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Beast of the Month - February 2004
Lee Scott, Wal-Mart CEO
"I yam an anti-Christ..."
John Lydon (aka Johnny Rotten) of The Sex Pistols, "Anarchy in the UK"
When it comes to korporations, Beastliness tends to come in two flavors. There are companies such as Microsoft and AOL Time Warner (uh, make that Time Warner) where Beasthood is not so much from its overt kreepiness but by the frightening size and power they have at their disposal. Then there are companies like Lockheed and Monsanto, which while not being the largest businesses in the world, maximize their Beasthood for what its worth and are pound for pound as kreepy as it gets.
And then there is Wal-Mart.
To put it mildly, Wal-Mart is big. Indeed, it is to korporate monoliths what a Fatburger Double Bacon-Cheese Kingburger with supersized freedom fries and Pepsi is to lunch. With annual sales in 2003 of nearly $250 billion (greater than the annual GNP of Switzerland) it is the biggest korporation in the history of the world, with influence that arguably rivals Rockefeller's Standard Oil at its peak. With 4,400 Wal-Marts, Wal-Mart SuperCenters and Sam's Clubs worldwide (including 3,600 in the US) and an unmatched employee force of 1.3 million "associates" (already three times the total of General Motors, with plans to expand to 2.1 million in the next five years) it is not only the biggest retailer but the biggest grocer, after only ten years since jumping into the supermarket business.
But in terms of Beastliness, it is a Sugar Ray Robinson in a Muhammad Ali body. This is not mere hyperbole: only Enron at its peak could combine sleazy behavior and market size in such a nasty combo. Indeed, Wal-Mart is one of those companies where size and beastliness are synergized to maximize each. It's kind of a chicken-or-egg question: is Wal-Mart big because it's kreepy, or is it kreepy because it's big?
The incredible thing is, at least until recently, Wal-Mart has gotten a relatively free ride in their ride to dominance. Much of this is thanks to the small town, folksy charm brought to the company by its founder, the late Sam Walton. Founded in the little backwater hillbilly state of Arkansas (also home to food monolith Tyson Foods and the Klintons) he turned the Bentonville-based business into a retailing empire, and was the richest man on the planet when he died. Today, thanks to inheritance, five of the ten richest people in the world are members of the Walton family, with a combined total of $100 billion, which is more than Bill Gates is worth.
Sam Walton is still the human face to the Wal-Mart korporate structure, as Wal-Mart execs know a good symbol when they see one. Indeed, despite its enormous size, Lee Scott, Wal-Mart's CEO and The Konformist Beast of the Month, is hardly a household name, nor even a widely known individual (though he did pull in $11.5 million of pay in 2002.) That a man could head an organization with almost as much economic clout as the Pentagon and be that invisible to the American public suggests a company that is trying to conceal itself.
And just what is it concealing? Consider the following:
* Low wages for worker: The average pay of a Wal-Mart employees was $8.23 in 2001, which is over twenty percent lower than workers at a unionized supermarket. This picture is actually flattering, as most Wal-Mart workers are part-timers: though the company claims 70 percent of its staff are full-time, they define "full-time" as working 28 hours a week. (By their own definition, then, full-time workers can make less than $1,000 a month.) Further, Wal-Mart only get health benefits after two years of employment, and even then the introductory plans have high premiums and deductibles most employees can't afford.
* Disability discrimination: The Equal Employment Opportunity Commission has filed more suits against Wal-Mart for disability discrimination than any other corporation. A top EEOC lawyer told Business Week, "I have never seen this kind of blatant disregard for the law." It was fined $750K for its behavior in the state of Arizona and required to run commercials admitting its guilt.
* Sexual discrimination: The korp faces a national class-action suit regarding sexual discrimination at Wal-Mart, the largest in history involving nearly one million people. It alleges that there is "a harsh, anti-woman culture in which complaints go unanswered and the women who make them are targeted for retaliation." While seventy-two percent of salespeople are women, only 33 percent of overall managerial positions are (as compared to 56 percent by their major competitors) as well as only 10 percent of store managers. Female store managers are paid an average of $16,400 less a year than men while hitting the corporate glass ceiling.
