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The politics of red, Wal-Mart and blue

As the world's biggest retailer fights criticism from unions and others, the battle takes on political tones.

By MARK ALBRIGHT
Published April 10, 2005

BENTONVILLE, Ark. - Sam Walton, founder of the world's biggest retail empire, had little interest in politics. He often contributed to both sides in elections in case he would need a favor. These days, his heirs and a new generation managing the country's largest private employer find themselves knee-deep in partisan politics.

A growing public relations war over Wal-Mart Stores Inc. has developed its own special red state-blue state political dimension. The spin doctors are describing Wal-Mart either as a company that embodies the American entrepreneurial spirit and rewards hard work, or a greedy corporation that thrives off corporate welfare and its workers' relative poverty. For organized labor, a bulwark of the Democratic Party, attacking nonunion Wal-Mart targets the company and Walton's heirs, who have been writing big checks to the Bush White House, Republican candidates and conservative causes.

Last week, reaction to the relentless spread of Wal-Mart echoed across the political spectrum from Rush Limbaugh to the Maryland statehouse.

Lawmakers in Annapolis agreed to require that any private employer of more than 10,000 people - Wal-Mart happens to be the only one to qualify - must spend a minimum of 8 percent of payroll on employee health care. Seven other states concerned that too many low-wage Wal-Mart workers rely on Medicaid for health care are considering similar measures.

Meanwhile, in many city halls and courthouses, plots are being hatched to impose outright bans on such big-box stores - not for aesthetic reasons or because of overtaxed streets, but because of the social burdens they supposedly create.

In Wal-Mart's hometown, the Bentonville behemoth's top brass last week gathered about 70 reporters to get out the company's side of the story. The rare two-day conference was book-ended, however, by partisan critics who slipped in under the company's radar.

A group that has fought Wal-Mart in Inglewood, Calif., booked an adjacent meeting room in the same hotel under the guise of "Tracy's Reunion." Then members showed up with some politicians and a videographer to stage their own media event.

"We challenge Wal-Mart to prove they are the good neighbor they say they are by negotiating with us a commitment to pay a living wage and mitigate the costs they impose on our community," said Jerome Horton, a Democratic California state Assembly member.

After each daylong Wal-Mart session, an operative from the United Food and Commercial Workers union buttonholed reporters to offer the latest spin from Paul Blank, who held court in a back table of the hotel lounge. Blank, who heads the union's Wake Up Wal-Mart campaign, was previously national political director for presidential candidate Howard Dean. He plans to parlay the same Internet chat group politics that got the Dean campaign off the ground to rally other interest groups to fight Wal-Mart's growth. Heading a new coalition for Wal-Mart critics is Andy Grossman, former director of the Democratic Party's Senatorial Campaign Committee.

"Clearly, this is going to be more than an organized labor campaign," said Tracy Sefl, spokeswoman for Grossman's nonprofit group, the Center for Community and Corporate Ethics.

"This isn't politics," Blank said. "It's about people and the effect Wal-Mart has on communities."

If the attacks on Wal-Mart sound a bit familiar, they should. The same unions orchestrated similar campaigns against Publix Super Markets when the Lakeland chain challenged union grocers in Atlanta, and Food Lion Inc. when it moved into a union market in Washington, D.C.

Unable to organize Wal-Mart workers, they stepped up the campaign to slow down the chain once it began building supercenters that combine discount stores with supermarkets in union grocery hotbeds of Los Angeles, Baltimore, New York, Denver and Chicago. The fight was predicted. Two years ago, one Merrill Lynch analyst even charted Wal-Mart's strongest markets by plotting all the big metro areas in states that voted Republican in the 2000 election. The company only now is trying to elbow its way into selling groceries by building its first supercenters in big markets that vote heavily Democratic.

Lee Scott, Wal-Mart president and chief executive officer, said the company is confronting its critics head-on.

"If we have the best product out there at the best price, and we treat our customer right, it doesn't make a bit of difference what a bunch of people marching around with signs say about us," Scott said. "I just don't want opinion leaders and decisionmakers . . . to believe what these people are saying about us. I will reach out to meet critics who want Wal-Mart to be a better company, but these people have a different agenda. The politicians who respond to them are protecting the status quo that funds their campaigns and gets out the vote."

