NEW YORK — It’s looking like Walmart’s upcoming annual meeting is going to be a bittersweet affair as the company observes its 50th anniversary against the backdrop of an unfolding Mexican bribery scandal and an appeal from a major shareholder this week urging a no vote on five board members.
New York City comptroller John Liu, who oversees five New York City pension funds that hold 5.6 million Walmart shares, is encouraging fellow Walmart shareholders to vote against the re-election of company directors including chairman Rob Walton, president and CEO Mike Duke, former president and CEO Lee Scott, Marriott CEO Arne Sorenson and Christopher Williams, chairman and CEO of the investment bank Williams Capital Group. Liu’s office issued a detailed press release on Tuesday that spells out the rationale for such action, sent a letter to Walmart dated Wednesday, May 2 and then on Thursday Walmart disclosed the letter in a filing with the Securities and Exchange Commission.
“We are taking this extraordinary step in light of the recently reported cover-up in 2005 and 2006 of alleged widespread bribery in Mexico – which occurred at the same time the audit committee was stonewalling repeated shareowner demands for a comprehensive, independent compliance review – as well as our more general concerns with the board’s independence,” Liu wrote in the letter.
Liu was elected comptroller two years ago and essentially functions as the CFO of the City of New York. In that capacity, he is continuing the work begun by is predecessors to promote improved compliance with regulatory affairs at Walmart. Liu contends the board’s audit committee on which Williams and Sorenson serve has failed shareholders based on the New York Times article from April 22, which detailed an alleged scheme of payments to Mexican officials to accelerate store openings.
“The audit committee’s failure with respect to legal and regulatory compliance is especially troubling given that, in three separate letters between May 2005 and May 2006, then-NYC Comptroller William C. Thompson, Jr., joined by other institutional shareowners, requested that Wal-Mart’s audit committee retain independent counsel to conduct a comprehensive review of Walmart’s legal and regulatory controls and issue a report to shareowners with findings and recommendations,” according to Liu’s letter to Walmart.
While Liu makes some points that appear valid and documents efforts (http://comptroller.nyc.gov/press/walmart.html) by predecessors to improve regulatory compliance at Walmart, the letter reeks of grandstanding on the part of an aspiring politician. Liu surely knows how well it plays with key segments of the New York City electorate to be seen as taking a hard line with Walmart. Liu also knows, as do all shareholders who read Walmart’s proxy statement, that no shareholder initiative has any chance of passing without the support of the Walton family which now controls nearly 50% of the outstanding shares following years of aggressive share repurchase activity. What’s Rob Walton gong to do? Vote against himself.