* Undocumented Workers: In October 2003, hundreds of undocumented workers at Wal-Mart stores in 21 states were arrested on immigration charges. The investigation surrounded Wal-Mart's use of janitorial contractors, and if it can be proven Wal-Mart knowingly hired undocumented immigrants, it could be fined $10,000 per worker.
* Dead Peasants Insurance: It has been a leader in a grim life insurance scheme known as Dead Peasants, where a company takes out a policy on its workers, which they can collect on if the unlucky ducky should die (up to $750K.) All of this is done without telling the employee or his family, who stand to collect nothing from the twisted transaction. After taking out 350,000 of such policies (and getting a hefty tax deduction to boot for premium costs) they now face worker lawsuits over the practice, and claim to have gotten out of the Dead Peasant business due the potential for bad publicity.
* Rabid anti-union activities: as a company guidebook for supervisors reads, "Wal-Mart is opposed to unionization. You, as a manager, are expected to support the company's position. This may mean walking a tightrope between legitimate campaigning and improper conduct." John Lehman, a former Wal-Mart manager, states every manager is given a document titled "Manager's Tool Box to Remaining Union Free" with a toll-free hotline to Bentonville HQ. When alerted, men in ties are flown via jet to the location, who interview all managers and workers, bad-mouth unions and look for dirt on anybody hinting at union support to remove them. In Jacksonville, Texas, meat-cutters became the first union workers in February 2000, joining the UFCW: eleven days later, Wal-Mart closed the meat-cutting department in all stores to buy prepackage meat (from companies using nonunion labor, of course.) Sidney Smith, one of the meat-cutters who established the union, was fired (on Labor Day, no less) on charges of theft. As the Texas Observer reported, his crime was eating half of a banana in an overripe box while waiting in line to pay the 50 cents for the lot. Smith isn't alone here: the NLRB issued more than forty formal complaints against the company, with widespread tactics such as illegal spying, threats and firings. For this, a national complaint against top Wal-Mart executives was in the works in 2000, but was stopped DOA when the Bushistas stole the White House.
* Workers pay fraud: Perhaps worst of all is the common practice of assigning "off-the-clock" work. At the end of the shift, employees are often assigned extra tasks to do, which can often add an extra hour or more per week of work without pay. (One employee told Bill Moyer on Now that she worked ten to fifteen hours a week off the clock.) Moyers interviewed forty-eight employees that insisted this was not an exception but the rule. Also common: altering payroll records and doctoring time cards in computers. This is a systematic problem, as managers, to meet implausible payroll requirements, are left no real other choice. In Texas alone, this outrageous form of fraud against workers costs $30 million per year, and in Colorado, Wal-Mart paid $50 million to settle a class-action lawsuit against the company. For the korp's overtly criminal actions, Wal-Mart faces cases in 25 states, as well as charges of locking employees in buildings.
Wal-Mart is also a contemptuous violator of workers' compensation laws, child-labor laws (1,400 violations in Maine alone), and surveillance of employees. No wonder they are sometimes called "The Beast from Bentonville." No wonder as well turnover in stores is above 50% a year, with many stores having to replace 100% of their employees each year, and some reaching as high as a 300%.
But just as bad as how they treat their own employees is how they downgrade the quality of employment for workers across the boards. The current lockout and strike of Southern California grocery workers by Ralphs, Vons and Albertsons involves this dynamic: the three chains claim they can't compete with the threatened onslaught of non-union Wal-Mart groceries in the state without wage and benefits concessions from the workers. While it is hard to sympathize with giant supermarkets chains, their concern in this case is valid.