Don't think Wal-Mart is being financially outgunned. The company, which generated $10-billion in net income the fiscal year that ended Jan. 31, substantially increased the size of its lobbying team and its $2.7-million in political contributions, about 80 percent of which went to Republican candidates in 2004. Separately, Sam Walton's family, which holds 40 percent of the stock and two board seats, also increased its political giving to $3.2-million in the presidential election cycle, giving most of it to pro-Bush groups.

"We are being both defensive and proactive" in lobbying, said Mona Williams, vice president of communications for the company.

Perhaps the ultimate company town for the 21st century, Bentonville has lost its bucolic charm since Sam Walton opened the first Wal-Mart discount store in 1962. Today, the place looks more like any sprawling edge-city suburb, lined by strip shopping centers and overcrowded roads.

Wal-Mart, which generated revenues of $288-billion in the most recent fiscal year, has spread to nine countries and lost a lot of its corn-pone culture. The modest home office remains a hodgepodge of Butler buildings hunkered around a vintage 1960s brick school building. But Wal-Mart's huge state-of-the-art warehouses and home office employ 10,000 people in a fast-growing boomtown of 20,000 and a county of 150,000 tucked into the foothills of the Ozarks.

For miles around, the latest zero-lot subdivisions sprout from cow pastures. Million-dollar Georgian-style mansions have views of aged farmhouses with nearby trailers, farm implements and chicken coops. Well-dressed, but necktie-free, Wal-Mart executives drive nothing flashier than BMWs.

The airport was built with $15-million privately raised by Sam Walton's youngest daughter, Alice, and matched by $76-million in federal grants arranged with a boost from friends of Bill and Hillary Clinton at nearby Tyson Foods. It already has drawn scheduled service from four national carriers. Daily nonstops shuttle Wal-Mart buyers and a continuous stream of vendors to and from LaGuardia Airport in New York. It may be the only airport where many of the indoor poster ads promote retail trade vendors selling cash register software and bubble-wrap packaging.

There's a heightened sense of urgency here about the state of affairs at Wal-Mart, however. Popular Tom Coughlin, the vice chairman and last top executive holdover from Sam Walton's old crew, was just fired in connection with a criminal investigation of a vendor scandal. The chain's sales growth has slowed. The company faces the biggest sexual discrimination suit in U.S. history, which some link to the unions. And there are continued calls for the company to pay a "living wage" as Wal-Mart tries to muscle into big urban markets where many retail clerks are union members.

Nationwide, Wal-Mart pays hourly workers about $9.68 an hour. In the Tampa Bay area, it's about $9.32. The national average is $9.55. But that's a lot less than the $12 to $18 that union clerks earn in the big cities.

To Scott, being competitive is what matters. The proof is, job applicants flock to Wal-Mart for its pay and benefits, including health insurance, he said.

"I don't know where this "living wage' thing came up," he said. "Why stop at $12 an hour? Why not go to $20? The fact is, our entire business model is based on being efficient enough to have prices about 5 percent less than the competition. We work on a 3.4-ish-cents-on-the-dollar profit margin. How can we keep our pricing strategy when there are many retailers out there just paying the minimum wage and offering no benefits at all?"

Retail industry wages are typically 25 percent below manufacturing wages, he says, because it is a labor-intensive industry without the fat margins of a business that produces products. Wal-Mart generated $6,500 in profit per employee last year. Microsoft generated $143,000.

As for health care, Wal-Mart argues that there is one reason it has more employees getting health coverage from Medicaid than other private employers in states such as Florida: It is also the largest employer. The problems of entry-level workers not making enough to afford coverage is part of a larger government issue of affordable health care, it says.

"I don't hear anyone mentioning that Wal-Mart-created jobs took 160,000 people off the Medicaid rolls last year," he said.

The company also made public the Equal Employment Opportunity Commission reports charting its progress in minority recruiting and female promotions. Wal-Mart reported that 38 percent of its salaried officials and managers are women, up from 35 percent in 2002, and 22 percent are minorities, up from 18 percent. Nationally, women held 35 percent of similar jobs in all business; minorities held 15 percent.

Attorneys who filed the sex discrimination case argue that Wal-Mart's promotion performance looks worse when measured against only retail companies because they have proportionally more female workers.

Wal-Mart is committed to enhancing the diversity of its workforce, Scott said. In fact, all incentive bonuses for top officers, including him, are linked to their meeting recruiting and promotion goals.

Mark Albright can be reached at albright@sptimes.com or 727 893-8252.

[Last modified April 10, 2005, 00:41:07]