April 30, 2012
The New York Times, this Week-End, in front page article entitled Vast Mexico Bribery Case the Hushed Up by Walmart After Top-Level Struggle, revealed that back in 2005, Walmart officials in Mexico had paid more than $24 million dollars in bribes to Mexican officials to obtain building and occupancy permits for the opening of their stores in Mexico.
Furthermore, the article alleges that once alerted to these illegal payments, Walmart Mexico, concealed the information from Walmart’s US headquarters in Betonville. Sergio Cicero, a former executive who had helped organize the illegal payments said “dirty clothes are washed at home.” The investigation was done internally and quickly concluded. A decision was also made not to inform either U.S. or Mexican authorities.
David Tovar, VP of Corporate Communication said, in response to the New York Times article:
“We take compliance with the U.S. Foreign Corrupt Practices Act (FCPA) very seriously and are committed to having a strong and effective global anti-corruption program in every country in which we operate. We will not tolerate noncompliance with FCPA anywhere or at any level of the company. Many of the alleged activities in The New York Times article are more than six years old. If these allegations are true, it is not a reflection of who we are or what we stand for. We are deeply concerned by these allegations and are working aggressively to determine what happened.”
Walmart is Mexico’s largest private company with more than 209,000 employees. Wal-Mart is the world largest employer with more than 2 million employees and had sales of $421 billion in 2011.
This story may become a case study of what not to do when serious allegations of corruption are made by credible individuals.
Let me list a few things a company should do if it really wants to get into trouble. It should:
1. Always remember that growth and profit are the only things that matter and that a company should do “everything it takes” to achieve those goals.
2. Never take the allegations of corruption seriously.
3. Never conduct an independent investigation but rather appoint someone directly involved with the bribery to investigate.
4. Never inform senior management, because “the less people know the better.”
5. Never inform the authorities.
Walmart’s actions and reaction will most likely cost the company some heavy fines and may send some of its directors to jail. It’s stock loss more than 7% of its value since the publication of the article. That translates into a loss of $10 billion to shareholders.
Rana Foroohar of Time magazine in her article entitled Walmart’s Discounted Ethics suggests that the company looks at the example of Siemens. The German company was involved back in 2006 in a $1 billion bribery and corruption scandal. The company collaborated fully with the authorities, paid the fines imposed and was rehabilitated. In fact today, according to Foroohar “its code of conduct has become a competitive selling point and is widely copied by other firms.”
As John D. Rockefeller once said:
“I always tried to turn every disaster into an opportunity.”
Let’s hope Walmart does the same.