Wal-Mart sets new policy on ethics

By Elliot Blair Smith, USA TODAY

After Wal-Mart Stores (WMT) fired seven top managers in mid-December for failing to meet company standards, the world's biggest retailer quietly issued a sweeping new ethics policy just two weeks later.

Wal-Mart has not identified the fired managers, nor disclosed why they were ousted, but the new policy, dated Jan. 1, became public last week. Wal-Mart attached it in a filing to the Securities and Exchange Commission related to the retirement of Vice Chairman Tom Coughlin, 55, whom the company says voluntarily quit in early December.

Wal-Mart spokesman Dan Fogleman says the new policy toughens company guidelines dealing with internal accounting issues, vendor relationships and personal conduct.

For the first time, he says, the policy extends beyond Wal-Mart's 1.5 million employees and their families to include same-sex partners and close non-marital relations.

At 26 pages, the guide also is two to three times longer than most competitors' policies, governance specialist Eleanor Bloxham says.

Wal-Mart's effort to broaden its ethical umbrella comes at a time of several strong legal challenges to the company and significant turmoil in the retail industry involving accounting and vendor issues:

•In mid-January, the Justice Department and SEC filed complaints accusing nine key employees of several big grocery suppliers — including General Mills, Sugar Foods and Tyson Foods — of participating in a massive accounting fraud at Dutch grocer Royal Ahold.

•In October 2004, Ahold settled a related SEC complaint without admitting or denying the company overstated sales by $30 billion and operating profits by $3.3 billion from 2000 to 2002, in part by using vendor allowances to inflate profits by $700 million in the USA.

•In September 2004, retail supplier Fleming settled an SEC complaint accusing it of inflating profits, with the help of several vendors.

Wal-Mart is not accused of any accounting fraud. But it is the subject of a class-action lawsuit on behalf of 1.6 million past and present female associates that accuses the company of sexual discrimination. It also is the defendant in several civil lawsuits accusing the company of payroll violations. And it is the target of a federal grand jury probe into its contracting of undocumented maintenance workers.

Attorney Brad Seligman, lead counsel in the sex-discrimination lawsuit says, "Every time the company gets sued, its statement of ethics gets longer."

Seligman, who has obtained several versions of the ethics guide, says the retailer increasingly emphasizes the need to respect state wage-and-hour laws and to avoid sexual discrimination.

Wal-Mart's ethics policy also "requires honest and accurate" accounting, prohibits gifts from suppliers and asks associates to avoid social relationships and other conflicts of interest with vendors.

University of Virginia ethicist Edward Freeman says, "It was a small company run like a small company. Now it's a real big company, and they're struggling. They can't afford to lose the public trust."

 http://www.usatoday.com/money/workplace/2005-01-28-walmart-ethics_x.htm