were trading at $51.89 on Friday after closing at $51.75 on Thursday.

(Jeffrey Wood contributed to this report.)