Along with the grocery chains, giant retailers such as Toys "R" Us have had trouble competing with the lowest common denominator mentality pushed by Wal-Mart (one in five toys sold in the US are now from the giant.) But their problems are miniscule compared to the mom-and-pops that have gone head-to-head with Wally's World. To their credit, Wal-Mart usually does live up to its ad slogan "Always Low Prices." But it's an unfair fight: besides lower average overhead due to size, Wal-Mart has been known to engage in ruthless (and illegal) price-dumping when entering a new market. Though the strategy causes short-term losses, with $250 billion to finance their losses, they can shoulder the costs while destroying their less-financed competitors. After the competition has been squashed, they can raise prices to finance their next conquest. In the end, three decent-paying jobs are destroyed for every two created by Wal-Mart, making their existence a workers black hole.
Besides American workers and small businesses, Wal-Mart is even worse for Third World labor. Never mind Nike: Wal-Mart is, hands down, the top exploiter of impoverished workers the world over. Gone are the days under ol' Sam when the company proclaimed "We Buy American" in flag-covered ads, a claim which was always a fraud. The vast majority of Wal-Mart products are made in low-rent nations, most notably the totalitarian communist state of China. It buys $10 billion annually in merchandise from the People's Republic, making it Red China's largest importer. In 2001, Wal-Mart moved its world purchasing headquarters there.
Charlie Kernaghan of the National Labor Committee (NLC) states, "In country after country, factories that produce for Wal-Mart are the worst." He adds that Wal-Mart "is actually lowering standards in China, slashing wages and benefits, imposing long mandatory-overtime shifts, while tolerating the arbitrary firing of workers who even dare to discuss factory conditions."
A 58-page NLC report on a Wal-Mart Chinese toy factory, "Toys of Misery," reveals the following conditions:
* 13 to 16-hour days molding, assembling, and spray-painting toys, seven days a week, with 20-hour shifts in peak season.
* Though China's minimum wage is 31 cents an hour, workers are paid 13 cents an hour.
* They typically live in squatter shacks, seven feet by seven feet, or jammed in company dorms, with more than a dozen sharing a cubicle costing $1.95 a week for rent and about $5.50 a week for inferior food. They also must pay for their own medical treatment and are fired if too ill to work.
* Workers have constant headaches and nausea from paint-dust hanging in the air; the indoor temperature tops 100 degrees; little in protective clothing; repetitive stress disorders are rampant; and there's no training on the health hazards of handling the plastics, glue, paint thinners, and other every day solvents.
Wal-Mart execs including Mr. Scott shrugs when asked about these conditions, claiming they have no control over what happens in Chinese sweatshops. As Scott puts it, "There will always be people who break the law. It is an issue of human greed among a few people." (One wonders if Scott is referring to himself here.) Scott's denials aside, the idea that a company as notoriously control-freakish as Wal-Mart having no clue what's going on in its own factories is ludicrous.
To make it even worse, Wal-Mart orders its 65,000 suppliers to ruthlessly cut prices as well, and even demands its smaller suppliers to open the books to find where the money is going. When this is done, Wal-Mart red-pencils what Scott defines as "unnecessary costs" - which includes reasonable wages for workers. As writer/commentator Jim Hightower puts it, "He doesn't even have to say 'Move to China' - his purchasing executives demand such an impossible lowball price from suppliers that they can only meet it if they follow Wal-Mart's labor example."
There was a time when companies such as Ford and General Motors were the top employers in the US, and tried to ensure that their workers could also be their customers. Say what you will about Ford and GM, but they had a compact with their unionized workers that they would be part of the middle class. Wal-Mart also has workers that can be customers, but little else. This leads some to ask how we the people let the Bentonville behemoth become so insidiously large on its korporate license.
The good news: thanks to expository work of Mr. Hightower and others, Wal-Mart is finally getting a portion of the negative publicity it deserves. Even better is that communities are standing up to Wal-Mart, demanding that if they want to build megastores larger than four football fields in their towns, they have to pay their workers decent wages and work to benefit the community. Wal-Mart may be a giant beast, but it is a beast that Americans are finally waking up to.
In any case, we salute Lee Scott as Beast of the Month. Congratulations, and keep up the great work, Lee!!!
Thieves in High Places, Jim Hightower (Viking, 2003)
How Wal-Mart is Remaking our World
April 26, 2002
Wal-Mart and the World
Post Office Box 24825
Los Angeles, California 90024-0825
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